Final Results

16 May 2025

LAND SECURITIES GROUP PLC ("Landsec")

Results for the year ended 31 March 2025

Strong operational results set to drive continued growth

Mark Allan, Chief Executive of Landsec, commented:

"Our portfolio again delivered very strong performance with like-for-like net rental income growth of 5.0%, supporting growth in both earnings and portfolio valuation over the year. Owning the right real estate has never been more important and, with a very healthy pipeline of occupier demand, this trend looks set to continue, providing a clear trajectory for further near and medium-term EPS growth.

"Our undoubted portfolio quality is a result of proactive and successful capital recycling over recent years and this will continue to be a focus for us. Our capital allocation decisions from here are about ensuring that the growth outlook for our portfolio in 3-5 years' time is as positive as it is for our current portfolio today. That is why we have set out a clear plan to increase investment in major retail by a further £1bn and establish a £2bn+ residential platform by 2030, to be funded by rotating £3bn of capital out of offices, non-core investments and low or non-yielding pre-development assets. Delivering on this strategy, whilst continuing to drive sustainable income and EPS growth, is our priority and we are firmly underway."

Financial highlights

¾  EPRA earnings up £3m to £374m, as strong 5.0% LFL net rental income growth and lower overhead costs more than offset impact from significant disposals early in year and a rise in finance costs

¾  EPRA EPS(1)(2) up 0.4% to 50.3p, in line with expectations and ahead of initial guidance

¾  Total dividend up 2.0% to 40.4p per share, in line with guidance

¾  Profit before tax up to £393m, as strong 4.2% ERV growth supported £119m or 1.1% uplift in portfolio value, resulting in 6.4% return on equity and 1.7% increase in EPRA NTA per share

¾  Group LTV of 38.4% and average net debt/EBITDA of 7.7x pro-forma for disposals since year-end, as long 9.6-year average debt maturity underpins resilience of capital base

¾  Further LFL growth and efficiency improvements, alongside portfolio rebalancing to enhance long term growth, provides c. 20% EPRA EPS growth potential by FY30, with c. 2-4% growth expected in FY26

Operational highlights

¾  Delivered 5.0% LFL net rental income growth, ahead of guidance, with 8% rental uplifts on relettings / renewals in London and major retail, and continued strong leasing momentum since the year-end

¾  Increased occupancy by 100bps on a LFL basis to 97.2%, the highest level in five years

¾  Drove 4.2% ERV growth through successful leasing activity, adding to future income growth potential

¾  Reduced overhead costs by 5%, with more than 10% further savings expected over FY26-27

Central London income growth increases, as investment market activity starts to pick up

¾  Delivered 6.6% LFL net rental income growth, with occupancy up 120bps to 98.0%, £24m of lettings signed or in solicitors' hands 7% above ERV, and relettings/renewals 13% above previous rent

¾  Drove 5.2% ERV growth, as customer demand remains focused on high-quality space in best locations, with growth for current year expected to be at broadly similar levels

¾  Reversionary potential increased to 12%, paving way for further near-term LFL income growth

¾  Portfolio valuation up 1.0%, as yields start to stabilise and investment market activity continues to pick up steadily, supporting planned release of £2bn of capital employed from FY27 onwards

¾  Set to complete £860m of developments in late FY26 at accretive 7.1% gross yield on cost, with encouraging customer interest expected to translate into first pre-letting activity in second half

Major Retail income up strongly, as brands focus on best destinations

¾  Delivered 5.1% LFL net rental income growth, with occupancy up 110bps to 96.6%, £39m of lettings signed or in solicitors' hands 11% above ERV, and relettings/renewals 8% above previous rent

¾  Drove 4.0% ERV growth, capitalising on continued focus from brands on fewer, bigger, better stores, with similar growth expected for current year

¾  Expect continued LFL income growth, as leasing pipeline remains strong and rental uplifts grow

¾  Portfolio valuation up 3.4%, reflecting attraction of high-quality, growing income

¾  Invested £610m in Liverpool ONE and Bluewater acquisitions at average 7.7% income return, with aim to invest a further £1bn in highly accretive growth of major retail platform over next 1-3 years

Progressed preparation of sizeable residential pipeline, ahead of first potential starts in late 2026

¾  Started on site with infrastructure works, secured vacant possession and completed demolition for first phase of consented 1,800-homes Finchley Road scheme in Zone 2, London

¾  Renegotiated development agreement at Mayfield, Manchester, unlocking option to deliver c. 1,700 homes from 2026 onwards, with decision on detailed planning for first phase expected in second half

¾  Submitted outline/detailed planning application for masterplan in Lewisham, Zones 2&3, London, covering up to 2,800 homes, with planning decision expected in second half of year

¾  Preparing for first potential residential development starts in late 2026, as part of strategic objective to invest £2bn+ in this structural growth sector by FY30

Maintained strong capital base, with £655m of capital recycling broadly in line with book value

¾  Sold £496m of non-core assets during year plus a further £159m since year-end, on average 1% below Mar-24 book value, with further non-core disposals expected in near term

¾  Maintained solid capital base, with 9.6-year average debt maturity, £1.1bn cash and undrawn facilities, and pro-forma for disposals post year-end, 7.7x average net debt/EBITDA and 38.4% LTV

¾  Capitalised on sector-leading access to credit during year, with £350m 10-year bond issue at 4.625% coupon and refinancing of £2.25bn revolving credit facilities at existing low margins

1. An alternative performance measure. The Group uses a number of financial measures to assess and explain its performance, some of which are considered to be alternative performance measures as they are not defined under IFRS. For further details, see the Financial review and table 14 in the Business analysis section.

2. Including our proportionate share of subsidiaries and joint ventures, as explained in the Financial review. The condensed consolidated preliminary financial information is prepared under UK adopted international accounting standards (IFRSs and IFRICs) where the Group's interests in joint ventures are shown collectively in the income statement and balance sheet, and all subsidiaries are consolidated at 100%. Internally, management reviews the Group's results on a basis that adjusts for these forms of ownership to present a proportionate share. These metrics, including the Combined Portfolio, are examples of this approach, reflecting our economic interest in our properties regardless of our ownership structure. For further details, see table 14 in the Business analysis section.

A live video webcast of the presentation will be available at 9.00am BST. A downloadable copy of the webcast will then be available by the end of the day.

We will also be offering an audio conference call line, details are available in the link below. Due to the large volume of callers expected, we recommend that you dial into the call 10 minutes before the start of the presentation.

Please note that there will be an interactive Q&A facility on both the webcast and conference call line.

Webcast link: https://webcast.landsec.com/2025-full-year-results

Call title: Landsec Full Year Results 2025

Conference call: https://webcast.landsec.com/2025-full-year-results/vip_connect

Forward-looking statements

These full year results, the latest Annual Report and Landsec's website may contain certain 'forward-looking statements' with respect to Land Securities Group PLC (the Company) and the Group's financial condition, results of its operations and business, and certain plans, strategies, objectives, goals and expectations with respect to these items and the economies and markets in which the Group operates.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as 'anticipates', 'aims', 'due', 'could', 'may', 'should', 'expects', 'believes', 'intends', 'plans', 'targets', 'goal' or 'estimates' or, in each case, their negative or other variations or comparable terminology. Forward-looking statements are not guarantees of future performance. By their very nature forward-looking statements are inherently unpredictable, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Group's ability to control or estimate precisely. There are a number of such factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. These factors include, but are not limited to, changes in the political conditions, economies and markets in which the Group operates; changes in the legal, regulatory and competition frameworks in which the Group operates; changes in the markets from which the Group raises finance; the impact of legal or other proceedings against or which affect the Group; changes in accounting practices and interpretation of accounting standards under IFRS, and changes in interest and exchange rates.

Any forward-looking statements made in these full year results, the latest Annual Report or Landsec's website, or made subsequently, which are attributable to the Company or any other member of the Group, or persons acting on their behalf, are expressly qualified in their entirety by the factors referred to above. Each forward-looking statement speaks only as of the date it is made. Except as required by its legal or statutory obligations, the Company does not intend to update any forward-looking statements.

Nothing contained in these full year results, the latest Annual Report or Landsec's website should be construed as a profit forecast or an invitation to deal in the securities of the Company.

Chief Executive's statement

A clear trajectory for growth, both near and longer term

Owning the right real estate has never been more important. Irrespective of sector, there is a clear focus from customers on best-in-class space and as this space 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 is vindicated by the strength of our operational performance, with like-for-like rental income up 5.0% and like-for-like occupancy up 100bps to 97.2%, substantially outperforming wider markets.

In the long run, it is clear that income growth is the main driver of value growth in both equity markets and real estate, so our primary focus is on delivering sustainable income and EPS growth. For an £11bn REIT like us, materially shifting portfolio mix takes time, so 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. In that respect, we expect our customers' focus on quality to persist and for this to support continued like-for-like rental income growth. This encouraging outlook on income is further supported by our clear plans to further reduce overhead costs by over 10% over the next two years following the 13% saving we already made over the last two years. These two factors combined underpin our expectations for positive near-term EPS growth.

The capital allocation decisions we make today have more impact on EPS growth in the medium to longer term. As such, our decisions on development and recycling capital today are therefore about making sure that in 3-5 years' time, our asset mix is such that we are still as confident about the income growth prospects of our portfolio at that point, as we are about our current portfolio today.

These two factors - impact on sustainable income and EPS growth nearer term and impact on desired portfolio mix longer term - are, alongside our assessment of risk, the primary guide for our capital allocation decisions. It is this framework which underpinned our decision to invest £0.6bn of capital in two of the very best retail destinations in the UK over the past year - Liverpool ONE and Bluewater - and to sell £0.4bn of ageing hotels with a substantial capex bill looming. It is also what underpins our aim to invest a further £1bn in major retail over the next 1-3 years, as we monetise further non-core assets and surplus land. And, on a 2-5 year view, our aim to reduce our capital employed in offices by £2bn to build a sizeable residential platform, which we believe will provide higher structural growth and lower volatility.

Whilst we are mindful of the recent rise in global economic uncertainty, we are yet to see any impact of this on customer demand or investment markets. Given the actions we have taken over the past few years, our outlook for EPS growth and return on equity therefore remains positive. Executing our strategy will build further on this and deliver material value for shareholders by moving to higher income, higher income growth and lower cyclicality in the medium term.

Strong operational performance underpins solid financial results

Our operational performance over the past year has been strong. Occupancy increased to a high 97.2% and we delivered 5.0% growth in like-for-like net rental income, with strong growth across London and major retail. For both, our reversionary potential is growing, with 8% rental uplifts on relettings/renewals. In retail in particular, this trend has continued to rise, up from 1% last year to 4% at the half year, 7% for the full year and 10% for current lettings. Overall leasing was 4% above ERV, driving 4.2% ERV growth.

Our strong operational performance and £4m reduction in overhead costs, on top of the £7m reduction in the prior year, mean our financial results for the year are positive. Despite the earnings impact of the significant disposals we made early in the year, EPRA earnings still increased £3m to £374m, or 50.3 pence per share. This was also despite the fact that the prior year benefitted from £14m, or 1.9 pence, higher surrender receipts than the last twelve months and means EPS is ahead of our initial guidance for the year. Reflecting this, our dividend is up 2.0%.

The valuation of our portfolio was up 1.1%, in line with our view a year ago that yields were set to stabilise and values for the best assets would return to growth. As such, our return on equity improved to 6.4% and NTA per share increased 1.7%. Meanwhile, our balance sheet remains robust, with a long average debt maturity of 9.6 years. Pro-forma for disposals since the year-end, our LTV is 38.4% and average net debt/EBITDA is 7.7 times. Following a £350m 10-year bond issue at 4.625%, representing a 97bps credit spread, and refinancing of £2.25bn revolving credit facilities at stable margins during the year, the benefit of our balance sheet strength is clear and maintaining this remains a key priority.

Table 1: Highlights

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information in the Financial Review.

2. Includes owner-occupied property and non-current assets held-for-sale.

Our strategy

Through targeted investments and £3.3bn of disposals since our Strategy Review in late 2020, we have established a high-quality portfolio and pipeline of best-in-class office-led, retail-led and residential-led places with substantial income growth potential. The predominant use of space in each of these areas differs, yet there is increasingly more binding them together than setting them apart, as the lines between traditional uses of successful urban places continue to blur. Our ability to curate these places to adapt to the evolving demands of modern cities is what supports their sustained growth over time.

This strategy has paid off, as demand for modern, sustainable office space in London remains strong and in retail, brands continue to concentrate on fewer, but bigger and better stores in key locations. As supply of both is constrained, rents in our portfolio continue to grow, which underpins our positive view on near-term income and EPS growth. This reflects the investments decisions we have made in recent years, in terms of assets, but also in respect of our organisation, people, and technology platform. Similarly, the investment decisions we make over the next 1-2 years will determine the trajectory for our returns in 3-5 years' time.

Looking ahead, over the medium to longer term, we see a number of macro trends that we expect to shape the environment we operate in:

¾  Growing geopolitical risk and climate change mean inflationary pressures will likely persist, which stresses the importance of driving sustainable like-for-like income growth;

¾  The normalisation of interest rates means the cost of capital is likely to remain elevated, putting more emphasis on risk-adjusted returns, the time value of money, and efficiency;

¾  Technological change means customer expectations will continue to evolve rapidly, impacting depreciation in sectors with fewer long-term supply constraints; and lastly,

¾  Continued population growth will mean the existing shortage of urban housing is set to grow.

The Strategy Update we set out in February this year is built around these structural trends. In executing this strategy, our primary focus will be on delivering sustainable income and EPS growth. As a framework for capital allocation decisions, this means we will prioritise opportunities that deliver income and EPS growth in the near term but also position our portfolio mix such that EPS growth can be sustained in the medium to longer term. Beyond that, there will be a balance between these two factors - near term EPS growth and impact on our desired portfolio mix - but our decisions will always seek to enhance at least one of these, without distracting from the other.

This explains why major retail still remains our highest conviction call and why we seek to grow our retail platform by a further £1bn over the next 1-3 years. Risk-adjusted returns on acquisitions are compelling, with highly attractive 7-8% day-one income yields; rents having returned to growth from rebased levels; and zero supply of new space in the foreseeable future, as capital values are around half of replacement costs, meaning that competition for the best space is expected to persist and rents continue to grow.

This framework also explains our plan to reduce capital employed in office-led assets by £2bn to fund the build-up of a £2bn+ residential-led platform over the next 2-5 years. We are very confident in the near-term income growth prospects of our high-quality London office assets, as the focus from customers on best-in-class space and modest new supply in recent years has created 12% positive reversionary potential. Yet, longer term there are fewer supply constraints, and demand and hence rents are likely to be more cyclical. The growth in demand for homes, however, is more structural, as it is underpinned by long-term demographic trends. This means residential income and values have been much less volatile historically and we expect this to remain the case going forward.

Whilst investing in residential offers limited near-term EPS upside, income growth closely tracks inflation over time and is captured annually, so real returns are attractive. Net yields of c. 4.5-5% are similar to net effective income returns on offices after lease incentives, so rotating capital out of offices into residential should be broadly EPS neutral initially, but offers higher EPS growth and lower risk over time. The scale-up of our residential platform is supported by the 6,000-homes development pipeline we have established over the past few years across three large scale, well-located and highly-connected sites in London and Manchester, which combined with selective acquisitions will take us to our £2bn+ target by 2030.

The other implications of our recent strategy update are also clearly explained by our thinking on capital allocation. We plan to release half of our £0.7bn capital employed in low/non-yielding pre-development assets over the next 1-3 years to reduce the holding cost of this, which should improve earnings by c. £15m p.a. and overall ROE by c. 25-50bps. We also plan to exit our residual £0.8bn of retail/leisure parks, as day-one yields are reasonable but like-for-like income growth trails the growth in major retail destinations. In addition, we will scale back our office-led development by at least half, to grow our residential development. All of these decisions either enhance our near term EPS growth, help rebalance our portfolio towards higher longer-term EPS growth, or contribute to both.

Implications for EPS growth and driving shareholder value

As most of our near-term income and EPS growth will be driven by our current assets, we are confident in how we have positioned our portfolio and platform in recent years. Our strong 5.0% growth in like-for-like income over the past twelve months is testament to this. In addition to continuing to capture the growing reversion in our existing portfolio and further reducing overhead costs over the next two years, all else equal, the above capital allocation decisions would therefore drive c. 30% EPS growth by FY30. Against that, we have to absorb the impact of interest costs going up as we refinance maturing debt plus the expiry of the income at Queen Anne's Mansions, which have a combined negative EPS impact of c. 5 pence, spread over a number of years.

Overall, we therefore see the potential for EPS to grow c. 20% from 50.3 pence over the past year to c. 60 pence by FY30, which adds further to our attractive existing income return at NTA of 5.8%. Over this period growth should be relatively linear although the exact year-on-year profile will be influenced by factors such as the timing of development lettings, with for example £61m of ERV completing at our two highly sustainable, on-site developments in Victoria and the Southbank in about a year's time. We are seeing encouraging customer interest in this space emerge and although it will take time to lease-up as these are multi-let buildings, they should add £7m to earnings once fully let. We will not start any new speculative office-led projects until the expected income on these projects is substantially de-risked.

Over time, our compound growth in EPS should drive continued growth in dividends, whilst rebalancing our portfolio towards higher long-term income growth and lower cyclicality will create a more valuable income profile. In support of this, we will retain our strong capital base, as we continue to target a net debt/EBITDA of below 8x and an LTV around the mid 30's at this stage of the cycle. This will be further enhanced by a reduction in risk profile and cyclicality, as we reallocate capital from offices to residential. As we execute our strategy, Landsec is well-placed to deliver significant shareholder value.

Outlook

The outlook for our best-in-class portfolio and pipeline remains firmly positive.

In major retail, the top 1% of all shopping destinations in the UK provide brands with access to 30% of all in-store retail spend. As close to 90% of our retail assets are in this top 1%, brands continue to invest in space with us, focussing on 'fewer, bigger, better' stores in the best locations. Any pressure on brands' margins from increased NI costs or wider economic uncertainty will likely sharpen this focus further and put more pressure on the tail-end of brands' store portfolios. As our occupancy is now higher than it was before Covid, we expect rental value growth this year to be around similar levels as last year.

In London, office utilisation across our portfolio continues to grow and customers are now planning for c. 25% more space per person than five years ago, with c. 80% of our lettings over the past year having seen customers grow or keep the same space. In the near future, new supply across London is modest, so we expect our rental values this year to continue to grow at a broadly similar rate as they did last year. This also bodes well for our two committed developments, Thirty High and Timber Square, where we expect to see first pre-let activity in the second half of this year, in line with our underwrite assumptions.

Meanwhile, in residential, we have created a £3bn development opportunity to build scale in a sector with strong structural growth characteristics, attractive real returns and much lower volatility. The attractive long-term prospects in this space should enhance our sustainable income and EPS growth over time.

The trends that have supported our strong operational performance over the past few years remain intact, even though the global economic outlook has become more uncertain in recent months as a result of shifting US trade policy. We are mindful of the disruption this can cause but, as a purely UK focused business with an existing customer base that is primarily focused on successful omnichannel retail brands, professional services and financial services and a development pipeline which is increasingly focused on residential, we are not seeing any impact on customer demand or financial performance.

In investment markets, we continue to see a steady pick-up in activity across the UK and increasingly in London offices, albeit from a low base. The outlook for long-term interest rates is more relevant than the outlook for base rates, but for assets where there is an opportunity to drive income growth in the coming years, such as our best-in-class portfolio, there appears to be a growing understanding amongst investors that real returns look attractive relative to real interest rates. Absent any major economic shocks, we expect this will continue to underpin valuations for such assets as investment activity recovers further.

In summary, we are well-placed due to the successful execution of our 2020 strategy, with clear upside as we deliver the next phase of our strategy. Our portfolio is 97.2% full, so ERVs are growing. Our office rents are 12% reversionary and rental uplifts on relettings/renewals in retail have risen to 10%. We are on track to reduce overhead cost by a further 10% over the next two years, with additional upside to EPS to come from recycling £3bn of capital out of offices and non-core assets into major retail and residential.

All this means we see the potential to deliver c. 20% growth in EPS by FY30 and with c. 2-4% growth in EPS expected for FY26, supported by c. 3-4% growth in like-for-like net rental income, we are well on track. We expect this to support continued growth in dividends and to drive an attractive return on equity over time, built on an existing income return at NTA of 5.8% plus future income growth. As we move to higher income, higher income growth and lower cyclicality in returns, the delivery of our strategy is set to drive significant shareholder value. Owning the right real estate has never been more important.

Operating and portfolio review

Overview

We have created a high-quality, urban real estate portfolio which produces £657m of annualised rental income and offers potential for material income growth. This portfolio was valued at £10.9bn as of March and comprised the following segments:

¾  Central London (62% by value): our well-connected, high-quality office (85%) and retail and other commercial space (15%), principally focused on multi-let assets in a small number of key areas in the West End (68%), City (24%) and Southwark (8%).

¾  Major retail destinations (24%): our investments in seven shopping centres and three retail outlets, c. 90% of which sit in the top 30 highest selling retail destinations in the UK.

¾  Mixed-use urban neighbourhoods (7%): our investments in mixed-use urban places in London and a small number of other major UK cities, with future repositioning or residential development potential.

¾  Subscale (7%): assets in sectors where we have limited scale or competitive advantage and which we therefore plan to divest over time, split broadly equally between retail and leisure parks.

From FY26 onwards, we will align our financial reporting to our updated strategy and operating model, with a split between Office-led (61%), Retail-led (29%) and Residential-led (2%) places plus an element of residual non-core assets (8%). A reconciliation will be provided separately, but this report is based on the segmentation of how our portfolio was managed over the past financial year. 

Driving sustainable income growth

Our main focus is delivering sustainable income and EPS growth. In the long run, valuation yields of real estate assets and P/E multiples in equity markets are both broadly stable, which means that delivering sustainable income and EPS growth, over time, will result in attractive return on equity for shareholders.

Given the time it takes to develop and acquire or sell a meaningful share of an £11bn property portfolio, in the next few years the majority of our income growth will be driven by our existing portfolio, where the outlook is positive. Our capital allocation decisions from here are about ensuring our income growth prospects in 3-5 years are as attractive as they are for our current portfolio today.

The strength of this has again been proven over the past twelve months. Like-for-like net rental income was up 5.0%, with strong growth in both London and retail. Occupancy increased 100bps on a like-for-like basis to a high 97.2% and we secured rental uplifts of 8% on relettings/renewal across the two main parts of our portfolio. Overall ERVs were up 4.2%, underpinning future income growth, and on a like-for-like basis, our gross to net margin was up 1.7ppt due to a reduction in service charge expense and operating costs as a result of our focus on efficiencies.

Table 2: Like-for-like income growth

Central London

Customer demand for office space with the best sustainability credentials, local amenities and transport connectivity continues to grow and given that such space is in limited supply, rents continue to rise.

The appeal of our offer is reflected in the fact that we continue to see growth in daily turnstile tap-ins in our buildings. The rate of growth will naturally plateau as customers' space nears full capacity, yet the last three months saw average daily tap-ins up 11% vs the prior year. Our customers are now planning for c. 25% more space per person than they did five years ago, so c. 80% of our lettings over the last twelve months have seen customers grow or keep the same space.

Reflecting this, like-for-like occupancy increased 120bps to 98.0%, significantly outperforming the London market as a whole at 91.9%. We completed 42 lettings and renewals during the year, totalling £21m of rent, on average 5% ahead of ERV, with a further £3m of lettings in solicitors' hands, 22% above ERV. Uplifts on relettings/renewals were 10%, supporting 6.6% LFL rental income growth, reflecting strong leasing results across a wide range of assets and further income growth at Piccadilly Lights. ERVs were up 5.2%, so as our reversionary potential is now 12%, we expect continued growth in rental income.

Our two established Myo flex office locations in Victoria and Liverpool Street saw occupancy reduce from 90% to 79% in the first half due to a small number of larger lease expiries, but in line with the view we set out at the half year, occupancy has recovered to 90% since then. The lease-up of the four new Myo locations we opened a year ago has taken slightly longer than expected, but these are now 61% let or under offer, with a further 21% in negotiations and rents on average 2% ahead of our underwrites.

Major retail destinations

The top 1% of all UK shopping destinations provide brands with access to c.30% of the country's in-store, non-food retail spend, offering higher sales densities and productivity than other formats. Around 90% of our retail assets sit in this top 1%, which mean our destinations continue to materially outperform, with total sales up 3.4% and footfall up 0.4%, well ahead of BRC Benchmarks (-1.7% and -0.7% respectively).

As a result, we continue to see strong demand for our space, as brands focus on 'fewer, bigger, better' stores. Examples of this over the past year are deals with Next to triple the size of their existing store in Bluewater to 133,000 sq ft and Primark to double their store in White Rose from 37,000 to 71,000 sq ft; new openings of e.g. Bershka, Pull&Bear and Sephora at Bluewater; and with JD Sports, who are moving into a major new store in St David's from elsewhere in Cardiff city centre.

Over the past year, 17 brands increased their space with us, 30 new brands opened in our centres and 45 existing brands opened stores in new locations within our portfolio. This meant like-for-like occupancy increased 110bps to 96.6%, so occupancy is now higher than it was before the pandemic. We signed 201 leases totalling £26m of rent on average 8% above ERV, driving 4.0% ERV growth for the year. Relettings and renewals for the year were 7% above previous passing rent, up from 3% at the half year and 1% over the prior year. This has risen further to 10% for deals in solicitors hands, underlining the growing reversionary potential in our portfolio. As a result, like-for-like net rental income increased 5.1%.

At the same time, on a like for like basis our leasing pipeline is up meaningfully vs this time last year, with £12m of lettings in solicitors' hands on average 20% ahead of ERV, and as our existing assets are nearly full and new supply is non-existent, we expect this to drive continued growth in rental income over time.

Mixed-use

After taking full control of MediaCity in October, we have already started to deliver a turnaround in performance with a number of office lettings and new F&B lettings, resulting in a 110bps increase in occupancy to 93.5%. We recently appointed a CEO for MediaCity who joins from a senior media background, and who will oversee the entire operations of the estate including the studios business. This will allow us to further build on the growing momentum and capitalise on the upside potential our new control offers us.

In other mixed-use, our previous approach to Buchanan Galleries in Glasgow and our centres at Finchley Road and Lewisham in London was to manage each towards a full vacant possession date to maximise development flexibility. This naturally impacted income as leases were shortening, which in turn weighed on values. We changed this approach last year in response to the higher interest rate environment to focus more on retaining and improving the existing income, which for Finchley Road and Lewisham will augment the major residential opportunity at both sites. At Buchanan, we will build on this by focusing on upgrading the existing retail space. This new asset management approach should see income grow over time, which was up 2.8% for the year.

Subscale

Across our portfolio of retail and leisure parks, occupancy increased 40bps to 97.4%. We completed or are in solicitor's hands on £9m of lettings, on average 2% below ERV. During the first half of the year, Cineworld announced a restructuring plan which resulted in a rent reduction in five of their 13 cinemas in our portfolio. We took the opportunity to relet two of these to other operators at higher rents so the combined impact on rental income was minimal. Overall, like-for-like income on our retail and leisure parks was flat, which was well short of the 5.1% increase at our major retail destinations.

Table 3: Operational performance

1. Excluding developments.

Acquisitions

We made £720m of acquisitions during the year, in line with our strategy to grow our major retail platform and future residential optionality. The majority of this was our acquisition of a 92% stake in Liverpool ONE for £490m, which is one of the top retail destinations in the UK. £35m of the consideration is deferred for two years at zero interest charge and with a day-one net income return of 7.5% and rents which are reversionary and poised to grow, we expect overall returns to be in the double digits. We invested £120m in buying a further 17.5% stake in Bluewater at an income yield of 8.5% and £19m in two smaller assets adjacent to our existing retail assets in Cardiff and Glasgow, bringing total retail acquisitions to £629m.

Other acquisitions totalled £91m. This principally reflected the acquisition of the remaining 25% interest in MediaCity from Peel, plus the 218-bed hotel and studio operations at the estate which were wholly owned by Peel. The cash consideration was £23m and we assumed £61m of debt, providing an overall consideration of £84m. This represented a discount to the book value of our existing stake, reflecting the value of future income from wrapper leases to Peel we agreed to surrender. Adjusted for this, the deal was broadly in line with book value and EPS neutral in the short term, but it enhances medium to longer term EPS growth, as it provides us with full control to implement our asset management plans for the existing estate, whilst the Phase 2 land has a planning allocation to develop 2,700 homes. We also acquired £7m of assets adjacent to our future residential schemes in Manchester and London.

Disposals

We sold £496m of assets during the year which did not fit our strategic objectives and longer-term growth aspirations. On average, these disposals reflected an effective net income yield of 7.5% and were 1% below their March 2024 book value. The largest disposal was our £400m hotel portfolio, which had seen a strong recovery in performance post Covid, yet as the income was 100% turnover-linked on long-term leases to the operator of the hotels, there was little opportunity for us to influence or enhance its future operational performance. In addition, c. 70% of the hotels were more than 25 years old and the portfolio was therefore expected to require significant capex in the near future. The disposal included a deferred payment of £50m for up to two years, for which we receive an annual 6% coupon.

We also sold a retail park in Taplow for £46m and a number of smaller non-core assets for a combined £50m. Since the year-end, we have sold two further retail parks for £143m, reflecting an average net rental income yield of 6.4%, in line with book value. We expect to progress further disposals in the near future, as we continue to recycle capital out of subscale sectors and aim to monetise part of our capital employed in low-yielding pre-development assets. Over the next 2-5 years, we aim to further rebalance our portfolio mix by monetising c. £2bn of capital employed in offices.

Development and investments in existing assets

During the year, we invested £486m in capex, including £202m for our two on-site office projects in Victoria and Southwark and £85m in pre-development assets. As we plan to reduce our capital employed in pre-development assets by half over the next three years, the latter is set to reduce over time. We invested £199m in our existing portfolio, including £45m in the refurbishment of 5 New Street Square where we agreed a new 17-year lease with Taylor Wessing in 2023; £28m in repositioning traditional office space to Myo flex space, which delivers a material uplift in income; £22m in our net zero investment programme; and £14m in public realm improvements. The remainder principally relates to leasing activity and accretive investment in retail capex.

Current projects

Our two committed office developments are expected to complete over the next twelve months and we are starting to see good customer interest emerge. We expect this will translate into progress on pre-lets in the second half of the year for both schemes, as high-quality, sustainable office space in locations with good transport connectivity and attractive amenities remains in scarce supply. However, as both schemes are designed to be multi-let, the majority of lease-up is expected to occur post completion. At Thirty High in particular, this enables us to capture a premium for the unique views this 30-storey West End tower offers and with £61m of ERV, these two projects are expected to add £7m to earnings once fully let based on current interest costs.

The completion of Thirty High has moved out a few months, but costs remain in line with expectations. At Timber Square, building on the success at our n2 scheme in Victoria, we have added clubrooms to the original design which will be accessible to all customers. This will drive additional rent, yet combined with some design refinements and a sub-contractor insolvency, we reported at the half year that overall costs had gone up £31m and the expected gross yield on cost had reduced slightly from 7.1% to 7.0%. There have been no further changes to costs in the second half.

Table 4: Committed pipeline

Potential future pipeline

As part of our aim to invest a further £1bn into major retail destinations over the next 1-3 years, we plan to progress a number of accretive investments in our existing major retail assets, such as the creation of a new F&B destination at Trinity, Leeds; the significant upsizes of Primark and Next at White Rose and Bluewater; the repositioning of Buchanan Galleries in Glasgow; and a new waterfront F&B offer at Gunwharf Quays. Total capex could be c. £200m, spread over multiple smaller projects, with double-digit IRRs and a blended yield on cost of around 10%.

In terms of larger development projects, our success in terms of planning over the past two years means we now have more options to start new projects across Central London offices or our major residential schemes in the next 12-24 months than we have the balance sheet capacity or risk appetite to accommodate. In addition, we have a number of other development opportunities outside of our core focus areas. 

Table 5: Pre-development assets

1. Indicative figures given multi-phased nature of schemes; subject to change depending on final scope, planning and design

Our total capital employed in these pre-development assets is c. £730m yet the current net income yield on this is minimal at c. 1%. As there is a clear holding cost in maintaining this optionality for a prolonged period, we plan to monetise around half of our capital employed over the next 1-3 years, principally from office-led and other projects. This will add c. £15m to earnings through reduced interest costs and improve our overall ROE by c. 25-50bps, taking into account lower capitalised pre-development costs.

Post the completion of our two existing office schemes, we will reduce our office-led development activity by at least half compared to the average c. £1bn committed TDC we have had over the last five years. From 2026, we plan to shift development activity to residential, where we now have an attractive pipeline of more than 6,000 homes across three schemes in Manchester and London, which could deliver over £200m of annualised net rental income in the next decade.

The first of our main residential projects is Finchley Road, in zone two London, where we have outline consent for 1,800 homes and detailed planning consent for the first 600 homes. We expect a decision on a variation to the detailed consent in the second half of 2025. We have secured vacant possession and completed the demolition and enabling works for the first phase, which means we could start on site in late 2026. We expect a gross yield on cost of close to 6.5%, which translates into a net yield after property operating expenses of c. 4.8-5.0%, resulting in a c. 10-12% unlevered IRR.

At our residential-led scheme at Mayfield, adjacent to Manchester's main train station, we agreed with our JV partners to optimise the development strategy for this 24-acre site during the year. The site benefits from effective outline consent in the form of a strategic regeneration framework and we have submitted a detailed planning application for the first 879 homes, which we expect a decision on in the second half of this year. We are working towards the potential start of a c. £150m office block as part of the first phase of development. Office demand in Manchester remains strong, with prime rents up 13% over the past two years. Whilst we would not pursue office development in isolation, the returns on this look acceptable and, importantly, delivering this would unlock the opportunity to invest c. £1bn in delivering c. 1,700 homes across multiple phases. The first residential phase could start in late 2026 with a gross yield on cost of c. 6.5-7.0% and net yield after direct property costs of c. 5.0-5.5% is expected to deliver an unlevered IRR of c. 11-13%.

At Lewisham, south-east London, we submitted a planning application for our new masterplan, which has the potential to deliver up to 1,700 homes with a further 445 co-living homes and 660 student beds over the next decade across multiple phases. The plans have been developed after substantial consultation with local stakeholders, as a result of which our plans received ten times more letters of support than objections. We expect a decision on our application in the second half of this year. Given that we have vacant possession flexibility for the first phase, this could allow for a start on site in 2027. We expect a gross yield on cost of around 6.5%, which translates into a net yield after direct property costs of c. 4.9-5.1%, resulting in a c. 10-12% unlevered IRR.

Across London, office space under construction is stable vs March 2024 at 13m sq ft, of which c. 45% is pre-let or under offer. Whilst demand for space remains good, the build cost inflation over the past few years, continued challenges in supply chains and higher exit yields have put pressure on development returns, despite growing rents. This impacts office development more than residential, so we continue to carefully weigh risks and returns on any new schemes, but in any case, we do not plan to commit to any new speculative London office projects until we have secured the majority of the £61m ERV on our existing projects.

Portfolio valuation

Successfully delivering on our objective to drive sustainable income growth over time will underpin growth in property values in the long run, even though in the short term valuations are also affected by changes in valuation yields. Reflecting our successful leasing activity and the fact that property yields stabilised, in line with the expectation we set out a year ago, the external valuation of our portfolio was up 1.1%.

Our Central London portfolio was up 1.0%, driven by strong 5.2% growth in ERVs, whilst valuation yields rose slightly. Developments were up 2.5% reflecting ERV growth and a de-risking of our on-site schemes. The valuation of our major retail portfolio was up 3.4%, reflecting a combination of 4.0% ERV growth and 22bps yield compression. Combined with the high income return, this again was best performing segment in our portfolio, with a 10.1% total return for the year compared with Central London at 5.2% and mixed-use at 0.1%.

The value of our mixed-use assets was down 5.0% for the year, principally reflecting a rise in valuation yields at MediaCity in the first half of the year, although this stabilised in the second half. The shortening of income at our three existing retail assets in Glasgow and London which previously had been managed for flexibility for future redevelopment also weighed on values in the first half yet this slowed in the second half, as our plans become more tangible. The value of our retail parks was up 5.4%, principally driven by yield compression. We have now sold c. 40% of this portfolio since the year-end, on average in line with book value. The value of our leisure portfolio was down slightly for the year, but stable in the second half.

We continue to see a steady pick-up in investor interest and activity in London and major retail. As rents for the best assets continue to grow, yields for such assets remain attractive in a historical context. Whilst we have not seen any impact on investor appetite from the recent increase in global economic uncertainty so far, we are mindful that the direction for long-term interest rates and credit spreads will likely influence the pace at which momentum continues to improve from here. As customer demand remains robust, following our 4.2% growth in overall ERVs over the past twelve months, we expect London and major retail ERVs to grow by a broadly similar rate this year as they did over the last twelve months.

Table 6: Valuation overview

1. Rental value change excludes units materially altered during the period.

2. Excluding developments / land.

3. Includes owner-occupied property.

4. Includes non-current assets held-for-sale.

Growing in a sustainable way

We target to reduce direct and indirect greenhouse gas emissions by 47% by 2030 vs 2019/20, including all of our Scope 1 and 2 emissions and all of our reported Scope 3 emissions and reach net zero by 2040. So far, we have reduced our emissions by 33% vs our 2019/20 baseline. We also target to reduce energy intensity by 52% by 2030 vs 2019/20 and are currently on track, with a 23% reduction vs this baseline so far.

In 2021, we set out a net zero transition investment plan to ensure all our assets would meet a Minimum Energy Efficiency Standard of EPC 'B' by 2030. The cost of this is reflected in our valuations and we completed the first retro-fit of air source heat pumps in an occupied building during the year at Dashwood, so 56% of our portfolio is now rated EPC 'B' or higher, up from 49% a year ago. We also installed almost 1,300 additional solar panels at Gunwharf Quays, which combined with the already existing system will generate over 670,000 kWh per year, representing 23% of total landlord electricity demand.

We also continue to focus on reducing embodied carbon in development, with our future pipeline tracking a 41% reduction vs the standard baseline. This is principally achieved via relatively low-cost changes in design and retention of existing structures, but there is a limit to how much of a further reduction is economically achievable. Whilst there is clear evidence that energy in use is important to customers and investors, there is no evidence they are willing to pay a premium for buildings with less embodied carbon.

Finally, through our Landsec Futures programme, we continue to improve social mobility in real estate and tackle issues local to our assets. To date, this has created career pathways for 18 interns and supported 13 real estate bursaries. From our 2019/20 baseline, we have so far created £96m of social value and empowered 14,737 people towards the world of work.

Financial review

Overview

We delivered solid financial results for the year. EPRA EPS was ahead of our initial guidance due to our strong leasing activity and, in line with the view we set out a year ago, valuations for our best-in-class assets returned to growth, underpinning a positive return on equity. Meanwhile, our strong capital base allowed us to take advantage of the opportunity to invest in a number of rare, high-quality, accretive acquisitions, which will further enhance future growth income and our overall return prospects.

With continued customer demand for our best-in-class space resulting in over 97% occupancy and positive rental uplifts on relettings and renewals, like-for-like net rental income was up 5.0%, ahead of our increased guidance at the half year. Despite continued inflation, overhead costs were down 5%, as our continued focus on driving cost efficiencies more than offset inflation. We see further upside on both fronts in the near future, underpinning a positive outlook on EPS growth.

Our £23m like-for-like net rental income growth and £4m reduction in overhead costs more than offset a small rise in finance costs, the impact from net disposals during the period, and a reduction in surrender receipts, so EPRA earnings were up £3m to £374m, or 50.3 pence per share. Our total dividend for the year of 40.4 pence is up 2.0%, in line with our guidance of low single digit percentage growth, and our dividend cover of 1.25x remains comfortably within our target range of 1.2-1.3x on an annual basis.

Our successful leasing drove 4.2% growth in ERVs, which further enhances our income growth potential and underpinned a 1.1% increase in the valuation of our assets. This meant IFRS profit before tax was £393m and basic EPS was 53.3 pence, compared with a loss before tax of £341m in the prior year. EPRA NTA per share was up 1.7% to 874 pence, so including dividends, our return on equity was 6.4%.

All this remains underpinned by our clear commitment to retain a strong balance sheet. Adjusted net debt increased from £3.5bn to £4.3bn, principally due to our £455m investment in Liverpool ONE in December, but this reduces to £4.1bn pro-forma for our £159m of disposals since the year-end. Pro-forma for these, our LTV is 38.4% and our weighted average net debt/EBITDA is 7.7x and we anticipate to make further disposals in the near term. In September, we issued a £350m 10-year Green bond at a 4.625% coupon and in October we refinanced £2.25bn revolving credit facilities at stable margins, so our average debt maturity remains long, at 9.6 years. We have no need to refinance any debt until 2027 and have £1.1bn of cash and undrawn facilities.

Presentation of financial information

The condensed consolidated preliminary financial information is prepared under UK adopted international accounting standards (IFRSs and IFRICs) where the Group's interests in joint ventures are shown collectively in the income statement and balance sheet, and all subsidiaries are consolidated at 100%. Internally, management reviews the Group's results on a basis that adjusts for these forms of ownership to present a proportionate share. The Combined Portfolio, with assets totalling £10.9bn, is an example of this approach, reflecting our economic interest in our properties regardless of our ownership structure.

Our key measure of underlying earnings performance is EPRA earnings, which represents the underlying financial performance of the Group's property rental business, which is our core operating activity. A full definition of EPRA earnings is given in the Glossary. This measure is based on the Best Practices Recommendations of the European Public Real Estate Association (EPRA) which are metrics widely used across the industry to aid comparability and includes our proportionate share of joint ventures' earnings. Similarly, EPRA Net Tangible Assets per share is our primary measure of net asset value.

Measures presented on a proportionate basis are alternative performance measures as they are not defined under IFRS. This presentation provides additional information to stakeholders on the activities and performance of the Group, as it aggregates the results of all the Group's property interests which under IFRS are required to be presented across a number of line items in the statutory financial statements. For further details see table 14 in the Business analysis section.

Income statement

Our primary focus is to deliver sustainable income and EPS growth as, over time, it is sustainable growth in income and EPS which drives value growth in real estate and equity markets. During the year, our high-quality portfolio and strong leasing activity delivered strong like-for-like rental income growth.

We have continued to reposition our portfolio to further enhance its long-term return prospects, but as our main disposals were at the start of the year and our principal acquisitions were towards the end of the period, the loss of income for the year from the timing of these transactions was £24m. We also saw a £14m reduction in surrender premiums vs 2024, yet despite this we delivered a £2m increase in net rental income, principally driven by strong like-for-like growth. Finance expenses increased slightly, but this was offset by a reduction in administrative expenses so EPRA earnings of £374m were ahead of the prior year, as expected, and ahead of our initial guidance for the year.

Table 7: Income statement(1)

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.

2. Includes finance lease interest, after rents payable.

3. Current year balances reflect a reclassification of joint venture service charge management fee income from net direct property expenditure to net service charge expense of £3m. While the comparatives have not been restated, the equivalent reclassification would have been £3m.

Net rental income

Our gross rental income was down £17m to £624m, principally reflecting the timing difference between acquisitions and disposals, as outlined above, and the fact that surrender receipts were £14m lower than in the prior year, at £5m. We anticipate surrender receipts to remain limited in the future, given lower levels of customer rightsizing or repurposing activity across our portfolio. The release of bad and doubtful debt provisions was up £5m, principally due to the recovery of outstanding debts on assets that were previously managed externally and we now manage in house, so we expect this level to reduce this year. The benefit of this broadly offset the fact that surrenders were lower than our original guidance.

Reflecting the above, our overall net rental income was up £2m to £552m, although on a like-for-like basis net rental income was up £23m, or 5.0%. This was well ahead of our initial guidance for the year of similar growth as the prior period's 2.8% and above our raised guidance at the half year of growth being closer to 4%. This reflects our strong leasing, with increased occupancy, positive uplifts on relettings and renewals, and growth in turnover income, but also our focus on costs, as direct property costs reduced by £8m and net service charge expenses were down £5m. Looking ahead, we expect to like-for-like net rental income to grow by c. 3-4% in this financial year.

Our gross to net margin improved by 2.7ppt to 88.5%, which was well ahead of our guidance, reflecting the growth in like-for-like income, our focus on managing costs, and the increase in recovery of bad and doubtful debt provisions, although we expect the benefit of the latter to reduce next year.

Table 8: Net rental income(1)

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.

2. Gross rental income on a like-for-like basis and the impact of developments, acquisitions and disposals exclude surrender premiums received.

Net administrative expenses

Following a £7m reduction during the prior year, net administrative expenses were down a further £4m to £73m last year, as our continued focus on managing costs more than offset inflation, principally driven by organisational changes and procurement savings. We implemented our new data and tech systems late last year, so the material efficiency savings these will deliver will mostly benefit future years. Alongside a further streamlining of our resources and other savings, this means we expect net administrative expenses to be well below £70m for FY26 and less than £65m for FY27, despite the increase in national insurance costs and ongoing inflation.

The reduction in net administrative expenses and increase in gross to net margin resulted in a 3.3ppt improvement in our EPRA cost ratio to 21.7%, although this is not a measure which is overly useful in its own right. Assets with long leases to a single tenant naturally have lower operating costs than more operational assets such as e.g. residential or shopping centres, yet that clearly does not mean they deliver better income or total returns. For us, it is the overall net income return which matters, as that is what ultimately drives value for shareholders.

Net finance expenses

Net interest costs increased by £3m to £105m, which reflected a small increase in our weighted average cost of debt and higher adjusted net debt following the acquisition of a 92% stake in Liverpool ONE in December. We expect to reduce our net debt over the coming year from the level at March 2025 due to our planned capital recycling, but as our starting net debt for the year is higher than it was last year, we still expect net finance expenses for this financial year to be higher than last year.

Non-cash finance expense, which includes the fair value movements on derivatives, caps and hedging and which is not included in EPRA earnings, increased from a net expense of £23m in the prior year to £39m this year. This is predominantly due to the fair value movements of our interest-rate swaps over the period.

Valuation of investment properties

The independent external valuation of our Combined Portfolio showed an increase in value of £119m. Our continued strong leasing activity resulted in 4.2% ERV growth, and valuations yields were stable in both the first and second half of the year. We continue to see investment activity picking up, which we expect will continue to underpin values for those assets that can generate income growth, although we are mindful that the pace at which activity recovers further from here could well be influenced by any changes in long-term interest rates.

IFRS loss after tax

Substantially all our activity during the year was covered by UK REIT legislation, which means our tax charge for the period remained minimal. The IFRS profit after tax of £396m reflects our continued strong income performance and the positive fair value adjustment of our investment portfolio. This compares with an IFRS loss after tax of £341m last year.

Net assets and return on equity

Including dividends paid, our total return on equity for the year was 6.4%, compared with -4.0% for the prior year. The income component of this was 5.8%. Movements in valuation yields reduced our overall return on equity by 0.8%, but other valuation movements added 2.1%. Within this, the upside from ERV growth was offset in part by an increased level of capex on pre-development assets and a reduction in the value of QAM, as it is getting nearer the end of its lease. We also recognised an element of goodwill write-off and provisions, as detailed below, which reduced ROE by 0.7%, but these are not expected to recur. Given our attractive income return and clear income growth, we are well-placed to deliver attractive return on equity over time.

After the £297m of dividends paid, EPRA Net Tangible Assets, which reflects the value of our Combined Portfolio less adjusted net debt, increased to £6,530m, or 874 pence per share. This was up 1.7% vs the prior year. Our strong operational performance supported a £119m valuation uplift across our portfolio, yet this was partly offset by a number of items. In line with our guidance at the half year, we wrote off £22m of goodwill which principally arose from acquiring the studios business at MediaCity alongside our acquisition of the remaining 25% stake of this estate, in line with our practise to not carry any goodwill on our balance sheet. In addition, we saw a £18m loss on disposals and we made a number of other small adjustments impacting NTA in respect of certain transaction costs and property provisions totalling £23m.

Table 9: Balance sheet(1)

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.

2. Includes owner-occupied property and non-current assets held-for-sale.

Table 10: Movement in EPRA Net Tangible Assets(1)

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.

2. Includes owner-occupied property.

Net debt and leverage

Adjusted net debt, which includes our share of JV borrowings, was flat over the first half of the year, but increased by £787m to £4,304m during the second half. We spent £702m on acquisitions, most of which was in the second half of the year, reflecting the 92% stake in Liverpool ONE and the residual 25% stake of MediaCity. We invested £486m in capex, including £202m for our two on-site London office schemes, £45m in a significant office refurbishment, £85m on pre-development assets, £28m for investments in Myo flex office space, and £22m in net-zero investments. This was partly offset by £446m of disposals, including our £400m hotel portfolio and other non-core assets.

We expect our adjusted net debt to reduce over this financial year. Since the year-end, we have already sold £159m of assets, which reduce adjusted net debt to £4,145m on a pro-forma basis, and we expect further disposals in the near future. We have £232m of committed capex remaining on our two London office developments, which will complete at the end of this financial year. We do not intend to commit to any new office-led developments until we have secured the majority of income on these projects.

The other key elements behind the increase in net debt are set out in our statement of cash flows and note 9 to the financial statements, with the main movements in adjusted net debt shown below. A reconciliation between net debt and adjusted net debt is shown in note 13 of the financial statements.

Table 11: Movement in adjusted net debt(1)

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.

Net debt/EBITDA increased to 7.9x on a weighted average basis, which is more representative than the 8.9x year-end position, as the latter includes the full cost of the Liverpool ONE acquisition but only three months of income. We expect average net debt/EBITDA to tick up slightly in the short term, reflecting the fact that our two on-site developments are nearing the point of full capital deployment but are not yet producing income, yet we target this to be below 8x over time. All else equal, our objective to reduce our capital employed in pre-development assets by half over the next 1-3 years will reduce net debt/EBITDA by c. 0.7x.

We said at the half year that we expected our Group LTV, which includes our share of JVs, to increase temporarily as we would aim to capitalise on attractive acquisition opportunities, but to remain within our 25-40% target range. With the acquisition of Liverpool ONE, LTV ended the year at 39.3%, but as we have sold £159m of assets since the end of March, this has come down to 38.4% on a pro-forma basis since then, whilst net debt/EBITDA is down to 7.7x. We expect LTV to reduce further towards the mid 30's as we recycle further capital out of non-income producing development sites and non-core assets.

Table 12: Net debt and leverage

1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.

Financing

We continued to strengthen our financial position during the year. In September, we issued a £350m Green Bond with a maturity of 10 years at 4.625%, representing a spread of 97bps over the reference gilt yield. In October, we put in place £2,250m of revolving credit facilities to replace facilities that were due to expire across 2025-27. The new facilities are split evenly across two tenors of 3+1+1 and 5+1+1 years, to spread refinancing dates, and on average have the same margin as the facilities they replaced.

Both transactions underline the strength of our credit profile and ensure our overall debt maturity remains long, at 9.6 years, providing clear visibility and underpinning the resilience of our attractive earnings profile. We had £1.1bn of cash and undrawn facilities at the end of March 2025, providing substantial flexibility, and no refinancing needs until FY27. Our debt is 91% fixed or hedged and our average cost of debt was up marginally to 3.4%. We expect this to increase slightly in the current year. 

Our gross borrowings of £4,396m are diversified across various sources, including £2,868m of Medium Term Notes (MTNs), £778m of syndicated and bilateral bank loans and £750m of commercial paper. Our MTNs and the majority of bank loans form part of our Security Group, which provides security on a floating pool of assets valued at £10.0bn. This structure provides flexibility to include or exclude assets, and an attractive cost of funding, with our MTNs currently rated AA and AA- with a stable outlook respectively by S&P and Fitch.

Our Security Group has a number of tiered covenants, yet below 65% LTV and above 1.45x ICR, these involve very limited operational restrictions. A default only occurs when LTV is more than 100% or the ICR falls below 1.0x. Our portfolio could withstand a c. 36% fall in value before we reach the 65% LTV threshold and c. 58% before reaching 100% LTV, whilst our EBITDA could fall by c. 60% before we reach the 1.45x ICR threshold and c. 72% before reaching 1.0x ICR.

Table 13: Available facilities(1)

1. Assuming the extensions on both RCF tranches are executed; 8.9 years excluding this.

2. Calculated as fixed rate debt and hedges over gross debt based on the nominal values of debt and hedges.

3. Including amortisation and commitment fees; excluding this the weighted average cost of debt is 3.3% at 31 March 2025.

Financial summary

In summary, the high quality portfolio we have created over the past few years continues to benefit from strong customer demand, so we expect our strong operational performance to persist. Reflecting this, we expect like-for-like net rental income for this year to increase by c. 3-4% and we also anticipate a further reduction in overhead cost. We expect this to more than offset an increase in interest expenses and the fact that we are unlikely to have the same benefit of the recovery of outstanding debts on assets that were previously managed externally that we had last year.

Overall, we expect EPRA EPS to grow by c. 2-4% this year. This is on track with the c. 20% EPS growth potential we see by FY30 as we execute our strategy and is expected to drive further growth in dividends, in line with our 1.2-1.3x target cover. As our capital base remains strong, we are well-placed to deliver significant shareholder value over time.

Principal risks and uncertainties

Principal risks are identified through regular risk assessments undertaken by the business, reviewed by the Executive Leadership Team, Audit Committee and approved by the Board on a biannual basis. Principal risks are also reviewed by the business and the Board during Landsec's annual strategic planning and business planning processes, taking account of those that would threaten our business model, future performance, solvency, liquidity or the Group's strategic objectives. From these activities, the Group has identified ten principal risks and uncertainties and has assessed how these are managed through a combination of strategic risk management, mitigating controls, or insurance. The Group's approach to the management and mitigation of these risks is included in the Annual Report. The table below sets out our ten principal risks, with explanations of changes in the risk profile across the year. Changes to our principal risks from half-year have been minor, with consideration given to the impact of our updated strategy and recent acquisition activity alongside a backdrop of growing geopolitical risk.

Whilst we are mindful that, in general, economic uncertainty could impact business decision-making, we are not yet seeing any signs of a slowdown in customer demand and Landsec has positioned itself strongly to take advantage of future opportunities.

Statement of Directors' Responsibilities

The Annual Report 2025 will contain the following statements regarding responsibility for the financial statements and business reviews included therein.

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the Group and the Company financial statements in accordance with the requirements of the Companies Act 2006. Under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules and Company law, group financial statements are required to be prepared in accordance with UK adopted international accounting standards (IFRSs and IFRICs). Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit and loss of the Group and the Company for that period.

In preparing these financial statements, the Directors are required to:

¾ select suitable accounting policies in accordance with IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors' and then apply them consistently;

¾ make judgements and accounting estimates that are reasonable and prudent;

¾ present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

¾ in respect of the Group financial statements, state whether international accounting standards in conformity with the requirements of the Companies Act 2006 (and UK adopted international accounting standards) have been followed, subject to any material departures disclosed and explained in the financial statements;

¾ in respect of the Company financial statements, state whether international accounting standards in conformity with the requirements of the Companies Act 2006 have been followed, subject to any material departures disclosed and explained in the financial statements;

¾ provide additional disclosures when compliance with the specific requirements of UK adopted international accounting standards is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the Group's and Company's financial position and performance; and

¾ prepare the Group's and Company's financial statements on a going concern basis, unless it is inappropriate to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and the Company, and to enable them to ensure that the Annual Report complies with the Companies Act 2006 and as regards the Group financial statements, Article 4 of the IAS regulation. They are also responsible for safeguarding the assets of the Group and the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Directors' responsibility statement under the Disclosure and Transparency Rules

Each of the Directors, whose names and functions appear below, confirm to the best of their knowledge:

¾ the Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 (and UK adopted international accounting standards)

¾ give a true and fair view of the assets, liabilities, financial position, performance and cash flows of the Company and Group as a whole; and

¾ the Strategic Report contained in the Annual Report includes a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties faced by the Group and Company.

Directors' statement under the UK Corporate Governance Code

Each of the Directors confirm that to the best of their knowledge the Annual Report taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and Company's position, performance, business model and strategy.

A copy of the financial statements of the Group is placed on the Company's website. The Directors are responsible for the maintenance and integrity of statutory and audited information on the Company's website at landsec.com. Information published on the internet is accessible in many countries with different legal requirements. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

The Directors of Land Securities Group PLC as at the date of this announcement are as set out below:

¾ Sir Ian Cheshire, Chair*

¾ Mark Allan, Chief Executive

¾ Vanessa Simms, Chief Financial Officer

¾ Moni Mannings, Senior Independent Director*

¾ James Bowling*

¾ Michael Campbell*

¾ Baroness Louise Casey*

¾ Madeleine Cosgrave*

¾ Christophe Evain*

¾ Miles Roberts*

¾ Manjiry Tamhane*

*Non-executive Directors

The Statement of Directors' Responsibilities was approved by the Board of Directors on 15 May 2025 and is signed on its behalf by:

Mark Allan Vanessa Simms

Chief Executive Chief Financial Officer

Financial statements

The financial statements on pages 29 to 50 were approved by the Board of Directors on 15 May 2025 and were signed on its behalf by:

Notes to the financial statements

Basis of preparation

These financial statements have been prepared on a going concern basis and in accordance with UK adopted international accounting standards (IFRSs and IFRICs), and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. The financial statements have been prepared in Pounds Sterling (rounded to the nearest one million), which is the presentation currency of the Group (Land Securities Group PLC and all its subsidiary undertakings), and under the historical cost convention as modified by the revaluation of investment property, financial assets at fair value through profit or loss, derivative financial instruments and pension assets.

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

On 15 May 2 025, the consolidated financial statements of the Group and this preliminary announcement were authorised for issue in accordance with a resolution of the Directors and will be delivered to the Registrar of Companies following the Group's Annual General Meeting. Statutory accounts for the year ended 31 March 2024 have been filed unqualified and do not contain any statement under Section 498(2) or Section 498(3) of the Companies Act 2006. The annual financial information presented in this preliminary announcement for the year ended 31 March 2025 is based on, and consistent with, the financial information in the Group's audited financial statements for the year ended 31 March 2024. The audit report on these financial statements is unqualified and did not contain a statement under Section 498(2) or 498(3) of the Companies Act 2006. This preliminary announcement does not constitute statutory financial statements of the Group within the meaning of Section 435 of the Companies Act 2006. While the information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of IFRS, this announcement does not itself contain sufficient information to comply with IFRS.

A copy of the Group's Annual Report for the year ended 31 March 2024 can be found on the website at landsec.com/investors.

Going concern

Given the impact of international and domestic political and economic events over the course of the year, the Directors have continued to place additional focus on the appropriateness of adopting the going concern assumption in preparing the financial statements for the year ended 31 March 2025. The Group's going concern assessment considers changes in the Group's principal risks (see pages 24-26) and is dependent on a number of factors, including our financial performance and continued access to borrowing facilities. Access to our borrowing facilities is dependent on our ability to continue to operate the Group's secured debt structure within its financial covenants, which are described in note 14. 

In order to satisfy themselves that the Group has adequate resources to continue as a going concern for the foreseeable future, the Directors have reviewed the base case, downside and reverse stress test models, as well as a cash flow model which considers the impact of pessimistic assumptions on the Group's operating environment (the 'mitigated downside scenario'). This mitigated downside scenario reflects unfavourable macro-economic conditions, a deterioration in our ability to collect rent and service charge from our customers and removes uncommitted acquisitions, disposals and developments. 

The Group's key metrics from the mitigated downside scenario as at the end of the going concern assessment period, which covers the 16 months to 30 September 2026, are shown below alongside the actual position at 31 March 2025.