Land Securities Group H2 2026 Earnings Report

Land Securities Group EPS Results

• Actual EPS: GBX 51.40
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Land Securities Group Revenue Results

• Actual Revenue: $892.00 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Land Securities Group Announcement Details

• Quarter: H2 2026
• Date: 5/14/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, May 14, 2026
• Conference Call Time: 5:00AM 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 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Landsec said customer demand remains very strong, with portfolio occupancy rising to 98%+ and the highest level in more than two decades, while rental values are growing at the fastest pace in nearly 20 years.
• Positive Sentiment: FY2026 results showed 4.6% like-for-like net rental income growth, with office and retail both performing well, and EPRA earnings up 2.2% despite the impact of the Queen Anne’s Mansions sale.
• Positive Sentiment: Management highlighted a much stronger operating leverage profile after cutting overheads by 15% to a 20-year low, which should allow more of future income growth to flow through to earnings and dividends.
• Neutral Sentiment: The balance sheet remains resilient, with 8.6-year average debt maturity, about 89-90% of debt fixed or hedged, and net debt to EBITDA expected to fall below 7x within two years as developments lease up.
• Positive Sentiment: Landsec reiterated a constructive growth outlook, guiding to high-single-digit EPS growth in FY2028 and around 5% compound annual EPS growth through FY2030, supported mainly by existing portfolio reversion and current developments.

Presentation

[Mark Allan, CEO at Land Securities Group]

Very good. Well, ladies and gentlemen, good morning, and welcome to the presentation of Landsec's 2026 full year results. Landsec is in excellent shape. Customer demand for our places remains very high, and with supply increasingly constrained, occupancy across our portfolio has risen to its highest level in more than two decades. As a result, rental values continue to rise, now at the fastest pace in nearly 20 years. We've carried this momentum into the new financial year, with 1 million square foot of active occupier demand across our recent office projects, a record leasing pipeline in retail, and no signs of weakening demand arising from the Middle East situation. This supports continued strong income growth from here, and with that, an acceleration in EPS growth in both the near- and medium-term.

[Mark Allan, CEO at Land Securities Group]

For this year, as we previously guided, we expect reported EPS to be stable due to the impact of last year's sale of Queen Anne's Mansions, offsetting strong underlying growth. Based on our current momentum, we expect EPS for FY 2028 to grow by a high single-digit %. This means that we remain on track to deliver compound annual growth in EPS of around 5% between now and FY 2030. On top of an existing income return NTA of 5.8%, implies an attractive low double-digit total return annually for shareholders. Our operational performance has shown consistent growth over the last few years, despite the elevated uncertainty in the external macro environment throughout that period. This reflects the uniqueness and resilience of our high-quality portfolio and our market-leading operating platforms, with occupancy rising steadily to now 98%.

[Mark Allan, CEO at Land Securities Group]

With our portfolio effectively full, the upward pressure on rents has continued to build, and uplifts in rent on relettings and renewals virtually doubled over the past year to 15%. As a result, we delivered 4.6% growth in like-for-like net rental income for the year, ahead of our initial guidance and a robust 4% compound annual growth over the last four years. Although the global macro outlook today is once again uncertain, the rapidly growing reversion in our high-quality portfolio means that the potential for future income growth is well underpinned regardless. Over the past few years, we have sought to reinforce this positive portfolio outlook through strategic discipline by actively positioning Landsec for a higher inflation, higher interest rate environment.

[Mark Allan, CEO at Land Securities Group]

Our average debt maturity of 8.6 years is now twice as long as the UK REIT sector average, which, combined with around 90% fixed rates, means our earnings are well protected against volatility in interest rates. We have brought our overhead costs down to their lowest level in 20 years, which means our future income growth flows through to earnings more readily. Our development exposure will be down to just 2% of our portfolio value by the summer, with no plans to add meaningfully to this in the near-term. With just GBP 185 million CapEx left to spend and no need to refinance any debt until 2028, we are in no way reliant on disposals or new financing to fund any commitments.

[Mark Allan, CEO at Land Securities Group]

Alongside a clearer, stronger growth outlook, we have actively now moved the business to a lower risk profile. All of this is reflected in another set of positive financial results. Driven by our strong like-for-like income growth and a 15% reduction in overhead costs, our 2.2% growth in EPRA earnings was at the top end of our guidance for the year, factoring in the 1.8% impact on EPS from the earlier than planned sale of QAM that was not part of our initial guidance, which gave rise to 2% growth in dividends. Our NTA per share was up 0.9% for the year, 2.2% in the second half, after having absorbed the 1.1% cost to NTA of selling over GBP 700 million of assets, which generated little or no return.

[Mark Allan, CEO at Land Securities Group]

Whilst LTV was down slightly to 38.7% and net debt to EBITDA improved to 8.4x. We expect this to reduce to below 7x over the next two years, driven by the lease-up of our latest developments and continued like-for-like income growth. Combined with our lower cost base and strategic discipline, this means our ongoing income growth will increasingly flow through to an acceleration in EPS growth. There are two very clear trends that support our positive outlook. Firstly, whether it's in retail, driven by a need to maximize consumer reach efficiently, or in office, with a need to attract and retain the best talent, occupier demand is increasingly concentrated on the very best space. Secondly, with development viabilities under pressure, the supply of space of the right quality is very heavily constrained.

[Mark Allan, CEO at Land Securities Group]

That's why our portfolio occupancy is now at its highest level since 2003, and ERVs are growing at their fastest pace since 2008. Prime commercial real estate is emerging as a clear winner in a tech-enabled world. In retail, the top 1% of retail destinations in the U.K. provide brands with access to almost 1/3 of all in-store retail spend. Unsurprisingly, therefore, this is where, for example, around 90% of all Apple, Inditex, Uniqlo, and Sephora stores are located. It is where 85% of our portfolio is located. Effective curation of the brands shoppers want drives growing footfall and consumer spend. This in turn results in higher demand for space from brands and so on.

[Mark Allan, CEO at Land Securities Group]

Over the past four years, sales in our destinations have grown by around 7x the U.K. national average, outperforming by a total 19 percentage points over that time. Brands continue to focus on our destinations when it comes to investing in fewer, bigger, better stores. Occupancy rises, rents grow. With replacement costs around double current values, new supply is and will remain effectively zero. In our offices, it's a similar story. There's roughly 900 million sq ft of office space across the U.K. With a 5 million sq ft portfolio, we own just 0.5% of the U.K. office market, and not just any 0.5%. Virtually all of that space is located in the two most highly valued locations in the country, the West End and the City, including Bankside.

[Mark Allan, CEO at Land Securities Group]

These locations consistently rank as number one or two of the top destinations in the world for international businesses as they provide the very best access to and conditions for talent. Even within these highly prized locations, we are significantly outperforming benchmarks as our occupancy of almost 99% is well ahead of the 93% for Central London as a whole. Meanwhile, net new supply is very limited, partly reflecting the well-understood challenges of build cost inflation and higher interest rates constraining development, but also space being taken offline or repurposed. For example, in Victoria, where around 45% of our London portfolio is located, expected new development supply over the next three years is almost entirely offset by the potential loss of space from offices which are in the process of being converted to alternative uses, such as residential or hotel.

[Mark Allan, CEO at Land Securities Group]

Rents for the best locations continue to rise with recent lettings across our existing Victoria estate now well in excess of GBP 100 a sq ft. The ongoing adoption of emerging technologies such as AI is only likely to accelerate consumers or customers' focus on the very best space. Back office and processing roles are set to reduce, the impact of this in central London is more than offset by the creation of new roles and indeed new businesses enabled by technology. There is the demand driven by large businesses concentrating their office space in vibrant business districts as opposed to out of town business park locations. A good example of this is our recent major letting at Timber Square to BP, which is consolidating much of its operations from just south of Heathrow into the center of London.

[Mark Allan, CEO at Land Securities Group]

The drivers of occupier demand in central London, certainly for our assets, are encouragingly diverse. You can see this in the roughly 1 million sq ft of active demand across our latest developments. Customers more often than not see new technologies not as an opportunity to improve productivity and to grow, rather than simply as a trigger to reduce headcount and space requirements. In retail, customers expect the rise of AI and agentic commerce to put even more focus on the value of the physical experience and customer connection as part of a wider unified commerce ecosystem. Brands will need to invest more in their spaces to deliver the right experience, adding further weight to the fewer, bigger, better thesis.

[Mark Allan, CEO at Land Securities Group]

The fact that we opened or exchanged contracts with more leading expansionary brands such as Sephora, Uniqlo, Pull&Bear, Lefties and other Inditex labels over the past 18 months than any other U.K. retail platform simply highlights the enduring appeal of our destinations. In an environment that is changing rapidly, our edge is clear. We have two market leading platforms and an irreplaceable portfolio focused firmly at the very top end of the market where customer demand is strongest. Reflecting this, we've had another strong year in terms of operational performance. In retail, rental uplifts continue to trend higher, as shown here on the left, whilst occupancy is up 100 basis points to almost 98%, and that's the highest that it's been since the early 2000s.

[Mark Allan, CEO at Land Securities Group]

Growth in like-for-like income rose to 5.5%, we signed or enlisted as hands on GBP 49 million of leases on average 11% above ERV. This drove an acceleration in ERV growth to 5.8%, that's comfortably ahead of our initial guidance of similar growth to last year's 4%, it's the highest rate of growth in over 20 years. This further adds to our future income growth potential. Building on the unique data and insights that our market leading U.K. platform provides, we continue to invest in creating experience-led places with a record number of new lettings. That means footfall in our locations is growing well ahead of the U.K. market average, we are gaining market share.

[Mark Allan, CEO at Land Securities Group]

This drives sales growth that in turn attracts more leading brands, which alongside enhancing our social eating, dining and leisure offer, leads to higher footfall, which then drives higher sales, and so on. As a result, we remain confident in our potential to deliver 4.5%-7% growth in net rental income per year from our existing retail platform over the next few years, driven by capturing the growing reversion in our portfolio, growing turnover rents and commercialization income, and selective CapEx investments into highly accretive smaller projects. In office, occupancy is now nearly 99%. Uplifts on relettings and renewals increased to 14% compared to 10% for the prior year, and this drove 6% growth in like-for-like income.

[Mark Allan, CEO at Land Securities Group]

We signed or in solicitors' hands on GBP 21 million of lettings, on average 7% ahead of ERV, and this drove 7% growth in rental values, well ahead of our guidance of similar growth to the 5% for the prior year, and the highest level that we've seen in our office portfolio since the EU referendum 2016. Our portfolio is effectively full, yet our reversionary potential has jumped now to a high 17%, and the potential income upside on lease events remains clear. This strength in customer demand bodes well for our latest London office completions, and we've made strong progress in terms of leasing since our half year results. Our three recently completed projects are now 54% let, with interest in the form of negotiations, requests for proposals, or active engagement covering substantially all of the remaining space.

[Mark Allan, CEO at Land Securities Group]

ERVs have increased meaningfully, especially so for Thirty High, which is due for sectional completion over the summer. With completion nearing, this is now also seeing strong customer engagement, we expect this to translate into good leasing activity over the next few months. In total, we now expect these projects to generate GBP 63 million of net effective rent once let, with an associated incremental GBP 43 million pound of annualized interest expense. Based on current momentum, we continue to expect all projects to lease up within around 12 months of completion, consistent with previous guidance, which will drive strong earnings growth for FY 2028 in particular. Turning now to capital allocation, we continue to base our capital allocation decisions on this clear framework, which is underpinned by our commitment to retain our strong balance sheet.

[Mark Allan, CEO at Land Securities Group]

This framework looks at how our investment decisions contribute to income and EPS growth in the short term, and how they shift our portfolio mix such that it can continue to deliver sustainable income and EPS growth for the longer-term. We constantly monitor for changes in risk and return prospects. At this stage, our priorities for the next 12-18 months remain broadly unchanged. As such, we will continue to explore opportunities to recycle capital out of lower returning assets, including offices, as we have done over the past year, and we will continue to prioritize investment into retail, given the high income returns and attractive income growth on offer. To create capacity for this, we do not plan to commit any meaningful capital to new development over this period, and that means that our net debt to EBITDA ratio will reduce meaningfully.

[Mark Allan, CEO at Land Securities Group]

Based on this framework, we've had an active year in terms of capital recycling. Our largest disposal was Queen Anne's Mansions. This was an asset that generated zero total return despite its high short-term income profile, as the valuation depreciated exactly in line with every quarterly rent receipt until the end of the lease, at which point the asset requires substantial redevelopment. Aside from the impact of turning the residual finance lease income into a capital receipt up front, this sale has essentially no impact on earnings and de-risked the remaining value of the site by transferring planning risk for a change of use to the buyer. We also sold two pre-development assets, which were generating a negative income return and would have required over GBP 400 million of CapEx to build out, as well as 4 retail parks and two smaller offices in London.

[Mark Allan, CEO at Land Securities Group]

All in all, this means that we sold just over GBP 700 million of assets which were generating limited or no return. This came at a cost to NTA of 1.1% when comparing sales proceeds to 2025 book values, and that was reflected in our half year numbers, but it's in line with the goal of our capital allocation framework. It significantly enhances our future income and EPS growth prospects. As we prioritize investment into retail, we are not planning to commit any meaningful capital to new development over the next 18 months. In London, we expect office rents to continue to grow, but as we have demonstrated over the past year, our existing portfolio is very well placed to capture this growth.

[Mark Allan, CEO at Land Securities Group]

Taking into account the materially higher risk involved, we do not believe that returns for new office development offer a sufficient premium versus our high quality existing portfolio to justify selling existing offices to fund the development of new ones. In residential, we continue to view the long-term demand supply and balance as compelling and are drawn to the long-term characteristics of higher inflation-linked income growth and lower cyclicality. Development viability for residential remains challenging, but over the past year, we have made substantive positive progress in improving the viability of our build-to-rent pipeline with proactive public sector support an important enabler, such as the government and GLA's package of acceleration measures for London.

[Mark Allan, CEO at Land Securities Group]

We can now see a potential route to viability for the most progressed of our projects, and in the year ahead, we'll seek to bottom out whether or not these projects are capable of proceeding. CapEx spend will remain very limited as we do so, and holding costs are low, but we continue to consider the time investment to be worthwhile. If we are able to secure viable returns, lead times are still such that the earliest start dates would be late 2027. As a result, our committed development exposure will reduce to less than 2% of portfolio value by the summer, down from on average around GBP 1 billion, closer to 10% over the last couple of years.

[Mark Allan, CEO at Land Securities Group]

It will likely stay at this level for the near future, but even over the longer-term, it will remain well below where it's been historically as we move to a structurally lower level of capital tied up in development. Supported by the positive outlook for rent and interest rates, investment market activity in both office and retail recovered steadily across 2025 and into the first few months of 2026. It's too early to assess what the longer-term impact of the Middle East conflict on this growing momentum might be. We are mindful that the renewed uncertainty around interest rates could impact investor decision-making in the near-term. It is worth stressing, however, that interest rates are only one factor, and others, such as confidence in rental growth prospects and returns relative to alternative options, are all stronger than they were a year ago.

[Mark Allan, CEO at Land Securities Group]

For us, the near-term focus in capital recycling remains unchanged. We will aim to continue to monetize further pre-development assets as these generate zero income return and would require significant CapEx to build out. We will also look to monetize further capital in offices as the potential upside from recycling capital into major retail destinations at around a 200 basis points higher net effective income yield and higher income growth is meaningful. We will, however, be a disciplined seller. We remain highly selective on quality, price, and CapEx risks in retail investment, which is why we chose not to progress any opportunities last year. We do, however, have decent visibility on future opportunities which are likely to come to the market over the next year or two.

[Mark Allan, CEO at Land Securities Group]

Capital rotation remains an important part of our longer-term strategy, but we are not reliant on this to drive growth, as around 80% of our potential EPS growth by FY 2030 is driven entirely by our existing portfolio and platform. With that, I will now hand you over to Vanessa.

[Vanessa Simms, CFO at Land Securities Group]

Thank you, Mark, and good morning. It has been another positive year for Landsec, driven by the quality of our portfolio and strong operational execution. With occupancy and rental growth at record highs, our growing reversion gives us good visibility on future income growth. It leaves us well-placed to accelerate EPS growth over the near-term. In financial year 2026, like-for-like income was up 4.6%. Overheads reduced significantly. As a result, our EPS increased 2.2% despite the 1.8% EPS impact from the earlier than planned sale of Queen Anne's Mansions. That supported a 2% increase in the dividend. Portfolio valuation was up 1.2%, with NTA per share up 0.9% for the year. 2.2% in the second half.

[Vanessa Simms, CFO at Land Securities Group]

We also reduced net debt by almost GBP 100 million, taking our LTV lower to 38.7% and reducing our net debt to EBITDA to 8.4x. With under GBP 200 million of development CapEx still to come, net debt to EBITDA should reduce meaningfully in the near-term as we lease up our new developments. Our balance sheet remains in a strong position. The main driver of that performance was strong like-for-like rental growth, with growth of 4.6% well ahead of our initial guidance, and it was in line with our revised guidance that we gave in November. Office and retail, which together represent over 90% of our income, both performed strongly with growth of 6% and 5.5% respectively.

[Vanessa Simms, CFO at Land Securities Group]

Occupancy in both portfolios reached new highs, our focus on efficiency helped us to lift our operating margin by 160 basis points to 87.1%. At the same time, uplifts on relettings and renewals virtually doubled to 15%, showing the growing reversion across the portfolio. Customer demand remains strong, and that continues to support further growth. Our office portfolio is now 99% full, so future like-for-like growth in offices will mainly come from capturing the reversion at lease events. While we expect office growth to moderate a little, in the year ahead, we still expect 3%-5% like-for-like income growth overall. The second key driver of earnings was a continued reduction in overhead costs. These were down 15% last year to GBP 62 million, well below our guidance of below GBP 70 million.

[Vanessa Simms, CFO at Land Securities Group]

In fact, we have already delivered our financial year 27 target of reducing our overheads to the low GBP 60 million. That improvement reflects the investments that we have made in data and technology over the last few years, which are now helping to automate core processes and improve our insights to drive further value. Taken together, overhead costs are down more than GBP 20 million over the last three years and are now at their lowest level in over 20 years. Looking ahead, we expect overheads to stay in the low GBP 60 million, with further efficiencies offsetting inflation, which means most of our income, more of our income will flow through to earnings and dividends. That earnings growth is also supported by our resilient funding profile.

[Vanessa Simms, CFO at Land Securities Group]

Our 8.6-year average debt maturity is the longest in the U.K. REIT sector, and it's twice as long as the average for the rest of the sector. We also have no need to refinance debt until 2028, and 89% of our debt is fixed or hedged. Our average cost of debt is 3.6%, and this will rise only gradually over time. Because our maturities are so long dated, we expect average debt costs to stay comfortably below the marginal cost of borrowing well beyond the next decade. That gives us strong protection from interest rate volatility. You can see the benefit of those three key drivers clearly in this year's EPS bridge.

[Vanessa Simms, CFO at Land Securities Group]

Like-for-like income growth of GBP 21 million added GBP 0.028 to EPS, and GBP 11 million of overhead savings added a further GBP 0.015, more than offsetting the like-for-like increase in finance cost. The year-over-year movements in other items reduced EPS by GBP 0.015, which was driven by two factors. The benefit from the recovery of previously provided bad debts normalizing to GBP 2 million, following an increase in the prior period, while surrender receipts were also minimal at just GBP 4 million. Both items now have only a minimal EPS benefit, we don't expect a meaningful impact from them in the future. Almost all of this year's income was regular recurring rental income with little benefit from one-off receipts.

[Vanessa Simms, CFO at Land Securities Group]

Regular investment activity had a net impact of GBP 0.003. EPS was up 4% before the effect of the earlier than planned disposal of QAM. That was at the top end of our initial guidance. Including this disposal, EPS was up 2.2%. The trends behind this strong operational performance remain very much in place. The near-term outlook for EPS growth is positive. As we guided in November, we expect EPS this year to be stable versus last year, with underlying growth offset by the annualized impact of the QAM sale, which has a 4% impact on EPS. Given the momentum that we have today, we expect EPS growth in the financial year 2028 to be in the high single-digits. That comes from continuing to capture our growing reversion and from leasing up our recent London office developments.

[Vanessa Simms, CFO at Land Securities Group]

As Mark said, demand for the space is strong, and we are already making good leasing progress. We typically assume that developments lease up within a 12-month period of completion whilst we stop capitalizing the interest as soon as the project's complete. That timing gap is, between incurring the interest and receiving the full income means we expect a temporary earnings drag from these developments in this financial year of between GBP 6 million-GBP 8 million. This should be more than offset the following year as these projects are expected to add GBP 20 million to earnings once they're fully let, supporting high single-digit EPS growth in financial year 2028. This is also a key part of the meaningful reduction in net debt to EBITDA that we expect over the next two years.

[Vanessa Simms, CFO at Land Securities Group]

Our current ratio reflects the fact that net debt includes GBP 1 billion of capital employed in our recent London office developments, but we received virtually no income from these developments last year, as three of them have only recently completed, and Thirty High is due to complete in the next few months. We're not planning to start any new development in the near future, and we're reducing our investment in pre-development assets. As we continue to capture reversion in our existing portfolio and lease up the developments, we expect net debt to EBITDA to fall below 7x within the next 2 years without material disposals. The strong capital base this provides is further underpinned by our other balance sheet metrics.

[Vanessa Simms, CFO at Land Securities Group]

Portfolio valuation was up 1.2%, helped by leasing activity that drove 6.4% ERV growth, the highest level in nearly 20 years and comfortably ahead of guidance. Yields were virtually stable, although the benefit of that strong ERV growth was offset by two isolated factors. These were the increase in business rates at Piccadilly Lights, which I mentioned six months ago, and a valuation reduction in office development assets due to higher build costs. Together, these two factors reduced the overall portfolio valuation by 1.1%. The disposal of around GBP 700 million of assets which generated limited or no returns had a 1.1% cost to NTA in total accounting return, as reflected in our half-year results. Even so, NTA was up 0.9% for the year and 2.2% in the second half.

[Vanessa Simms, CFO at Land Securities Group]

With net debt down nearly GBP 100 million, LTV reduced to 38.7%. We recognize that renewed uncertainty around global interest rates could affect investment markets in the near-term. Over the long run, income growth drives value growth in real estate. The record rental growth across our portfolio shows that upside continues to increase. We remain well-placed to accelerate EPS growth over the next few years. In November, we raised our outlook for potential earnings per share for financial year 2030 from GBP 0.60-GBP 0.62. Today, we reiterate that outlook. Let me briefly talk through the moving parts. Starting with last year's GBP 0.514, the sale of QAM has a residual EPS impact this year of GBP 0.02. The largest driver of future EPS growth continues to be capturing the growing reversion in our existing portfolio.

[Vanessa Simms, CFO at Land Securities Group]

Over the last four years, we have delivered 4% compound annual growth in like-for-like net rental income. Over the same period, the reversionary potential in offices has tripled to 17%. Uplifts in retail lettings and renewals have also grown to 15%. We have clear visibility on delivering our outlook, which assumes around 4% growth in like-for-like income per annum from here. Having now delivered our targeted overhead savings, the second-largest contributor is leasing up our current London office developments, which will add around GBP 0.03. Our recently completed schemes are already 54% let with strong interest in the remaining space, pushing ERVs higher. This is another area we have good visibility. Further reducing capital employed in low or non-yielding pre-development assets will add around GBP 0.01 per share through interest cost savings.

[Vanessa Simms, CFO at Land Securities Group]

Whilst global interest rates have increased since November, the impact on our future earnings growth is largely mitigated by our long dated maturities and hedging profile, and further offset by the increase in the ERV on both our existing portfolio and recent developments. Future asset rotation gives us further upside as we plan to recycle more capital out of lower return assets and invest around GBP 1 billion in major retail destinations. Our planned recycling from offices into residential is broadly EPS neutral over this period, with the EPS benefit coming beyond financial year 2030. We remain well-placed to deliver on average 5% EPS growth per year between now and financial year 2030, and that is on top of our existing strong income return of 5.8% on NTA.

[Vanessa Simms, CFO at Land Securities Group]

Around 80% of that growth comes from our existing portfolio and platform, so we are not reliant on investment market activity to deliver attractive EPS growth. As development exposure is coming down, our risk profile is reducing, leaving us well-placed to deliver substantial shareholder value. With that, I will hand back to Mark.

[Mark Allan, CEO at Land Securities Group]

Thank you, Vanessa. I'll now wrap up with a summary of what you can expect from us in the year ahead, where we see the differentiation and opportunity for Landsec, and then we'll open to Q&A. Over the last few years, we have actively positioned Landsec for a higher inflation, higher interest rate environment. The updated strategy that we set out just over a year ago encapsulated this, as it clearly set out our primary focus as being delivering sustainable income and EPS growth for our shareholders. All our priorities and decisions flow from that, whether that's the decision to materially reduce our development exposure, our proactive approach to reducing overhead costs, or taking advantage of market windows to term out debt, or indeed repositioning and refining our portfolio.

[Mark Allan, CEO at Land Securities Group]

Over the last five years, we sold nearly GBP 4 billion of largely mature assets and reinvested a broadly similar amount in high quality new acquisitions and well-timed developments. This resulted in the two irreplaceable portfolios and best-in-class platforms that we have today. Our focus now is on maximizing the potential of these by driving continued like-for-like income growth and leasing up our latest developments. We aim to supplement this by rotating further capital out of offices into retail over time, yet the contribution to EPS growth from this is relatively modest compared to the upside embedded in our existing portfolio. We will time this as we judge market conditions to be most suitable. Meanwhile, our current capital employed in residential is low and focused on high quality opportunities.

[Mark Allan, CEO at Land Securities Group]

We're focused on securing viability for these projects as the longer-term fundamentals of this space remain attractive and are worth the effort. CapEx here in the year ahead will be minimal. All this means that our differentiation remains clear. Our primary focus on sustainable income and EPS growth provides absolute clarity across our entire business. Our clear capital allocation framework means we are rational about investment decisions in pursuit of this financial objective as we move to an even stronger capital base. At the same time, customer demand remains high. Our occupancy is up to a two-decade high. Rents are rising at their fastest pace in nearly 20 years, which adds to our growing reversion and means the upside in terms of future income growth is abundantly clear.

[Mark Allan, CEO at Land Securities Group]

As our overhead costs are now down to a 20-year low, with our savings target hit a year ahead of schedule, this top line growth will increasingly flow through to an acceleration in EPS growth. Landsec is now positioned with a lower risk profile and a clearer, stronger growth outlook. With an existing income return at NTA of 5.8%, the potential to deliver around 5% EPS growth per year between now and FY 2030 supports an attractive total return outlook for shareholders. Ladies and gentlemen, thank you very much. I'm now going to open up for Q&A. As usual, we'll start with Q&A here in the room. We have handheld mics, if you could just wait for a mic after you've raised your hand.

[Mark Allan, CEO at Land Securities Group]

Then I'll move to questions from anyone attending on the call, and finally, the webcast. First question, just stand here on the right, and then in the middle with Paul at the back there. Three rows back.

[Oliver Woodall, Analyst at Kolytics]

Morning. It's Oliver Woodall from Kolytics, wondering if you could provide just a bit more color on what needs to change to trigger more attractive risk-adjusted returns, in your view, for residential developments to become more viable.

[Mark Allan, CEO at Land Securities Group]

It really boils down to one thing, which is public sector policy support. If I take the most advanced of our projects, the O2 Centre Finchley Road, which has a detailed planning set in place but has a consent with a 35% affordable housing requirement and full Community Infrastructure Levy charges, that project isn't viable on that basis. We had an announcement from the government and GLA at the back end of last year, consulting on a package of acceleration measures, which were finalized in March of this year, that for certain projects that can hit a timetable of delivery, which would include Finchley Road, reduces the affordable housing from 35%-20% and effectively halves the CIL charge.

[Mark Allan, CEO at Land Securities Group]

Those two things together, we believe, get that project to a level that would be around a level of that we think supports viability. We've got to bottom out build cost and design to validate that. As I said in my comments on the call, we're spending very little money on these projects in the next year ahead, and I think the objective has to be to conclude whether or not these projects can get to viability. It's primarily policy support.

[Oliver Woodall, Analyst at Kolytics]

Okay. Thank you. Just one more. I wonder if you could provide any update on conversations relating to the transaction market for major retail assets and any changes there, given elevated bond yields and things like that?

[Mark Allan, CEO at Land Securities Group]

Yeah. I think we comment earlier and said out in the statement that we've got visibility. We think of something in excess of GBP 3 billion worth of prime catchment dominant retail assets that we expect to come to the market over the next one to two years. The next one that's likely to come forward will be the Metrocentre, which could be in the market as soon as this month. I think there is more investor interest in the sector. Clearly, the sort of stats that we've reported today don't go unnoticed.

[Mark Allan, CEO at Land Securities Group]

For the more significant lot sizes where you need to have a combination of access to capital, desire to own assets long-term, and operational expertise, I think there's much less likely competition around there. Given that you're talking about yields that are typically starting with a 7% and maybe even starting with an 8%, it's much less sensitive in terms of that upfront position to purely rates, and I think the level of growth is something people are getting more comfortable with.

[Oliver Woodall, Analyst at Kolytics]

Thank you.

[Mark Allan, CEO at Land Securities Group]

If we just go to Paul here in the middle, and then there's a couple just back from there.

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

Thanks very much. Paul May from Barclays. Just a couple of questions. Three, actually. Two are linked. Obviously, you clearly moved away from most valuation-based metrics, with EPS instead of NAV being your focus, net debt to EBITDA instead of LTV seemingly a greater focus for you. You still focus on ERVs, as some might call them, elusive rental values. Why are you not reporting on and just focusing on renting and leasing versus previous passing? The usual pushback being that, you know, rent on vacant space is an infinite uplift, surely just reporting on an absolute basis would be more relevant for the earnings-based metrics that you have. Linked to that is TSR, earnings yield plus earnings growth not more relevant than earnings yield at NAV plus earnings growth as a focus point for you.

[Mark Allan, CEO at Land Securities Group]

Okay. Was that three?

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

That's two, and then there's another one.

[Mark Allan, CEO at Land Securities Group]

Oh, right. Okay.

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

linked ones that was.

[Mark Allan, CEO at Land Securities Group]

When we set out with the strategy a year ago, I mean, we've spent a lot of time thinking about, you know, our responsibilities as a management team in terms of creating value for the long-term for our shareholders. A sector that's traded pretty much consistently at quite a wide discount to its NTA, to its implied value of its underlying assets. Focusing on that doesn't seem to be solving the conundrum. We focus much more on the quality of our income stream and our ability to grow that income stream sustainably over time, and that's driven everything that's in our strategy.

[Mark Allan, CEO at Land Securities Group]

That breaks down really into two things, the quality of the portfolio and the ability of the portfolio to drive quality income, you see that today in all of the 20-year highs and the rest of it. Our business model and our financing, and you can see that in terms of taking cost out of the business, so there's very little leakage now, 55 basis points of overhead as a percentage of value, turned out the debt twice the sector average, and not allocating capital to areas that we think are excessively risky relative to what we can get in current assets. For us, that focus on earnings and earnings growth is absolutely key.

[Mark Allan, CEO at Land Securities Group]

The total accounting return, which includes the sort of valuation movement, you know, we of course report that. For us to deliver value for our shareholders is how you create value from that portfolio rather than a six-month to six-month valuation of what it would theoretically be worth if you theoretically tried to sell all those assets individually at the same time into the market. Net debt to EBITDA, sorry, you touched on, it's a cash on cash measure. I think if you look at LTV, you could have two businesses with LTV of say 35%, one of which has got 20% of its portfolio in development with a lot of risk, and one of which has no development. The LTVs would look the same.

[Mark Allan, CEO at Land Securities Group]

I'd argue that the risk profiles of those two businesses, theoretical businesses are very different. By looking at net debt to EBITDA, we reflect the value or the reduction in risk that is inherent in leasing up a development program and not being dependent on lots of moving parts on development risk looking forward.

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

Just linking that back to ERV, there's constant mention of that, and that seems to be the last fallback towards valuation type metrics rather than previous passing and rental uplift on previous passing.

[Mark Allan, CEO at Land Securities Group]

Yeah, I think we're sort of halfway there on that, if I must just say. On the retail side of the business, we haven't been reporting our reversionary potential based on ERVs for some time, largely because what's driving like for like growth are things like turnover income, commercialization income, which value has struggled to put a cap rate on and include within an asset value. There we are reporting the leasing relative to previous passing, and you've seen that move dramatically up to mid-teens now. We've probably had about 3.5 years of market value growth on a portfolio with roughly five-year average lease terms. There should be another 18 months of sort of super growth, if you like, in that underlying reversion before things start to lap more encouraging growth numbers.

[Mark Allan, CEO at Land Securities Group]

I think in office, it's a slightly different position because you've got much less variable numbers in the office rents. Obviously, we're virtually full within the portfolio. By disclosing a true market value of the rents today based on rental evidence, typically drawn from our own portfolio, I think that does give a robust indication of what's the gap between what it's leased at today and what it would be leased at in the market. You can then combine with the average lease term, see how that should translate into earnings growth over the next few years. We're sort of in a sort of halfway there on that, but we think it is a relevant disclosure, particularly on the office side.

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

Okay. Just linking to the earlier question on the retail side. I mean, as a result of the Middle East conflict, obviously higher rates look like they're gonna be here to stay for even longer. Do you see potential for some of the retail assets that were on the market that I'm sure you guys were looking at, that fell away because the existing owners just thought, "Well, things are looking good. The operational performance is there. Rates were coming down or expected to come down." That's now changed. Do you think some of those assets could come back to the market at more realistic pricing for you to be more interested in them again?

[Mark Allan, CEO at Land Securities Group]

I wouldn't want to say that there are a lot of assets that we just thought were priced too expensively. We are a disciplined buyer. I think we're still expecting to see assets come to the market, as I mentioned, you know, GBP 3 billion or so that we would see visibility of. I think it is fair to say they're in the hands of owners that are not natural long-term owners that will be looking at what's the best way of crystallizing an exit that gives them value for their investors. They must be looking at execution risk in a higher cost of capital world, that's got to play into their thinking.

[Mark Allan, CEO at Land Securities Group]

We've got no evidence today of exactly what's happening on the ground, but I think, you know, what you suggest, you know, makes sense to me.

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

Perfect. Thanks very much.

[Mark Allan, CEO at Land Securities Group]

Thank you. I think there was a just behind one row. Oh, sorry. That was you next, Adam. Sorry. That's it. Thanks. Yeah, please.

[Bjorn Zietsman, Director of Real Estate Equity Research at Panmure Liberum]

It's Bjorn Zietsman from Panmure Liberum. Two questions. You mentioned you're not reporting reversion on the retail portfolio. We can calculate it, how much reversion are you seeing within your retail portfolio? The second question, just over and above reversion, how much like for like rental growth are you assuming to achieve your 2030 EPS targets?

[Mark Allan, CEO at Land Securities Group]

In terms of what reversion we're seeing on retail, right now, we're for the year just ending, we were 15% ahead of previous passing. As I mentioned a moment ago, I think there's further ERV growth to go because we've effectively got 3.5 years of growth that we've seen since market rents turned positive to in-place rents. There should be another 18 months before we start lapping with an average lease term of five years. We flag on the retail side an expectation to deliver between 4.5% and 7% like for like income growth between now and 2030. Combination of capturing reversion, growing turnover rent, commercialization income, digital media, car charging, events, et cetera, and then a small number of CapEx projects.

[Mark Allan, CEO at Land Securities Group]

That's assuming an ERV growth number that would be in the region of 3%-4%, below what we're currently seeing at the moment. It would be a similar story in terms of ERV growth expectations on the office portfolio as well. I don't think we're making any particularly significant or aggressive assumptions in further market growth from here. If you look at the office portfolio, 17% reversionary, average lease term of around six years. You've sort of got 3% per annum roughly baked in already. I think we would be underwriting around 3%-4%. You know, as we've said, ERV growth, we expect to see that grow again at that sort of level for the year ahead. Just turn to Adam. You've got Mike.

[Adam Shapton, Senior Analyst of European Research at Green Street]

Good morning. Adam Shapton from Green Street. One on the retail opportunity set, and you've been very clear about your views of the recent market and the future investment market, how that, how that might fall in your favor. Just a point of clarification. For the opportunity set you see, are any of those likely to come with significant near-term CapEx needs to capture your target returns? So is it you spend GBP 800 million and maybe there's another GBP 100 million-GBP 250 million on top of that in the near-term?

[Mark Allan, CEO at Land Securities Group]

I would say the majority of those will come with decent amounts of CapEx requirements that we would price into our.

[Adam Shapton, Senior Analyst of European Research at Green Street]

In the near-term.

[Mark Allan, CEO at Land Securities Group]

relatively near-term, I would say on a, on a three- to five-year basis, we would be looking to acquire things and reposition and, you know, so, and we looked at a couple of assets last year. We didn't proceed. Couple of the ones that we chose not to bid on had, we felt, quite significant maintenance CapEx backlogs.

[Adam Shapton, Senior Analyst of European Research at Green Street]

About the sort of CapEx chart you showed, we could imagine sitting here in two years' time, you've acquired GBP 600 million-GBP 800 million of retail, and there's a CapEx chunk for that on top.

[Mark Allan, CEO at Land Securities Group]

I think the way we would look at that, our GBP 1 billion in retail, there's GBP 200 million of CapEx on our existing assets. The other GBP 800 million, I think we would be factoring in CapEx as part of that. We're not gonna be spending money and then taking on a very significant CapEx liability that we haven't priced in.

[Adam Shapton, Senior Analyst of European Research at Green Street]

Thank you. You very sensibly, proactively answered the share buybacks question in your statement this morning. The clear inference from that is that your return investment opportunities are cheaper than your shares today, is your view. Does it follow then that you're open-minded about issuing equity to part fund these retail acquisitions to keep at the very least leverage neutral or even a reduction in leverage if shopping centers are cheaper than your stock today?

[Mark Allan, CEO at Land Securities Group]

Yeah. So I think if you look at shopping centers, and let's assume there's a yield of somewhere in the mid-sevens. If you adjust for leverage, I think that gets you know, consistent level of leverage. I think that implies an income return on equity of nine, which is broadly in line with where the shares trade today. It's not a significant delta, but provided the right quality of assets are there and the there's scarcity that is gonna underpin longer, you know, better long-term growth characteristics, we think that's the better use of capital. In terms of raising capital to do something, if it's something that is the right quality of asset and it is growing earnings, then it's certainly something that we would consider.

[Mark Allan, CEO at Land Securities Group]

We're not going to dilute earnings across an existing portfolio for the sake of adding a nice asset.

[Adam Shapton, Senior Analyst of European Research at Green Street]

Okay. Understood. Thank you.

[Zachary Gauge, Director of European Real Estate Research at UBS]

Morning. It's Zachary Gauge from UBS. A couple of questions along fairly similar themes. Firstly, mostly on capital allocation. The CMD last February, you said in the next one to three-year plan, you expect to fund GBP 800 million of the shopping centers from disposals. Should we still be thinking that in two years' time there'll be an additional GBP 800 million deployed into shopping centers? Related to that, how flexible will you be on pricing on the office disposals, given what's happened to government bond yields and the political situation since the end of the reporting period? Then secondly, just to wrap up on the residential piece. If I understand correctly, you're essentially saying, and you've got 12 months to get viability working or not working.

[Zachary Gauge, Director of European Real Estate Research at UBS]

If it's not working in 12 months, is that sort of the end of residential development, and we should be thinking about how else that capital might be deployed?

[Mark Allan, CEO at Land Securities Group]

Yeah. I'll take those in reverse order. With respect to the recycling, I might ask Vanessa to talk to a bit more specifically what's assumed in our guidance around recycling over the next few years. With respect to residential, I think we are at a point now where we've got 9,000 units across four very high quality sites. As we've mentioned, viabilities currently are below a level that would make sense for us. They do all have planning consents in place, and we are on the most progressed of those in active and I think positive constructive engagement with public sector partners.

[Mark Allan, CEO at Land Securities Group]

I think on those projects, we will know where we can get to in terms of net yields on costs and IRRs over the next six to 12 months. If those numbers don't stack up, we're not gonna put capital into those projects. It would be crazy to do so. I think as I stand here today, there is a route through to that viability, that's why we're investing the time. We do think it's worthwhile, they're very strong projects, we think there's the basis of quite significant competitive advantage. If we can't get the returns to a level that makes sense, you know, you can't have a capital allocation framework as the one we set out then decide, actually, no, we wanna get on with these projects over here because we've had them for ages.

[Mark Allan, CEO at Land Securities Group]

I think with respect then to the recycling, I think the GBP 800 million is still our objective. Within two years, I think, you know, perhaps we will. Perhaps it'll be slightly longer than that, given those opportunities. Just with respect to earnings guidance, perhaps Vanessa could give a bit of clarity on what we're assuming.

[Vanessa Simms, CFO at Land Securities Group]

Yeah. We are targeting that rotation, as you say, across to financial year 2030. What we are assuming is we're splitting the GBP 800 million of investment into new assets, roughly around the three-year period from financial year 2028, 2029 and 2030. That's what we, if you assume that. Where we've guided financial year 2027, we're not making significant assumptions in the 2027 guidance around investment into retail acquisitions. In financial year 2028, we're assuming we get a third of that delivered. That would be around GBP 250 million-GBP 300 million of assumption within our guidance, which equates to probably around GBP 5 million or GBP 6 million of upside on earnings. It's not a significant amount in the financial year 2028 guidance.

[Vanessa Simms, CFO at Land Securities Group]

If you look at then the financial year 2030 potential that we have, 20% of that growth comes from that rotation. Therefore, you can see that we've shown that 80% remaining actually comes from our own portfolio. That's the differential between the two ends of those spectrums.

[Mark Allan, CEO at Land Securities Group]

Thank you. Zach?

[Zachary Gauge, Director of European Real Estate Research at UBS]

Sorry, just on the yields versus office yields that you would potentially move to fund in the current environment.

[Mark Allan, CEO at Land Securities Group]

Excuse me. I think that the 150-200 basis point spread between a true net effective yield on both sides of the ledger is still the sort of level that we would look at. Just to take that as an opportunity to stress and remind people about net effective yields. The net effective yield is what goes through our P&L account. It's different from the headline rents on offices because of the typically 20% of incentive that is offered upfront that we spread over the lease term. Typically, the net effective yield on an office is 20% lower than the headline yield that might be quoted on a transaction.

[Mark Allan, CEO at Land Securities Group]

If you sell at a yield of six, you're probably selling at a P&L yield of five. Whereas in retail, incentives tend to be more like 10% now, so less significant. Of course, in residential, essentially no incentives at all. Oh, sorry, one further question over here. There's a race with microphones. No.

[Ashnaa Vyas, Equity Research Associate at Deutsche Numis]

Morning. Ashnaa Vyas from Deutsche Numis. I just had one question on the use of agentic commerce and AI in your shopping centers, and if you guys are investing in it and what kind of spend you're putting in or thinking about putting in. Just on the back of that, what the experience is for your tenants using that and the end user, which is the consumers.

[Mark Allan, CEO at Land Securities Group]

Yeah. I think most of the investment in AI for consumers and more immersive retail environments, that CapEx is in the main coming from the retailers. I think that's what you're seeing in retailers deciding to sign for much larger stores and then investing within those store fits. Of course, you know, I don't know exactly where their investment numbers are, but on the basis that if I, you know, give the next example in Bluewater, I think that's an 11-year term certain on that lease with a turnover component to the lease as well. They're clearly looking at long periods of time to recoup investment.

[Mark Allan, CEO at Land Securities Group]

With ourselves, we're always looking at how we improve and enhance the environment and how we use data and AI to track performance and consumer behaviors and movements within our centers, but it's not a significant level of investment and not something that we have planned for investment at a significant level. I don't think there are any more questions in the room. Mark, I was gonna let you ask a question, but as you've decided you don't want to, that's just fine. I'm gonna go to anyone on the call now.

[Operator]

Thank you. I would like to remind everyone over the phone to ask the question. Please press star one on your telephone keypad. There are no questions.

[Mark Allan, CEO at Land Securities Group]

Okay

[Operator]

waiting at this time. Presenters, you may continue.

[Mark Allan, CEO at Land Securities Group]

Great. Thank you. Just going to go to one question on the webcast, which has come from Mike Pr. How does net effective rent on the BP pre-let at Timber Square compare with the underwrite? There's two questions. I'll cover that one first. That was a little way ahead of the underwrite. Probably a mid-single digit level ahead of what we'd assumed originally. The growth in Bankside has not been as significant as we've seen in Thirty High, for example. Still very encouraging, of course, with the quality of the occupier there. You know, that's also very additive to overall value. I think a very positive outturn.

[Mark Allan, CEO at Land Securities Group]

Sorry, I'm just trying to scroll back through here. Then is the residential operating platform still intended to be established organically or is it TBA? I think that will be part of the decisions we make over the next 12 months about the viability of developments. We would need to be confident of what the underlying operating solution was. As I think we've said in past, sort of conceptually, I don't think it's necessarily moving to the final answer immediately. It could be that you work with private operators to run things whilst we subscale and then move to something in-house longer-term. That'll be a decision alongside the viability of those residential projects over the next year or so. Then a question from Kempen.

[Mark Allan, CEO at Land Securities Group]

Since the acceleration in technologies around AI, have you started to look differently at your office portfolio or change your strategy? I think our strategy remains the same within office, the reduction of GBP 2 billion of capital employed by 2030. That still leaves us with a very significant high quality office portfolio. As I mentioned in comments during the presentation, we see that as being an accelerant of the concentration of occupied demand on the very best space. I think it's unlikely we'll see any shift in our plans around development just given the elevated risk we see and the ability of capturing growth within the existing portfolio. It's not something I expect to see delivering resulting in a change in strategy.

[Mark Allan, CEO at Land Securities Group]

It is something which I think underpins a very positive growth outlook for the portfolio. I think at that point, that's hopefully covering all the Q&A. I appreciate you've had a lot of you, a number of presentations this morning. Thank you very much for taking the time to come along or to dial in. Have a good day.

Participants

Executives

• Mark Allan, CEO
• Vanessa Simms, CFO

Analysts

• Adam Shapton, Senior Analyst of European Research at Green Street
• Ashnaa Vyas, Equity Research Associate at Deutsche Numis
• Bjorn Zietsman, Director of Real Estate Equity Research at Panmure Liberum
• Oliver Woodall, Analyst at Kolytics
• Paul May, Director and Head Real Estate Equity Research at Barclays
• Zachary Gauge, Director of European Real Estate Research at UBS