Land Securities Group H2 Earnings Call Highlights

Key Points

• Landsec posted solid FY2026 results with like-for-like net rental income up 4.6% and EPRA earnings up 2.2%, while occupancy rose to 98% across the portfolio and rental values grew at their fastest pace in nearly 20 years.
• Management guided to stable EPS this year because the benefit of underlying growth is being offset by the Queen Anne’s Mansions sale, but it expects stronger growth ahead, including high single-digit EPS growth in FY2028 and potential EPS of 62 pence by FY2030.
• Both retail and offices are performing strongly, with retail like-for-like income up 5.5% and office income up 6%; Landsec is also reducing development risk and focusing capital recycling toward higher-return retail assets.

Land Securities Group LON: LAND, known as Landsec, said strong occupier demand and limited new supply helped lift occupancy across its portfolio to the highest level in more than two decades, supporting faster rental growth and a stronger medium-term earnings outlook.

Presenting the company’s 2026 full-year results, Mark said Landsec was “in excellent shape,” with customer demand remaining high across both offices and retail. He said occupancy had risen to 98% across the portfolio, while rental values were increasing at the fastest pace in nearly 20 years.

The company reported 4.6% growth in like-for-like net rental income for the year, ahead of its initial guidance. EPRA earnings rose 2.2%, which management said was at the top end of guidance after accounting for the impact of the earlier-than-planned sale of Queen Anne’s Mansions. The dividend increased 2%, while net tangible assets per share rose 0.9% for the year and 2.2% in the second half.

Landsec said loan-to-value declined slightly to 38.7%, and net debt to EBITDA improved to 8.4 times. Vanessa said the company expects that ratio to fall below 7 times over the next two years, driven by the lease-up of recent developments and continued like-for-like income growth.

Guidance Points to Stable EPS This Year, Stronger Growth in FY 2028

Management reiterated that reported earnings per share are expected to be stable in the current financial year, with underlying growth offset by the annualized effect of the Queen Anne’s Mansions disposal. Vanessa said that sale will have a 4% impact on EPS this year.

Looking further ahead, Landsec said current momentum supports high single-digit EPS growth in financial year 2028. The company also reiterated its outlook for potential EPS of 62 pence by financial year 2030, implying average annual EPS growth of about 5% from current levels.

Vanessa said the largest driver of future EPS growth remains the capture of reversion in the existing portfolio. She noted that Landsec has delivered 4% compound annual growth in like-for-like net rental income over the past four years, while reversionary potential in offices has tripled to 17%.

Management said around 80% of expected EPS growth by financial year 2030 is expected to come from the existing portfolio and operating platform, meaning the company is not reliant on investment market activity to meet its growth targets.

Retail and Office Portfolios Both Show Strong Demand

Landsec reported strong performance in both retail and offices, which together account for more than 90% of income. Retail like-for-like income rose 5.5%, while office like-for-like income grew 6%.

In retail, occupancy increased by 100 basis points to almost 98%, its highest level since the early 2000s. Landsec signed or had in solicitors’ hands £49 million of retail leases, on average 11% above estimated rental value. ERV growth in retail accelerated to 5.8%, which Mark said was the highest rate in more than 20 years.

Mark said Landsec’s retail assets are concentrated in the top tier of U.K. destinations, where brands are focusing investment in “fewer, bigger, better stores.” He said sales in Landsec’s destinations have grown at around seven times the U.K. national average over the past four years.

In offices, occupancy reached nearly 99%. Uplifts on relettings and renewals increased to 14%, compared with 10% in the prior year. Landsec signed or had in solicitors’ hands £21 million of office lettings, on average 7% ahead of ERV. Office rental values grew 7%, the strongest level in the portfolio since the 2016 EU referendum.

Mark said occupier demand is increasingly concentrated in the best locations, particularly London’s West End, City and Bankside. He cited BP’s letting at Timber Square as an example of companies consolidating operations into central London locations.

Development Exposure Set to Fall Sharply

Landsec said it has materially reduced development risk and does not plan to commit meaningful capital to new development over the next 18 months. Mark said committed development exposure will fall to less than 2% of portfolio value by the summer, down from an average of about £1 billion, or close to 10%, over the past few years.

The company has less than £200 million of development capital expenditure still to come. Vanessa said Landsec has no need to refinance debt until 2028, and 89% of its debt is fixed or hedged. The average cost of debt is 3.6%, and the average maturity is 8.6 years, which she said is the longest in the U.K. REIT sector.

Landsec’s recently completed London office projects are now 54% let, with interest covering substantially all remaining space through negotiations, requests for proposals or active engagement. Management said it expects those projects to generate £63 million of net effective rent once fully let, with associated incremental annualized interest expense of £43 million.

Vanessa said the developments are expected to create a temporary earnings drag of £6 million to £8 million in the current financial year because interest stops being capitalized at completion before full rental income is received. Once fully let, the projects are expected to add £20 million to earnings.

Capital Recycling Focused on Retail

Landsec said it sold more than £700 million of assets during the year that generated limited or no return, including Queen Anne’s Mansions, two pre-development assets, four retail parks and two smaller London offices. The disposals reduced NTA by 1.1%, but management said they improved future income and EPS growth prospects.

Mark said the company will continue to explore recycling capital out of lower-returning assets, including offices, and prioritize investment into retail, where it sees higher income returns and stronger income growth. He said Landsec has visibility on more than £3 billion of prime retail assets that could come to market over the next one to two years, though the company will remain disciplined on quality, price and capital expenditure risks.

On residential development, Mark said the company continues to see attractive long-term fundamentals but viability remains challenging. He said public sector support, including reduced affordable housing requirements and lower Community Infrastructure Levy charges for certain projects, could help improve returns. Landsec expects to determine over the next six to 12 months whether its most progressed residential projects can proceed.

Management said macroeconomic uncertainty, including the Middle East conflict and renewed uncertainty around interest rates, could affect investor decision-making in the near term. However, Mark said Landsec has seen no signs of weakening occupier demand from the Middle East situation and said the company’s portfolio is positioned to benefit from continued demand for prime space.

About Land Securities Group LON: LAND

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.

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