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COMPANY PROFILE

Land Securities Group
PLC

REFERENCE CODE: 75280F5E-DA03-4F2A-9312-EEA7D57643B8
PUBLICATION DATE: 24 Jul 2018
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Land Securities Group PLC
TABLE OF CONTENTS

TABLE OF CONTENTS

Company Overview ........................................................................................................3
Key Facts ......................................................................................................................... 3
SWOT Analysis ...............................................................................................................4

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Land Securities Group PLC
Company Overview

Company Overview

COMPANY OVERVIEW
Land Securities Group PLC (Land Securities) is a real estate development company. It carries out buying,
selling, development and management of commercial and residential properties. The company’s portfolio
includes retail, leisure, shopping centers, workspace, residential and retail parks. As of March 31, 2018,
Land Securities owns a combined portfolio of GBP14.1 billion across a floor space of 24 million sq ft. Key
properties of the company include Bluewater, One New Change, Gunwharf Quays, Trinity Leeds, Queen
Anne’s Gate, White Rose, Nova SW1, One New Change, New Street Square, 1 & 2 New Ludgate and
80-100 Victoria Street. Land Securities is headquartered in London, the UK.

The company reported revenues of (British Pounds) GBP852 million for the fiscal year ended March 2018
(FY2018), an increase of 8.3% over FY2017. In FY2018, the company’s operating margin was 3.1%,
compared to an operating margin of 21.7% in FY2017. The net loss of the company was GBP252 million
in FY2018, compared to a net profit of GBP113 million in FY2017.
Key Facts

KEY FACTS

Head Office Land Securities Group PLC
100 Victoria Street
London
England
London
England
GBR
Phone 44 20 74139000
Fax 44 20 79250202
Web Address www.landsecurities.com
Revenue / turnover (GBP Mn) 852.0
Revenue (USD Mn) 1,096.9
Financial Year End March
Employees 570
London Stock Exchange (LON) LAND
Ticker

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Land Securities Group PLC
SWOT Analysis

SWOT Analysis

SWOT ANALYSIS
Land Securities Group PLC (Land Securities) is a real estate development and management company.
The company’s strong asset base, tenant base and increasing business performance of Retail Portfolio
are the key strengths, even as limited liquidity position remains as a cause for concern. However, positive
outlook for commercial construction industry and growing retail market in UK and strategic growth
initiatives could provide growth opportunities to the company. Inability to collect rent from tenants,
increase in manpower cost in UK and real estate regulations in UK could impact the operations of the
company.

Strength Weakness

Tenant Base Liquidity Position
Asset Base
Business Performance – Retail Portfolio Segment
Opportunity Threat

Growing Retail Market in UK Real Estate Regulations in UK
Growth Initiatives Inability to Collect Rent from Tenants
Positive Outlook of Commercial Construction Industry Increase in Manpower Cost in UK
in UK

Strength

Tenant Base

The company has a strong tenant base, which helps the company in establishing itself as a leading real
estate company. The company’s properties are occupied by various tenants across its retail and London
portfolio. Key tenants in its retail portfolio includes Boots, Cineworld, Next, Sainsbury’s, Arcadia Group,
Vue, Tesco, Marks & Spencer, Primark and Hennes & Mauritz. Its London portfolio tenants include
Central Government, Deloitte, Mizuho Bank, Taylor Wessing, Equinix, Deutsche Bank, K&L Gates, Bain &
Co, City of Westminster and Schlumberger Oilfield UK. The company’s Retail portfolio recorded
aggregate consumer satisfaction scores for of 93%.

Asset Base

Strong asset base enables the company to increase its revenues and serve large customer base. As of
March 31, 2018, the company has a combined portfolio GBP14.1 billion across a floor space of 24 million
sq ft. Its retail portfolio comprises 15 shopping centers, 12 retail parks, five stand-alone leisure assets and
21 Accor hotels. It also owns GBP3 million worth of development lettings; and GBP13 million worth of
investment lettings. The company’s London portfolio Central London shops, West End, Mid-town, Inner
London and City office portfolio. The company’s key assets include New Street Square with GBP35

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Land Securities Group PLC
SWOT Analysis

million an annual net rent, 80-100 Victoria Street with GBP23.3 million annual net rent, One New Change
with GBP28.9 million annual net rent, Gunwharf Quays with GBP26.2 million annual net rent, Trinity
Leeds with GBP26.7 million annual net rent, 1 & 2 New Ludgate with GBP 22.8 million annual net rent,
Queen Anne’s Gate with GBP 32.4 million annual net rent, White Rose with GBP23.1 million annual net
rent and Nova with GBP3.6 million annual net rent.

Business Performance – Retail Portfolio Segment

Increase in the business performance of Retail Portfolio segment enables the company to enhance its
operations. In FY2018, it accounted for 52.7% of the total rental income and reported a YoY growth of
2.2%. Increase in net rental income was due to acquisition of three outlet centers including Freeport in
Braintree, Junction 32 in West Yorkshire and Clarks Village in Somerset. The segment also reported 1%
increase in operating profit to GBP292 million in FY2018.

Weakness

Liquidity Position

Limited cash and liquidity position puts it at a disadvantage when funding any potential opportunities in
the market. Land Securities current ratio was 0.5 in FY20187. This was lower than its previous year
current ratio of 0.8 and industry average current ratio of 4.2. This suggests that the company is less able
to meet its short-term obligations than some of its peers. At the end of the review year, the company had
total current assets worth GBP572 million, a decrease of 3.1% over the previous year, with cash worth
GBP 62 million.

Opportunity

Growing Retail Market in UK

The company stands to benefit from growing retail market in the UK. According to in-house research, the
retail sales in the UK is expected to reach GBP376.4 billion by 2021 at a CAGR of 2.9% during 2016-
2021 (forecast period). The retail sales have been consistently rising since past five years in the country
and are expected to grow in the future. The two main channels that are driving the retail industry are
convenience stores and food and drinks specialists. Food and grocery market is expected to grow at a
CAGR of (3.4%) followed by clothing and footwear (2.8%), electricals (0.8%), health and beauty (4.3%),
DIY and garden (1.8%), furniture and floor coverings (1.1%) and homewares (1.4%) during the forecast
period.

Growth Initiatives

Land Securities is taking various strategic initiatives to drive growth. The initiatives are expected to
strengthen the company’s operations and increase its returns. In May 2017, the company acquired
Freeport in Braintree, Clarks Village in Somerset and Junction 32 in West Yorkshire. This acquisition
enabled the company to become one of the leading owner-manager of outlet centers in the UK. In

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Land Securities Group PLC
SWOT Analysis

FY2018, the company completed and let out the development of projects at Nova, SW1 and Westgate
Oxford. It also launched a 564,000 sq ft development at 21 Moorfields.

Positive Outlook of Commercial Construction Industry in UK

Land Securities is likely to benefit from the positive outlook for construction industry in the UK. According
to in-house research, the construction industry in the UK is expected to record a CAGR of 2.20% between
2018 and 2022 (forecast period) reaching a value of GBP362.4 billion in 2022. Growth is expected to
drive from the government’s focus to retain investor confidence and implement construction projects
through public-private partnerships. Commercial construction is expected to grow at a forecast-period
CAGR of 3.30% during the forecast period to reach GBP89.4 billion in 2022. This market is expected to
be drive by improvements in the country’s tourism and retail sector, and advancements in investments in
new office buildings projects. According to Office for National Statistics (ONS), the country’s average
retail sales index increased 1.9% in 2017. In the first quarter of 2018 (Q1), the average retail sales index
grew by 1.5% YoY, to 107.1 from 105.5 in Q1 2017. This trend is projected to provide a positive outlook
for the retail buildings category during the forecast period.

Threat

Real Estate Regulations in UK

Land Securities is required to comply with stringent regulations at the federal, state and local levels.
Services which do not comply with legislation outlined by regulatory bodies may face a delay in reaching
its customers. Non-compliance with legislation may also lead to penalties and legal proceedings, which
may damage the company’s image. The company must comply with various real estate regulations such
as Control of Asbestos Regulations 2012, Housing Act 1985, the Housing Act 198, the Housing Act 1996,
The Minimum Energy Efficiency Standards (MEES) Regulations 2015, The Heat Network (Metering and
Billing) Regulations 2014, S21 Housing Act, Landlord and Tenant Act 1954, Landlord and Tenant
(Covenants) Act 1995, 2007 Code for Leasing Business Premises and others.

Inability to Collect Rent from Tenants

Land Securities inability to collect rent form its tenants would weaken its financial condition significantly.
In the adverse event of default by any tenant, the company would face delays and costs in implementing
its rights as a landlord under the terms of its leases. Failure by multiple tenants to occupy their premises
in a shopping center or multiple lease terminations by tenants could result in lease terminations or
significant reductions in rent by other tenants in the same shopping centers under the terms of some
leases. In such events, the company could not re-lease the emptied space at attractive rents or at all, and
rental payments from its continuing tenants could decrease considerably. Bankruptcy filing by its tenants
would also restrict the company’s efforts to collect pre-bankruptcy debts unless the bankruptcy court
permits. A lease guarantor bankruptcy could also delay the company’s efforts to collect past due balances
under the relevant leases and could ultimately affect the total collection.

Increase in Manpower Cost in UK

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Land Securities Group PLC
SWOT Analysis

Increasing manpower costs may hamper the company. The tight labor markets and a higher proportion of
full-time employees are resulting in increase in labor costs. On recommendation from Low Pay
Commission, the UK government increased the minimum wage rate for workers aged 25 and over by
4.4% to GBP7.83 per hour in April 2018. The minimum wage rate has been increased by 4.7% to
GBP7.38 per hour for adults within the age group of 21-24 years. In the age group of 18 to 20 years, the
increase has been 5.4% to GBP5.9 per hour, while for the age group of 16 to 17 years, it increased to
GBP4.2 per hour.

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