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Interim Results

Land Securities resilient first half

15 November 2016 08:14

Land Securities reports revenue profit - the group's measure of underlying pre-tax profit which excludes all capital items, such as valuation movements and profits and losses on disposals, as well as items of an exceptional nature - of £192.5m for the six months to the end of September, up from £184.2m last time.

The group posts a pre-tax loss of £95.0m for the six months to the end of September against a profit of £707.9m a year ago. This was due to the valuation deficit in the six months to 30 September compared to a surplus over the same period last year

Net rental income decreased by £6.7m from the comparable period as rental income growth in our like-for-like portfolio and new lettings at its developments were more than offset by the impact of properties sold since 1 April 2015.

Chief executive Robert Noel said: "and Securities is well-positioned following the actions taken over the last few years. We have transformed our Retail Portfolio and predominantly completed and let a large scale development programme in London whilst keeping debt on a tight rein.

"Since we reported in May, the UK has voted to leave the European Union and a new government has set out its intended, though legally challenged, timeframe for triggering Article 50 of the Lisbon Treaty. We have seen early indications of revised policy priorities that may affect our market, including public spending, housing and infrastructure. Uncertainty hangs over many issues and businesses find themselves in uncharted territory.

"These conditions are having a tangible effect on the commercial property market. Occupational demand for office space in London is hesitant and the vacancy rate has continued to rise. We will watch closely how this uncertainty affects development decisions and construction starts. In retail, we expect consumer spending to be affected by growth in prices exceeding that of pay, which will put increased pressure on retailers. This will continue to widen the gap in performance between dominant destinations like ours and the rest.

"Uncertainty has also affected real estate pricing. Across most market sectors, values have weakened. Our external valuer has marked down our assets by 1.8% since 31 March 2016. In both London and Retail, we have experienced smaller falls than seen elsewhere in our market sectors due to the actions we took to position the business for change. Our adjusted diluted net assets per share were also down 1.8%.

"In contrast, despite being significant net sellers in the second half of last year, our revenue profit is up 4.5%, as we have reduced our interest costs and continue to benefit from our developments. The second quarterly dividend is 8.95p, making the first half dividend 17.9p, up 9.8% on the comparative period.

"Our high-quality portfolio, historically low levels of speculative development and conservative financial gearing put us in a resilient position as we move through near-term uncertainty. With 51% of our portfolio acquired or developed over the last six years, we have achieved this resilience thanks to the efforts of our people across the business.

"Our drive to lead on sustainability continues. Smart, long-term thinking is central to our purpose of providing the right space for our customers and our communities - helping businesses to succeed, the economy to grow and people to thrive. For me, it's quite simple: we can only prosper as a business when we anticipate and meet the changing needs and expectations of our customers, communities, employees and partners.

"Social trends and technological innovation are reshaping how we live, work, shop and play. That's why we have transformed our Retail Portfolio to ensure we provide places that communities value and visitors want to experience. And it's why we are constantly innovating to ensure our offices are both technically resilient machines - in terms of power and performance - and inspiring working environments that attract and retain talent.

"Looking ahead, we expect both our market sectors to see a general weakening of net effective rental values as a result of current uncertainty, but our high quality, well-let portfolio should mean we are relatively insulated. Also, uncertainty usually presents opportunities and we are ready to act."

Land Securities also announced that it has appointed Nicholas Cadbury as a new independent non-executive director.

He will join the board and become an audit committee member with effect from 1 January. He will also succeed Kevin O'Byrne as chairman of the audit committee on a date to be confirmed in 2017. Cadbury is presently group finance director of Whitbread PLC, a position he has held since November 2012.

At 8:14am: (LON:LAND) Land Securities Group Plc share price was +45p at 1030p

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