Gladstone Land Corporation Annual Report 2020

FY2020 Annual Report · Gladstone Land Corporation

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Landsec
Annual
Report
2020

Welcome to Landsec

Our portfolio

Office
Our Office segment consists of
high-quality, modern offices in great
locations in central London. Our offer
ranges from traditional long-term
leases through to shorter-term, flexible
space. We also have significant
development opportunities.

Pages 24-29

Retail
Our Retail segment includes outlets,
retail parks, large regionally dominant
shopping centres outside London
and shopping centres within London.
We also have great retail space within
our office buildings.

Pages 24-29

Specialist
Our Specialist segment comprises
17 standalone leisure parks, 23 hotels
and the iconic Piccadilly Lights in
central London.

Pages 24-29

Chart 1

A £12.8bn portfolio

1. West End office

2. City office

3. Mid-town office

4. Southwark and other office

5. London retail

6. Regional retail

7. Outlets

8. Retail parks

9. Leisure and hotels

10. Other

Read more online
at landsec.com

Organising our response

— We responded quickly to establish teams to support our priorities during
the pandemic ranging from employee and customer support, operations
and corporate affairs through to internal functions including finance
and tech.

— We have been working on plans for how Landsec and our markets will
emerge from the current conditions based on a number of scenarios
to ensure we are well placed to respond quickly for our customers and
focus on strategic priorities.

Read more online
at landsec.com

Reduce

Re-use

Recycle

Divert

Wellbeing
With staff costs typically accounting for about
90% of a company’s overall operating costs,
we know that investing in features that improve
health and productivity of employees makes
good business sense. Creating workspaces that
positively influence our customers’ physical and
mental wellbeing remains a priority.

The WELL Building Standard is a performance-
based certification scheme developed to put
occupant health at the centre of building
design. Our own headquarters at Victoria Street

are certified to the WELL Building Standard;
and we’ve started the process to recertify: as a
performance-based certificate, we’re reviewing
the quality of the space every three years.

In addition, we’re embedding occupant health
and wellbeing in the very early design of our
developments where we include appropriate
features from the WELL Standard.

The interior design at Nova East, for instance,
revolves around the use of a palette of natural
materials such as locally-sourced timber, recycled
porcelain tiles and cork. Lucent will also feature

A net zero carbon building at 105 Sumner Street

All electric solution based on highly
efficient air-source heat pumps
with heat recovery powered with
renewable electricity

A ‘Design for Performance’
approach helps minimise
operational energy demand, and
aligns with the UK Green Building
Council’s net zero trajectory

298m2

of green roof installed will result
in significant biodiversity net
gain for the area

No energy generated from fossil
fuels, improving local air quality

107

PV panels to be installed on
the roof

The innovative ‘Design for
Manufacture and Assembly’
approach has reduced embodied
carbon emissions by

19%

compared to a regular build

Embodied carbon is further
minimised by careful specification
of materials such as high recycled
content in key construction
materials and cement replacement

Read more online
at landsec.com

Landsec Annual Report 2020a planted winter garden and atrium, bringing
daylight and natural elements deep within the
building. In addition to these tangible features
we’re also delivering less visible benefits critical
to a healthy building including clean air in
abundant volumes, filtered water, non-toxic
materials and high-quality lighting.

Where we provide HQ space for our
customers, we make sure the quality of our
base-build designs enables them to achieve
certification to the WELL Building Standard
for their own operations, just as we’ve done
at 80 Victoria Street.

Materials
What we buy and where we buy it matters
at every level of our supply chain. To get
it right, we take a thorough approach to
sourcing sustainable materials. This includes
environmental and ethical sourcing, health
impacts, embodied carbon impacts and
resource efficiency considerations.

Across our development pipeline, we have
early in-depth conversations with specialist
contractors, to be able to influence design
and specification, and we request information
from suppliers to improve transparency in our
decision making.

At 21 Moorfields, we’re buying 99.9% of our core
construction materials from responsible sources.
Steel, in particular, is of paramount importance
for the building, given its prominence in the
design. This is why we’re asking our specialist
contractor to get detailed information from
their own suppliers about the sustainability
of their products – matters such as method
of fabrication, recycled content and distance
travelled, alongside the necessary responsible
sourcing accreditation. From this information,
we rate our preferred suppliers, and factor this
rating, alongside cost and lead-time, into the
decisions we make when placing orders.

What’s on the surface matters too, and for
our material finishes we’re recommending we
select, wherever possible, natural low-carbon
materials that can be sourced locally. At Nova
East, the proposed palette includes extensive
areas of carbon-negative materials such as
cork and timber.

Biodiversity
Green infrastructure plays an important role not
only in increasing ecological habitat in dense
urban environments, but also as a resilience
feature to lessen surface rainwater on our sites.
Importantly, it provides our customers and local
communities with a much-needed connection
to nature in their daily lives. Our spaces have a
vital role to play in linking enhancements for
biodiversity with better customer experiences,
and we’re committed to maximising the
ecological potential of our development and
operational sites.

Building materials
With our growing development pipeline,
we’ve taken a closer look at our procurement
policies to equip ourselves and our partners
with the right tools for meeting our
expectations. That’s why this year we’ve
published our new Prohibited Materials List,
to strengthen our fight against modern
slavery in the sourcing of construction
materials. The list is based on the Walkfree
Global Slavery Index and on the Ethical
Trading Initiative, to enable us to assess
materials and geographical areas at risk,
and promote sourcing of responsible
materials. We’re laying out our expectations
from our partners clearly, so we can address

Across our development pipeline, we’re going
well beyond compliance and achieving
significant biodiversity net gain as part of all
of our designs, in a way that’s considerate to
each site’s ecological context. At Nova East
for instance, green infrastructure permeates
the design from public realm planting, a
15 metre-long green wall, climbing plants at
street level and planted terraces, not forgetting
a 385 m2 green roof. These features enable us
to achieve an exemplary improvement in the
local biodiversity and create a green corridor
to the nearby Royal Parks.

To strengthen our approach, this year we
developed a new Biodiversity Brief to guide our
partners and expand on our requirements.

We continue to partner with The Wildlife
Trusts to enhance biodiversity net gain at five
operational sites. We implemented a number
of biodiversity enhancements across these
sites including over half a square kilometre
of wildflower planting. During 2020, we will
be undertaking an ecological survey at each
site to assess the effectiveness of these
enhancements, and to measure progress
towards our biodiversity net gain target of
25% by 2030.

human rights challenges within the industry
and discuss how we’ll work together to
increase transparency and minimise risk.

This Prohibited Materials List
complements our Sustainability
Brief for Developments.

Read more online
at landsec.com

Sustainable Development Goals

In 2015, the UN General Assembly adopted a
blueprint for building a sustainable future for all
by 2030: the 17 Sustainable Development Goals
(SDGs). Delivering them requires productive
partnerships between business, government
and society.

Last year we became a signatory to the UN
Global Compact (UNGC), a voluntary initiative
which brings together leading businesses
committed to UN goals and universal
sustainability principles. This year we’re pleased
to report our first annual Communication on
Progress (COP) in our 2020 Sustainability
Performance and Data Report.

By demonstrating our ongoing commitment
to the UNGC’s Ten Principles in the areas of
Human Rights, Labour, Environment and
Anti-Corruption, we’re substantially advancing
our vital work towards meeting the SDGs.

Read more online
at landsec.com

Landsec Annual Report 2020Strategic Report
Here we set out what

we’ve been doing

this year to make sure
our business creates
lasting value for society
through the way we
work with our employees,
customers, partners
and communities.

Creating social value
We don’t believe anyone should be defined by
their background, or by any barriers they face.
Our ambition is to create opportunities, through
our social sustainability programmes, for people
from our communities, improving social mobility
and ensuring we have a diverse industry with
the skills we need now, and for the future.

That’s why we’re measuring the social value we
generate through our programmes. This allows
us to quantify the positive impact we’re having
and target our work to where we can make a
difference. Last year we published Our Social
Contribution, a report that outlined where we
are creating the most social value. We continue
to focus on groups including young people from
diverse socio-economic backgrounds, prisoners
and ex-offenders, and people experiencing
homelessness.

Our social contribution
£25m

of social value to be created
through our programmes by 2025

£4.8m+

of social value created
this year

3,400

people benefited from our
volunteering programme

95%

of students surveyed reported
they feel more prepared for the
labour market

Read more online
at landsec.com

w
e
i
v
e
r

a
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o
S

Working with The Social Value Portal and
our community partners, we’re aiming for
an ambitious target of generating £25m of
social value through our programmes by 2025.
This year we achieved our year’s target of
creating over £4.8m of social value.

In planning our future development activity,
we’re looking to consider social value across
the whole portfolio.

Community employment
Our community employment programme is
helping address socio-economic challenges
that affect people living in our communities.
Working with industry partners and customers,
we continue to fill significant skills gaps in
construction, facilities management and
customer service, supporting excluded groups
in finding employment.

The positive impact this programme achieves
shows the power of creating opportunities
for those who need them most. This year
approximately £2.5m of social value was
generated through a range of initiatives,
including employability support, training
and job outcomes.

In Lewisham, our partnership with Circle
Collective – a charity and social enterprise
empowering young people through training
and work experience – is just one example of
how we’re creating value for communities and
our customers. Circle Collective is based in our
Lewisham shopping centre and consistently
helps local people into roles with our brand
partners in the centre, and with our own Head
Office team. Our collaboration continues to
deliver social value by helping those further
from employment to access sustainable and
exciting opportunities.

We’re continuing to evolve our prisons
programme through our partnership with
Bounce Back, who deliver construction training
in prisons and communities in London and
Leeds. We’ve also established a new partnership
with Key4Life, a charity supporting some of
the hardest-to-reach young offenders, and
those at risk of offending, in Brixton, Camden
and Shepherd’s Bush.

Volunteering with young prisoners
to help them prepare for work
after release has truly shaped my
attitudes. Working to make sure
they don’t reoffend when released
is a side of the rehabilitation process
that deserves more recognition.”

Development Director at Landsec

Landsec Annual Report 2020
Our own employees are lending their expertise
too, by mentoring prisoners and ex-offenders,
helping them build their emotional resilience
and reducing the likelihood of their reoffending.
This year Landsec volunteers spent almost
500 hours supporting our prisons programme
with their employability skills.

Importantly, our community employment
programme also allows our own workforce
to offer their skills, and help the beneficiaries
of our programme directly. By making this
part of our employee volunteering, we’ve
seen positive results for our own people, too.

Education
The property industry is changing rapidly.
We know our future workforce will need the
skills to address shifts towards modern methods
of construction, building information modelling
(BIM) and new, innovative technologies, as
well as sustainability. We design our education
programmes to help develop a pipeline of the
talent needed for the future of our business
and our industry more widely. We’re working
with young people in our communities who
would most benefit from spending time in a
professional environment, helping them develop
their skills to prepare for their future careers.

Our Future Property School, run in collaboration
with Construction Youth Trust, educates and
inspires students from diverse socio-economic
backgrounds in Westminster about our industry.
Landsec volunteers work closely with students
for three months on a project to create their
own sustainable development proposals.
The programme also includes our partners
in construction and architecture, and our
retail customers, who all offer their skills and
expertise, and provide opportunities for work
placements. This not only motivates young
people to join our industry, it also helps us
instil the skills we’ll need for the future.

Our programmes are all fundamentally
connected to our Diversity and Inclusion
objectives, by engaging students from diverse
backgrounds, and focusing on schools where a
high proportion of students are on free school
meals. This, in turn, is helping address the
gender and ethnicity balance in our industry.
We generate the most social value when young
people from less privileged backgrounds meet
professional volunteers over a sustained period,
as this has a long-term impact on their skills,
confidence and aspirations.

We believe providing young people with visible
and diverse role models is crucial, and in turn
it helps us better reflect the communities
we operate in. We’re therefore running the
Circl leadership training programme for our
employees who coach sixth-form students
from Southwark over the course of an academic
year. Circl provides long-term support to young
people to help develop their career ambitions
and, at the same time, is expected to have
a positive impact on our own people by
enhancing their coaching and managerial skills.

Our response to Covid-19

In response to the Covid-19 pandemic, we’ve
been working closely with our community
partners across the UK to support them,
both in the initial emergency period, and
in planning to help them beyond the crisis.
This has helped our charity partners provide
immediate support to people facing huge
challenges in our local communities. These
include people experiencing homelessness,
families in poverty, people facing job insecurity
and vulnerable individuals in isolation.

Our support will also ensure our partners
can continue to provide their services in the
coming months. These services include our
community employment and education
programmes, which are likely to see
significantly increased demand beyond
Covid-19, and which our employees will
support through ‘virtual volunteering’.

We are a founding supporter of LandAid’s
Covid-19 appeal, which united the property
industry in providing emergency grants to
grass-roots charities that support young

people experiencing homelessness across
the UK. The fund will help many charities to
provide basic necessities for vulnerable young
people, including food, accommodation, bill
payments and mental health support. We
will also provide pro bono business support
to charities through LandAid, to help them
through this challenging time.

As well as supporting our existing community
partners, we’ve also been working with the
NHS at a local level, to help the remarkable
people at the front line of fighting
Covid-19. We’ve used our spaces to
provide free car parking for NHS
staff and other key workers, as
well as for mobile blood banks
to ease pressure
on hospitals.

Read more online
at landsec.com

Charity partnerships
Our charity partnerships are all closely aligned
with our social value strategy. This way, we can
address key societal issues as a business and
use our skills and expertise where we know our
impact will be the greatest and most sustainable.

This year we expanded our work with LandAid,
the property industry’s charity, which aims
to end youth homelessness in the UK. Our
partnership enables us to collaborate with our
peers to raise awareness amongst our staff
and customers, and to offer grants to specific

projects. We also encourage our own employees
to use their professional experience to support
charities within our areas of operation, through
pro bono volunteering.

On a local level, we’re continuing our partnerships
with smaller charities who support marginalised
communities including those experiencing
homelessness, young unemployed people and
ex-offenders. This work includes our well-
established volunteering programme, which over
40% of our employees participated in this year,
contributing more than 8,500 volunteering hours
to our community partners.

Landsec Annual Report 2020Strategic Report
Gender by level

Chart 22 Whole organisation by ethnicity

Chart 23

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Female

Male

We have good female representation at all
levels of our organisation except at Leader
and Senior Leader level. We are moving in
the right direction at Leader level however,
we are now at 24%, up from 19.5% last year.

White

80%

Black, Asian and
minority ethnic
(BAME)

Not recorded

17%

17% of our employees disclose themselves to
be from BAME ethnicity backgrounds. This
compares favourably to the UK benchmark of
14% as a whole according to the 2011 UK census
data. However, this reduces to 11% for Executive
Committee, Senior Leader and Leader levels.

Whole organisation
by sexual orientation

Chart 24

Whole organisation
by disability

Chart 25

Heterosexual

83%

Prefer not to say

11%

Lesbian, gay,
bisexual and
transgender (LGBT) 3%

Not recorded

No disability

87%

Not recorded

Prefer not to say

Have a disability

of Landsec employees have disclosed that they
are LGBT. 11% of our employees prefer not to say,
a figure that has reduced from 15% last year.

of Landsec employees have disclosed that
they have a disability. However, 10% have
not recorded their details or prefer not to say.

Key targets

Female
representation
(by 2025)

BAME
representation
(by 2025)

Whole organisation

Board, Executive
Committee
and Senior Leaders

Leader level

50% 50% 40%

>14% 14% 14%

Sexual orientation
Achieve appropriate accreditation as a
welcoming place to work for everyone
irrespective of sexual orientation.

Disability
Achieve appropriate accreditation as a
welcoming place to work for everyone
irrespective of physical ability.

Social review
continued

Diversity
Our ambition is to lead from the front on
diversity and inclusion, because we know
getting this right is critical to our long-term
success. We have made some progress over
the past year, but recognise we still have a
way to go. We are not yet representative of the
communities we serve, and still have work to do
in nurturing a culture of inclusion where we can
all be our authentic selves in the workplace.

In 2019, we set some specific targets to support
our ambitions, but progress towards these has
been mixed. In the representation of women
at leader level, we moved from 19.5% in March
2019 to 24% in March this year, but at Senior
Leader level, we moved back to 30% from
38% last year. Across the whole organisation,
though, 52% of our employees are women,
exceeding our 50% target for 2025.

Generally, we have made significant progress
on improving levels of disclosure and have a
much better base to measure progress from.
Our representation of black, Asian and
minority ethnic (BAME) employees is also very
encouraging – 17% across the organisation,
comparing favourably with the UK benchmark
of 14%. We have also made progress at Leader
level, up to 11% from 7% last year, but we don’t
have any BAME employees at Senior Leader,
Executive Committee or Board level.

Our representation of employees disclosing they
are lesbian, gay, bi-sexual and transgender
(LGBT) remains at 3%, though 11% of our
employees have not disclosed their sexual
orientation, a figure that has reduced from 15%
last year. We want to build on the momentum
of having more employees tell us about their
sexual orientation, ensuring our LGBT colleagues
can be themselves in the workplace. We will
undertake some external benchmarking in
2020 to measure our progress in becoming
an inclusive employer for LGBT people.

We want to create an environment where
employees feel comfortable telling us about a
disability, and 3% have done so. However, 10%
have not recorded their details or prefer not to
say. Having achieved the status of Disability
Confident Committed level 1 (external
accreditation as an inclusive employer for
disabled people) in 2019, we will now focus
on achieving level 2 and 3, and aim for all
employees to have a rewarding career
irrespective of their personal characteristics.

Landsec Annual Report 2020

We also know how important flexible working is
to a positive work-life balance, so we’ve invested
in technology that can help, such as full Office
365, and lightweight Microsoft Surface Pros,
that people can use to work anywhere.

Recruitment and retention
During 2019 we consulted with our partners
and employees and undertook a project to
streamline certain services for the benefit of
our customers. We also combined two of our
business units into one. These changes to our
business resulted in a number of Landsec
employees transferring to partner organisations
and an overall increase in employee turnover
to 27% (2018: 15%). Our voluntary employee
turnover this year is 12%, just 1% higher than
last year. We continue to monitor the number
of regretted leavers and to focus on the
promotion of internal talent through our
recruitment function.

To help us increase representation of women
and BAME employees at Leader level and
above, our recruitment agencies will look for
candidates from the widest pool possible, and
we hold them to account in providing diverse
shortlists for all roles. In addition, to ensure our
roles are attractive to a diverse mix of people,
we are rewriting job descriptions and adverts
to use universally neutral language. We also
ensure all roles advertised internally and on our
website are open to flexible working. We publish
our family-friendly policies on our website, so
everyone can learn how we support parents
and carers.

We’ve also introduced a development
programme, Thrive, designed to help more
women attain promotion and develop into
leadership roles, and also to help men support
aspiring female leaders. We are testing the
programme with 14 women of high potential at
manager level and below, representing a range
of ages, experience, background, ethnicities
and tenure.

We’ve configured Workday, our HR system, to
collect and report on data to help our decisions
about promotions, pay, internal moves and
recruitment more powerful and insightful,
and helping us continue to build diversity into
our processes.

Affinity networks
This year, our affinity networks have played a
key role in continuing to establish an inclusive
culture across Landsec. Our Women’s network
hosted a panel discussion to look at cultural and
structural barriers women face in the workplace,
as part of International Women’s Day. The event
was useful in educating employees about some
of the intersectional challenges women face in
the workplace, and the ways organisations have
overcome them.

Working with our Disability forum this year,
we took part in Purple Tuesday across the
organisation, a campaign established to
recognise the needs of consumers with
disabilities. Many retail assets took part,
promoting inclusive shopping with a purple
theme in their lighting and promotional items
for our customers, such as purple lanyards,
flyers and T-shirts.

The Disability forum also supported Autism
Awareness Week by co-ordinating with our
assets to provide quiet periods and dimmed
lights for autistic customers. Keen to ensure this
support for autistic customers is ongoing, we
signed a pledge to provide tailored support
across all our properties.

The LGBT network reviewed our policies to help
ensure they are inclusive of LGBT people, and they
also supported London Pride this year, where our
Piccadilly Lights were centre stage of the
celebrations. The LGBT network also sponsored
Freehold, a leading and unique networking forum
for lesbian, gay, bisexual and transgender real
estate professionals working within the real estate
sector. The property sector considerably lags
behind other industries in tackling sexual
orientation issues; our support of Freehold enables
us to take a leadership role in helping to address
the equality gap for the LGBT community.

Changing the way we work
We will do all we can to ensure diversity and
inclusion are central to the way we work by
2025. To help, we’ve appointed a diversity and
inclusion manager, a new role for Landsec, and
an appointment we believe will enhance our
efforts to meet our diversity goals.

We want to support people throughout their
careers, and that means in life outside Landsec,
too, removing traditional barriers for those with
caring responsibilities. This year we’ve enhanced
our parental leave allowances so employees
can balance their home and work life more
effectively. We now offer six months’ fully paid
parental leave to all employees – an increase
of 10 weeks. It’s important that people have
the opportunities to spend more time with their
children as their families grow, and that we can
ease the financial pressures new and existing
parents can often experience.

People and culture

Creating opportunity

people promoted
in the last year

438

Above and Beyond award
recognitions in the last year

Developing skills

253

Landsec employees have
volunteered to support our
community programmes
this year

8,527

hours volunteered
by our employees

Valuing difference

611

people across the UK

Being heard

Disability forum target
to double membership

75%

engagement rate
in our employee
engagement survey

All new employees invited
to attend lunch with our
Executive Committee

Enabling health and wellbeing

>40

mental health first aiders
across the business

130

people signed up to our
cycle to work scheme

Read more online
at landsec.com

Landsec Annual Report 2020Strategic Report
Female representation
at Landsec
52%

of our employees

24%

of our leaders

53%

of our managers

30%

of our senior leaders

Read more online
at landsec.com

Social review
continued

Employee Forum
Our Employee Forum has continued to evolve
and play a growing role in employee life and
company culture at Landsec. It now has 15
members, to ensure it speaks for all parts
of our business. Over the last year, we have
invested in external training for members,
which has clarified our engagement model
and ways of working, for both them and the
colleagues they represent.

With the Board’s desire to build closer ties with
employees, the Forum met Edward Bonham
Carter, Chair of the Remuneration Committee,
to better understand Landsec’s approach
to executive remuneration and to let the
Board know its views. The discussion was very
informative, and a summary on our staff intranet
was well received, opening the topic up to a
wider number of colleagues. The Forum also
met our Chairman in private to discuss various
employee-related topics, which all parties
found valuable.

The Employee Forum has three
simple aims:

Represent our colleagues

Support the business
with communication

Be a sounding board
for management

Gender pay gap
Although the gender split of our business is
almost even – 48% male, 52% female – our
gender pay gap worsened slightly during the
year. We’re confident that our pay gap is not
caused by our approach to setting pay levels.
We use an industry standard Job Evaluation
methodology and we voluntarily undertake
regular independent equal pay audits to
confirm that our approach to pay operates
fairly and within the law.

We believe that our pay gap is driven by the
structure of our workforce because we have
significantly more women (66%) than men
(34%) in non-management roles (our support
and professional roles) and a higher number of
men (73%) than women (27%) in leadership
and senior leadership roles.

We have put measures in place to support
women in their career progression but we
recognise that we need to do more. To focus
the organisation, we have set some long-term
targets to provide an impetus to narrow the
gender pay gap over time.

Targets are not enough; these targets will
require the organisation to mobilise behind
the changes necessary to achieve them. We
continue to work hard to provide a welcoming
and supportive environment for women, with
a strong focus on removing any potential
barriers to progression. We have recently
reviewed and improved our family-friendly
policies to enhance the flexibility that many
employees with caring responsibilities need
to help them work productively and flexibly.
We have also introduced a female coaching
programme to support all of our women
through their career at Landsec. And we are
introducing ways to remove bias when making
decisions on hiring people. Although there is
much work still to be done to remedy the pay
gap, we remain proud of the diverse nature
of our teams at senior levels.

As at April 2020

Table 26
Pay gap
year-on-
year
change
(% points)

Pay element

Male

Female

April 2020

%
difference

Male

Female

April 2019

%
difference

Mean hourly salary

£47.19

£29.38

(37.7)

£48.02

£30.36

Median hourly salary

£36.25

£23.80

(34.3)

£36.99

£23.28

Proportion of employees
receiving a bonus

Mean bonus

Median bonus

82.9%

78.7%

n/a

78.2%

74.5%

£23,382

£9,108

(61.0) £28,419 £10,053

£11,332

£5,850

(48.4) £11,236

£4,803

(36.8)

(37.1)

n/a

(64.6)

(57.3)

0.9

(2.8)

n/a

(3.6)

(8.9)

Lower quartile

Lower middle

Upper middle

Upper quartile

Number

133

132

%
Male

30.1

36.1

58.3

71.2

%
Female

Male
mean
hourly rate

Female
mean
hourly rate

£15.02

£16.25

£24.87

£24.11

£36.27

£35.92

69.9

63.9

41.7

28.8

£81.24

£63.84

(21.4)

Table 27
%
difference
in hourly
rate

8.2

(3.0)

(0.9)

Landsec Annual Report 2020Fairness
The Real Living Wage
In 2015 we committed to ensuring that everyone
working on our behalf, in an environment we
control, is given equal opportunities, protected
from discrimination and paid at least the Real
Living Wage by 2020. Over the past few years
we’ve worked closely with our supply chain
partners to achieve this.

We’re an official Living Wage Employer, accredited
by the Living Wage Foundation. This recognises
that everyone in our business is paid at least
the Real Living Wage (£10.75 an hour in London;
£9.30 outside London), except interns and
apprentices who are exempt from the rates.
We are on track to meet our 2020 commitment
to ensure everyone working on our behalf, in
an environment we control, will be paid the
Real Living Wage by the end of 2020.

Working with our supply chain
We work alongside our suppliers to prevent
modern slavery and to promote fair, ethical
treatment of everyone working at our sites,
on our behalf.

During 2019, for a second year, we carried out
due diligence to assess workforce-related risks
on our sites and to understand how our
corporate commitments and policies work in
practice. We looked at high-risk areas of our
supply chain, focusing on cleaning, security and
construction labour in the UK. An accredited
third party held anonymous interviews with
247 workers from 31 partner organisations at
eight of our retail, office and construction sites.
This year, for the first time, we also visited two
of our suppliers’ own sites, including a UK-based
steel manufacturer.

The surveys covered a range of issues, including
labour exploitation, fair payment, health and
safety, right to work and discrimination. We
found no cases of modern slavery in this process,
but we did identify areas for improvement,
including the need for increased guidance on
right-to-work checks.

We’ve extended our due diligence activities for
the coming year, to increase our focus on the
modern slavery risk across our construction
activity, and to include partners outside the UK.

Our Circl leadership programme engages
and educates young people on the
property industry

This year, we completed the integration of our
online compliance reporting system RiskWise.
This tool provides a single accessible platform for
all aspects of asset compliance data, incident
statistics, development projects, permits to
work and environmental management. It allows
us to provide rigorous and efficient reporting
to the business, as well as offering a consistent
approach for managing compliance across
the portfolio.

We have also taken the opportunity to embrace
innovative construction methods, to realise the
full potential of health and safety benefits.
This relates to both key design principles and
on-site construction risks. We are working with
design teams to ensure developments maximise
desired operational outcomes while achieving
our vision of providing healthy, safe and secure
places for our customers to live, work, shop
and relax.

Health and safety
We provide healthy, safe and secure places
for our customers to live, work, shop and relax,
recognising that we can only achieve this
through close collaboration with our partners,
including our supply chain, investors and
enforcing authorities.

In February 2020 we successfully migrated
to the international H&S standard ISO 45001,
from the British Standard OHSAS 18001.

We’ve embarked upon an ambitious
programme of mandatory health, safety and
security training for all our employees, including
contingent workers. The training is designed
to reduce our organisational risks and comply
with local or national policies and government
guidelines, while encouraging our people to be
risk-aware rather than risk-averse. Our new
standards and systems ensure consistent
competence for the safe and efficient provision
of services.

In response to the Grenfell fire in 2017, we
reviewed fire safety across our entire portfolio,
prioritising occupancy, height, means of escape
and life-safety systems. We have since invested
over £7m rectifying approximately 125,000
firestopping defects in our buildings, and
£4.3m in resolving cladding risks. We continue
to enhance fire safety across the portfolio and
ensure we are aligned with new Government
initiatives and legislation.

Landsec Annual Report 2020Strategic Report
Managing
risk

Our key successes
in 2019/20
— Developed risk dashboards for

each of our properties to support
the strategic planning process

— Enhanced the process to

identify, assess and monitor
emerging risks

— Improved the contingency risk

planning process for our
developments

— Promoted a positive risk culture
across the business and raised
risk awareness

Our key priorities
in 2020/21
— Develop an assurance mapping
process to assess the quality of
the assurance we receive across
the three lines of defence for our
principal risks

— Establish a process to analyse risk
events as a measure of control
effectiveness

— Roll out the new business

resilience plans to each property

— Use technology to improve risk
aggregation and assessment of
risk dependencies

— Continue to assist the business

with the response to and recovery
from Covid-19

We set out an

overview of our risk

management process
explaining the key
elements of our approach
to risk, how we have
continued to develop our
process over the course
of the current year, the
key successes in risk
management and our
priorities for 2020/21.

Governance
The Board has overall responsibility for
oversight of risk and for maintaining a robust
risk management and internal control system.
The Board recognises the importance of
identifying and actively monitoring our strategic,
reputational, financial and operational risks,
and other longer-term threats, trends and
challenges facing the business. The Audit
Committee supports the Board in the
management of risk and is responsible for
reviewing the effectiveness of the risk
management and internal control processes
during the year.

Identification of risks
Identifying risk is a continual process. We have
established a network of risk champions across
the business and we utilise this network, in
conjunction with ongoing discussions with
management, external agencies and
stakeholders, to identify the risks facing our
business. The Property Committee also
completes a detailed review of the business
risks, controls and mitigation strategies four
times a year as we continue to further embed
the risk culture across our business. This forms
the basis for the principal and emerging risks,
which are challenged and validated by the
Executive Committee and the Audit Committee,
before being presented to the Board. In addition,
an in-depth risk session is held with the Board
every two years, with the most recent one
taking place in December 2019.

Evaluation of risks
The business considers both external and
internal risks from the property business
through to Group level. We use a risk scoring
matrix to ensure risks are evaluated consistently.
Our matrix considers likelihood, financial impact
to income and capital values and reputational
impact. When we evaluate risk, we consider the
inherent or gross risk (the level of the risk before
any mitigating action) and the residual or net
risk (the risk that remains after we consider
the effect of mitigating actions and controls).
From this, we identify principal risks (current
risks with relatively high impact and certainty)

and emerging risks (risks where the extent
and implications are not yet fully understood).
We have taken the opportunity this year to
enhance our emerging risks process given the
pace of business change. Where there is a
relatively high inherent risk and relatively low
residual risk, we know we have a high dependency
on internal controls, which helps to focus the
work of the Internal Audit function and other
assurance providers.

Management of risks
Ownership and management of the risks
is assigned to members of the Executive
Committee. They are responsible for ensuring
the operating effectiveness of the internal
control systems and for implementing risk
mitigation plans.

The Board undertakes an annual assessment
of the principal risks, taking account of those
that would threaten our business model, future
performance, solvency or liquidity as well as
the Group’s strategic objectives.

Helping the business to navigate the
challenges and opportunities it faces
through proactive risk management.”

Risk appetite
The Board is responsible for defining the level
and type of risk that the Group is willing to take
and ensuring it remains in line with our strategy.
The Board regularly reviews the risk appetite
of the business, reassesses the information
available and the risk factors that are relevant.
This ensures our risk exposure remains
appropriate at any point in time and that risk
is considered dynamic. Our risk appetite is
cascaded throughout the organisation by being
embedded within our policies, procedures and
delegated authorities.

We formally report on the Group risks every
six months to the Audit Committee and Board
through a principal risk dashboard. This sets
out risk appetite statements for each principal
risk and risk tolerance ranges which explicitly
align our risk appetite and the corresponding
key risk indicators (KRIs) to our strategy and
key performance indicators (KPIs).

The risk dashboard uses risk indicators to track
whether our risk level is within our risk appetite.
The risk indicators are a mixture of leading and
lagging indicators, and internal and external
indicators. The primary aim of the dashboard
is to act as a catalyst for discussion about how
the principal risks are moving, whether the risk
tolerance ranges remain appropriate for the
business circumstances, and whether further
mitigating actions need to be taken in order to
bring a risk back within the desired risk tolerance
range. The KRIs are rated red, amber or green
based on where the indicators sit in relation to
our tolerance level.

Landsec Annual Report 2020Each of the principal risks has a number of KRIs
and we provide some examples of the KRIs
against our principal risks in the table on page 52.
All red rated KRIs will be discussed by the
Executive Committee and the relevant business
units, with required actions agreed by the
Executive Sponsor. These actions may be to
refresh the risk tolerance range to reflect a
change in the business landscape and/or further
mitigating actions. The agreed action will be
noted in the Audit Committee and Board reports
for final approval by the Board. On an ongoing
basis, we will continue to refine the tolerance
ranges and to review regularly whether the KRIs
continue to be the best indicators.

One of our successes this year has been to
develop risk dashboards for each of our properties
to support the strategic planning process. The
dashboard for each property sets out a balanced
scorecard view which is aligned to the principal
risks of the Group and ensures that risks are
explicitly considered in conjunction with
developing the property management strategy.

Risk management framework
As shown in the diagram below, we have an
established risk management and control
framework that enables us to effectively
identify, evaluate and manage our principal
and emerging risks. Our approach is not to
eliminate risk entirely, but to ensure we have
the right structure to effectively navigate the
challenges and opportunities we face. We focus
on being risk-aware, clearly defining our risk
appetite, responding to changes to our risk
profile quickly and having a strong risk culture
among employees.

The Executive Committee is responsible for
the day-to-day management of risk. Senior
managers also attend the Executive Committee
and the Audit Committee to discuss specific risk
areas, and will be accompanied by external
advisers where relevant. Some of our specific
risk focus areas from this year included cyber
security, data governance, fire management
strategies and contingency planning for a
no-deal Brexit scenario.

The Risk Management function, headed by
the Director of Risk Management and Internal
Audit, assists management with facilitating
the risk discussions and provides challenge
and insight where appropriate. The Risk
Management function also oversees and
provides support to a network of risk champions
across the business. These risk champions are
critical in promoting a positive risk culture
across the business and raising risk awareness.

Internal Audit provides assurance to the
Audit Committee and Executive Committee in
evaluating the design and operating effectiveness
of the risk management and internal control
processes, through independent review. On a
quarterly basis, management self-certify that
the key controls within their area of responsibility
have been operating effectively. These results
are independently validated by Internal Audit
through sample testing. We continue to enhance
and refine the key controls to ensure we have
the most effective set of key controls to mitigate
our principal risks. An area of focus for 2020/21
is to update our assessment of the quality and
completeness of assurance provided over each
line of defence against a principal risk.

Risk management framework

Oversight,
identification,
assessment and
mitigation of risk
at a Group level

Top-down

Bottom-up

Identification,
assessment and
mitigation of risk at
business unit and
functional level

Risk
governance

Board
— Set the risk culture
— Approve risk appetite
— Agree the risk programme
— Discuss the Group ‘principal’ risks with executive management

1st line of defence

2nd line of defence

3rd line of defence

Audit Committee:
— Supports the Board in

monitoring risk exposure
against risk appetite
— Review the effectiveness
of our risk management
and internal control
processes

Internal Audit:
— Provide assurance on

effectiveness of the risk
programme, testing of
key controls and risk
response plans for
significant risks

Risk
management

Executive Committee:
— Define the risk appetite
— Evaluate proposed

strategies against risk
appetite and risk
tolerances

— Identify the principal risks
— Design, implementation
and evaluation of the
system of internal control,
and for ensuring its
operational effectiveness

— Identify and monitor

emerging risks

Risk
ownership

Business units and risk
champions:
— Identify and assess risks
— Respond to risks
— Monitor risks and risk

response

— Ensure operating

effectiveness of key
controls

Risk Management:
— Aggregate risk
information

— Assist management with
the identification and
assessment of principal
and emerging risks
— Monitor risks and risk

response plans against
risk appetite and
tolerance levels

— Create a common risk

framework and language

— Provide direction on
applying framework
— Provide guidance and

training

— Facilitate risk escalations

Support functions:
— Provide guidance/support

to the risk team and
business units

Landsec Annual Report 2020Strategic Report
Our response
to Covid-19

The risk of Covid-19 has

very quickly elevated
from being an emerging
risk to impacting all of
the principal risks facing
our business.

The risk of a pandemic outbreak has been a
standing item on our risk register and, at an
operational level, we have established response
plans for each of our properties on how to deal
with such a crisis. The speed and scale of the
impact of Covid-19 has been unprecedented
and fundamentally affected all aspects of
our business.

Our business resilience and risk planning has
been tested in recent months and the business
has responded very well to the challenges
presented by the crisis. All levels of our
organisation have been rapidly mobilised
to assess, plan, respond and mitigate the
myriad of risks presented to the business by
the current situation.

We have established six workstreams to help
us co-ordinate our response to the impact
of Covid-19 across our business: Customers,
People, Operations, Public Affairs and
Regulation, Development and Financial.
Each workstream has a team leader, a dedicated
team of subject matter experts in the area and
an Executive Director sponsor. The workstreams
have been co-ordinated by a central project
management office and the Executive
Committee and the workstream leads have
been meeting regularly to discuss issues and

concerns, and where required quickly approve
decisions. The Board received weekly updates on
our response to Covid-19 and briefings at their
meetings so that they could make any business
critical decisions quickly. In recent weeks we have
kicked off our recovery workstream to plan for
a relaxation of lockdown restrictions and ensure
the business is fully prepared to provide the best
possible support to our customers, communities,
employees and service partners during this
transition. The workstream structure and a high
level overview of the scope of each areas is set
out below.

We demonstrate the pervasive nature of the
Covid-19 impact on our business risks in the
heat map on page 51, showing the movement
in each principal risk as a consequence of
Covid-19. The risk table shows two changes
for each risk; the first risk arrow is the change
from March 2019 to December 2019 (before
the impact of Covid-19) and the second arrow
shows the risk change from December 2019
to March 2020 (the quarter covering the first
impact of Covid-19).

The risk table also sets out further details of
the risk mitigation actions we have taken as
a business in each of our workstreams against
the Covid-19 impact on our business.

ExecCom/OpCom decision-making body

Co-ordination by a central PMO

Lead: Robin Holgate, Director of Risk Management and Internal Audit; Team: Risk and Legal team

People

Operations

Development

Public affairs
& regulation

Financial

Customers

Sponsor:
Martin Greenslade, CFO

Sponsor:
Colette O’Shea, MD

Sponsor:
Martin Greenslade, CFO

Lead:
Barry Hoffman,
HR Director

Lead:
Jamie Taylor, Head of
Property Operations

Lead:
David Heaford,
Head of Development

Scope:
— Internal comms
— Working from home
practices, including
technology
— Mental health
awareness

— People processes
— Operations

workstreams in
progress

Scope:
— Review of all

developments
— Management of
contractors and
supply chain
— Review of capex
commitments

— Assessment of critical
work costs and design
costs for each
programme

Scope:
— Building response

plans

— Maintaining essential
services in a lockdown
— Site closure protocols
— Health and safety

maintaining statutory
compliance

— Security
— Service provider
management
— Management

of service charge
— Co-ordination of
marketing activity

Lead:
Caroline Hill, Director
of Corporate Affairs &
Sustainability

Scope:
— Press comms
— Customer comms
— Regulation update
— Lobbying Central

Government
— Input into REVO
— Input into BPF
— Board cadence

Lead:
Marc Cadwaladr, Group
Financial Controller

Lead:
Rosalind Futter, Head of
Finance/Marcus Geddes,
Head of Property

Scope:
— Funding management
— Working capital
— Scenario analysis
— Payments process
— Office overheads
— Market expectations
— Management of

valuation process and
external audit process

Scope:
— Credit risk
— Payment plans
— Concessions and
rent deferrals

— Protecting service

charge

— Customer response

forum

— Sector and sub-
sector analysis
— Customers with
turnover rent

Sponsor: Martin Greenslade, CFO; Lead: Angela Maurer, Head of Innovation; Scope: develop ‘Return’ and ‘Reimagine’ plans against four scenarios

7 Recovery

Landsec Annual Report 2020Our principal risks
and uncertainties

Our risk assessment
The risk heatmap (right) sets out the
Landsec Group principal risks for the 2019/20
Annual Report. The heatmap shows where
the principal risks were as at December 2019
(i.e. before the impact of Covid-19 was felt
in the UK) and as at March 2020.

Residual risk as at
March 2020 (shows
impact of Covid-19)

Residual risk as at
December 2019
(prior to Covid-19)

4
4

h
g
h
y
r
e
V

h
g
H

m
u
d
e
M

w
o
L

t
c
a
p
m

Low
(<25%)

Medium
(26–50%)

High
(51–75%)

Very high
(76–100%)

Probability

Strategic objectives

Principal risks overview

Deliver sustainable long-term
shareholder value

Maximise the returns from the
investment portfolio

Maximise development performance

Ensure high levels of customer
satisfaction

1. Customers

2. Market cyclicality

3. Disruption

4. People and skills

Attract, develop, retain and motivate
high performance individuals

5. Major health, safety and security incident

Be a best-in-class counterparty to
our partners and suppliers

Continually improve sustainability
performance

6. Information security and cyber threat

7. Climate change

8. Investment and development strategy

Strategic objectives

Change in the year

Prior to
Covid-19

Post
Covid-19

Landsec Annual Report 2020Strategic Report

Our principal risks
and uncertainties
continued

1. Customers
Structural changes in customer and consumer expectations leading to a change in
demand for space and the consequent impact on income.

2. Market cyclicality
Market and political uncertainty leading to a reduction in demand or deferral of
decisions by occupiers, impacting real estate values and the ability to buy, develop,
manage and sell assets at the appropriate time in the property cycle.

3. Disruption

4. People and skills

Inability to understand and mobilise effectively to changes in our competitive

Inability to retain and develop the right people and skills required to achieve the

landscape and customer value chain resulting in business model disruption.

business objectives in a culture and environment where employees can thrive.

Executive responsible: Colette O’Shea

Executive responsible: Mark Allan

Executive responsible: Martin Greenslade

Executive responsible: Barry Hoffman

Example KRIs
— UK net retail openings and shopping centre vacancy rates (external metric)
— Amount of people visiting our assets
— Percentage of lease expiries over our five-year plan
— Void rates across our portfolio
— Customer credit risk profile and tenant counterparty risk
— Customer retention
— Like for like rental income metrics
— Customer and space churn

Example KRIs
— UK Gross Domestic Product (external metric)
— UK household spending levels (external metric)
— Employment intentions – Business Services (external metric)
— Interest rates (external metric)
— Business confidence (external metric)
— Our loan-to-value ratio

Mitigation
— Our Customer Relationship Management processes actively monitor our customer

base and performance

— We have a robust credit policy and process which defines what level of credit risk

we will accept

— Our Property Committee reviews customers at risk and agrees the best plan of

action, as well as monitoring online sales trends

Mitigation
— Our Research team prepare a quarterly report for the Executive and Property
Committees, which measures both macroeconomic and internal risk metrics,
against tolerance ranges, e.g. occupancy vacancy levels

— Our Research team also produces a bi-annual Cycle Watch document, which
analyses macroeconomic, political and market risk factors. This drives the
assumptions used in our budget and forecasting process

— The monthly management accounts review lease expiries, breaks, re-gears and

— We complete scenario analyses as part of our annual budgeting and five-year

— We are reviewing each element of our customer journeys to identify opportunities

— Clear employee objectives and development plans to ensure alignment to business

compare new lettings against estimated rental value

— We measure footfall and retail sales at our shopping centres to provide insight

into consumer trends

forecasting process. Specific scenarios we have modelled include the impact of
different Brexit outcomes and changes in legislation. These are considered in more
detail in the viability scenario assumptions

— We regularly measure customer satisfaction across our retail and office customer base

— Our business portfolios prepare a quarterly report reviewing the market risk for each

Make-a-thon which was a seven-hour competition where teams made up of both

— We have set specific diversity metrics to be achieved by 2025

of our sectors

— We are active members of local business and community groups, as well as industry
and professional bodies. This ensures we are actively engaged in decisions affecting
our business, customers, partners and communities

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

We were already operating in a tough
retail environment, with a number of
company voluntary arrangements (CVAs)
throughout the year, and like-for-like
footfall and retail sales declining. We were
monitoring our retailers at risk of CVA and
looking at more flexible leasing options
in retail. The office market had remained
resilient through 2019. We elevated this
risk last year to reflect the deterioration
in the retail market.

The Covid-19 outbreak is a very
challenging time for many businesses
and, in particular, some of our retail
and leisure customers. We are regularly
communicating with our customers
and are engaged in conversations about
how we can support them through this
difficult time. We continue to closely
monitor the cash collections of rents
across the whole portfolio and we have
seen a material reduction in cash
collections in late March 2020. This
indicates a likely increase in business
failures and we are closely monitoring
any customers in financial distress.
We expect to see greater non-payment
of rent as we move through 2020.

We have established a support fund
to provide up to £80m of rent relief for
customers – around £15m of this fund
will support our F&B customers and
the remaining £65m will be allocated
on a case-by-case basis to small- and
medium-sized businesses.

This risk reduced with greater certainty
over the political landscape in the UK
following the general election and some
valuation write-downs already taken in
the retail portfolio. We were continuing to
plan for a range of potential Brexit trade
deal outcomes. The Audit Committee has
proactively reviewed and challenged our
Brexit risk assessments over the year to
ensure we are well prepared and able to
minimise downside business
consequences.

Covid-19 has resulted in high levels of
macroeconomic and market uncertainty
and volatility. As a result, we have seen a
greater reduction in our retail and leisure
asset values. We see an increased risk of
an economic downturn or recession which
could further impact the value of our
assets, including those in London.

We have refreshed our own economic
outlook and modelled different scenarios
to understand and plan for the potential
impact of Covid-19 on our business. In
light of the extreme market uncertainty
the Board believes that conserving
liquidity is in the best interests of
shareholders. Therefore, the Board took
the decision to cancel our third interim
dividend and is not proposing a final
dividend. We will regularly review the
position on future dividend payments,
reinstating them as soon as it is
appropriate to do so.

Opportunity
Enhance and maintain our position as the partner of choice for our customers by
better understanding their needs.

Opportunity
The strength of our balance sheet, combined with our strong rating, enables us to
invest in our growing development pipeline and other opportunities as they arise.

We are assessing plans for significant mixed use developments on our suburban
London retail sites where we see opportunities to create value.

Opportunity

Dealing with trends and changes promptly and effectively will help us create further

Build further expertise, knowledge and capability in the business.

value, and grow while maintaining our competitive advantage. We will be able to

make decisions now that have a positive impact in the future.

Example KRIs

— Serviced office take-up (external metric)

— Proportion of total retail sales that are online (external metric)

— Engagement survey results – innovation mindset

Example KRIs

— Employee turnover levels

— High potential employee turnover

— Employee engagement score

— Succession planning

— Employee mental health

— Time to hire

— Diversity of long and shortlists in recruitment

Mitigation

— We commissioned independent research into customer trends and disruptors so

— Our remuneration plans are benchmarked annually to ensure they remain

that we have a better understanding of the potential impact on our business

competitive and support us in attracting and retaining the best talent

— Our Insight team holds a monthly Future of Work forum examining disruption

— The talent management programme identifies high potential individuals within the

themes, megatrends and changes in the way people shop, work and live

— We are actively investing in training our people to help create an innovation mindset

— We have robust succession plans in place for senior and critical roles to mitigate key

and have established innovation roles in the business

to improve

Mitigation

organisation

people risks

goals

— We have defined an innovation process to capture ideas and workshop with our

— We recognise the value of employee health and wellbeing through our Health and

customers on their needs in a test office environment. For example, we hosted a

Wellbeing Statement of Practice

Landsec colleagues and customers had to solve customer problems

— Our flexible working policy promotes work-life balance, reduces employee stress

— Our Innovation team is debating and investigating ways to build more efficiently

and improves performance

and effectively with our strategic partners

— We regularly complete employee engagement surveys to understand areas of

— We are actively speaking to and involving our customers in creating new experiences

strength and opportunities for improvement

— We have high profile, market-leading developments and assets to manage, in places

people want to work

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

Consistent with our review of emerging

As outlined in customer above, the

Employee uncertainty increased because

In response to Covid-19, the majority of

risks impacting the business, we had

seen the pace of change continue to

Covid-19 outbreak has been disruptive for

we had combined the main operating

our employees are now working from

a number of our customers impacting

functions of the London and Retail

home. Overall this transition has been

accelerate. While we had improved our

their ability to trade, supply chains and

business units and had also begun the

smooth from a technology and

internal capability in this area over the

demand for their products. We believe

process of transitioning to a new CEO

communications point of view. We have

last year with our expanded Business

there could be a structural shift in how

following Robert Noel’s decision to retire.

not seen any significant impacts on

Foresight team, we continue to experience

our customers use space going forward –

This led to an increase in the people and

employee productivity, although we are

ongoing structural challenges, particularly

for example, the retail sector has seen

skills risk. This is consistent with the

carefully monitoring employees’ mental

within the retail business. Therefore, the

greater use of online business models

elevated risk that we presented at the

and physical wellbeing. We have also set

residual risk remained unchanged.

as a result of Covid-19 and these new

half-year.

up a ‘skills exchange hub’ to allow people

with any spare capacity in the current

environment to pick up extra work from

teams who are currently under pressure.

business models may require less physical

retail space. In addition, as people

become more comfortable and familiar

with virtual interactions, the use of

permanent office and physical meeting

rooms may decline.

Landsec Annual Report 2020

1. Customers

2. Market cyclicality

Structural changes in customer and consumer expectations leading to a change in

Market and political uncertainty leading to a reduction in demand or deferral of

demand for space and the consequent impact on income.

decisions by occupiers, impacting real estate values and the ability to buy, develop,

manage and sell assets at the appropriate time in the property cycle.

3. Disruption
Inability to understand and mobilise effectively to changes in our competitive
landscape and customer value chain resulting in business model disruption.

4. People and skills
Inability to retain and develop the right people and skills required to achieve the
business objectives in a culture and environment where employees can thrive.

Executive responsible: Colette O’Shea

Executive responsible: Mark Allan

Executive responsible: Martin Greenslade

Executive responsible: Barry Hoffman

Example KRIs
— Serviced office take-up (external metric)
— Proportion of total retail sales that are online (external metric)
— Engagement survey results – innovation mindset

Example KRIs
— Employee turnover levels
— High potential employee turnover
— Employee engagement score
— Succession planning
— Employee mental health
— Time to hire
— Diversity of long and shortlists in recruitment

Mitigation
— We commissioned independent research into customer trends and disruptors so
that we have a better understanding of the potential impact on our business
— Our Insight team holds a monthly Future of Work forum examining disruption

Mitigation
— Our remuneration plans are benchmarked annually to ensure they remain
competitive and support us in attracting and retaining the best talent

— The talent management programme identifies high potential individuals within the

— Our Property Committee reviews customers at risk and agrees the best plan of

analyses macroeconomic, political and market risk factors. This drives the

— We are actively investing in training our people to help create an innovation mindset

— We have robust succession plans in place for senior and critical roles to mitigate key

— Our Research team also produces a bi-annual Cycle Watch document, which

themes, megatrends and changes in the way people shop, work and live

organisation

and have established innovation roles in the business

people risks

— We are reviewing each element of our customer journeys to identify opportunities

— Clear employee objectives and development plans to ensure alignment to business

to improve

goals

— We have defined an innovation process to capture ideas and workshop with our
customers on their needs in a test office environment. For example, we hosted a
Make-a-thon which was a seven-hour competition where teams made up of both
Landsec colleagues and customers had to solve customer problems

— We recognise the value of employee health and wellbeing through our Health and

Wellbeing Statement of Practice

— We have set specific diversity metrics to be achieved by 2025
— Our flexible working policy promotes work-life balance, reduces employee stress

— Our Innovation team is debating and investigating ways to build more efficiently

and improves performance

and effectively with our strategic partners

— We regularly complete employee engagement surveys to understand areas of

— We are actively speaking to and involving our customers in creating new experiences

strength and opportunities for improvement

— We have high profile, market-leading developments and assets to manage, in places

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

people want to work

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

Consistent with our review of emerging
risks impacting the business, we had
seen the pace of change continue to
accelerate. While we had improved our
internal capability in this area over the
last year with our expanded Business
Foresight team, we continue to experience
ongoing structural challenges, particularly
within the retail business. Therefore, the
residual risk remained unchanged.

As outlined in customer above, the
Covid-19 outbreak has been disruptive for
a number of our customers impacting
their ability to trade, supply chains and
demand for their products. We believe
there could be a structural shift in how
our customers use space going forward –
for example, the retail sector has seen
greater use of online business models
as a result of Covid-19 and these new
business models may require less physical
retail space. In addition, as people
become more comfortable and familiar
with virtual interactions, the use of
permanent office and physical meeting
rooms may decline.

Employee uncertainty increased because
we had combined the main operating
functions of the London and Retail
business units and had also begun the
process of transitioning to a new CEO
following Robert Noel’s decision to retire.
This led to an increase in the people and
skills risk. This is consistent with the
elevated risk that we presented at the
half-year.

In response to Covid-19, the majority of
our employees are now working from
home. Overall this transition has been
smooth from a technology and
communications point of view. We have
not seen any significant impacts on
employee productivity, although we are
carefully monitoring employees’ mental
and physical wellbeing. We have also set
up a ‘skills exchange hub’ to allow people
with any spare capacity in the current
environment to pick up extra work from
teams who are currently under pressure.

Example KRIs

— UK net retail openings and shopping centre vacancy rates (external metric)

— Amount of people visiting our assets

— Percentage of lease expiries over our five-year plan

— Void rates across our portfolio

— Customer credit risk profile and tenant counterparty risk

— Customer retention

— Like for like rental income metrics

— Customer and space churn

Example KRIs

— UK Gross Domestic Product (external metric)

— UK household spending levels (external metric)

— Employment intentions – Business Services (external metric)

— Interest rates (external metric)

— Business confidence (external metric)

— Our loan-to-value ratio

— Our Customer Relationship Management processes actively monitor our customer

— Our Research team prepare a quarterly report for the Executive and Property

Committees, which measures both macroeconomic and internal risk metrics,

— We have a robust credit policy and process which defines what level of credit risk

against tolerance ranges, e.g. occupancy vacancy levels

Mitigation

base and performance

we will accept

action, as well as monitoring online sales trends

assumptions used in our budget and forecasting process

— The monthly management accounts review lease expiries, breaks, re-gears and

— We complete scenario analyses as part of our annual budgeting and five-year

compare new lettings against estimated rental value

forecasting process. Specific scenarios we have modelled include the impact of

— We measure footfall and retail sales at our shopping centres to provide insight

different Brexit outcomes and changes in legislation. These are considered in more

into consumer trends

detail in the viability scenario assumptions

— We regularly measure customer satisfaction across our retail and office customer base

— Our business portfolios prepare a quarterly report reviewing the market risk for each

of our sectors

— We are active members of local business and community groups, as well as industry

and professional bodies. This ensures we are actively engaged in decisions affecting

our business, customers, partners and communities

We were already operating in a tough

The Covid-19 outbreak is a very

This risk reduced with greater certainty

Covid-19 has resulted in high levels of

retail environment, with a number of

challenging time for many businesses

over the political landscape in the UK

macroeconomic and market uncertainty

company voluntary arrangements (CVAs)

and, in particular, some of our retail

following the general election and some

and volatility. As a result, we have seen a

throughout the year, and like-for-like

and leisure customers. We are regularly

valuation write-downs already taken in

greater reduction in our retail and leisure

footfall and retail sales declining. We were

communicating with our customers

the retail portfolio. We were continuing to

asset values. We see an increased risk of

monitoring our retailers at risk of CVA and

and are engaged in conversations about

plan for a range of potential Brexit trade

an economic downturn or recession which

looking at more flexible leasing options

how we can support them through this

deal outcomes. The Audit Committee has

could further impact the value of our

in retail. The office market had remained

difficult time. We continue to closely

proactively reviewed and challenged our

assets, including those in London.

resilient through 2019. We elevated this

monitor the cash collections of rents

Brexit risk assessments over the year to

risk last year to reflect the deterioration

across the whole portfolio and we have

ensure we are well prepared and able to

We have refreshed our own economic

in the retail market.

minimise downside business

consequences.

seen a material reduction in cash

collections in late March 2020. This

indicates a likely increase in business

failures and we are closely monitoring

any customers in financial distress.

We expect to see greater non-payment

of rent as we move through 2020.

We have established a support fund

to provide up to £80m of rent relief for

customers – around £15m of this fund

will support our F&B customers and

the remaining £65m will be allocated

on a case-by-case basis to small- and

medium-sized businesses.

outlook and modelled different scenarios

to understand and plan for the potential

impact of Covid-19 on our business. In

light of the extreme market uncertainty

the Board believes that conserving

liquidity is in the best interests of

shareholders. Therefore, the Board took

the decision to cancel our third interim

dividend and is not proposing a final

dividend. We will regularly review the

position on future dividend payments,

reinstating them as soon as it is

appropriate to do so.

Opportunity

Enhance and maintain our position as the partner of choice for our customers by

The strength of our balance sheet, combined with our strong rating, enables us to

better understanding their needs.

invest in our growing development pipeline and other opportunities as they arise.

We are assessing plans for significant mixed use developments on our suburban

London retail sites where we see opportunities to create value.

Opportunity
Dealing with trends and changes promptly and effectively will help us create further
value, and grow while maintaining our competitive advantage. We will be able to
make decisions now that have a positive impact in the future.

Opportunity
Build further expertise, knowledge and capability in the business.

Landsec Annual Report 2020Strategic Report

Our principal risks
and uncertainties
continued

5. Major health, safety and security incident
Failure to identify, mitigate and/or react effectively to a major health, safety or
security incident, leading to serious injury, illness or loss of life; criminal/civil
proceedings; loss of stakeholder confidence; delays to building projects and access
restrictions to our properties resulting in loss of income; inadequate response to
regulatory changes; and reputational impact.

6. Information security and cyber threat
Data loss or disruption to the corporate systems and building management systems
resulting in a negative reputational, operational, regulatory (including GDPR) or
financial impact.

7. Climate change

and stranded assets.

Failure to properly identify and mitigate both physical and transition risks from climate

Unable to effectively execute our strategy of buying, developing and selling assets

change, leading to a negative impact on our reputation, disruption in our operations

at the appropriate time in the property cycle, including inappropriate sector selection

and weighting; inability to deliver capital expenditure programme to agreed returns;

and/or occupiers reluctant to take new space.

8. Investment and development strategy

Executive responsible: Martin Greenslade

Executive responsible: Caroline Hill

Executive responsible: Colette O’Shea

Example KRIs
— Health and safety training
— Number of reportable health and safety incidents
— Progress of fire stopping and cladding project against agreed milestones
— Security Service national threat level (external metric)
— Security risk assessment results of our properties

Example KRIs
— Speed of threat and vulnerability detection
— Speed of vulnerability resolution
— Number of data loss events
— Disaster recovery – system availability
— Building Management cyber security risk
— Cyber security and GDPR training

Mitigation
— The Group Health, Safety & Security (HS&S) Committee is chaired by the CFO
and governs the H&S management systems and processes. H&S performance
is reported to the Board every six months

— Our ‘One Best Way’ standards define mandatory H&S compliance policies for the

Mitigation
— We have a dedicated Information Security team and Data Privacy Officer who

monitor information security and privacy risk and cyber threat

— All of our colleagues complete mandatory cyber security and GDPR training
— Our IT security management policy sets out our standards for security and

business and our supply chain

— We hold quarterly Customer Improvement Groups with our principal contractors

and key Service Providers to drive continuous improvement across our supply chain

— All of our colleagues must attend H&S training relevant to their role
— All our key Service Partners are assessed against H&S KPIs
— All suppliers engaged in construction activities must be approved by the health

and safety team to ensure they have the appropriate skills, knowledge, attitude,
training and experience

— An event safety management plan is completed for all events at our assets
— We have reviewed fire safety across our entire portfolio and completed a £7m

penetration testing, vulnerability and patch management, data disposal and access
control including Multi-Factor Authentication

— We complete a quarterly assessment that key IT controls are operating effectively
— All third-party IT providers must complete an information security vendor assessment

which is reviewed and approved by the cyber security officer

— We work closely with our IT service partners to manage risk and improve technical

the low-carbon economy, using our Sustainability Brief for developments and

— We have robust succession plans in place for senior and critical development and

standards

project management roles

— Our development brief clearly defines the required technical IT standards for all

— We undergo assurance for data and disclosures across our sustainability programme,

— We have robust and established governance and approval processes, including the

building systems

— Our move to the ‘Cloud’ has improved the resilience of our disaster recovery and

enhancing the integrity, quality and usefulness of the information we provide

Investment Committee

programme of proactive fire safety improvements during the year

business continuity plans

Example KRIs

— Energy intensity and carbon emissions

— Recycling waste

— Renewable electricity

— Embodied carbon for new developments

— Portfolio natural disaster risk

— Headroom versus development capital expenditure

— Speculative development, pre-development and trading property risk exposure

Example KRIs

— Development pipeline

— Portfolio liquidity

— Counterparty credit risk

— Group hedging

Mitigation

— Through our Responsible Property Investment Policy and sustainability due diligence

— Our Investment Appraisal Guidelines define the key investment criteria (including

process, we assess risks and opportunities in potential acquisitions

hurdle rates and alignment to strategic objectives), the risk assessment process,

— We are committed to become net zero carbon by 2030, leading the transition to a

key stakeholders and the delegations of authority to approve investment decisions

— We’ve increased the ambition of science-based target, reducing our emissions in line

developments and create employment and education opportunities through our

— We ensure strong community involvement in the design process for our

construction and operations activities

— To support our strategy, we’ve created our Green Bond Framework, enabling future

— We are actively considering other sector opportunities and running trials as

appropriate to test our propositions and market demand and requirements

— Our developments are designed to be resilient to climate change and are ready for

— Our highly experienced development team and partners have a track record of success

Mitigation

low-carbon economy

with a 1.5°C scenario

green bond issuance

associated processes

— We have an effective vulnerability management system, including an annual rolling

penetration testing programme across our IT estate.

— All our properties have business continuity and crisis management plans in place,

which are tested at least annually

— Our fire risk framework categorises and assesses all of our properties based on:
occupancy and use, fire safety systems, management systems, adequacy of
means of escape and materiality. This drives the ongoing actions as part of our
estate management

— The H&S team completes regular property healthchecks at our assets to audit

compliance with our policies, procedures and legislation

— All our properties have completed security risk assessments, which drives the

physical security measures in place at that property. Our properties have dedicated
security teams, which are supported by CCTV and other physical security measures

— Our menu of tactical security options and Group building response levels now give
us the ability to react to a local or national criminal threat in a proportionate and
reasonable way

— Our Group insurance programme protects against losses of rent and service charge

resulting from terrorism

— All accidents and incidents are reported and recorded in our H&S system with

analysis performed on trends and root causes of the incidents

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

As outlined in our half-year announcement,
we evaluated our fire management
strategies across our entire property
portfolio and identified some fire safety
improvements. We have now implemented
these improvements, although the
regulatory environment continues to
evolve and tighten requirements. Physical
security risk has decreased with the
threat level being changed from severe
to substantial. Overall the risk remained
the same as last year.

We have worked closely with our
customers to safely and securely close
all non-essential retail premises. As the
government eases lockdown restrictions,
and occupancy and footfall levels at our
assets increase, we remain aware that
there is an increased risk of a health and
safety incident related to Covid-19.

Our efforts are now focused on ensuring
we are well-prepared for a gradual and
safe return to our properties as
restrictions are eased.

The level of this risk had not changed,
reflecting that, while companies continue
to be subject to an increasing number of
attempted cyber attacks, we have
continued to develop and invest in the
maturity of our mitigation controls.

This risk has slightly increased following
an increase in coronavirus-related
phishing and fraud attempts.

to public data demonstrating how global

level of this risk.

emissions continue to grow, increasing

climate-related risks. The residual risk

is the same as we have intensified our

mitigations and launched our ambition

to be a net zero carbon business by 2030.

We elevated the risk last year in response

Covid-19 has not impacted the residual

We have a large development pipeline

This risk has increased due to the impact

and planned to have 1.4 million sq ft

of programme delay on our development

of development on site by April 2020,

pipeline and increased uncertainty around

increasing our development exposure

the future economic environment we will

and therefore our risk in this area.

deliver our developments into.

We have re-profiled our cash flows and

commitments for the whole development

pipeline, and have completed analysis

on the pipeline based on potential future

scenarios against the baseline budget.

Opportunity
We are testing a prototype of a new construction approach at Sumner Street.
In this, we aim to manufacture and assemble off site as much as possible, which
reduces the health and safety risk.

We are working with our peers on fire safety, to help advance industry standards.

Opportunity
We continue to work with our service partners and strategic suppliers to examine our
industry’s standards, in particular for building systems. We consider new technologies
so we can take advantage of the latest innovations and opportunities and enhance
our reputation as a trusted and responsible partner.

Opportunity

Lead our business and the property sector towards a low-carbon economy,

As mentioned above, the strength of our balance sheet, combined with our

creating long-term value for our shareholders and wider stakeholder groups.

strong rating, enables us to invest in our growing development pipeline and

other opportunities as they arise.

Landsec Annual Report 2020

5. Major health, safety and security incident

6. Information security and cyber threat

Failure to identify, mitigate and/or react effectively to a major health, safety or

Data loss or disruption to the corporate systems and building management systems

security incident, leading to serious injury, illness or loss of life; criminal/civil

resulting in a negative reputational, operational, regulatory (including GDPR) or

proceedings; loss of stakeholder confidence; delays to building projects and access

financial impact.

restrictions to our properties resulting in loss of income; inadequate response to

7. Climate change
Failure to properly identify and mitigate both physical and transition risks from climate
change, leading to a negative impact on our reputation, disruption in our operations
and stranded assets.

8. Investment and development strategy
Unable to effectively execute our strategy of buying, developing and selling assets
at the appropriate time in the property cycle, including inappropriate sector selection
and weighting; inability to deliver capital expenditure programme to agreed returns;
and/or occupiers reluctant to take new space.

regulatory changes; and reputational impact.

Executive responsible: Martin Greenslade

Executive responsible: Caroline Hill

Executive responsible: Colette O’Shea

Example KRIs

— Health and safety training

— Number of reportable health and safety incidents

— Progress of fire stopping and cladding project against agreed milestones

— Security Service national threat level (external metric)

— Security risk assessment results of our properties

Example KRIs

— Speed of threat and vulnerability detection

— Speed of vulnerability resolution

— Number of data loss events

— Disaster recovery – system availability

— Building Management cyber security risk

— Cyber security and GDPR training

Example KRIs
— Energy intensity and carbon emissions
— Recycling waste
— Renewable electricity
— Embodied carbon for new developments
— Portfolio natural disaster risk

Mitigation

— The Group Health, Safety & Security (HS&S) Committee is chaired by the CFO

— We have a dedicated Information Security team and Data Privacy Officer who

and governs the H&S management systems and processes. H&S performance

monitor information security and privacy risk and cyber threat

is reported to the Board every six months

— All of our colleagues complete mandatory cyber security and GDPR training

Mitigation
— Through our Responsible Property Investment Policy and sustainability due diligence

process, we assess risks and opportunities in potential acquisitions

— We are committed to become net zero carbon by 2030, leading the transition to a

— Our ‘One Best Way’ standards define mandatory H&S compliance policies for the

— Our IT security management policy sets out our standards for security and

low-carbon economy

business and our supply chain

penetration testing, vulnerability and patch management, data disposal and access

— We’ve increased the ambition of science-based target, reducing our emissions in line

— We hold quarterly Customer Improvement Groups with our principal contractors

control including Multi-Factor Authentication

with a 1.5°C scenario

and key Service Providers to drive continuous improvement across our supply chain

— We complete a quarterly assessment that key IT controls are operating effectively

— To support our strategy, we’ve created our Green Bond Framework, enabling future

— All of our colleagues must attend H&S training relevant to their role

— All third-party IT providers must complete an information security vendor assessment

green bond issuance

— All our key Service Partners are assessed against H&S KPIs

which is reviewed and approved by the cyber security officer

— All suppliers engaged in construction activities must be approved by the health

— We work closely with our IT service partners to manage risk and improve technical

and safety team to ensure they have the appropriate skills, knowledge, attitude,

standards

— Our developments are designed to be resilient to climate change and are ready for

the low-carbon economy, using our Sustainability Brief for developments and
associated processes

Example KRIs
— Development pipeline
— Portfolio liquidity
— Headroom versus development capital expenditure
— Speculative development, pre-development and trading property risk exposure
— Counterparty credit risk
— Group hedging

Mitigation
— Our Investment Appraisal Guidelines define the key investment criteria (including
hurdle rates and alignment to strategic objectives), the risk assessment process,
key stakeholders and the delegations of authority to approve investment decisions

— We ensure strong community involvement in the design process for our

developments and create employment and education opportunities through our
construction and operations activities

— We are actively considering other sector opportunities and running trials as
appropriate to test our propositions and market demand and requirements

— Our highly experienced development team and partners have a track record of success
— We have robust succession plans in place for senior and critical development and

project management roles

training and experience

— Our development brief clearly defines the required technical IT standards for all

— We undergo assurance for data and disclosures across our sustainability programme,

— We have robust and established governance and approval processes, including the

enhancing the integrity, quality and usefulness of the information we provide

Investment Committee

— An event safety management plan is completed for all events at our assets

building systems

— We have reviewed fire safety across our entire portfolio and completed a £7m

— Our move to the ‘Cloud’ has improved the resilience of our disaster recovery and

programme of proactive fire safety improvements during the year

business continuity plans

— Our fire risk framework categorises and assesses all of our properties based on:

— We have an effective vulnerability management system, including an annual rolling

occupancy and use, fire safety systems, management systems, adequacy of

penetration testing programme across our IT estate.

means of escape and materiality. This drives the ongoing actions as part of our

— All our properties have business continuity and crisis management plans in place,

estate management

which are tested at least annually

— The H&S team completes regular property healthchecks at our assets to audit

compliance with our policies, procedures and legislation

— All our properties have completed security risk assessments, which drives the

physical security measures in place at that property. Our properties have dedicated

security teams, which are supported by CCTV and other physical security measures.

— Our menu of tactical security options and Group building response levels now give

us the ability to react to a local or national criminal threat in a proportionate and

— Our Group insurance programme protects against losses of rent and service charge

reasonable way

resulting from terrorism

— All accidents and incidents are reported and recorded in our H&S system with

analysis performed on trends and root causes of the incidents

regulatory environment continues to

there is an increased risk of a health and

evolve and tighten requirements. Physical

safety incident related to Covid-19.

security risk has decreased with the

threat level being changed from severe

Our efforts are now focused on ensuring

to substantial. Overall the risk remained

we are well-prepared for a gradual and

safe return to our properties as

restrictions are eased.

the same as last year.

Opportunity

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

Change in year prior

to Covid-19

Covid-19 impact:

change since Dec-19

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

Change in year prior
to Covid-19

Covid-19 impact:
change since Dec-19

As outlined in our half-year announcement,

We have worked closely with our

The level of this risk had not changed,

This risk has slightly increased following

we evaluated our fire management

strategies across our entire property

customers to safely and securely close

reflecting that, while companies continue

an increase in coronavirus-related

all non-essential retail premises. As the

to be subject to an increasing number of

phishing and fraud attempts.

portfolio and identified some fire safety

government eases lockdown restrictions,

attempted cyber attacks, we have

improvements. We have now implemented

and occupancy and footfall levels at our

continued to develop and invest in the

these improvements, although the

assets increase, we remain aware that

maturity of our mitigation controls.

We elevated the risk last year in response
to public data demonstrating how global
emissions continue to grow, increasing
climate-related risks. The residual risk
is the same as we have intensified our
mitigations and launched our ambition
to be a net zero carbon business by 2030.

Covid-19 has not impacted the residual
level of this risk.

We have a large development pipeline
and planned to have 1.4 million sq ft
of development on site by April 2020,
increasing our development exposure
and therefore our risk in this area.

This risk has increased due to the impact
of programme delay on our development
pipeline and increased uncertainty around
the future economic environment we will
deliver our developments into.

We have re-profiled our cash flows and
commitments for the whole development
pipeline, and have completed analysis
on the pipeline based on potential future
scenarios against the baseline budget.

We are testing a prototype of a new construction approach at Sumner Street.

We continue to work with our service partners and strategic suppliers to examine our

In this, we aim to manufacture and assemble off site as much as possible, which

industry’s standards, in particular for building systems. We consider new technologies

reduces the health and safety risk.

We are working with our peers on fire safety, to help advance industry standards.

so we can take advantage of the latest innovations and opportunities and enhance

our reputation as a trusted and responsible partner.

Opportunity

Opportunity
Lead our business and the property sector towards a low-carbon economy,
creating long-term value for our shareholders and wider stakeholder groups.

Opportunity
As mentioned above, the strength of our balance sheet, combined with our
strong rating, enables us to invest in our growing development pipeline and
other opportunities as they arise.

Landsec Annual Report 2020Strategic Report

Our principal risks
and uncertainties
continued

Climate-related risks
and opportunities
We are committed to implementing the
recommendations of the Task Force on Climate-
Related Financial Disclosures (TCFD), providing
investors and other stakeholders with decision-
useful information on climate-related risks and
opportunities that are relevant to our business.

In this Annual Report, we provide a summary
of our TCFD disclosure. Full disclosure of
climate change scenarios and how they may
affect our business are included in our 2020
Sustainability Performance and Data Report
at landsec.com/sustainability. For further
disclosures you can access our CDP response
at www.cdp.net/en.

Governance
Our Chief Executive has overall responsibility
for climate-related risks and opportunities.
The Board is updated on our sustainability
performance at least once a year, including
discussion of climate-related issues. In addition,
the Audit Committee supports the Board in
the management of risk, which includes
climate-related risks.

Ongoing oversight of climate-related issues is
carried out by our Sustainability Committee,
chaired by the Chief Executive and attended by
our Group Corporate Affairs & Sustainability
Director, Group HR Director and senior
representation from portfolio management
and development teams. The Committee meets
quarterly and is the senior forum for developing
and implementing sustainability strategy and
commitments, assessing and managing
climate-related risks, and reviewing performance.

Strategy
As a UK real estate company, our business is
exposed to both physical and transitional risks
and opportunities from climate change. We’re
committed to assessing and mitigating physical
and financial climate change adaptation risks
that are material across our portfolio.

We assess the impact of climate-related risks
through quantitative and qualitative scenario
analysis, considering short- to medium-term
until 2030, and long-term beyond 2030 until
2100. Our analysis focuses on two distinct
scenarios, a best-case scenario where global
average temperature increases by less than
two degrees, and a worst-case scenario, where
temperatures increase by up to four degrees.

The nature and level of climate-related risk
is dependent on government, business and
society’s response in the short and long term.
In the event of a strong response to climate
change in the short term up to 2030, our
business will be affected in positive and

Our analysis gives us confidence in the resilience
of our strategy, as we’re supporting the transition
to a low-carbon world whilst managing the
impact of climate-related risks to our portfolio.

Risk management
Our risk management and control framework
enables us to effectively identify, assess and
manage climate-related risks. We recognise
the importance of identifying and monitoring
climate-related risks, which feature prominently
on our principal risk register.

Ownership and management of all risks
is assigned to members of the Executive
Committee, who are responsible for ensuring
the operating effectiveness of the internal
control systems and for implementing key risk
mitigation plans. The Executive Committee
is supported by risk champions across the
business, who are tasked with maintaining
awareness of key risks and control measures.

Responsibility for climate-related risk is assigned
to the Group Corporate Affairs & Sustainability
Director. Our climate-change principal risk
includes both transition and physical climate risk
and is monitored on a quarterly basis using a
series of key risk indicators. Both the Executive
Director and Risk Champion responsible for
climate-related risk ensure integration with
the overall risk management process. Where
climate-related risks correspond to other risks
these are discussed between the network of
risk champions.

Our risk management process to address
climate change is discussed further under
principal risks and uncertainties on page 55.

negative ways by the transition period. With a
limited response to climate change, our business
will be affected in the long term past 2030 by
physical effects such as extreme weather and
higher temperatures.

Our strategy to address climate-related risks
and opportunities spans all areas of our
business including investment, development,
operation and divestment. Through our
Responsible Property Investment Policy, we
assess climate risks when we buy an asset. In
our development pipeline, we’re designing and
constructing high-quality buildings and spaces
capable of achieving operational resilience over
their lifetime, considering how the UK’s climate
will change in the coming decades. We’re also
transitioning towards all-electric solutions,
scaling back fossil fuel-dependent boilers in
favour of electric heating and cooling.

We continue evolving our strategy to address
climate-related risks and opportunities. As part
of our approach to manage transition risks, in
November 2019, we announced our commitment
to becoming a net zero carbon business by 2030
and we increased the ambition level of our
science-based target, aligning it with a 1.5°C
scenario. Our science-based carbon reduction
target is a key part of our net zero carbon
strategy. In addition to reducing our operational
emissions, by improving the energy efficiency in
our assets, we’re looking to increase investments
in renewables, such as corporate power purchase
agreements (PPAs), managing the future risk of
higher energy costs. We’re also implementing
an internal shadow carbon price, anticipating
a potential carbon price in the future, to inform
our decision-making process. Furthermore,
we’re reducing carbon emissions across our
construction activities by setting embodied
carbon intensity and reduction targets for each
of our developments. Finally, we’ll offset any
remaining carbon emissions through carefully
selected projects which actively take carbon out
of the atmosphere. Further details on our net
zero strategy are discussed on pages 38-39.

Key metrics and targets

Climate-related financial metrics

Value of BREEAM certified assets

Percentage of total portfolio

Rental income derived from BREEAM certified assets

Percentage of rental income

Operational expenditure in low-carbon equipment and products

Savings from investments in low-carbon equipment and products

Capital expenditure in low-carbon equipment and products

Avoided energy consumption costs measured against 2013/14 baseline

Insured value of assets exposed to a 10-20% risk of inland, coastal
and flash flooding in a ten-year period

Percentage value of portfolio exposed to a 10-20% risk of inland,
coastal and flash flooding in a ten-year period

2019/20
£m

7,510

2018/19
£m

8,283

59%

380

56%

1.5

1.6

1.5

264

60%

387

57%

1.5

1.9

2.4

264

Table 28

Change
£m

(773)

–1%

(7)

–1%

–

(0.3)

(0.9)

–

1.1%

1.4%

–0.3%

Landsec Annual Report 2020Going concern
and viability

Going concern
The Directors confirm they have a reasonable
expectation that the Company has adequate
resources to continue in operational existence for
at least 12 months from the date of signing these
financial statements. This confirmation is made
after having reviewed assumptions about future
trading performance, valuation projections,
capital expenditure, asset sales and debt
requirements contained within the Group’s
current five-year plan. The Directors also
considered potential risks and uncertainties in
the business, credit, market and liquidity risks,
including the availability and repayment profile
of bank facilities, as well as forecast covenant
compliance. Further stress testing has been
carried out to ensure the Group has sufficient
cash resources to continue in operation for at
least the next 12 months following the recent
deterioration in cash collections as a result of
Covid-19. This stress testing included extreme
downside scenarios with materially reduced
levels of cash receipts over this period. Based
on the above, together with available market
information and the Directors’ knowledge and
experience of the Group’s property portfolio
and markets, the Directors continue to adopt the
going concern basis in preparing the accounts
for the year ended 31 March 2020. See note 1
of the financial statements for further details.

Viability statement
The viability assessment period
The Directors have assessed the viability of the
Group over a five-year period to March 2025,
taking account of the Group’s current financial
position and the potential impact of our
principal risks.

The Directors have determined five years to
be the most appropriate period for the viability
assessment as it fits well with the Group’s
development and leasing cycles and is broadly
aligned to the maturity of the Group’s floating
rate debt facilities.

Process
Our financial planning process comprises a
budget for the next financial year, together
with a projection for the following four financial
years. Generally, achievement of the one-year
budget has a greater level of certainty and is
used to set near-term targets across the Group.
Achievement of the five-year projection is less
certain than the budget, but provides a
longer-term outlook against which strategic
decisions can be made.

The financial planning process considers the
Group’s profitability, capital values, gearing,
cash flows and other key financial metrics over
the projection period. These metrics are subject
to sensitivity analysis, in which a number of the
main underlying assumptions are flexed and
tested to consider alternative macro-economic
environments. Additionally, the Group also
considers the impact of potential structural
changes to the business in light of varying
economic conditions, such as significant
additional sales and acquisitions or refinancing.
These assumptions are then adapted further
to assess the impact of considerably worse
macro-economic conditions than are currently
expected, which forms the basis of the Group’s
‘viability scenario’.

Given the significant impact of Covid-19 on
the macro-economic conditions in which the
Group is operating, additional stress-testing
has been carried out on the Group’s ability
to continue in operation under extremely
unfavourable operating conditions, including a
scenario in which we are unable to collect any
rent for an extended period of time. While the
assumptions we have applied in these scenarios
are possible, they do not represent our view of
the likely outturn. However, the results of these
tests help to inform the Directors’ assessment
of the viability of the Group.

Impact on key metrics
We have assessed the impact of these
assumptions on the Group’s key financial metrics
over the assessment period, including profitability,
net debt, loan-to-value ratios and available
financial headroom.

Key metrics

Loan-to-value ratio

Table 29

Viability
scenario
31 March

2025

41.3%

31 March
2020

30.7%

Adjusted net debt

£3,926m

£4,840m

EPRA net assets

£8,751m

£6,636m

Available financial
headroom

£1,163m £(2,983)m

The viability scenario represents a significant
contraction in the size of the business over the
five-year period considered, with the LTV at 42.7%
at its highest point in the assessment period.

The Group would be required to renew, or
exercise extension options, for a minimum of
£3.0bn of its debt facilities by the end of the
period considered. The Directors expect this to
be possible considering the Group’s expected
loan-to-value ratio and the flexibility of the
financing structure in place.

Confirmation of viability
Based on this assessment the Directors have
a reasonable expectation that the Group
will continue in operation and meet its liabilities
as they fall due over the period to March 2025.

Key risks
The table below sets out those of the Group’s
principal risks (see pages 51-56 for full details
of the Group’s principal risks) that could impact
its ability to remain in operation and meet
its liabilities as they fall due and how we have
taken these into consideration when making
our assessment of the Group’s viability.

Customers
Structural changes in customer and consumer
expectations leading to a change in demand for
space and the consequent impact on income.

Link to strategic objectives

Viability scenario assumption

— Cash collections deteriorate significantly over
the two years ending March 2022 reflecting
the anticipated impact of Covid-19

— Downward pressure on rental values in the
Retail and Specialist segments across the
forecast period.

Market cyclicality
Impact of Covid-19 and the outcome of Brexit
negotiations.

Link to strategic objectives

Viability scenario assumption

— Severe decline in economic activity and

weakening occupier demand in the initial
years of the period considered as a result
of Covid-19, with some recovery towards
the end of the period considered

— Decline in capital values and outward yield
movements through to March 2023 before
partial recovery through to March 2025
driven by our Office assets

— Declines in capital values through to March

2025 for Retail and Specialist assets.

Investment and development
strategy
Programme delays caused by Covid-19 and the
impact of the outcome of Brexit. Inability to
deliver our development pipeline and re-stock
the portfolio.

Link to strategic objectives

Viability scenario assumption

— Delays caused by Covid-19 reflected in cash

flow assumptions

— No uncommitted debt refinancing takes
place, and no new debt or bank facilities
are raised or extended

— Any uncommitted forecast acquisitions,

disposals and developments do not take place.

Landsec Annual Report 2020Strategic Report

Non-financial
information statement

This section of the Strategic Report constitutes Landsec’s Non-financial information statement and is produced to comply with sections 414CA
and 414CB of the Companies Act 2006.

Reporting requirement

Policies and standards which govern our approach

Information necessary to understand our business and
its impact, policy due diligence and outcomes

Sustainability policy1
Environment and Energy policy1
Responsible Property Investment policy1
Sustainability Brief for developments1
Prohibited Materials List1
Biodiversity Brief1

Health, Safety and Security policy1
Health and Wellbeing policy1
Mental Health First Aider policy1
Employee Code of Conduct1
GDPR data protection policy
Whistleblowing procedure

Human Rights policy1
Slavery and Human Trafficking statement1
Equal Opportunities policy1

Stakeholder Engagement policy1
Sustainability Charter for suppliers1

Anti-bribery Gifts and Hospitality policy1
Anti-money Laundering policy1
Conflicts of Interest and Anti-competitive
Behaviours policy1
Group Procurement policy1
Tax Strategy and Governance1

Environmental matters

Employees

Respect for human rights

Social matters

Anti-corruption and anti-bribery

Description of principal risks and impact
of business activity

Description of the business model

Non-financial key performance indicators

Understanding the needs of our
stakeholders – our communities, page 17
Our net zero carbon strategy,
pages 38-39
Physical review,
pages 38-41
Our principal risks and uncertainties,
pages 51-56

Understanding the needs of our
stakeholders – our people, page 17
People, culture and diversity,
pages 42-47
Our principal risks and uncertainties,
pages 51-56

Understanding the needs of our
stakeholders – our partners, page 17
People, culture and diversity,
pages 42-47

Understanding the needs of our
stakeholders – our customers, page 17
Understanding the needs of our
stakeholders – our communities, page 17
Social review,
pages 42-47

Understanding the needs of our
stakeholders – our customers, page 17
Understanding the needs of our
stakeholders – our people, page 17

Managing risk,
pages 48-50
Risk management framework,
page 49
Our principal risks and uncertainties,
pages 51-56

Our business model,
pages 18-19

Key performance indicators,
pages 22-23
Focus for 2020/21
page 25

1. These policies and statements are published on our corporate website: landsec.com

This Strategic Report was approved by the Board of Directors on 11 May 2020 and signed on its behalf by:

Mark Allan
Chief Executive

Landsec Annual Report 2020Introduction from the Chairman

60
61 Roles and responsibilities
62 Board of Directors
67 Board activity
68 Our culture
70 The Board and our stakeholders
72 Our investors
73 Report of the Nomination

Committee
Introduction from the Chairman of
the Audit Committee

78 Report of the Audit Committee
84 Directors’ Remuneration Report –
Chairman’s Annual Statement

86 Remuneration at a glance
88 Annual Report on Remuneration
99 Summary of Directors’ Remuneration

Policy

104 Directors’ Report

e Contents
c
n
a
n
r
e
v
o
G

Highlights

73 Report of the Nomination

76 Report of the

84 Directors’ Remuneration

Committee

Audit Committee

Report

G
o
v
e
r
n
a
n
c
e

Landsec Annual Report 2020

Introduction from
the Chairman

This year, we carried out an internal evaluation
of our performance as a Board, and this section
describes the process we followed and the
resulting actions and priorities we have taken
from this.

The most important decision made by the
Board in 2019 was the appointment of Mark
Allan to replace Robert Noel as our CEO.
Mark’s appointment followed a comprehensive
process led by the Nomination Committee and
we set this out in more detail on page 75.

Finally, it seems appropriate to comment on our
governance in the context of the Covid-19 crisis.
It is clear that in many situations the balance
between corporates and stakeholders has
shifted as a result of the stresses placed on
the economy. Society is increasingly looking
to large companies to help work through the
crisis. Against such a backdrop it is particularly
important that we listen to our stakeholders
and work closely with them. Our clear governance
framework has helped us to make decisions in
a rapidly changing environment, and play our
part responsibly.

Cressida Hogg
Chairman

Dear shareholder
Welcome to the governance
section of this year’s Annual
Report. The purpose of this
section is to provide you with
an overview of the way in
which the Board has operated
over the last year, and to give
you comfort that, as I have
outlined in my letter to
shareholders (on page 10),
we aim to make good
governance an integral part
of all that we do.

This year we have presented this section in
a different way to try to make it more logical
in its layout and more understandable to the
reader, as well as meeting the requirements
of the 2018 UK Corporate Governance Code.

As in previous years, we begin our governance
section with detail on our leadership and
decision-making structure, together with
information on our Board members and the
skills and experience each bring to our meetings.
This year, we also give more colour on how we
have engaged with our stakeholders, including
our investors and employees, to better
understand their perspectives.

For the first time, we have included a specific
section that gives an insight into our corporate
culture, and how this culture is integral to all
that we do. It underpins the way that we
behave as an organisation and is a core part
of our approach to governance. We have also
set out some measures against which we will
evaluate and monitor our culture going forward.

Cressida Hogg
Chairman

Overview
— Managing the CEO transition
as Robert Noel resigned as
Chief Executive on 11 July 2019
and stepped down from the
Board on 31 March 2020

— Mark Allan joined as

Chief Executive on 14 April 2020

— Chris Bartram retired

as Non-executive Director
on 31 March 2020

Landsec Annual Report 2020

Roles and
responsibilities

Audit Committee
— Responsible for oversight of the
Group’s financial and narrative
reporting processes

— Responsible for integrity of

financial statements

— Supports the Board in risk

management

Remuneration Committee
— Recommends to the Board the
executive remuneration policy

— Determines remuneration packages
of Executive Directors and Executive
Committee members

Nomination Committee
— Reviews structure, size and

composition of the Board and its
Committees

— Oversees succession planning of

Directors and Executive Committee

— Oversight of remuneration practices

— Leads Board appointment processes

for all employees

— Recommends appointments to

the Board

— Monitors corporate governance

CEO
— Leads the Group

— Articulates vision, values and purpose

— Develops and implements strategy

— Responsible for overall performance

of the business

— Manages executive leadership team

Executive Committee
— Composed of the Executive

Directors, together with the Group
HR Director and the Group General
Counsel and Company Secretary

— Advisory Committee to support the
Chief Executive on the management
of the operational and financial
performance of the Group

— Remit includes operating plans,

budgets, policies and procedures, risk
and reputation management, brand,
organisational development and
employee remuneration

Management Committees
— Investment Committee

— Property Committee

— Sustainability Committee

— Health, Safety & Security Committee

How we make decisions
Decisions that can only be made by the Board,
together with the terms of reference for our
Committees, can be found on our website
landsec.com/governance.

Decision making on investments, commercial
agreements, including the acquisition, disposal
and development of assets, is delegated
according to value.

Board

over £150m

Investment Committee

£20m-£150m

Chief Executive

£10m-£20m

Property Committee

up to £10m

All other decisions are the responsibility of the CEO with a clear Delegation of Authorities
framework which sets out levels of authority for decision making throughout the business.

GovernanceLandsec Annual Report 2020Board of Directors —Responsible for the long-term success of the Group —Provides leadership and direction to the Group on its culture, values and ethics —Sets strategy and oversees its implementation —Agrees risk appetite and is responsible for risk oversight —Responsible for corporate governance —Responsible for the overall financial performance of the Group —Appoints core executive management positions
Board of
Directors

Key to symbols

A Audit Committee

N Nomination Committee

R Remuneration Committee

* Independent as per the UK Corporate Governance Code.

Cressida Hogg was considered independent upon
appointment as Chairman.

† Two additional Board meetings were held during the
year relating to CEO succession. Stacey Rauch and
Christophe Evain were each unable to attend one of
these meetings due to pre-existing commitments.

Chairman of the Board

Senior Independent Director

Non-executive Directors

Cressida Hogg
Chairman

Edward Bonham Carter
Non-executive Director*

Role: Leads the Board, responsible for governance,
major shareholder and other stakeholder engagement.

Role: A sounding board for the Chairman and a trusted
intermediary for other Directors and shareholders.

Years on the Board: 6
Chairman since 12 July 2018

Years on the Board: 6
Senior Independent Director since July 2016

Skills and experience
Cressida has spent over 20 years in the investment
industry and has experience of building and developing
businesses both in the UK and globally. She has extensive
Board experience, including most recently on the Boards
of Anglian Water Group and Associated British Ports.
Cressida was Global Head of Infrastructure at the $350bn
Canada Pension Fund Investment Board, managing
a portfolio of investments worth c.£16bn. Prior to that,
as Managing Partner she was responsible for managing
3i Infrastructure plc, a FTSE 250 investment company,
having co-founded the infrastructure business at 3i
in 2005. She was previously a member of the advisory
board for Infrastructure UK, the HM Treasury unit
working on the UK’s long-term infrastructure priorities.

Other current appointments
Non-executive Director, London Stock Exchange Group plc.
Non-executive Director, Troy Asset Management.

Board attendance
Attended 100% of scheduled meetings.

Skills and experience
Edward has significant experience of general management
as a former CEO of a private equity backed and a large
listed company. Having been a fund manager for many
years, he has a comprehensive understanding of stock
markets and investor expectations which is beneficial
to the Company when it considers its engagement with
investors. Edward became Vice Chairman of Jupiter
Fund Management plc in March 2014, having been Chief
Executive Officer of the company since June 2007 where
he oversaw the firm’s listing on the London Stock Exchange
in 2010. Edward became chairman of the Remuneration
Committee in January 2019.

Other current appointments
Vice Chairman, Jupiter Fund Management plc.
Senior Independent Director, ITV plc. Board member,
The Investor Forum CIC. Trustee, Esmée Fairbairn
Foundation. Director, Netwealth Investments Ltd.
Member, Strategic Advisory Board Livingbridge LLP.

Board attendance
Attended 100% of scheduled meetings.

Nicholas Cadbury
Non-executive Director*

Years on the Board: 3

Skills and experience
Nicholas brings wide-ranging and international financial
and general management experience to the Group
gained from working in consumer-facing businesses,
particularly in the retail, leisure and hospitality sectors.
He also has extensive commercial and operational
knowledge and skills in relation to strategy and IT
development. This broader commercial perspective adds
breadth of discussion in Board discussions and enables
Nicholas to provide effective challenge as Chairman of
the Audit Committee. Nicholas is Group Finance Director
of Whitbread PLC, a position he has held since November
2012. Before that, he was Chief Financial Officer of
Premier Farnell PLC. Nicholas originally qualified as an
accountant with Price Waterhouse. Nicholas became
Chairman of the Audit Committee in September 2017.

Other current appointments
Group Finance Director, Whitbread PLC.

Board attendance
Attended 100% of scheduled meetings.

Madeleine Cosgrave

Non-executive Director*

Years on the Board: 1

Skills and experience

Christophe Evain

Non-executive Director*

Years on the Board: 1

Skills and experience

Stacey Rauch

Non-executive Director*

Years on the Board: 8

Skills and experience

Madeleine has deep knowledge and perspective in

Christophe has extensive investment experience in

Stacey brings deep analytical thought to the Board, with

relation to investment decisions, property management

private equity, debt and other alternative asset classes.

considerable expertise of retail trends and insights gained

and market dynamics from her extensive experience

As the former CEO of a UK listed company, he also has

at a leading international management consultancy.

in the property industry. She is a fellow of the Royal

management and leadership strengths, having

Institution of Chartered Surveyors and former chair of

successfully led the transformation of Intermediate

She has significant board level experience gained through

non-executive positions held in retail and other industries

the INREV Investor Platform and has sat on a number

Capital Group PLC (ICG) from a principal investment

which is of particular relevance and benefit to the

of GIC Real Estate boards across Europe. Madeleine

business into a diversified alternative asset management

Company at a time of challenge in the UK retail sector.

is currently Managing Director and Regional Head of

group with €34bn assets under management. Christophe’s

Stacey is a Director (Senior Partner) Emeritus of McKinsey

Europe at GIC Real Estate, a position she has held since

broad experience, both as a business leader and an

& Company where she served clients in the US and

2016. She is responsible for the real estate investment

investor, is a valuable asset to the Board. Having started

internationally for 24 years. Whilst there, she co-founded

strategy and portfolio, leads the real estate business in

his career in banking, holding various positions at NatWest

the New Jersey office and was the first woman to be

Europe and is a member of the GIC Real Estate global

and Banque de Gestion Privée, he joined ICG in 1994 as

appointed as an industry practice leader. Stacey retired

investment committee. Prior to GIC Madeleine held

an Investment professional, became CEO in 2010 and

from McKinsey & Company in 2010 and has since then

various positions with JLL in London and Sydney.

stepped down from that position in 2017. During this time

pursued a portfolio career. In 2019, Stacey was named

Madeleine’s global real estate experience, combined

he held various investment and management roles,

to the NACD Directorship 100, the annual list of the most

with her knowledge and perspective of investment

founded the Group’s businesses in Paris, the Asia-Pacific

influential leaders in boardrooms and in corporate

decisions, property management and market dynamics,

region and North America, and was instrumental in

governance in the US.

is an asset to Board discussions on all property matters.

adding various additional businesses, including a UK

Other current appointments

Corporate representative, Euro Lily Private Limited

Other current appointments

(a corporate director of CeGeREAL SA).

None.

property lending business.

Board attendance

Attended 100% of scheduled meetings.

Attended 100% of scheduled meetings†.

Other current appointments

Chairman, Board Fiesta Restaurant Group Inc.

Non-executive Director, Ascena Retail Group Inc.

Non-executive Director, Heidrick & Struggles

International, Inc.

Board attendance

Attended 100% of scheduled meetings†.

Landsec Annual Report 2020Chairman of the Board

Senior Independent Director

Non-executive Directors

The Role of our Non-executive Directors
Our Non-executive Directors are responsible for
bringing an external perspective, sound judgement
and objectivity to the Board’s deliberations and
decision making. They support and constructively

challenge the Executive Directors using their broad
range of experience and expertise and monitor
the delivery of the agreed strategy within the risk
management framework set by the Board.

Cressida Hogg

Chairman

Edward Bonham Carter

Non-executive Director*

Nicholas Cadbury

Non-executive Director*

Role: Leads the Board, responsible for governance,

Role: A sounding board for the Chairman and a trusted

Years on the Board: 3

major shareholder and other stakeholder engagement.

intermediary for other Directors and shareholders.

Years on the Board: 6

Chairman since 12 July 2018

Skills and experience

Cressida has spent over 20 years in the investment

industry and has experience of building and developing

businesses both in the UK and globally. She has extensive

Board experience, including most recently on the Boards

of Anglian Water Group and Associated British Ports.

Cressida was Global Head of Infrastructure at the $350bn

Canada Pension Fund Investment Board, managing

a portfolio of investments worth c.£16bn. Prior to that,

as Managing Partner she was responsible for managing

3i Infrastructure plc, a FTSE 250 investment company,

having co-founded the infrastructure business at 3i

in 2005. She was previously a member of the advisory

board for Infrastructure UK, the HM Treasury unit

Other current appointments

Non-executive Director, London Stock Exchange Group plc.

Non-executive Director, Troy Asset Management.

Board attendance

Attended 100% of scheduled meetings.

Years on the Board: 6

Senior Independent Director since July 2016

Skills and experience

Nicholas brings wide-ranging and international financial

and general management experience to the Group

gained from working in consumer-facing businesses,

particularly in the retail, leisure and hospitality sectors.

Edward has significant experience of general management

He also has extensive commercial and operational

as a former CEO of a private equity backed and a large

knowledge and skills in relation to strategy and IT

listed company. Having been a fund manager for many

development. This broader commercial perspective adds

years, he has a comprehensive understanding of stock

breadth of discussion in Board discussions and enables

markets and investor expectations which is beneficial

Nicholas to provide effective challenge as Chairman of

to the Company when it considers its engagement with

the Audit Committee. Nicholas is Group Finance Director

investors. Edward became Vice Chairman of Jupiter

of Whitbread PLC, a position he has held since November

Fund Management plc in March 2014, having been Chief

2012. Before that, he was Chief Financial Officer of

Executive Officer of the company since June 2007 where

Premier Farnell PLC. Nicholas originally qualified as an

he oversaw the firm’s listing on the London Stock Exchange

accountant with Price Waterhouse. Nicholas became

in 2010. Edward became chairman of the Remuneration

Chairman of the Audit Committee in September 2017.

Committee in January 2019.

Other current appointments

Group Finance Director, Whitbread PLC.

Board attendance

Attended 100% of scheduled meetings.

Vice Chairman, Jupiter Fund Management plc.

Senior Independent Director, ITV plc. Board member,

The Investor Forum CIC. Trustee, Esmée Fairbairn

Foundation. Director, Netwealth Investments Ltd.

Member, Strategic Advisory Board Livingbridge LLP.

Board attendance

Attended 100% of scheduled meetings.

working on the UK’s long-term infrastructure priorities.

Other current appointments

RNA

Madeleine Cosgrave
Non-executive Director*

Years on the Board: 1

Christophe Evain
Non-executive Director*

Years on the Board: 1

Stacey Rauch
Non-executive Director*

Years on the Board: 8

Skills and experience
Madeleine has deep knowledge and perspective in
relation to investment decisions, property management
and market dynamics from her extensive experience
in the property industry. She is a fellow of the Royal
Institution of Chartered Surveyors and former chair of
the INREV Investor Platform and has sat on a number
of GIC Real Estate boards across Europe. Madeleine
is currently Managing Director and Regional Head of
Europe at GIC Real Estate, a position she has held since
2016. She is responsible for the real estate investment
strategy and portfolio, leads the real estate business in
Europe and is a member of the GIC Real Estate global
investment committee. Prior to GIC Madeleine held
various positions with JLL in London and Sydney.
Madeleine’s global real estate experience, combined
with her knowledge and perspective of investment
decisions, property management and market dynamics,
is an asset to Board discussions on all property matters.

Other current appointments
Corporate representative, Euro Lily Private Limited
(a corporate director of CeGeREAL SA).

Skills and experience
Christophe has extensive investment experience in
private equity, debt and other alternative asset classes.
As the former CEO of a UK listed company, he also has
management and leadership strengths, having
successfully led the transformation of Intermediate
Capital Group PLC (ICG) from a principal investment
business into a diversified alternative asset management
group with €34bn assets under management. Christophe’s
broad experience, both as a business leader and an
investor, is a valuable asset to the Board. Having started
his career in banking, holding various positions at NatWest
and Banque de Gestion Privée, he joined ICG in 1994 as
an Investment professional, became CEO in 2010 and
stepped down from that position in 2017. During this time
he held various investment and management roles,
founded the Group’s businesses in Paris, the Asia-Pacific
region and North America, and was instrumental in
adding various additional businesses, including a UK
property lending business.

Other current appointments
None.

Board attendance
Attended 100% of scheduled meetings.

Board attendance
Attended 100% of scheduled meetings†.

Skills and experience
Stacey brings deep analytical thought to the Board, with
considerable expertise of retail trends and insights gained
at a leading international management consultancy.
She has significant board level experience gained through
non-executive positions held in retail and other industries
which is of particular relevance and benefit to the
Company at a time of challenge in the UK retail sector.
Stacey is a Director (Senior Partner) Emeritus of McKinsey
& Company where she served clients in the US and
internationally for 24 years. Whilst there, she co-founded
the New Jersey office and was the first woman to be
appointed as an industry practice leader. Stacey retired
from McKinsey & Company in 2010 and has since then
pursued a portfolio career. In 2019, Stacey was named
to the NACD Directorship 100, the annual list of the most
influential leaders in boardrooms and in corporate
governance in the US.

Other current appointments
Chairman, Board Fiesta Restaurant Group Inc.
Non-executive Director, Ascena Retail Group Inc.
Non-executive Director, Heidrick & Struggles
International, Inc.

Board attendance
Attended 100% of scheduled meetings†.

GovernanceLandsec Annual Report 2020
Board of Directors
continued

Executive Directors

Mark Allan
Chief Executive

Martin Greenslade
Chief Financial Officer

Colette O’Shea
Managing Director, Portfolio

Role: Responsible for the leadership of the Group,
implementation of strategy, managing overall business
performance and leading the executive team.

Years on the Board: Appointed in November 2019 and
joined the Board on 14 April 2020.

Role: Supports the Chief Executive in developing
and implementing strategy, determining funding
arrangements and reporting Group financial
performance.

Years on the Board: 14

Skills and experience
Mark brings extensive knowledge and experience of
the property sector combined with strong operational
leadership and financial and strategic management skills
to the Board. Prior to joining Landsec, Mark was Chief
Executive of St. Modwen Properties PLC. Prior to that
he was Chief Executive of The Unite Group since 2006.
He moved to Unite in 1999 from KPMG and held a
number of financial and commercial roles in the business,
including Chief Financial Officer from 2003 to 2006.
A qualified Chartered Accountant and a member of
the Royal Institution of Chartered Surveyors.

Skills and experience
Martin brings extensive and wide-ranging financial
experience to the Group from the property, engineering
and financial sectors in the UK and overseas. He also has
extensive financial expertise, particularly in relation to
corporate finance and investment arrangements, and
significant listed company experience at board level.
Prior to joining Landsec in 2005, Martin was Group
Finance Director of Alvis plc and before that he worked in
corporate finance serving as a member of the executive
committee of Nordea’s investment banking division and
Managing Director of its UK business.

Other current appointments
None.

Management committees
Chairman of the Group’s Executive, Investment and
Sustainability Committees. He attends the Audit,
Remuneration and Nomination Committees at the
invitation of the chairs of the relevant Committees.

Board attendance
Mark joined the Board on 14 April 2020.

Other current appointments
Non-executive Director of Tullow Oil plc and Trustee
of International Justice Mission UK.

Management committees
A member of the Group’s Executive and Investment
Committees. Chairman of the Health, Safety & Security
Committee. He attends Audit Committee meetings at
the invitation of the Committee Chairman.

Board attendance
Attended 100% of scheduled meetings.

Role: Responsible for our Office, Retail and Specialist assets.

Years on the Board: 2

Skills and experience
Colette brings extensive property experience to the
Board including investment, asset management and
development. She joined Landsec in 2003 and was
Head of Development, London Portfolio, before being
appointed its Managing Director in April 2014. Colette led
the London business through its 2010 three million sq ft
speculative London development programme, including
the transformation of Victoria. In May 2019, Colette took
on responsibility for the Retail Portfolio, in addition to
London. Prior to joining Landsec, Colette was Head
of Estates at the Mercers’ Company where she led the
property team whilst also gaining extensive office, retail
and residential experience.

Other current appointments
Business Board Member of the Mayor of London’s
Local Enterprise Partnership for London (LEAP) in 2016.
Joint Chair of the Royal Docks Enterprise Zone
Programme Board.

Management committees
A member of the Group’s Executive and Investment
Committees. Chairman of the Property Committee.

Board attendance
Attended 100% of scheduled meetings.

Other Directors who served throughout the year

Robert Noel
Robert Noel stepped down as Executive Director and
Chief Executive on 31 March 2020 having served ten years
on the Board and having been Chief Executive since
April 2012. Robert attended 100% of all scheduled Board
meetings throughout the year.

Robert is a Chartered Surveyor with over 30 years
in the property industry and significant executive
leadership experience.

Chris Bartram
Chris Bartram, Non-executive Director, retired from the
Board on 31 March 2020. Chris had been a member of
the Board since 2009 and at the time of his retirement
was a member of the Nomination and Audit Committees.
Chris attended 100% of all scheduled Board meetings
throughout the year.

Chris is a scion of the property industry with decades
of property investment, fund management and capital
allocation experience.

Landsec Annual Report 2020Induction
The induction programme for Madeleine and
Christophe continued over the past year.
Christophe met senior leaders in the business,
principal external advisors and visited portfolio
assets. Madeleine has travelled to some of our
retail and office assets as well as spending time
with our valuation experts.

Our induction plan is delivered over the first
year of tenure, after which Directors participate
in Board development sessions and ongoing
training as required.

Training
Directors attended a number of development
sessions during the year, including a detailed
session on the planning process in London, fire
safety and emerging risks. Directors received
regular updates in their Board papers, facilitating
greater awareness and understanding of the
Group’s business and the legal, regulatory
and industry-specific environment in which it
operates. This was complemented throughout
the year by visits to properties owned, managed
or being developed by the Group to see our
operations and have the opportunity to meet
with local management teams and gain
customer and community insight.

Conflicts of interest and external
appointments
The Board has a policy to identify and manage
Directors’ conflicts or potential conflicts of
interest and has delegated authority to the
Nomination Committee to (i) approve
or otherwise any such disclosed conflicts, and
(ii) determine any mitigating actions deemed
appropriate to ensure that all matters in the
Boardroom are considered solely with a view
to promoting the success of Landsec. Directors’
conflicts of interest (which extend beyond
third-party directorships and include close
family) are reviewed by the Nomination
Committee annually, with new conflicts
arising between meetings dealt with at
the time between the Chairman and the
Company Secretary.

Robert Noel joined the Board of Taylor Wimpey
plc as a Non-executive Director on 1 October 2019.
The risk of a potential conflict was considered as
part of the Board’s approval of this external
appointment, but it was agreed that it could
be managed and a letter of understanding was
put in place.

Overboarding
We follow the Institutional Shareholder Services
(ISS) proxy voting guidelines on overboarding
and accordingly deem all our Non-executive
Directors to be within these guidelines. We
appreciate that other proxy bodies and
institutional investors impose more stringent
guidelines than ISS and that each individual’s
portfolio of appointments must be considered
on a case-by-case basis, which the Board duly
does before approving any appointments and
then on an annual basis to assess whether each
member of the Board is able to continue
contributing effectively.

We acknowledge that Edward Bonham Carter
and Stacey Rauch are at their maximum
number of appointments under the ISS
guidelines. Edward Bonham Carter’s executive
role at Jupiter is on a part-time basis of three
days per week and Stacey’s time commitment
as the chair of Fiesta Restaurant Group Inc and
her other non-executive appointments do not
in the opinion of the Nomination Committee
impact her ability to meet her Board or
committee responsibilities at Landsec.

On 1 November 2019, Martin Greenslade
became a Non-executive Director of Tullow Oil
plc. No potential conflict was raised in relation
to Martin’s appointment. The Tullow Board
meets six times a year, mostly in London, and
has one annual overseas operational site visit.
Martin’s total time commitment (excluding
travel) is anticipated to be circa 22 days per
year. There are no clashes identified with
Landsec Board dates and Tullow has a
December year end.

The Board approved each of these appointments
in advance and agreed that the appointments
would not impact their commitment as
Executive Directors of Landsec.

Board visit to One New Change, EC4

Potential conflicts of interest and how we have managed them

Director

Potential conflict situation

Nomination Committee decision and mitigating action taken

Edward Bonham Carter
(Non-executive Director)

Vice Chairman of Jupiter Fund Management plc,
a fund manager which invests in listed company
shares including, at times, the Company. Jupiter
is also a customer of the Group.

Edward Bonham Carter’s position means that he is not involved in the
selection of investments and has agreed not to participate in any
investment decisions which may involve the Group’s securities. The
Committee concluded that there is no conflict of interest.

Madeleine Cosgrave
(Non-executive Director)

Robert Noel
(Executive Director)

As Regional Head of Europe at GIC Real Estate,
Madeleine may have commercial relationships
with peer/competitor companies. GIC owns a 17.5%
stake in Bluewater and Madeleine is a Management
Committee member of BWAT Retail Property Unit
Trust – the entity that owns the stake in Bluewater.
GIC also has a stake in AccorInvest which operates
the hotels in Landsec’s portfolio.

Chief Executive of Landsec (until 31 March 2020)
and Non-executive Director of Taylor Wimpey plc
from 1 October 2019. Although not a direct peer
of Landsec, Taylor Wimpey plc operates in the real
estate sector.

The potential for a conflict of interest situation is recognised and a letter
of understanding was agreed at the time of Madeleine’s appointment
that governs her involvement in Board decisions (and levels of access to
commercially sensitive information) where there is, or may be, a conflict.
The Nomination Committee believes that these mitigation principles and
actions are sufficient and appropriate to deal with any issues.

The potential for a conflict of interest situation was recognised and a letter
of understanding was agreed that governed his involvement in Board
decisions (and levels of access to commercially sensitive information)
where there could have been a conflict. The Nomination Committee
believed that these mitigation principles and actions were sufficient and
appropriate to deal with any issues.

GovernanceLandsec Annual Report 2020
Board of Directors
continued

Executive Committee

Mark Allan
Chief Executive

Full biography on page 64

Martin Greenslade
Chief Financial Officer

Full biography on page 64

Colette O’Shea
Managing Director, Portfolio

Full biography on page 64

Tim Ashby
Group General Counsel and Company Secretary

Barry Hoffman
Group Human Resources Director

Joined Landsec in September 2015.

Joined Landsec in June 2019.

Role: Provides advice and support to the Board, its
Committees and the Chairman, and is responsible
for legal, compliance and governance activity across
the Group.

The appointment and removal of the Company Secretary
is a matter for the Board as a whole.

Skills and experience
Tim is a solicitor and has significant legal, compliance
and commercial experience gained across a number
of different sectors and businesses both in the UK and
overseas. Prior to joining Landsec, Tim was Group
General Counsel and Company Secretary of Mothercare
Plc and previously worked at PepsiCo Inc. and Yum
Brands Inc.

Other current appointments
Member of Executive Committee GC100.

Management committees
Member of the Group’s Executive Committee.
Secretary of Group PLC Board, Secretary of Audit,
Nomination and Remuneration Committee.
Attends Investment Committee.

Role: Responsible for the articulation and delivery
of Landsec’s people strategy including talent, reward,
organisational design and engagement.

Skills and experience
Barry was previously Group HR Director at
Computacenter PLC, the IT infrastructure services
business where he was responsible for a large, complex
and diverse workforce. In addition, Barry has held senior
HR roles at the Legal Services Commission and
Volkswagen.

Other current appointments
Barry is a Non-executive Director for international
charity Sightsavers.

Management committees
Member of the Group’s Executive and Sustainability
Committee. Attends Remuneration and Nomination
Committee meetings at the invitation of the Chairs
of the relevant Committees.

Landsec Annual Report 2020Board
activity

The Board attends
eight scheduled Board
meetings per year.
This year, two additional
Board meetings were
held in relation to the
appointment of the
new CEO.

The calendar below sets out some of the
topics discussed at each Board Meeting.
In addition, the following matters were
discussed at every Board meeting.

— Property cycle and sector trends

— Group performance versus budget,

targets, external benchmarks and peers,
consideration of share price versus NAV

— Portfolio liquidity and development exposure

— Significant and emerging risks, including

cyber security, terrorism, the loss of
key people, ongoing uncertainty arising
from the Brexit process and other
political risks

— Developments in corporate governance
and key legal and regulatory updates

— Meeting reports from the Chairs
of the Audit, Remuneration and
Nomination Committees

— Stakeholder considerations under

section 172 of the Companies Act 2006

Board assets visit 2020

May ’19

Jun ’19

Jul ’19

Sep ’19

— Portfolio valuation
— Annual results and the

Annual Report

— Going concern and viability

statements

— Group’s dividend policy
— Risk framework and reporting

structure

— Proposals for enhancing worker

engagement, including Chairman
and SID attendance at the
Employee Forum

— Budget scenarios and Annual

— Meet the NEDs session for

— Group’s Slavery and Human

Funding Strategy

— Composition of the Board and
its Committees, including
succession planning

— Update on Investor Relations
including feedback from the
Investor Roadshow

employees
— Public Affairs
— Development session on the
planning process in London

Trafficking Statement

— Adapting to changing markets

and customer needs

— Health, safety and security updates
including fire safety management
— Debt funding arrangements and

gearing levels
— Group’s WACC
— Composition of the Board and its
Committees, including succession
planning, with a particular focus
on the succession planning for the
Chief Executive

— Data governance risk including

GDPR and cyber security

— The Group’s risk register and the
effectiveness of the systems of
internal control and risk
management

Nov ’19

Dec ’19

Jan ’20

Mar ’20

— Portfolio valuation
— Half-yearly results and

presentations to analysts
— Going concern and viability
statements and dividend

— Composition of the Board and its
Committees, including succession
planning, with a particular focus
on the succession planning for the
Chief Executive and the resulting
appointment of Mark Allan

— Development of people, diversity
and potential talent in the Group,
including succession planning for
Senior Leaders

— Development session on

emerging risks

approved proceeding with
development of Lucent

— The Board’s assessment of culture
— Development opportunities and

— Site visit to the development
underway at 21 Moorfields

approval of Nova East

— Asset visits to Dashwood House

— The Group’s 2020 sustainability

and One New Change

strategy

— Annual fees for Non-executive

Directors

— Themes arising from the Employee

— Board evaluation and effectiveness

Engagement pulse survey

review

— Dividend
— Development opportunities and

— Health, safety and security updates
(including fire safety management)

— Gender pay and diversity
— Financial performance of the

business, the annual budget and
key performance targets

— 2020 Annual Report
— Employee Engagement pulse survey
— Composition of the Board,

Committees and succession
planning

— Impact of Covid-19 on the business

GovernanceLandsec Annual Report 2020
Our culture

Our culture defines

what makes Landsec
a great place to work and
company to do business
with, and forms a
fundamental basis for
our governance.

To explain and demonstrate our culture, we
use four themes we feel are critical to operating
our business model and implementing our
strategy. These allow the Board to measure
and monitor any gaps between the actual
culture and the culture we would wish to see.
This is something our Board members will
discuss with employees as they look into the
topic of corporate culture in more detail during
the year ahead.

Purpose and
meaning

Giving our employees a sense of
purpose, explaining why we exist and
moving beyond profit to focus on
doing good for individuals, customers
and society

Landsec has a clear purpose of creating
shareholder and social value by providing the
right space for our customers and communities,
so that people and businesses can thrive. With
the arrival of our new CEO, this is an opportunity
to reassess our purpose and we will report more
on this next year.

Our purpose is about more than profit and we
have an enviable record of creating social value
and you can read more about our programme
of social contribution on page 42. All of our
Executive Directors have targets that relate to
creating social value and, together with our
volunteering programme where over 8,500
hours of Landsec time was given to help
organisations and communities less fortunate
than our own, Landsec is well on its way to
meeting its target of creating £25m of social
value by 2025.

All of the Board’s significant decisions are
subject to a section 172 evaluation to identify
the likely consequences of any decision in the
long term and the impact of the decision on
our stakeholders. You can find our section 172
Statement on pages 70 and 71. A new CEO
presents an opportunity to reassess our values,
vision and strategy and how we communicate
these over the year ahead.

% of s172 evaluations completed

100%

Code of Conduct in place

% of management and leadership

52%

No. of townhall meetings

Value of social contribution

£4.8m+

% of staff with social value/ESG
targets

56%

Ethics and

fairness

Collaboration

and growth

Transparency

and openness

Using data and technology

in a fair and trustworthy way;

having clear accountabilities

Designing jobs and systems of work

Sharing information openly

to achieve successful outcomes

and effectively and discussing

affording everyone the opportunity

challenges and mistakes

and an effective and transparent

to create, innovate, collaborate and

decision-making structure

contribute to Landsec’s growth

Landsec has a code of conduct, which all

Our culture is one which promotes personal

Our employees told us we needed to do more

employees sign up to and are reminded of,

development and growth and we have a

on internal communications and so during the

on an occasional basis, throughout the year.

flagship development programme for all

year we held a number of townhall meetings,

We have a number of committees that meet

to make operational, investment and property-

related decisions to ensure that decisions are

fair and fully informed. We have also created a

data governance board to discuss and identify

risks and develop our working practices in

relation to all the data that Landsec gathers

and uses.

We publish our delegated authorities limits to all

employees. Our HR policies meet best practice

standards and our HR system and monthly

leaders. All leader level roles, including the

where management held Q&A sessions for all

Executive Committee, form part of the talent

staff in our London office, with the sessions

assessment process with succession plans

broadcast to our regional staff.

developed for all critical and leadership roles.

We monitor staff turnover and encourage

internal moves and promotion from within

our business.

We hold regular ‘Food for Thought’ meetings

for employees on specific topics. We have a

weekly round-up newsletter which is sent to

all employees by email at the end of the week

We have included collaboration in our values

which celebrates successes and provides a

and all of our projects rely on teams from across

platform for communicating any other key

our own business as well as our supply chain

messages.

who work together to deliver our developments.

The members of the Executive Committee

reporting processes ensure that fairness is a

At the Company’s annual staff conference

regularly meet employees and the HR Director

feature of our working practices and out of

‘Landsec Live’ in July 2019, the keynote speaker,

holds a ‘six months in’ meeting for all new

process actions are clearly explained.

a noted author, gave an inspirational speech on

employees.

the topic of Growth Mindset. We encourage a

culture of growth mindset at all levels of the

organisation.

We use a job evaluation system to ensure that

jobs are designed to meet the Company’s needs

and independent external benchmarking is

used to set pay based on job families and levels.

Job opportunities are advertised internally as

well as externally wherever practical and the

Company undertakes regular equal pay reviews

to ensure fairness of reward.

For the first time, Landsec now has a Diversity

and Inclusion manager, who joined us in 2019.

Departing employees are all given the opportunity

to complete an exit survey anonymously and

the HR Director also reviews external ratings

on Glassdoor.

Internal meetings and major projects all end

with a ‘completion cycle’ which encourages

feedback and continuous improvement

allowing all participants freedom to comment

on what went well, not so well and what could

be improved.

Gifts and Hospitality Register

in place

roles with succession plans in place

% staff turnover – regretted leavers

1.6%

Equal Pay claims

None

% of roles filled by internal

26%

No. of grievances raised

% roles offered internally

73%

candidates

programme

No. of people on new development

No. of whistleblowing incidents

No. of exit interviews completed

No. of Employee Forum meetings

Employee engagement index

No. of diversity champions

75%

People promoted in last year

Face to face training days per

employee

Our culture is what makes Landsec a great place to workLandsec Annual Report 2020
Purpose and

meaning

Giving our employees a sense of

purpose, explaining why we exist and

moving beyond profit to focus on

doing good for individuals, customers

and society

Landsec has a clear purpose of creating

shareholder and social value by providing the

right space for our customers and communities,

so that people and businesses can thrive. With

the arrival of our new CEO, this is an opportunity

to reassess our purpose and we will report more

on this next year.

Our purpose is about more than profit and we

have an enviable record of creating social value

and you can read more about our programme

of social contribution on page 42. All of our

Executive Directors have targets that relate to

creating social value and, together with our

volunteering programme where over 8,500

hours of Landsec time was given to help

organisations and communities less fortunate

than our own, Landsec is well on its way to

meeting its target of creating £25m of social

value by 2025.

All of the Board’s significant decisions are

subject to a section 172 evaluation to identify

the likely consequences of any decision in the

long term and the impact of the decision on

our stakeholders. You can find our section 172

Statement on pages 70 and 71. A new CEO

presents an opportunity to reassess our values,

vision and strategy and how we communicate

these over the year ahead.

Value of social contribution

£4.8m+

% of staff with social value/ESG

56%

targets

Ethics and
fairness

Collaboration
and growth

Transparency
and openness

Using data and technology
in a fair and trustworthy way;
having clear accountabilities
and an effective and transparent
decision-making structure

Designing jobs and systems of work
to achieve successful outcomes
affording everyone the opportunity
to create, innovate, collaborate and
contribute to Landsec’s growth

Sharing information openly
and effectively and discussing
challenges and mistakes

Landsec has a code of conduct, which all
employees sign up to and are reminded of,
on an occasional basis, throughout the year.

We have a number of committees that meet
to make operational, investment and property-
related decisions to ensure that decisions are
fair and fully informed. We have also created a
data governance board to discuss and identify
risks and develop our working practices in
relation to all the data that Landsec gathers
and uses.

We publish our delegated authorities limits to all
employees. Our HR policies meet best practice
standards and our HR system and monthly
reporting processes ensure that fairness is a
feature of our working practices and out of
process actions are clearly explained.

We use a job evaluation system to ensure that
jobs are designed to meet the Company’s needs
and independent external benchmarking is
used to set pay based on job families and levels.
Job opportunities are advertised internally as
well as externally wherever practical and the
Company undertakes regular equal pay reviews
to ensure fairness of reward.

For the first time, Landsec now has a Diversity
and Inclusion manager, who joined us in 2019.

Our culture is one which promotes personal
development and growth and we have a
flagship development programme for all
leaders. All leader level roles, including the
Executive Committee, form part of the talent
assessment process with succession plans
developed for all critical and leadership roles.
We monitor staff turnover and encourage
internal moves and promotion from within
our business.

We have included collaboration in our values
and all of our projects rely on teams from across
our own business as well as our supply chain
who work together to deliver our developments.

At the Company’s annual staff conference
‘Landsec Live’ in July 2019, the keynote speaker,
a noted author, gave an inspirational speech on
the topic of Growth Mindset. We encourage a
culture of growth mindset at all levels of the
organisation.

Our employees told us we needed to do more
on internal communications and so during the
year we held a number of townhall meetings,
where management held Q&A sessions for all
staff in our London office, with the sessions
broadcast to our regional staff.

We hold regular ‘Food for Thought’ meetings
for employees on specific topics. We have a
weekly round-up newsletter which is sent to
all employees by email at the end of the week
which celebrates successes and provides a
platform for communicating any other key
messages.

The members of the Executive Committee
regularly meet employees and the HR Director
holds a ‘six months in’ meeting for all new
employees.

Departing employees are all given the opportunity
to complete an exit survey anonymously and
the HR Director also reviews external ratings
on Glassdoor.

Internal meetings and major projects all end
with a ‘completion cycle’ which encourages
feedback and continuous improvement
allowing all participants freedom to comment
on what went well, not so well and what could
be improved.

% of s172 evaluations completed

100%

Code of Conduct in place

Gifts and Hospitality Register
in place

Equal Pay claims

No. of grievances raised

% roles offered internally

% of management and leadership
roles with succession plans in place

52%

No. of townhall meetings

% staff turnover – regretted leavers

1.6%

None

73%

% of roles filled by internal
candidates

No. of people on new development
programme

People promoted in last year

Face to face training days per
employee

26%

No. of whistleblowing incidents

No. of exit interviews completed

No. of Employee Forum meetings

Employee engagement index

No. of diversity champions

75%

GovernanceLandsec Annual Report 2020

The Board and
our stakeholders

Our stakeholders are central to our vision – to be the best

property company in the UK in the eyes of our customers,
communities, employees, partners and investors – which places
our stakeholders at the forefront of the Board’s decision making.

This is our section 172 statement.

How has the Board engaged with our stakeholders during the year?

Stakeholder

1. Customers

How the Board
has engaged

— Asset visits
— MD reports to the Board

2. Employees

— Employee Forum
— Meet the NEDs
— Asset visits

3. Communities

4. Investors

5. Partners

Read more online
at landsec.com

— Asset visits
— Annual sustainability review at

the Board

— Board session on the

increasing importance
attached to environment and
community by planning
authorities

— AGM
— Investor Roadshow
— Investor meetings
— Capital Markets Day
— Regular feedback from Head

of Investor Relations

— Twice yearly health and safety
review at the Board (including
fire safety)

— MD reports to the Board
— Board session on the planning
system and political changes
in London and the increasing
importance attached to
environment and community
by planning authorities

Landsec Annual Report 2020Meeting the Non-executive
Directors
For the first time this year, we held a ‘Meet
the NEDs’ event for employees which we held
immediately after our Annual General Meeting.
This was a great opportunity for employees to
hear about our Non-executive Directors’ career
paths, what attracted them to the Landsec
Board and what they most enjoy and find
most challenging about being on the Board.

We would like to hold a similar event in 2020,
subject to social distancing restrictions imposed
by Covid-19, which will build upon the first
meeting and focus on themes highlighted by
the Employee Forum. This event will also help
the Board’s assessment of culture.

Employee Forum
Four Employee Forum meetings were held
during the year. Edward Bonham Carter, our
Senior Independent Director and Chairman of
our Remuneration Committee, attended one
of the meetings to provide the Employee Forum
with an insight into executive remuneration
and gain a sense of employee perception of
executive remuneration.

Stakeholders and Board
decision making
The Board takes the interests of stakeholders
into account when making decisions. The
relevance of each stakeholder group may
increase or decrease by reference to the issue
in question, so the Board seeks to understand
the needs and priorities of each group during its
discussions. This, together with the combination
of the consideration of long-term consequences
of decisions and the maintenance of our
reputation for high standards of business
conduct, is integral to the way the Board
operates. Stakeholder engagement is on the
Board agenda twice a year to assess whether
the identity and priorities of our stakeholders
have changed, and whether the Board has

Lucent, W1 – development decision

In January 2020, the Board approved
proceeding on a speculative basis with the
development of Lucent, W1, the mixed-use
building on the island site behind the Piccadilly
Lights. In making its decision, the Board took
into account the following s172 considerations:

— the development would complete the

Piccadilly Island site providing benefits to
customers and the community

— large scale projects create significant
development opportunities for our
employees

— the project will create long-term, large

scale work for our suppliers

— meeting customer needs will be a key

requirement for the success of the project
and will be continually assessed

— the project offers opportunities to further

Landsec’s community goals

— the project provides eight affordable

housing apartments at Wardour Street,
of benefit to the community.

Read more online
at landsec.com

sufficient engagement with each stakeholder
group. The Company Secretary plays a key role
in ensuring that stakeholders’ interests are fully
considered and addressed during the course
of the Board’s discussions.

We have continued to embed stakeholder
interests into the culture and operating
model of our business by providing training
to management committees that make
investment decisions. Papers presented to
these committees always include a section
on stakeholders’ interests.

Covid-19
The Board took the interests of its stakeholders
into account when it decided to establish a
rent relief fund of £80m to help our customers
most in need, to provide £500,000 to our charity
partners and support our employees to transition
to home working, reflecting that we recognise
that the long-term success of our business is
reliant on our customers, employees and the
communities in which we operate. In light of the
market uncertainty, and taking all stakeholder
interests into account, the Board took the
decision to cancel our third interim dividend
and has not proposed a final dividend. For
more information on our Covid-19 response
see pages 2 and 3.

Employee Forum met with Edward Bonham Carter, Chair of the Remuneration CommitteeGovernanceLandsec Annual Report 2020
Our
investors

We want to create

sustainable value

for our three types of
investors: institutional,
private, and debt.

No. of equity investors

11,232

Institutional investors

2,663

99% of shares

Private investors

8,569

1% of shares

No. of listed bonds

Institutional investors

Our Executive Directors once again held
meetings with investors representing more
than half the register by value during the year.
In addition to the UK, meetings were held in
Europe, North America and the Far East.
Institutional investors were invited to attend
the Company’s full year and half-yearly results
presentations. We held a Capital Markets Day
which focused on providing an operational
update and included a site visit to our three
office offers: HQ, Fitted and Myo. The Senior
Independent Director and other Non-executive
Directors were available to meet with
shareholders and the Chairman conducted
a series of meetings with investors as part
of the recruitment process for our new CEO.

Private investors

Our private investors are encouraged to give
feedback and communicate with the Directors
via the Company Secretary throughout the year.

2019 Annual General Meeting
Our main private shareholder event of the year
was our Annual General Meeting which we held
in July. This annual event gives our investors a
great opportunity to receive an overview of our
performance, question the Board on matters
put to the meeting and informally chat to our
Directors and Senior Management over coffee
and refreshments.

All resolutions put to the meeting received
overwhelming support of those investors
who had voted by proxy and in person, being
approximately 75% of the shareholder base.
The results of the voting at all general
meetings are published on our website:
landsec.com/investors.

Debt investors

Credit side institutional investors
and analysts
Our treasury team held non-deal specific
meetings with credit side institutional
investors and analysts after the half-yearly
and full year results.

We conducted a sustainability roadshow in
the Netherlands in February and engaged with
investors throughout the year on all aspects of
environmental, social and governance matters.

Industry conferences
Industry conferences provide Executive Directors
with a chance to meet a large number of
investors on a formal and informal basis.
Conferences attended this year included the
UBS Global Property conference in London,
the Kempen conferences in Amsterdam and
New York, the Bank of America Merrill Lynch
conference in New York and the Exane BNP
Paribas conference in Paris.

Five-year private investor plan
We have a rolling five-year private investor plan,
the intention of which is to maintain an efficient
share register with minimal non-cashed
dividends, limited paper distributions, effective
communications and the provision of best-in-
class service to our investors. Key activities
under the plan that we have implemented this
year include a low-cost share dealing programme
which allowed investors holding up to 1,150
shares to either sell or purchase shares at
preferential dealing and commission rates and
the sale of 25,669 dormant shares. We donated
the proceeds of the sale of the dormant
shareholdings to our charity partners to help
them during the Covid-19 crisis.

From October 2020 onwards, we will no longer
be paying dividends by cheque. Dividends will be
paid directly into bank accounts, or alternatively,
investors can sign up to our Dividend
Reinvestment Programme and receive their
dividends in additional shares.

Banks
Regular dialogue is maintained with our key
relationship banks, including at least bi-annual
meetings with our treasury team and in-house
events hosted by the Executive and Non-executive
Directors. Our treasury team also actively
engaged with new and potential lenders.

Credit rating agencies
During the year, business and financial updates
were provided by our treasury team and senior
managers to Standard & Poor’s, Fitch Ratings
and Moody’s. Further information for our
debt investors can be found on our website:
landsec.com/investors.

Landsec Annual Report 2020Report of the
Nomination Committee

Committee members
— Cressida Hogg (Chairman)

— Chris Bartram

(until 31 March 2020)

— Edward Bonham Carter

— Stacey Rauch

Highlights
— Appointment of new CEO

— Internal Board evaluation

Key responsibilities
— Composition of the Board

and Committees

— Succession planning

— Board appointment process

— Corporate governance

Number of meetings
and attendance
— Four scheduled meetings

— Additional meetings in relation

to CEO appointment

— 100% attendance from all
members at all meetings

Board and Committee changes
During the year, Mark Allan was appointed
as the new CEO and an Executive Director,
following Robert Noel’s announcement last
July that he was stepping down. Mark joined
the Board and took over as Chief Executive
with effect from 14 April 2020, and Robert left
Landsec on 31 March 2020 after ten years on
the Board and eight years as CEO. Members
of the Nomination Committee, collectively
and individually, spent a considerable amount
of time over a four-month period on the
appointment process, meeting to discuss the
required and desirable skills and experience that
the new Chief Executive should have, considering
potential candidates and interviewing those
that made the final selection. More detail of the
selection process used to appoint Mark is set
out on page 75.

We also announced Chris Bartram’s retirement
as a Non-executive Director with effect from
31 March 2020. Chris had been on the Board
for ten years and the Committee is extremely
grateful for his significant contribution during
this period.

Board composition and
succession
The topic of Director succession planning is
discussed at each Committee meeting. The
Committee has reviewed the Board and
Committee composition and, with the changes
made during the year, we believe that the
current composition of the Board and its
Committees is appropriate for now. However,
we note that Stacey Rauch will have served
on the Board for nine years in January 2021
and we intend to appoint at least one more
Non-executive Director this year.

Diversity
The Nomination Committee expanded its remit
last year to oversee certain policies and practices
across the wider workforce and this includes
monitoring our talent pipeline to ensure we have
a diverse succession pool. Diversity is more than
just gender-based and the Committee considers
this important issue in the wider context,
considering ethnicity and social and educational
background. We believe that a diverse workforce
benefits from a breadth of perspective and
debate that aids decision making. The Board
believes that a wide range of experience,
background, perspective, skills and knowledge

combine to contribute towards a high performing,
effective Board, which is better able to support
and direct the business.

We support the target set by the Hampton-
Alexander review for women to represent 33%
of board members by 2020 and the percentage
of women on our Board was 40% at 31 March
2020, including one female Executive Director.
However, the Committee recognises that there
is more to do in other areas, such as ethnicity
and socio-economic background. Further
information on diversity at Landsec can be
found on page 44.

Independence and re-election
to the Board
The independence, effectiveness and
commitment of each of the Non-executive
Directors has been reviewed by the Committee.
The Committee was satisfied with the
contributions and time commitment of all
the Non-executive Directors during the year.
The Committee also debated and took into
consideration the additional commitments
of all Directors (including the Chairman)
before approving any changes to external
appointments and recommending their
approval. It considered potential conflict issues
as part of that assessment. The Committee
is confident that each of the Non-executive
Directors remains independent and will be
in a position to discharge their duties and
responsibilities in the coming year. From a
governance perspective, the Board as a whole
is independent.

The appointment of Mark Allan is to be ratified
by shareholders at the Annual General Meeting
in July. The other Directors will stand for
re-election with the support of the Board.

Governance
The Committee oversees the governance
agenda on behalf of the Board and considers
papers and proposals issued by Government,
regulatory bodies and investor groups, and their
application to Landsec. It ensures that the
decisions taken by the Board and its delegated
Committees are made in the best interests of
the Company and that they address any wider
implications that may affect stakeholders.

Landsec complied in full throughout the year
with the principles of the 2018 UK Corporate
Governance Code.

You will find more detail regarding our
compliance, governance and effectiveness
elsewhere in this report, including our approach
to section 172 of the Companies Act 2006 and
how we address the broader stakeholder base,
as well as the interests of our investors.

GovernanceLandsec Annual Report 2020
Progress against objectives set for 2019/20

Strategy and innovation

People and succession
planning

Stakeholder engagement

Our objective 2019/20

The Board wants to continue
to focus on the diverse talent
pipeline and succession
management for the business.

The Board wants to reflect
on the relevant stakeholder
groups and how to engage
with them appropriately.

The Board wants to continue
its focus on strategy and
provide time to discuss a
broader range of topics by
extending the duration of
meetings; to retain and use
its development sessions for
external perspectives and to
increase engagement with
senior managers.

Our performance 2019/20

Board meetings were made
longer; there was a continued
emphasis on strategy and the
longer term when making
decisions; there has been a
continued use of development
sessions for broader discussion
topics that often involve a
range of senior managers
from the business.

The Board considered its own
succession planning during
the year, obviously including
finding and appointing a new
CEO; the Board and the
Nomination Committee have
discussed broader succession
planning for Executives and
senior levels in the business,
and noting employee
retention rates and the use of
recruitment processes to
promote diversity.

The Board reviewed its
stakeholder groups every six
months; the Chairman and
the Non-executive Directors
held a well received session
with employees on the same
day as the AGM; the
Chairman and Directors met
investors at the AGM, the
full and half-year results
presentations and the Capital
Markets Day last September.

Next year’s Board evaluation review (Year 3 of the cycle) will report on the extent to which the
areas of focus for 2020/21 have been achieved.

Board evaluation areas of focus for 2020/21

Strategy and risk

People and succession
planning

Stakeholder engagement

Our objective 2020/21

— More time will be allocated
to strategy next year as the
Board listens to the views
and perspectives of the
new CEO.

— More time to be spent on

considering and modelling
different risk scenarios and
their outcomes.

— More opportunity to

— Ongoing work on

engagement with relevant
stakeholder groups.

engage with employees and
the broader business to
gain a better understanding
of Landsec’s diverse talent
pipeline and succession
planning within the
business.

— Continued emphasis on
culture and diversity.

Report of the
Nomination Committee
continued

Board evaluation
Board evaluation process 2019/20
In line with year two of our three-year cycle,
we carried out this year’s review of the Board’s
effectiveness internally, having used an external
facilitator last year. There were two parts to
the evaluation process:

— Director appraisals: the Chairman held a

meeting with each Director during which she
conducted their own individual appraisals.
In order to ensure a consistency of approach,
the Chairman referred to an outline of the
topics and questions that she wanted to cover
during each appraisal. As Senior Independent
Director, Edward Bonham Carter conducted
the Chairman’s appraisal on behalf of the
Board, having obtained views from the other
Directors prior to this meeting.

— Questionnaire: the Board completed an
anonymous online questionnaire that
addressed a broad range of issues and which
enabled them to provide comments on a
range of matters. The questions covered
Board performance, judgement and culture,
the relationships between the Directors and
the Executive, the content and scope of topics
covered at Board meetings, and the nature
and dynamic of Director contributions to
meetings. This year, it covered specifically the
process followed for the appointment of Mark
Allan as the new CEO. The questionnaire also
addressed comments relating to the
operation of the Audit, Remuneration and
Nomination Committees, and in each case
the conclusions were discussed by those
Committees at their meetings in March.
The results of the questionnaire were collated
by the Company Secretary on behalf of
Edward Bonham Carter and the provisional
conclusions were discussed. Mr Bonham
Carter then spoke to each of the Directors
to ensure that these provisional conclusions
were fair and representative of their views,
and whether there were any additional points
that Directors wanted to make or address.

The output of the effectiveness review was
discussed collectively by the Board at its March
meeting before its conclusions were confirmed.

Landsec Annual Report 2020As always, there were areas identified for
improvement. Although investment decisions
were carefully considered at the time of any
approval, Directors would welcome a greater
level of review of those projects and initiatives
that they had previously approved. Directors
expect to allocate more time next year to
discuss strategy and risk and listen to Mark
Allan’s views and perspectives.

At an operational level, the Non-executive
Directors hold a private session at each meeting
but, with a view to improve the immediacy of
comments on its own performance, this will be
supplemented by a review to be held at the end
of each meeting to review the meeting, discuss
the agenda and set expectations for the next
Board meeting. The Non-executive Directors
are also keen to increase their exposure to the
workforce across the business to complement
the steps already in place.

Conclusions from this year’s
Board evaluation
The general conclusion from this year’s
Board evaluation was that the Board and
its Committees continue to operate to a
high standard and work effectively. The fact
that it was a year of transition following
Robert Noel’s decision to step down as CEO
was recognised. There were no material issues
to report.

The Board considered that it had performed
well and, in particular, the Directors believed
that CEO succession and appointment was the
area where the most value was added during
the year, together with a more general focus by
the Board on people and succession planning.
Other areas of strength included the skills and
experience of the Non-executive Directors
both to challenge and support the Executive,
and to contribute properly to Board discussion
and decision making. Directors believe that
risk is well understood by the Board, and that
sufficient time is allocated to areas of increasing
importance such as corporate governance,
corporate purpose and culture and section 172
obligations. The opportunity for Directors to
engage with employees provided by the ‘meet
the NEDs’ session that followed the AGM was
welcomed. Time allocated to Board meetings
was increased last year and Directors believe
that meetings provide sufficient time for
them to consider and discuss the matters
on the agenda.

Board evaluation: feedback received from Directors

Topic

Feedback

Culture, dynamics and the
Non-executive/Executive
Director relationship

— Directors are well equipped to contribute effectively to Board

discussion and decision making

— Directors have sufficient knowledge and expertise both to

support and challenge the Executive

Strategy

Performance, risk management
and governance

— The Strategy Day is valued by the Board as an opportunity to
understand the business; strategy should also remain a topic
for discussion at each Board meeting during the year

— The Board welcomes external perspectives and input on its strategy

— The Board believes that business performance is measured by
a range of appropriate indicators and presented and discussed
in an open and transparent manner

— The Board refreshed views on risk appetite and emerging risks
during the year and would like to spend more time on risk
scenarios as part of any debate on strategy

— The Board would like a greater level of review of those projects

and initiatives previously approved

— The Board has sufficient time to address and debate corporate

governance topics

Organisation, information
and agenda

— The quality of Board papers is good and the volume has

reduced; papers are received in a timely fashion

— Board meetings have been extended to accommodate time

for a broader discussion of ‘off-agenda’ items

— Non-executive Director only sessions are valued and should

be complemented by a review at the end of each meeting with
all Directors present

Appointment of new CEO
Following the announcement on 11 July
2019 that Robert Noel was to step down
as CEO, the Nomination Committee
led the search on behalf of the Board
to identify and recruit a new CEO.

The Committee considered the likely
needs of the Group in the future with
reference to its current and future
strategy and the Chairman met some
leading shareholders and other
stakeholders to obtain their views.

Egon Zehnder was appointed as the search
consultant because of its knowledge of
Landsec and its expertise and strength in
similar appointments. Egon Zehnder has
no connection with the Company or any
of our individual Directors.

The Committee reviewed a long list of
candidates that contained a diverse range
of individuals from several different sectors
and held several meetings and telephone
calls before this was reduced to a shortlist.

The Nomination Committee and the other
Non-executive Directors met and
interviewed the shortlisted candidates.
This interview was wide-ranging and
included a presentation from each
candidate of their views on the future
of Landsec.

Before making the final decision, the
Committee reviewed the process that it
has followed. It believed that the process
had been thorough and structured, broad
and diverse and produced high-quality
candidates to lead the Group.

The Committee decided unanimously
that Mark Allan be appointed. Mark is
an experienced CEO at St Modwen
Properties PLC and previously at The Unite
Group Plc, with deep knowledge of the
property market. He is highly regarded by
investors, equally for his strategic insight
and record of delivering value. Mark is a
qualified Chartered Accountant and a
member of the Royal Institution of
Chartered Surveyors.

The Committee recommended the
appointment of Mark Allan as the
new Group CEO and Executive Director,
a decision that was endorsed by
the Board. Mark’s appointment
as CEO was announced
on 22 November 2019.

Read more online
at landsec.com

GovernanceLandsec Annual Report 2020
Introduction from
the Chairman of the
Audit Committee

Dear shareholder
I am pleased to report on
the key activities and focus
of the Audit Committee
during the year.

Through the financial year, the Audit Committee
continued its focus on financial statements and
the integrity of the reporting process, coupled
with its oversight of the risk management
process and internal controls on which it
reported to the Board. This included the impact
of Covid-19 at the end of the financial year.

The composition of the Committee changed
during the year with Chris’s retirement as a
Director with effect from 31 March 2020. I would
like to add my personal thanks to Chris for his
contribution to this Committee, particularly
his expertise on the valuation process.

Risk
The Committee used the risks contained in the
Group’s risk register (set out on pages 51-55
of this Annual Report) as a basis for its activity
during the year. The Board held its own biennial
risk evaluation session last December that revised
risk appetite and considered the principal risks
and emerging risks (such as the use of artificial
intelligence and advanced technology)
affecting the business. This pre-dated the
emergence of the Covid-19 pandemic. On
behalf of the Board, the Committee manages
the process by which risks are identified,
prioritised and managed.

The risks identified in the risk register include
customer, market cyclicality, and climate
change risk. On top of this, the risk of Covid-19
quickly elevated from being an emerging risk to
something that impacted all the principal risks
facing our business. At a headline level, the
categories of principal risk pre-Covid-19 were
broadly the same as last year, but that does
not mean that things remained static. Matters
such as data security and data governance had
broadened in scope, as had the considerations
relating to health and safety, and the well-being
of our employees. At the same time, the
Committee recognised the fact that the
Brexit risk remains and there are longer-term
sustainability risks, including climate change,
for us to address. However, the pervasive nature
of the Covid-19 pandemic has fundamentally
affected all aspects of our business and our
response is set out on pages 2 and 3.

Nicholas Cadbury
Chairman of the Audit Committee

Committee members
— Nicholas Cadbury (Chairman)
— Chris Bartram (until 31 March 2020)
— Madeleine Cosgrave
— Stacey Rauch

Highlights
— Continued focus on integrity of

reporting process

— Rigorous assessment of risk

management and internal controls
with enhanced process to identity,
assess and monitor emerging risks

— Review of impact of Covid-19 on
the business and implications for
the coming year

Key responsibilities
— Reliability of the financial

statements and internal controls

— Effective risk identification

and management
— Overall transparency

and financial governance

Number of meetings
and attendance
— Four scheduled meetings
— One additional meeting
— 100% attendance1
1. With the exception of Chris Bartram who did not
attend the 31 March 2020 additional meeting as
he stepped down from the Board that day.

Aside from Covid-19 which hit hard in March,
at the end of our year, there are three areas
that the Committee reviewed that I would like
to note because of their importance. First, we
continue to monitor and assess Brexit risk and
our project group will test our process against
the downside risk of leaving the EU without a
trade deal. Second, as the risks relating to data
protection, data governance and information
security continue to expand, we established
a data governance project team in September
to address any identified threats as well as
training, awareness and best practice across
the business. The third risk relates to fire safety
management, which we discussed several times
during the year, including an in-depth review
last September, and our role as an owner or
superior landlord of buildings we own and the
impact of new building design.

The Committee addressed each of these
three risks, with in-depth consideration at
each of our meetings. The Committee sought
assurance from the Company that it had
suitable measures in place, with each risk
having an appropriate leader and team, and
that its risk management processes were being
updated regularly. This will continue as each of
these three risks affect us in the coming year
and beyond.

The Covid-19 outbreak is an example of an
unforeseen risk that has affected us all, directly
or indirectly. The Committee ensured that the
Company started work early on its reaction to
Covid-19 and reviewed the ways in which the
risk could affect the business, and developed
contingency plans for dealing with customers,
partners and employees (including those in
the head office). It also reviewed the financial
impact on the Company and any implications
on the financial statements, going concern
assessment and viability statement.

Financial statements
The Group’s financial statements are of critical
importance to investors and the Committee
monitors the integrity of the Group’s reporting
process and financial management. It scrutinises
the full and half-yearly financial statements
before proposing them to the Board for approval.
The Committee reviews in detail the work of the
external auditor and external valuer and any
significant financial judgement and estimates
made by management to ensure that it is
satisfied with the outcome.

Asset valuation
The valuation of our assets is an important
constituent of our financial results and
measurement of our performance. We use
CBRE, an industry-leading agency, to provide
us with an external valuation of our portfolio
twice a year. CBRE has extensive expertise and
knowledge and uses the best systems to provide
us with a valuation prepared in accordance with
the relevant industry standards. The valuation
process is an extensive exercise that uses
transactional evidence in the market in the
period to the valuation date by which each

Landsec Annual Report 2020asset can be assessed and analyses the
performance of each individual asset (such
as cash flow and void data). The Committee
analyses, challenges and debates each
valuation prepared by CBRE. Further, the
external valuation process and the values
ascribed to specific assets are also reviewed
independently by our auditor, Ernst & Young LLP
(EY), as part of its audit scope. This year, the
valuation will contain a material uncertainty
clause to reflect the Covid-19 impact.

Acquisitions and disposals
There were no material property acquisitions
or disposals during the year meaning that no
related judgements or estimates required scrutiny.

Company voluntary arrangements
(CVAs)
We continued to see CVAs and administrations
during the year that affected our customers.
Business failures impacted our own revenue
income, but not materially, and we had to
manage our bad debt provisions accordingly.
The Committee reviewed the application of
the accounting treatment and the Group’s
policy to ensure that it was appropriate,
including reviewing trade debtor and tenant
incentive balances.

Group financing
The Company’s treasury team has continued
to look at the financing of the Group as a
whole. During the year, the team’s focus
remained on enhancing our access to flexible
revolving credit facilities. It also concluded
another successful bond buyback tender at
the beginning of 2020.

Internal audit
The Company maintains its own risk
management and internal audit function and
the Committee believes that this works well
based on the quality of the data and reporting
from the Director of Risk Management and
Internal Audit. The Committee reviews the
scope, skills and competencies of this function
each year and considers any recommendations
for change. The knowledge, skills and resources
of our own team remain appropriate and there
is a benefit to having an internal team that has
knowledge of how the business operates. This is
coupled with a clear understanding that they
may require and benefit from specialist external
expertise from time to time. We believe that the
combination of internal and external advisers
continues to provide us with the best insight
into areas of risk and appropriate controls,
to ensure that the Committee receives clear
advice and enables us to report to the Board
that the system of internal processes and
controls are robust.

External support was provided during the
year by a number of consultants (but not our
auditor, EY) on topics including corporate cyber
security, treasury controls and data analytics.

Next year, the internal audit plan will review
matters including fire risk management,
development cycle processes, fraud risk
assessment and a UK ‘Sarbanes-Oxley’
readiness assessment.

External auditor
EY was appointed as the Company’s auditor
in 2013 following a tender process. EY continues
to perform to a high standard, although the
Committee is aware of the need to put the
audit work to tender every ten years. We took
the view that an audit tender was not required
in 2019 because of EY’s performance to date as
auditor, and the smooth transition in 2018 to
Kathryn Barrow as the new audit engagement
partner. Kathryn is supported by other members
of the EY audit team who have been involved in
the audit for a number of years and now attend
Committee meetings. We have no contractual
obligation to remain with EY and the choice of
audit firm will remain a topic of consideration
for the Committee.

I have my own meetings during the year with
Kathryn, as do other members of the Committee.
We also meet with EY’s valuation team. This
provides us the opportunity to obtain an
independent perspective from EY as auditor
on the Company’s performance from an
accounting perspective, and also to ask questions
of the audit work undertaken by EY. We also
discuss the changing perception and expectation
of the corporate auditor’s role, and likely
regulatory changes in the year ahead. These
meetings are not attended by management.
No material concerns have been raised.

Additionally, with Madeleine Cosgrave, I met
with the lead valuer at EY to discuss the EY
valuation team, the process and methodology
behind its valuation work and areas of focus
within the portfolio in the coming year.

The fee basis for EY’s services is contained
on page 81. Based on the Committee’s
recommendation, the Board is proposing
that EY be reappointed to office at this
year’s AGM.

External valuer
CBRE was reappointed as the Group’s valuer
in March 2019 for a further three-year period to
2022, as we reported last year. We are pleased
with CBRE’s performance and do not believe
there is any reason to change at this point.
However, we have no contractual obligation
to remain with CBRE and can terminate their
contract on three months’ notice should we
change our view.

Fair, balanced and understandable
The Committee assessed and recommended
to the Board that, taken as a whole, the
Company’s 2020 Annual Report is fair, balanced
and understandable. In order to come to this
conclusion, the Committee relied on the
Annual Report assurance document produced

by management that detailed the individual
responsible for each section, the assurance
provided by the CFO following his review of the
Annual Report and financial statements with
the Executive Committee and the confirmation
received from EY as external auditor on the
process for preparing the full year results and
the information contained in the Annual Report.
Additionally, the Company used its own internal
process to check the consistency of data
throughout the Report.

Going concern and viability
statement
Given the significant impact of Covid-19 on the
macro-economic conditions in which the Group
is operating, we have placed a particular focus
on the appropriateness of adopting the going
concern assumption in preparing the financial
statements for the year ended 31 March 2020.
The going concern statement is set out on
page 57 and detail of the assessment can also
be found under significant financial matters
on page 83. The viability statement, together
with the rationale behind the chosen five-year
time horizon, is set out on page 57. The
Committee again considered whether there
should be any change to the period chosen
for the statement, as we do every year, but
remained of the opinion that five years
remained appropriate taking into account
the balance sheet and financial strength
of the Company and its current exposure
to development risk.

UK Corporate Governance Code/
FRC Guidance on Audit Committees
The Committee considered its compliance
with the 2018 UK Corporate Governance Code
and the Financial Reporting Council (FRC)
Guidance on Audit Committees. We believe
that we have addressed both the spirit and
the requirements of each.

Committee effectiveness
The Committee’s performance was considered
as part of the external Board evaluation
conducted this year and the Committee assessed
its own performance having taken input from
its external advisers including EY and CBRE.
The conclusion is that we operate to a high
standard, with clear priorities, well defined
responsibilities and clarity around our work plan.
We will continue this next year and remain open
to innovation or other, better ways of working.

And finally I would like to thank the other
members of the Committee, together with
management, CBRE and EY, for their support
during the year and I hope that you find this
review, and the report that follows, a helpful
explanation of the work of the Committee.

Nicholas Cadbury
Chairman, Audit Committee

GovernanceLandsec Annual Report 2020
Report of the
Audit Committee

The Committee

continued its rigorous
oversight of the Group’s
risk assessment and
management, internal
controls, reporting
process and financial
management.

Structure and operations
The Audit Committee’s structure and operations,
including its delegated responsibilities and
authority, are governed by terms of reference
which are reviewed annually and approved by
the Board. The terms of reference are available
on our website: landsec.com/board-committees.

To maintain effective communication between
all relevant parties, and in support of its
activities, the Chief Executive, Chief Financial
Officer, Group General Counsel and Company
Secretary, Director of Risk Management and
Internal Audit, the partner and representatives
of our external auditor, EY, and other members
of the senior finance team regularly attend
Committee meetings.

Structure and operations

Audit
Committee
meetings

The Chairman of the Board and all Directors are
invited to attend meetings when the Group’s
external valuer, CBRE, presents its half-yearly
property valuation.

The Committee has private sessions with the
internal and external audit teams. In addition,
the Committee Chairman has private and
informal sessions with the EY audit team
and the CBRE valuation team to ensure that
open lines of communication exist in case
they wish to raise any concerns outside of
formal meetings.

The Committee members collectively have
a broad range of financial, commercial and
property sector expertise that enables them
to provide oversight of both financial and risk
matters, and to advise the Board accordingly.
The Board has determined that Nicholas
Cadbury, as Chairman of the Committee,
has recent and relevant financial experience
for the purposes of satisfying the UK Corporate
Governance Code. Details of the experience of
all members of the Committee can be found
on pages 62 and 63.

The Committee works to a structured
programme of activities and meetings to
coincide with key events around our financial

Regular attendance
at meetings to support
the Committee

All Directors are invited to attend
meetings when the Group’s external
valuer, CBRE, makes property
valuation presentations

Committee
private sessions

Chairman of the Board

Internal audit team

All Directors

CBRE valuation team

Chief Executive

Chief Financial Officer

Group General Counsel and
Company Secretary

Director of Risk Management
and Internal Audit

Members of senior finance team

Landsec Annual Report 2020calendar and, on behalf of the Board, to provide
oversight of the Group’s risk management
process. Following each meeting or whenever it
may be appropriate, the Committee Chairman
reports on the main discussion points and
findings to the Board.

Risk management framework
The Board is responsible for determining both
the nature and extent of the Group’s risk
management framework and the risk appetite
that is acceptable in seeking to achieve its
strategic objectives. The Committee supports
the Board in the management of risk and is
responsible for reviewing the effectiveness
of risk management and internal control
processes during the year.

An overview of the risk management process
explaining the key elements of the approach
to risk, any changes to the process over the
course of the current year and the key risk
management priorities for 2020/21 are described
on pages 48-56. This includes the risk
management process, by which the Property
Committee completes a detailed review of
the business risks, controls and mitigation
strategies. This forms the basis for the principal
and emerging risks, which are challenged and
validated by the Executive Committee, before
being assessed by the Audit Committee.

Primary responsibility for operation of the
Company’s internal control and risk management
systems, which extend to include financial,
operational and compliance controls (and
accord with the FRC’s 2014 ‘Guidance on Risk
Management, Internal Control and Related
Financial and Business Reporting’), has been
delegated to management. These systems
have been designed to manage, rather than
eliminate, the risk of failure to achieve the
Group’s business goals and can provide only
reasonable, not absolute, assurance against
material misstatement or loss.

Risk management
Under the overall supervision of the Committee,
there are several sub-committees and work
groups that oversee and manage day-to-day
risk within the business. The Group has a
Director of Risk Management and Internal
Audit (with a direct reporting line to the Audit
Committee Chairman) who provides regular
oversight of risk matters, evaluates emerging
risks that may affect the business and monitors
compliance to ensure that any mitigating
actions are properly managed and completed.
The Committee, in consultation with
management, agrees the annual work plan
(including any assistance that may be
required from external specialists) of the risk
management and internal audit function to
ensure alignment with the needs of the business

and compliance with its governance charter.
This work plan is assessed against the risk
register and developing market practice.

Internal control
In addition to the items for which external
audit support was used, internal audits
carried out by the Group and reviewed by the
Committee included the governance process
for the development cycle, site equipment
life-cycle management, the operating controls
over the Piccadilly Lights and the delegated
authority process.

The internal audit team also provided assurance
to the Committee on key controls and
programme assurance and used its data
analytics capability to improve the identification
of any issues in key financial processes, such as
accounts payable and accounts receivable.

The key elements of the Group’s internal
control are as follows:

— an established organisation structure with
clear lines of responsibility, approval levels
and delegated authorities

— a disciplined management and committee

structure which facilitates regular
performance review and decision making

— a comprehensive strategic review and annual

planning process

— a robust budgeting, projection and financial

reporting process

— various policies, procedures and guidelines
underpinning the development, asset
management, financing and main operations
of the business, together with professional
services support including legal, human
resources, information services, tax, company
secretarial and health, safety and security

— a compliance certification process from

management conducted in relation to the
half-yearly and full year results, and business
activities generally

— a quarterly self-certification by management
confirming that key internal controls within
their area of responsibility have been
operating effectively

— a risk management and internal audit

function whose work spans the whole Group

— a focused post-acquisition review and

integration programme to ensure the Group’s
governance, procedures, standards and
control environment are implemented
effectively and on time

— a financial and property information

management system

— a whistleblowing process that enables

concerns to be reported confidentially and on
an anonymous basis and for those concerns
to be investigated.

Additionally, the Committee receives and
discusses on a quarterly basis:

— the Group’s risk register, including significant
and emerging risks, and how exposures have
changed during the period

— the effectiveness of internal controls and

processes at mitigating those risks

— internal audit reports, summary reports
of findings and recommendations from
completion of the internal audit plan

— progress against completion of agreed

actions from internal audit on their review
of the effectiveness of various elements of
the internal control system maintained by
the Group

— the whistleblowing report.

Brexit
The risks associated with Brexit have continued
to evolve and now relate to the downside risk
of the UK leaving the EU without a trade deal.
The negotiation timetables are short and we
continue to plan for a range of potential Brexit
trade deal outcomes. The Audit Committee has
proactively reviewed and challenged our Brexit
risk assessments over the year to ensure we are
well prepared and able to minimise downside
business consequences.

Data governance
The world of data is changing very quickly. For
companies and organisations, there are risks
associated with the protection of data and
systems from attack, processes by which data
may be gathered, stored and used internally
or externally, and the ability to respond to
any data access requests in a timely fashion.
There are regular reports in the media of data
breaches that have been reported to the
Information Commissioner’s Office (ICO).

As we noted last year, the Group has migrated
its data to a world-class cloud-based server
that provides better security than we could
provide on our own system. This has worked well
and, coupled with our own internal training and
additional safeguards, has resulted in a notable
decrease in the number of reported data issues
(such as successful phishing attacks).

However, the problem of data protection and
information security is expanding every year.
We are not complacent about the risks and
established a Data Governance project team
last year, led by the Group General Counsel and
Company Secretary, and supported by our
Privacy and Compliance Officer, which reports
to the Executive Committee, to oversee all
aspects of data within the business. This
includes training, awareness, best practice
sharing and the introduction of technological
solutions to provide better security. All this helps

GovernanceLandsec Annual Report 2020
Report of the
Audit Committee
continued

but we recognise that it provides no guarantee
that breaches may not occur in future. The
Committee received updates on data security
and governance during the year, together
with reports on subject access requests and
any potential data breaches and assessed
the Company’s own evaluation of compliance
against the ICO accountability principles
and its maturity assessment as part of its
oversight process.

General Data Protection Regulation
(GDPR)
GDPR has now been in place for nearly two
years and its impact continues to evolve. We
monitor the guidance and reports from the ICO
and oversee what personal data is held by the
Group, the business reasons for holding such
data, the protections in place to safeguard the
data and the process for reporting any breach
should that occur. GDPR compliance falls under
the remit of the data governance project team
and will remain on the agenda in the year ahead.

Fire safety
The Hackitt Report was published in 2018,
and following the announcement of the Fire
Safety Bill in March 2020 we expect significant
changes to the existing Fire Safety Order
2005 to come into effect this year. These will
introduce new duties on property owners
and superior landlords of multi-occupied
residential buildings relating to building design,
construction and fire risk management.
Working with fire safety experts, we are
anticipating these changes and their potential
impact on the design of new buildings.

Coronavirus (Covid-19)
We have referenced the impact of Covid-19
on the business throughout this year’s Annual
Report. It has fundamentally affected all
aspects of our business and will influence our
financial performance in the 2020/21 financial
year and beyond. The Committee will continue
to monitor the Group’s risk planning and
business resilience measures and provide
oversight of its financial reporting.

Effectiveness
Last December, the Board undertook a robust
assessment of the principal risks faced by the
Group, including those that could threaten the
business model, future performance, solvency
or liquidity. Assisted by the Committee, the
Board also reviewed the effectiveness of the
systems of internal control and risk management
in place throughout the year and up to the date

of this report. This took into account the
valuable assurance work undertaken by the
risk management and internal audit function
(which is supplemented by external specialist
resource as necessary) and the relevant process,
controls and testing work undertaken by EY
as part of their half-yearly review and full year
audit. No weaknesses or control failures
significant to the Group were identified. Where
areas for improvement were identified, new
procedures have been introduced to strengthen
the controls and will themselves be subject to
regular review as part of the ongoing assurance
process. This work was beneficial to the way
Landsec structured its response to Covid-19.

External auditor
EY is Landsec’s external auditor and is engaged
to conduct a statutory audit and express an
opinion on the Company’s and the Group’s
financial statements. Their audit scope includes
a review of the property valuation process and
methodology using its own chartered surveyors
(more details below), to the extent necessary
to express an audit opinion.

When carrying out its statutory audit work, EY
also has access to a broader range of employees
and different parts of the business. If it picks up
any information as part of this process, it would
report to the Audit Committee anything that
it believes the Committee should know in order
to fulfil its duties and responsibilities. As audit
partner, Kathryn Barrow is authorised to
contact the Committee Chairman directly
at any time to raise any matter of concern.

Audit plan
EY presented their proposed audit plan (reviewed
by Senior Management and the Director of
Risk Management and Internal Audit) to the
Committee for discussion. The objective was
to ensure that the focus of their work remained
aligned to the Group’s structure and strategy.
The audit plan was again focused on risk and
materiality, challenging management and
designed to provide valuable insights beyond
the remit of the statutory audit brief.

Accordingly, to support this wider purpose, the
Committee is keen to ensure that its auditor
feels able to challenge management and is
afforded all the access it requires to report on
matters that may not be part of the statutory
audit but which, in the opinion of the auditor,
should be brought to the attention of the Audit
Committee. These matters may be financial or
non-financial and may be based on fact or opinion
(including any concern over culture or behaviour).
An example may be the use or adequacy of
any controls used by the Company to detect
any fraud or improper behaviour.

EY is afforded such access through attendance
at each Committee meeting, supported by

other meetings held during the year with the
Committee Chairman without management
being present and the knowledge that it can
raise any matter of concern to the Committee
Chairman at any time without going through
management. During the year, no issues were
reported to the Committee.

Independence and objectivity
The Committee is responsible for monitoring
and reviewing the objectivity and independence
of the external auditor. In undertaking its
annual assessment, the Committee took into
account the new UK Ethical Independence
Standards introduced by the FRC in December
2019 and effective from 15 March 2020.

The Committee reviewed:

— the confirmation from EY that they maintain
appropriate internal safeguards in line with
applicable professional standards, together
with an explanation of the due diligence
process followed to provide such a
confirmation

— the mitigation actions we take in seeking
to safeguard EY’s independent status,
including the operation of policies designed
to regulate the amount of non-audit services
provided by EY and the employment of
former EY employees

— the tenure of the audit engagement partner
(not being greater than five years); Kathryn
Barrow was appointed as EY audit partner
to the Group in April 2018

— the internal performance and effectiveness

review of EY referred to above.

No Committee member has any connection
with the current auditors. Taking the above
review into account, the Committee concluded
that EY remained objective and independent
in their role as external auditor.

Effectiveness of the external audit
Following the issue of our Annual Report each
year, the Director of Risk Management and
Internal Audit conducts a performance
evaluation and effectiveness review of the
external audit. This is conducted against
structured guidelines in consultation with the
Executive Directors and members of the senior
finance team. The Committee Chairman meets
privately with the audit engagement partner
before the Committee considers the results of
the effectiveness review. The Committee’s
preliminary view is that EY have again
performed their audit services effectively and
to a high standard, and this is consistent with
performance each year since appointment in
2013. Areas identified for development will be
shared with them for inclusion in their audit
and service delivery plans going forward.

Landsec Annual Report 2020Audit tendering
EY were first appointed to the office of auditor,
following a competitive tender process, in
respect of the 2013/14 financial year.

Under current regulations, we are required to
retender the audit by no later than the 2023/24
financial year. Kathryn Barrow took over as
audit engagement partner with effect from
1 April 2018. The Committee has assessed
the quality, stability and continuity of the
relationship with EY as the current auditor.
It has recommended to the Board that it is
in the best interests of the Company and
shareholders to tender the audit contract by
a date no later than that stipulated by the
current regulations. There is no contractual
obligation to remain with EY and the choice of
audit firm will remain a topic of consideration
for the Audit Committee.

On the recommendation of the Audit
Committee, the Board is proposing a resolution
at this year’s Annual General Meeting that EY
be reappointed to office for a further year.

The Company has complied with the
Statutory Audit Services Order 2014 for the
year under review.

Audit fee
The fees payable to EY for the audit for
2019/20 (including the audit of the Group’s
joint ventures) are £0.8m (2018/19: £0.8m).

Non-audit services
To help safeguard EY’s objectivity and
independence, we operate a non-audit
services policy that sets out the circumstances
and financial limits within which EY may be
permitted to provide certain non-audit services.
As noted above, the Committee also incorporated
the new FRC UK Ethical Independence
Standards into its approval process and
approval of non-audit services since December
has been assessed against these standards.

Audit vs. non-audit fees

Chart 30

Audit
Non-audit

70%
30%
(excluding the audit of the Group’s joint ventures)

The Committee monitors compliance with the
policy, including the prior approvals required
for non-audit services, which are as follows:

Table 31

Per assignment
(£)

Aggregate
during the year
(£)

0–25,000

<100,000

25,000–100,000 100,000–321,000

Chief
Financial
Officer

Audit
Committee
Chairman

Committee >100,000

>321,000

EY was engaged during the year to provide
non-audit services to the Group that related
to a range of minor matters totalling £25,000,
work relating to the Company’s half-year review
(£60,000), providing a comfort letter to Land
Securities Capital Markets PLC in connection
with a bond prospectus (£33,000), the
assurance statement on sustainability (£71,000)
and a non-statutory audit of another subsidiary
(£18,000). It was decided that it would be in the
interests of the Company to use EY for these
services, recognising that the use of audit firms
for non-audit work should generally be kept to
a minimum. Total fees for non-audit services,
including the half-yearly review and other
assurance-related services, amounted to
£207,000. Details of the fees charged by EY
during the year can be found in note 8 to the
financial statements.

The total of £207,000 paid for non-audit services
represented 30% of the audit fees payable by
the Group to EY during the year (excluding the
audit of its joint ventures). No non-audit fees
were approved or paid on a contingent basis.

External valuations and valuers
The valuation of the Group’s property portfolio,
including properties held within the development
programme and in joint arrangements, is
undertaken by external valuers. The Group
provides input, such as source data, and
support to the valuation process. CBRE has
been the Company’s principal valuer since 2015
and was re-appointed in 2019 for a further
three-year period. The valuation helps to
determine a significant part of the Group’s total
property return and net asset value, which have
consequential implications for the Group’s
reported performance and the level of variable
remuneration received by Senior Management
through bonus and long-term incentive
schemes. Accordingly, the scrutiny of each
valuation and the valuer’s objectivity and
effectiveness represent an important part
of the Committee’s work.

Valuations for the full and half-year were
presented to the Committee by CBRE.
These were reviewed and challenged by the
Committee, with reference to CBRE’s approach,
methodology, valuation basis and underlying
property and market assumptions. Other
Non-executive Directors attended the full
and half-year presentations. The Committee
Chairman and other members of the
Committee also had separate meetings with
CBRE as part of this process to provide an
opportunity to test and challenge the valuation
outcomes and the principles and evidence used
in the determination.

Additionally, CBRE met with EY and exchanged
information independently of management.
EY has experienced chartered surveyors on its
team who consider the valuer’s qualifications
and assess and challenge the valuation
approach, assumptions and judgements
made by them. Their audit procedures are
targeted at addressing the risks in respect
of the valuations and the potential for any
undue management influence in arriving at
them. This year EY identified 37 properties
(comprising 73% of the portfolio) for
substantive review by its valuation experts
primarily on the basis of their value, type, risk
profile and location. This year, EY was restricted
in its ability to visit sites due to Covid-19 but did
visit two properties and completed analytical
reviews over the input data for the valuations,
comparing this to market data. The Committee
reviewed their findings.

An internal evaluation of CBRE’s performance
and effectiveness will be conducted after the
year-end results are finalised with the results
reported to the Committee.

A fixed-fee arrangement (subject to adjustment
for acquisitions and disposals) is in place with
CBRE for the valuation of the Group’s properties
and, given the importance of their work, we
have disclosed the fees paid to them in note 8
to the financial statements. The total valuation
fees paid by the Company to CBRE during the
year represented less than 5% of their total fee
income for the year.

Significant financial matters
The Committee reviewed three significant
financial matters in connection with the
financial statements, namely the valuation
of the Group’s property portfolio, revenue
recognition and going concern and viability in
the context of the impact of Covid-19. Further
details are set out in the table on page 83.

These items were considered to be significant
taking into account the level of materiality
and the degree of judgement exercised by
management and, in respect of the valuation,
the external valuer. The Committee discussed
these with both parties, as well as EY.

GovernanceLandsec Annual Report 2020
We monitor whistleblowing awareness and
remind employees that a dedicated hotline
exists should they ever need to ‘blow the
whistle’. The arrangements also form part of
the induction programme for new employees.
Details of the whistleblowing hotline are
included in our Sustainability Charter and
procurement tender documentation.

Bribery and corruption policy
The Board has a zero tolerance policy for
bribery and corruption of any sort. We provide
training to staff on the procedures, highlighting
areas of vulnerability, and the policy is
reinforced through our Code of Conduct.
Our principal suppliers are required to have
similar policies and practices in place within
their own businesses.

Report of the
Audit Committee
continued

In addition, the Committee considered, took
action and made onward recommendations
to the Board, as appropriate, in respect of
other key matters including the going concern
basis and viability statement on which the
financial statements are prepared, accounting
for property acquisitions and disposals,
maintenance of the Group’s REIT status and
other specific areas of individual property and
audit focus. As part of this consideration, the
Committee discussed the viability and financial
resilience of the Company in the medium to
long term, taking into account the impact of
Covid-19 and the predicted outcomes when
various downside scenarios were applied.

The Committee was satisfied that all issues
had been fully and adequately addressed
and that the judgements made were
reasonable and appropriate and had been
reviewed and debated with the external
auditor who concurred with the approach
taken by management.

Non-financial matters
The Committee understands the level of
reliance that is placed by shareholders on the
statutory audit and the report of the external
auditor. As noted in the Brydon Report, the
purpose of the audit should go further than the
financial statements and help to establish and
maintain deserved confidence in a company,
in its directors and information for which they
have responsibility in the Annual Report.

We report on alternative performance measures
on page 187. The Committee debated and
discussed these measures and agreed that
they were appropriate for the business.

Fair, balanced and understandable
The Committee applied the same due diligence
approach adopted in previous years in order
to assess whether the Annual Report is fair,
balanced and understandable, one of the key
UK Corporate Governance Code requirements.
The Committee received assurance from the
verification process carried out on the content
of the Annual Report by the Executive Directors
to ensure consistent reporting and the existence
of appropriate links between key messages and
relevant sections of the Annual Report and this
was supported by an annual report assurance
document produced by the Company.

Taking the above into account, together with
the views expressed by EY, the Committee
recommended, and in turn the Board
confirmed, that the 2020 Annual Report, taken
as a whole, is fair, balanced and understandable
and provides the necessary information for
shareholders to assess the Company’s position,
performance, business model and strategy.

Whistleblowing policy
The Board receives a whistleblowing report at
each meeting. The Audit Committee reviews
the Group’s whistleblowing policy which allows
employees to report concerns about suspected
impropriety or wrongdoing (whether financial
or otherwise) on a confidential basis, and
anonymously if preferred. This includes an
independent third-party reporting facility
comprising a telephone hotline and an
alternative online process. Any matters reported
are investigated by the General Counsel and
Company Secretary (or the Director of Risk
Management and Internal Audit) and escalated
to the Committee, as appropriate. During the
year, one whistleblowing incident was reported
through the hotline, although other grievances
were received through different channels
and fully investigated. The reports of the
investigations were provided to the Board
and the Committee.

Landsec Annual Report 2020Significant financial matters

Significant financial matters considered

How the Committee addressed the matters

Valuation of the Group’s property portfolio (including investment properties,
investment properties held in joint ventures and trading properties)
The valuation of the Group’s property portfolio is a major determinant of the
Group’s performance and drives an element of the variable remuneration for
Senior Management. Although the portfolio valuation is conducted by an
external valuer, the nature of the valuation estimates is inherently subjective and
requires the making of significant judgements and assumptions by management
and the valuer.

Significant assumptions and judgements made by the valuer in determining
valuations may include the appropriate yield (based on recent market evidence),
changes to market rents (ERVs), what will occur at the end of each lease, the
level of non-recoverable costs and alternative uses. Development valuations also
include assumptions around costs to complete the development, the level of
letting at completion, incentives, lease terms and the length of time space
remains void.

The uncertainties over the current economic environment caused by Covid-19
has had an impact on the valuation of the Group’s properties, with the
Group’s external valuer reporting the valuation on the basis of ‘material
valuation uncertainty’.

Revenue recognition (including the timing of revenue recognition, the
treatment of rents, incentives and recognition of trading property proceeds)
Certain transactions require management to make judgements as to
whether and to what extent they should be recognised as revenue in the year.
Market expectations and revenue profit-based targets may place pressure on
management to distort revenue recognition. This may result in overstatement or
deferral of revenues to assist in meeting current or future targets or expectations.

Going concern in the context of Covid-19
The Group’s going concern assessment is dependent on a number of factors,
including the Group’s financial performance, the Group’s continued access to
borrowing facilities and the Group’s ability to continue to operate within its
financial covenants. The value of our investment properties supports the Group’s
borrowing facilities which are secured against a ring-fenced group of property
assets and are subject to financial covenants. There is a significant degree of
uncertainty about the further spread of Covid-19 and the impact this could have
on the world economy and a risk that this could adversely impact the Group’s
ability to continue to operate as a going concern. There is also a risk that the
impact of Covid-19 on the going concern basis has not been adequately
disclosed in the Annual Report and Accounts.

The Audit Committee adopts a formal approach by which the valuation process,
methodology, assumptions and outcomes are reviewed and robustly challenged.
This includes separate review and scrutiny by management, the Committee
Chairman and the Committee itself. The Group uses CBRE, a leading firm in
the UK property market, as its valuer. It also involves EY as the external auditor
which is assisted by its own specialist team of chartered surveyors who are
familiar with the valuation approach and the UK property market.

EY met with CBRE separately from management and their remit extends to
investigating and confirming that no undue influence has been exerted by
management in relation to CBRE arriving at its valuations.

CBRE submits its valuation report to the Committee as part of the half-yearly
and full year results process. They were asked to attend and present their report
to the Board and to highlight any significant judgements made or disagreements
which existed between themselves and management. There were none.

CBRE proposed changes to the values of our properties and developments
during the year, which were discussed by the Committee in detail and accepted.

Based on the degree of oversight and challenge applied to the valuation
process, the Committee concluded that the valuations had each been
conducted appropriately, objectively and in accordance with the valuer’s
professional standards.

The Committee and EY considered the main areas of judgement exercised
by management in accounting for matters related to revenue recognition,
including timing and treatment of rents, incentives, surrender premia and
other property-related revenue.

EY reviewed and tested individual transactions on a sample basis to ensure
there was a contractual relationship and consistency of accounting treatment
between last year and this year.

It performed data analytics over the whole population of leases in the Group’s
portfolio, analysing data held in the Group’s document and property
management system.

In its assessment, the Committee, in consultation with EY, considered all relevant
facts, challenged the recoverability of occupier incentives, the options that
management had in terms of accounting treatment and the appropriateness
of the judgements made by management. These matters had themselves been
the subject of prior discussion between EY and management.

The Committee, having consulted with EY, concurred with the judgements
made by management and was satisfied that the revenue reported for the year
had been appropriately recognised.

Given the significant impact of Covid-19 on the macro-economic conditions in
which the Group is operating, the Directors have placed a particular focus on the
appropriateness of adopting the going concern basis in preparing the financial
statements for the year ended 31 March 2020. The Group’s going concern
assessment considers the Group’s principal risks (see page 57) and is dependent
on a number of factors, including financial performance, continued access to
borrowing facilities and the ability to continue to operate the Group’s secured
debt structure within its financial covenants. The secured debt structure has a
tiered operating covenant regime which gives the Group substantial flexibility
when the loan-to-value and interest cover in the Security Group are less than
65% and more than 1.45x respectively. If either of these limits are exceeded, the
allowed operating environment becomes more restrictive with provisions coming
into effect to encourage a reduction in gearing. However, it is not until the
loan-to-value exceeds 100% or the interest cover ratio falls below 1.0x that a
breach occurs at which point the Group would enter a remedy period. The going
concern assessment is based on the first 12 months of the Group’s viability
model, which is based on a severe but plausible downside scenario including
the anticipated impact of Covid-19.

The Committee has reviewed the going concern disclosures in relation to Covid-19
in the Annual Report and Accounts and has concluded that they adequately
disclose the risk to the extent it can be evaluated at this time. For further
information on the Group’s going concern and viability assessments, see page 57.

The above description of the significant financial matters should be read in conjunction with the Independent Auditor’s Report on pages 109-114 and
the significant accounting policies disclosed in the notes to the financial statements.

GovernanceLandsec Annual Report 2020
Directors’ Remuneration
Report – Chairman’s
Annual Statement

Dear Shareholder,
I am pleased to introduce the
Directors’ Remuneration Report
for the year.
I cannot introduce this year’s report without
acknowledging the serious and sobering impact
that Covid-19 has had on our communities,
our partners and our employees. However
the management team has worked hard to
minimise the potentially devastating impact
of the virus and follow the plans we set out
at the beginning of the year under review.

This report comprises two sections: first, the
annual report on remuneration, which describes
how the Directors’ Remuneration Policy has been
implemented during the year and second, a
summary of our current Policy which received a
99.4% vote from shareholders at the Company’s
AGM in 2018. My letter to you provides: context
on the performance of the business and its
management; the decisions made by the
Committee during a turbulent year; and a
description of how the Policy has been and will
be implemented. I hope you find it useful.

Performance for the 2019/20 financial year
It is important that the pay for our Executive
Directors should be seen against the
background of the performance of the business,
both during the financial year in question and
over the performance period of the Long-Term
Incentive Plan (LTIP).

Although overshadowed by the Covid-19
pandemic, Landsec’s performance was mixed
for the financial year ended 31 March 2020.
We have been proactive in a tough retail
market, maintaining high occupancy and
protecting income. We have extended our
leadership in sustainability, setting further
stretching targets as we improve the way
we operate for the benefit of our customers,
communities and environment.

The market has faced unsettled conditions with
different sub-sectors affected in different ways.
The office market in London continued to be
strong with stable levels of demand, rising rental
values and capital values broadly flat. The retail
market continued to be challenged, with limited
demand for space and poor investor sentiment
impacting rental and capital values. Covid-19
has affected both markets, with retail being
particularly impacted with the majority of
physical stores closed.

Edward Bonham Carter
Chairman, Remuneration Committee

Committee members
— Edward Bonham Carter (Chairman)
— Cressida Hogg
— Stacey Rauch
— Christophe Evain

Highlights
— Engagement with Employee Forum
— Post-cessation shareholding policy

introduced

— New Chief Executive appointed

Key responsibilities
— Oversight of reward matters

across the Group

— Maintaining a strong link between

returns to shareholders and
reward for Executives

— Approving individual reward
outcomes for the Executive
Directors and Executive
Committee

Number of meetings
and attendance
— Four scheduled meetings
— Three additional meetings
— 96% attendance1

1. Christophe Evain was unable to attend one additional

meeting.

The actions we have taken to improve the
quality of our portfolio over the last few years
have enabled us to achieve resilient results in
the face of this wider uncertainty and caution.
Revenue profit, before provisions related to
2020/21 rent, is down 1.1%. Adjusted diluted
earnings per share are also down 6.4% to 55.9p.
Asset values declined by 8.8% in aggregate
reflecting the weaker retail market, particularly
shopping centres and retail parks. This resulted
in a 11.6% reduction in EPRA net tangible assets
per share to 1,192p.

These results are clearly reflected in the variable
pay awarded to the Executive Directors.

Annual bonus performance
The annual bonus for the year comprises two
parts: company performance and personal
performance. Company performance is
determined by three key measures – total
property return (TPR), revenue profit and
performance against specific business
objectives. Approximately half of our workforce
benefits from the Company performance
element, which is calculated using the same
methodology for everyone and all employees
are eligible for a personal performance bonus.

For 2019/20, we made a revenue profit of £414m;
a decrease of 6.3% on the prior year. TPR fell
below our external benchmark, but we made
important progress against many of our
strategic objectives. For each Executive Director,
the personal performance element of the bonus
(which makes up 13% of the total opportunity)
comprises a number of individual targets.
Performance against each target was
thoroughly tested by the Committee. Executive
Directors were awarded, on average, an annual
bonus of 46% of the maximum for the year –
a full assessment of performance under each
metric is provided on pages 89-90. In view of
the Covid-19 impact, this bonus will not be paid
in cash, but will be deferred in full into shares,
vesting in July 2021.

Long-Term Incentive Plan performance
Vesting of the LTIP is determined by performance
against two equally-weighted measures of total
property return (TPR), measured versus an MSCI
benchmark, and total shareholder return (TSR)
relative to FTSE 350 real estate companies.
Performance under both measures was below
the threshold level and as such there is no
vesting of the 2017 LTIP award.

Management changes
On 11 July 2019 Robert Noel announced his
intention to retire from the Board during 2020.
He stepped down as CEO on 31 March 2020 and
full details of the financial arrangements of his
departure are explained on page 91.

Following Robert’s announcement, the Board
instigated a search for a replacement CEO
and after thorough consideration Mark Allan
was appointed. He joined the business on
14 April 2020. Full details of his remuneration
arrangements are set out on page 91.

Landsec Annual Report 2020Discretion
The Committee considers the exercise of
discretion very carefully. The departure of Robert
Noel was comprehensively reviewed by the
Committee and after taking into account
Robert’s length of service, commitment to the
business and his record in steering the Company
through a turbulent economic environment, the
Committee deemed him to be a good leaver
under the terms of the LTIP and bonus schemes.
Robert continued to lead the business and fulfil
his role, offering his full cooperation during
handover; he will also maintain a substantial
shareholding for two years from 1 April 2020.
Full details can be found on page 91.

When considering the total amounts earned
under the annual bonus and LTIP, the
Committee considers the overall performance
of the Company and any exceptional factors.
The Committee determined that no discretion
needed to be exercised to override the bonus
or LTIP for 2019/20.

Executive remuneration for 2020/21
Impact of Covid-19
The Committee has considered the potential
impact of stock market movements on the
number of shares to be granted under the 2020
LTIP. The Committee is aware of concerns
expressed by some shareholder bodies that the
recent general stock market decline may distort
the numbers of shares granted under companies’
LTIP plans in 2020. We have therefore ensured
that the Remuneration Committee has
discretion to apply a downward adjustment
to the level of LTIP vesting in 2023 if it considers
that the vesting value represents an unjustified
‘windfall gain’ to executives, taking account
of the level of performance achieved over the
relevant period.

The 2020 annual salary review for Executive
Directors has been cancelled and the Executive
and Non-executive Directors have also agreed
to waive 20% of base salary or fees for a
three-month period commencing 1 May 2020.
The funds will be used for charitable contributions
towards the fight against the pandemic and
to support the most vulnerable members of
society in the communities we serve.

No cash bonus will be paid to Executive
Directors for the year under review. Instead all
bonus earned will be paid in July 2020 in the
form of deferred shares.

Additionally the Executive Directors have agreed
to waive their annual bonus related to financial
measures for at least the first quarter of 2020/21.

1. Base salary
Annual salary reviews, normally effective
from June, for Executive Directors have
been cancelled.

Colette O’Shea’s role expanded significantly
during the course of the year under review.
With effect from 1 April 2019 her role changed
to take accountability for our large Retail
Portfolio, in addition to the London Portfolio

she already managed. From the second half
of 2019, she also took on accountability
for leading and managing our extensive
development pipeline in suburban London.
Colette’s role also now includes leading our
transformation programme, including driving
the customer agenda and managing the
complex and high profile relationships with retail
and office occupiers at a time of economic
pressure. The Committee made an adjustment
to Colette’s salary, effective 1 January 2020, to
recognise the significant expansion of her role,
responsibilities and leadership status. The
Committee has benchmarked the role considering
these expanded responsibilities and her greater
leadership accountabilities, and has taken
input from its internal and external advisors.
The new salary is £480,000, an increase of
£40,000 (9.1%). There will be no further review
until June 2021.

2. Annual bonus
Executive Directors will be eligible for an annual
bonus of up to 150% of salary. As in previous
years, this will be based on a mix of financial
and strategic measures, with a minority based
on personal performance targets. Further detail
is provided on page 95. As noted above, annual
bonus related to financial measures will be
waived for at least the first quarter for 2020/21.

3. Long-Term Incentive Plan
No changes are proposed for the LTIP in 2020.
We will be making awards under the LTIP in
June 2020, which will be subject to TSR and
TPR performance conditions over the three-year
performance period. Any vesting awards will
continue to be subject to a two-year post-
vesting holding period. Further detail is provided
on page 95.

Remuneration across the Company
We oversee all remuneration policies and
practices across the organisation, and are
regularly briefed by the Group HR Director on
their implementation throughout the business.
When making any decisions on remuneration
matters, the Committee takes account of the
interests of all internal and external stakeholders.

Gender pay gap
During the course of the year, the Committee
was disappointed to learn that the Company’s
gender pay gap had not improved. We remain
concerned about the gap and continue to
review management’s response to this important
topic. More information on the measures being
taken to deal with this can be found on page 46
and on the Company’s website.

Employee voice
In addition to our first ‘Meet the NEDs’ event
(more details can be found on page 71), I took
the opportunity to meet with our Employee
Forum in 2019, specifically to understand the
views of the wider workforce in respect of
Executive remuneration, and to allow employees
to ensure their voice was heard directly by this
Committee. I was pleased to answer a number
of questions posed by the forum and we
engaged in a lively and constructive discussion.

Governance review
Minimum shareholding requirements (MSR)
During the year, the Committee approved the
Company’s minimum shareholding requirement
(MSR) policy. The MSR applying to our new
CEO has been increased to 300% of salary
(250% for the former CEO), and the MSR
remains at 200% of salary for other Executive
Directors. From 1 April 2020 the MSR will apply
in full for a period of two years after leaving the
Board, to ensure alignment with shareholder
interests even after an Executive Director leaves
the Company.

Pension
Complying with recent corporate governance
developments, our new CEO will receive a
pension allowance of 10.5% in line with the
wider workforce. Colette O’Shea also received
a reduced pension allowance of 10.5% from
1 January 2020. Martin Greenslade’s pension
allowance will reduce from 25% to 20% from
1 June 2020 and will be subject to further
consideration as part of the Policy review
in 2021.

Directors’ remuneration policy
We tabled our Directors’ remuneration policy
(DRP) at the Annual General Meeting on 12 July
2018 which was overwhelmingly supported
with a 99.4% shareholder vote in favour. The
Committee intends to carry out a full review
of the Directors’ Remuneration Policy during
2020, to ensure that it remains appropriate and
aligned with the interests of the business for the
coming period. In doing so, we will take account
of developments in market best practice and
investor expectations, as well as the specific
nature of our business and the sector in which
we operate. An amended policy will be
presented for approval at our 2021 AGM.

Conclusion
Having chaired the Remuneration Committee
since 1 January 2019 on a transitional basis,
I have handed over the role of Chair to
Christophe Evain from 6 May 2020. I will continue
to serve on the Committee. Christophe has
gained experience as a member of this
Committee and the Board since his appointment
in April 2019. He will lead the Committee
through the upcoming Policy review process.

I hope that you have found my letter useful,
informative and clear. I am grateful for the
engagement and support provided by our
shareholders, and welcome your feedback
on this report.

Edward Bonham Carter
Chairman, Remuneration Committee

GovernanceLandsec Annual Report 2020
Remuneration
at a glance

Our at a glance

summary sets out
clearly and transparently
the total remuneration
paid to our Executive
Directors in 2019/20.

We aim to align the total
remuneration for our Executive
Directors to our business strategy
through a combination of salary,
bonus and long-term incentive
schemes, underpinned by
stretching performance targets.

Remuneration structure

Remuneration principles

We will materially
differentiate reward
according to
performance.

Performance targets
will be stretching,
and will balance both
long- and short-term
performance, absolute
and relative measures.

We will reward
competitively to
attract and retain
the best talent.

The breakdown of fixed
and variable pay will
be appropriate to
each role.

Our framework will be
transparent with clear
line of sight from
Landsec’s performance
to individual outcomes.

Performance-related
variable pay will be
subject to malus and
clawback.

Fixed pay
— base salary

— benefits

— pension

Performance
£414m

Revenue profit
(2019: £442m)

-35.4%

Annual TSR
(2019: 2.9%)

-4.5%

Ungeared TPR
(2019: 0.4%)

55.9p

Adjusted diluted EPS
(2019: 59.7p)

Annual bonus

Long-Term Incentive

More details
on page 100

More details
on page 101

Remuneration across the Group
£51m

Chief Executive remuneration
£1,569,474

Total pay bill
(2019: £51m)

Single figure
(2019: £1,624,153)

43.8%

Employees received an annual increase
(2019: 83.3%)

Annual bonus percentage
(2019: 50.5%)

Average pay increase
(2019: 2.5%)

99.6%

Employees to be paid a bonus
(2019: 93.9%)

LTIP vesting
(2019: 0%)

-3.4%

Total remuneration
(2019: -4.1%)

Gender pay gap reporting
37.7%

Mean hourly pay gap
(2019: 36.8%)

34.3%

Median hourly pay gap
(2019: 37.1%)

61.0%

Mean bonus pay gap
(2019: 64.6%)

Landsec Annual Report 2020Summary of Executive Directors’ total remuneration

Table 32

Robert Noel,
Chief Executive
(£000)

Martin Greenslade,
Chief Financial Officer
(£000)

Colette O’Shea,
Managing Director,
Property
(£000)

1,569

1,624

2,000

1,500

1,000

500

1,038

1,063

845

827

Base salary earned

Benefits

Pension allowance

Annual bonus paid in cash

Annual bonus deferred into shares

Long-term incentives vested

2019/20
2019/20
812

2018/19
2018/19
797

202

–

533

–

199

400

206

–

2019/20
2019/20
528

132

–

358

–

2018/19
2018/19
519

130

260

134

–

Total remuneration

1,569

1,624

1,038

1,063

2019/20
2019/20
444

2018/19
2018/19
422

–

331

–

845

212

121

–

827

Summary of Executive Directors’ variable remuneration

Weighting

Outturn

% of weighting achieved

One-year TPR

Revenue profit

London development projects

26%

0.0%

9.3%

1.0%

London pipeline

12%

10.5%

Modern Methods of Construction

Annual
bonus

Enhanced retail offer

Social contribution

Energy reduction

People and diversity

3.5%

4.0%

3.0%

Total Company bonus opportunity

87%

37.3%

Individual targets

Total bonus opportunity

Three-year TSR

LTIP

Three-year TPR

Total LTIP opportunity

13%

8.7%1

100%

46.0%1

50%

0.0%

100%

0.0%

1. Average achieved for Robert Noel, Martin Greenslade and Colette O’Shea.

To read more on our strategy,
go to page 20

GovernanceLandsec Annual Report 2020
Annual Report on
Remuneration

The Annual Report on Remuneration

describes how the Directors’ Remuneration
Policy (‘The Policy’), approved by shareholders
at the Annual General Meeting in July 2018,
has been applied in the financial year ended
31 March 2020.

In this section
1. Remuneration outcomes
2. Management changes
3. Directors’ interests
4. Application of Policy for 2020/21
5. Comparison of CEO pay to Total

Shareholder Return

6. The context of pay in Landsec
7. Dilution
8. Remuneration Committee meetings
9. Shareholder voting

Fixed pay

Annual bonus

Long-Term Incentive Plan awards

During the course of 2019/20, the Remuneration
Committee was engaged in a number of key
matters, including:

— Determining the annual level of LTIP grants

to Executive Directors and Executive
Committee members

— Determining salary increases for the

— Monitoring Directors’ compliance with the

Executive Directors and Executive Committee
members, together with the overall level
of salary increases for employees across
the Group

— Setting and subsequently reviewing the

outcomes for corporate, business unit and
personal targets under the annual bonus
scheme for Executive Directors and Executive
Committee members

— Reviewing and determining the outturns
against the performance conditions, and
subsequent vesting outcome, of awards
granted under the Long-Term Incentive Plan
(LTIP) awarded in 2017

— Reviewing the long-term incentive
arrangements below Executive level

Company’s share ownership policy

— Monitoring developments in stakeholder

sentiment on executive pay and corporate
governance, including participating in
consultation exercises where appropriate

— Overseeing the calculation and publishing

of the Group’s gender pay report

— Determining the remuneration terms for

Robert Noel following his retirement

— Determining the remuneration terms for
Mark Allan, our newly appointed CEO

Unless otherwise stated, narrative and
tables are unaudited and TPR refers to the
Group’s ungeared total property return relative
to an MSCI benchmark comprising all March-
valued properties.

1. Remuneration outcomes for Directors during the year
In this section, we explain the pay outcomes for Directors in relation to the financial year ended 31 March 2020. Tables 33 and 34 show the payments
we expect to make and then tables 35-38 give more detail on how we have measured the performance outcomes with respect to the annual bonus
and LTIP in the context of value created for shareholders.

1.1 Directors’ emoluments (Audited)
The basis of disclosure in the table below is on an ‘accruals’ basis. This means that the annual bonus column includes the amount that will be awarded
in July 2020 in connection with performance achieved in the financial year ended 31 March 2020.

The values shown for the 2019/20 annual bonus and the 2017 LTIP awards (for the three-year performance period ended 31 March 2020) are based on
estimated achievement against total property return performance measures. The estimated LTIP achievement is based on actual TSR data and together
with the estimated TPR; the vesting level for the 2017 LTIP is projected to be zero.

Single figure of remuneration for each Executive Director (£000)

Table 33

Base salary1

Benefits2

Pension
allowance3

Annual bonus
paid in cash4

Annual bonus
deferred into
shares4

Long-term
incentives
vested5

Total

fixed pay

variable pay

Total

Executive Directors

Robert Noel

Martin Greenslade

Colette O’Shea

2019/20

2018/19

2019/20

2018/19

2019/20

2018/19

812

797

528

519

444

422

202

199

132

130

–

400

–

260

–

212

533

206

358

134

331

121

–

1,569

1,624

1,038

1,063

845

827

1,036

1,018

680

669

514

494

533

606

358

394

331

333

1. Base salary earned during the year. See table 46 for details of annual salary effective from 1 June 2019.
2. Benefits consist of a car allowance, private medical insurance, income protection and life assurance premiums.
3. The pension amount for Robert Noel and Martin Greenslade is a cash allowance of 25% of base salary. The pension amount for Colette O’Shea was 12.5% of base salary up to 31 December

2019 and 10.5% from 1 January 2020.

4. In response to the Covid-19 pandemic, Executive Directors’ 2019/20 annual bonus award will be wholly deferred into shares vesting in 2021.
5. As no LTIP awards were eligible to vest in respect of 2018/19 or 2019/20, figures in this table do not include the impact of any share price appreciation. Dividend equivalents do not accrue on

these awards between grant and vesting.

Landsec Annual Report 2020Single figure of remuneration for each Non-executive Director (£000)

Table 34

Fees1

Benefits2

Pension
allowance

Annual bonus
paid in cash

Annual bonus
deferred into
shares

Long-term
incentives
vested

Total

Total fixed
remuneration

Total variable
remuneration

Non-executive Directors

Cressida Hogg

Chris Bartram

Stacey Rauch2

2019/20

2018/19

2019/20

2018/19

2019/20

2018/19

Edward Bonham Carter 2019/20

Nicholas Cadbury

2018/19

2019/20

2018/19

Madeleine Cosgrave

2019/20

Christophe Evain3

2018/19

2019/20

2018/19

375

290

–

375

290

–

375

290

–

1. Represents fees paid to Directors during the year. See table 47 for annual fees as at 31 March 2020.
2. Stacey Rauch receives UK tax return support which is treated as a benefit in kind.
3. Christophe Evain was appointed to the Board on 1 April 2019.

1.2 Annual bonus outturn
In the year under review, Executive Directors had the potential to receive a maximum annual bonus of up to 150% of base salary. Of this, 130%
was dependent on meeting Group targets and 20% dependent on meeting personal targets. All targets were set at the beginning of the year.
The following table confirms the targets and their respective outcomes. The on-target bonus is 75% of salary (equivalent to 50% of the maximum
opportunity). The bonus payable for threshold performance is 37.5% of salary (equivalent to 25% of the maximum opportunity).

Annual bonus performance 2019/20: Company objectives

Measure

Weighting

Description

Performance outcome

Ungeared total
property return (TPR)

Revenue profit

London development
projects

26% The Group’s ungeared TPR relative to an MSCI
benchmark comprising all March-valued
properties (excl. Landsec)

26% Once the Group has met a threshold revenue
profit, 5% of the excess is contributed to the
bonus pool for the Group (capped at 26%)

6% Progress on key developments, including
21 Moorfields. High profile London
developments are key drivers of income and
revenue profit for the future

Threshold (6.5%)
Benchmark

Target (13%)
Benchmark +0.7%

Maximum (26%)
Benchmark +2.0%

Actual
Below benchmark

Threshold (0%)
£408m

Target (13%)
£426m

Maximum (26%)
£444m

Actual
£421m¹

Specific targets have been set for each major development in relation to
project progress versus time and budget and have been partially achieved.

London development
pipeline

12% Pipeline of future developments

ensures future ability to drive income and
capital growth

Threshold (3%)
1 On track

Target (6%)
2 On track

Maximum (12%)
3 On track

Actual
3 On track

Modern Methods
of Construction

Delivery of enhanced
retail units

Social value creation

Energy usage
reduction

Diversity

4% Introduction of Modern Methods of

Construction enables quicker and more
efficient construction, which reduces costs

4% Delivery of specific enhanced units for key,
strategic customers at shopping centres is
key to the delivery of our projected
performance targets

3% Landsec has committed to deliver £25m of
social value through our community
programmes by 2025

3% Delivery of quantifiable energy

reduction targets across our portfolio

3% Improving the diversity of our internal and

external talent pipeline

Threshold (1%)
Sumner Street

Target (3%)
Sumner Street +1

Maximum (4%)
Sumner Street +2

Actual
Sumner Street +1

Threshold (1%)
1 Complete

Target (3%)
2 Complete

Maximum (4%)
3 Complete

Actual
3 Complete

Threshold (1%)
£3.5m value
created

Threshold (1%)
1% reduction

Target (2%)
£4.0m value
created

Target (2%)
2% reduction

Maximum (3%)
£4.5m value
created

Actual
£4.8m value
created

Maximum (3%)
3% reduction

Actual
3% reduction

Threshold (1%)
Establish capability
to measure
shortlists

Target (2%)
Workplace
accreditations
achieved

Maximum (3%)
Improved
disclosure
demonstrated

Actual
Accreditation
and disclosure
achieved

Total Group targets

87%

Personal objectives

13% A mix of short- and long-term individual

goals set at the beginning of the year.

See table 36
overleaf.

Total annual bonus

100%

1. Adjusted revenue profit.
2. Average achieved for Robert Noel, Martin Greenslade and Colette O’Shea.

Table 35

Outturn
(% of

maximum)

0.0%

9.3%

1.0%

10.5%

3.5%

4.0%

3.0%

37.3%

8.7%2

46.0%

GovernanceLandsec Annual Report 2020
Annual Report on
Remuneration
continued

Annual bonus performance 2019/20: Personal objectives

The Executive Directors shared a number of common targets which included:

Personal objectives

Assessment

Table 36

— Oversee the successful rationalisation of business units into a streamlined

organisational structure to deliver efficiencies and synergies.

— Strengthen our position as a sustainability leader.

— Integration completed in the first half with synergies created and minimal
regretted leavers. Smooth transition to internal and external reporting in
the new structure.

— Established a strategy to be a net zero carbon business by 2030.

Science-based carbon reduction targets amended for 1.5ºC of warming.
CDP A list for third consecutive year.

— Develop succession and talent plans for critical leadership roles, with a

— Succession plans delivered, diversity strategy refreshed and transition

strong focus on diversity.

arrangements for smooth CEO handover implemented.

Each Director’s contribution towards these shared objectives was rigorously assessed by the Committee and a performance rating awarded out of a maximum
of 13% of the total opportunity (equivalent to 20% of salary) as shown in table 37 below.

Annual bonus achievement as a percentage of salary

Table 37

Robert Noel

Martin Greenslade

Colette O’Shea

Company bonus (87%)

Individual bonus (13%)

Total bonus (100%)

Maximum
achievable

% Salary
awarded

Maximum
achievable

% Salary
awarded

Maximum
achievable

% Salary
awarded1

130%

55.5%

20%

10%

12%

18%

150%

65.5%

67.5%

73.5%

1. Due to the impact of the Covid-19 pandemic, the Committee decided to defer cash bonus payments into shares, which will vest in July 2021.

1.3 Long-Term Incentive Plan outturns
The table below summarises how we have assessed our LTIP performance achievement over the three years to 31 March 2020.

LTIP performance 2017-2020

Measure

Weighting

Description

Performance outcome

Total shareholder
return (TSR)1

50% TSR relative to the FTSE 350 Real Estate

Index, weighted by market
capitalisation, measured over the
three-year performance period.

Ungeared total
property return
(TPR)2

50% The Group’s ungeared TPR relative to an

MSCI benchmark comprising all March-
valued properties (excluding Landsec),
measured over a three-year period.

Threshold (10%)
Index

Target (25%)
Index +1.3% p.a.

Maximum (50%)
Index +3% p.a.

Actual
Below index

Threshold (10%)
Benchmark

Target (25%)
Benchmark
+0.4% p.a.

Maximum (50%)
Benchmark
+1.0% p.a.

Actual
Below
benchmark

Total

100%

20%

50%

100%

1. Index excludes Landsec.
2. The outturn is adjusted to take account of the performance of trading properties.

Table 38

Outturn
(% of
maximum)

Landsec Annual Report 2020
2. Management changes during the year

2.1 Retirement of Robert Noel
As announced on 11 July 2019, Robert has retired from his role as CEO.
He stepped down as CEO and as a Director of the Board on 31 March
2020 and his employment ends on 10 July 2020 in accordance with his
12-month notice period.

Salary and benefits
Robert will receive salary, benefits, and pension allowance as normal
up until the end of his employment. The total value of these for the period
from 1 April to 10 July 2020 is £292,227 (subject to all necessary deductions).

Annual bonus
As explained on page 85, the Committee exercised its discretion and
deemed him to be a ‘good leaver’ under the terms of the Policy and
relevant incentive plan rules. In line with Company policy on ‘good leaver’
status, in July 2020 Robert will be paid his annual bonus of £533,357.
This is in respect of the year ended 31 March 2020 which he served in full.
The total bonus amount will be deferred into shares in line with other
Executive Directors and will vest after one year. No bonus award will
be made for the financial year commencing 1 April 2020.

subject to their performance conditions measured over the full
performance period. Any vesting awards will be subject to the normal
two-year post-vesting holding period.

Outstanding unvested deferred bonus options over 25,076 shares will
vest in full and become exercisable for a six-month period from the
normal vesting date, 25 June 2020, subject to the rules of the Deferred
Share Bonus Plan (DSBP).

As noted above, Robert will receive a further award under the DSBP
in respect of his full bonus for the Company’s financial year ended
31 March 2020.

Post-cessation shareholding
Although Robert’s retirement from Landsec was announced prior to
the approval of the Company’s post-cessation shareholding policy,
Robert is required to hold 100,000 shares for a period of two years
from 1 April 2020.

Compensation for loss of office
Robert will not be eligible for any payments for loss of office.

Share awards
Outstanding LTIP awards have been pro-rated for the portion of the
performance period served (see table below). The awards will remain

Malus and clawback
Malus and clawback provisions will continue to apply to annual bonus,
deferred bonus and LTIP award.

Outstanding LTIP awards – Robert Noel

Award

2017 LTIP share option granted on 26 June 2017

2018 LTIP share option granted on 25 June 2018

2019 LTIP share option granted on 25 June 2019

1. Subject to performance conditions.

Number of shares
subject to award

Maximum number of
shares which could vest1

228,583

251,880

297,950

228,583

167,920

99,316

Table 39

Vesting date

26 June 2020

25 June 2021

25 June 2022

2.2 Appointment of Mark Allan
Mark Allan was appointed as our new CEO with effect from 14 April 2020.
The Committee determined Mark’s remuneration taking account of pay
levels in our sector peers and for companies similar in size to Landsec,
as well as the skills and experience he brings. His remuneration has been
set within the parameters of the approved Policy, and consists of:

— A base salary of £800,000

— A standard Company benefits package including car allowance, health

cover and life insurance

— A one-time relocation allowance of £200,000 (subject to tax and NI)

repayable on a pro-rata basis in the event of termination within two years

— A pension allowance of 10.5% of salary, in line with the majority

In compensation for incentive awards forfeited on his resignation from
his previous employer, three share awards were made shortly after
Mark joined the Company, see table below for detail of the awards.
These awards will vest on the same timeframe as the awards they
replace. As the performance period for the first two tranches has been
completed, or substantially completed, their value has been determined
based on the extent to which the performance conditions were satisfied
up to 30 November 2019, and these tranches will vest subject to
continued service only. The third tranche will be subject to Landsec’s
TSR and TPR performance over the two-year period starting 1 April 2020,
with the same performance targets as the 2020 LTIP grant made to other
Landsec employees. All three tranches will be subject to a two-year
post-vesting holding period, and are granted on materially equivalent
terms to the rules of the Landsec LTIP including malus and clawback.

workforce rate

— A maximum annual bonus of 150% of salary and

— LTIP awards of 300% of salary.

Mark will also be required to comply with the Company’s newly approved
Minimum Shareholding Policy, and build and hold a shareholding to the
value of 300% of salary within five years of his appointment, which he will
also be required to retain for a two-year period post-cessation.

Compensation for forfeited awards – Mark Allan

As compensation for the annual bonus that would have been received
from his former employer, Mark will receive a replacement award of
£674,630, repayable on a pro-rata basis if he leaves Landsec within two
years. In line with the plan rules of his previous employer, 40% of the net
amount of this award will be used to purchase shares in Landsec to be
held for a period of at least three years.

Date of
grant

Landsec
awards
granted

Vesting
date

Face value (£)
of award1

Performance
conditions

Table 40

2019 award

2018 award

2017 award

On appointment

113,753

June 2022

1,039,476

On appointment

70,419

April 2021

On appointment

96,890

July 2020

643,488

885,379

1. Based on the Landsec share price as at 15 November 2019 of 913.8p.
2. These are based on previous employer’s performance, for which the performance periods are completed or substantially completed. They will vest subject to continued service only.

Yes

No2

GovernanceLandsec Annual Report 2020
Annual Report on
Remuneration
continued

3. Directors’ interests

3.1 Total shareholding (Audited)
Details of the Directors’ interests, including those of their immediate families and connected persons, in the issued share capital of the Company at the
beginning and end of the year, together with their required shareholding, are set out in the table below.

Executive Directors are expected to meet the minimum shareholding requirements within five years of appointment to the Board. Where the minimum
level is not met, or where the value of shareholding falls below the required level due to movements in the share price, the Executive Director is
expected to retain 100% of the shares acquired, net of tax, under any share plan awarded by the Company.

Non-executive Directors are expected to meet the minimum shareholding requirements within three years of appointment to the Board. The shareholding
requirements are considered met once the Non-executive Director has obtained the required holding value and, provided those shares are retained, no
adjustment is required due to movements in the share price.

Directors’ shares

Name
Robert Noel2
Martin Greenslade³
Colette O’Shea
Cressida Hogg
Chris Bartram
Stacey Rauch
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain

Salary/
base fee at
31 March 2020
(£)

Minimum
shareholding
requirements
(% of salary/
base fee)

Required
holding
value
(£)

Holding
(ordinary
shares)
1 April 2019

Holding
(ordinary
shares)
31 March 2020

Deferred
bonus shares
under holding
period

Value of
holding
(£)1

In
compliance
with policy

Table 41

814,000
530,000
480,000
375,000
70,000
70,000
70,000
70,000
70,000
70,000

250% 2,035,000
200% 1,060,000
960,000
200%
375,000
100%
70,000
100%
70,000
100%
70,000
100%
70,000
100%
70,000
100%
70,000
100%

396,810
432,653
66,309
9,375
19,080
8,000
9,375
4,481
–
–

100,000
444,087
66,309
41,375
19,080
8,000
9,375
7,481
4,883
8,000

13,290
8,651
7,850
n/a
n/a
n/a
n/a
n/a
n/a
n/a

630,799
2,520,845
412,923
230,376
106,237
44,544
52,200
41,654
27,189
44,544

–

1. Using the closing share price of 556.8p on 31 March 2020 and including deferred shares at 100%, net of the notional tax and employee NIC.
2. Robert Noel retired from the Board on 31 March 2020 and details of his post-termination shareholding obligations are detailed on page 91.
3. The number of shares held by Martin Greenslade at 31 March 2019 was 432,653 and not 422,153 as disclosed in last year’s report.

3.2 Outstanding share awards held by Executive Directors (Audited)
The table below shows share awards granted and vested during the year, together with the outstanding and unvested awards at the year end.
From 2015, Matching Share Plan (MSP) awards for Executive Directors have been discontinued. LTIP awards are granted in the form of nil cost options,
which may be exercised from the third anniversary of the date of grant, until their expiry on the tenth anniversary of the date of grant.

Outstanding LTIP and MSP share awards and those which vested during the year

Robert Noel

LTIP shares

Martin Greenslade

LTIP shares

Deferred shares

Colette O’Shea

LTIP shares

Deferred shares

Matching shares

Deferred shares

Award date

27/06/2016

26/06/2017

25/06/2018

25/06/2019

27/06/2016

26/06/2017

25/06/2018

25/06/2019

27/06/2016

26/06/2017

25/06/2018

27/06/2016

26/06/2017

25/06/2019

Market price
at award
date
(p)

Options
awarded

Options
vested

Table 42

Market price
at date of
vesting
(p)

Vesting date

1,005

1,029

953

820

1,005

1,029

953

820

1,005

1,029

953

1,005

1,029

820

229,453

228,583

167,920

31,458

25,076

149,361

148,795

163,960

20,477

16,323

50,497

49,908

88,881

30,298

29,945

14,812

–

n/a 27/06/2019

26/06/2020

25/06/2021

31,458

835 25/06/2019

25/06/2020

–

n/a 27/06/2019

26/06/2020

25/06/2021

20,477

835 25/06/2019

–

25/06/2020

n/a 27/06/2019

26/06/2020

25/06/2021

n/a 27/06/2019

26/06/2020

25/06/2020

Landsec Annual Report 2020Awards were granted under the LTIP in June 2019, subject to two equally-weighted performance conditions over a three-year performance period, as set
out below. No awards will vest if the threshold performance targets are not met.

Robert Noel

Martin Greenslade

Colette O’Shea

Number of
awards

297,950²

193,997

134,211

Share
price (p)1

819.6

Face value

Performance period

Performance conditions

£2,441,998

£1,589,999

£1,099,993

1 April 2019 to
31 March 2022

50% TSR relative to the FTSE 350 Real Estate Index,
weighted by market capitalisation. 50% ungeared
TPR relative to an MSCI benchmark.

1. Face value of awards has been determined based on the closing share price on the trading day immediately prior to the date of grant.
2. Number of shares have been pro-rated to 99,316 in line with termination date. See page 91 for further details

3.3. Directors’ options over ordinary shares (Audited)
The options over shares set out below relate to the Company’s Savings Related Share Option Scheme (SAYE). The Scheme is open to all qualifying
employees (including Executive Directors) and under HMRC rules does not include performance conditions.

Outstanding SAYE grants and those which were exercised during the year

Table 44

Table 43

Martin Greenslade

Total
Colette O’Shea

Total

Number of
options at
1 April
2019

Exercise price
per share
(p)

Number of
options
granted in
year to
31 March
2020

Number
options
exercised

Market price
at exercise
(p)

Number of
options at
31 March
2020

1,047

2,373

3,420

1,047

1,186

2,233

859

759

859

759

–

1,047

2,373

3,420

1,047

1,186

2,233

Exercisable dates

08/2020-02/2021

08/2021-02/2022

08/2020-02/2021

08/2021-02/2022

1. SAYE awards may be exercised during a six-month window after the end of the three-year contract.
2. The exercise price for the 2017 SAYE awards was determined based on the average share price over the period 24 May to 26 May 2017, discounted by 20%.
3. The exercise price for the 2018 SAYE awards was determined based on the average share price over the period 22 May to 24 May 2018, discounted by 20%.

3.4 External appointments for Executive Directors
Executive Directors are permitted to hold one external directorship subject to prior approval by the Board and are permitted to retain any fees paid.
Robert Noel was appointed as a Non-executive Director of Taylor Wimpey plc with effect from 1 October 2019, and received fees of £30,000 for the
year ended 31 March 2020 (£60,000 annually) in respect of this appointment. Martin Greenslade was appointed as a Non-Executive Director of Tullow
Oil plc with effect from 1 November 2019, and received fees of £27,113 (£65,000 annually) in respect of this appointment.

3.5 Directors’ Service Contracts and Letters of Appointment

Dates of appointment for Directors

Name

Executive Directors

Robert Noel

Martin Greenslade

Colette O’Shea

Non-executive Directors

Cressida Hogg¹

Chris Bartram

Stacey Rauch

Edward Bonham Carter

Nicholas Cadbury

Madeleine Cosgrave

Christophe Evain

Date of appointment

Date of contract

Table 45

1 January 2010

23 January 2012

1 September 2005

1 January 2018

9 May 2013

1 January 2018

12 July 2018

1 August 2009

1 January 2012

1 January 2014

1 January 2017

14 May 2018

13 May 2015

1 January 2017

1 January 2019

22 November 2018

1 April 2019

14 March 2019

1. Cressida Hogg was appointed to the Board on 1 January 2014 as a Non-executive Director. The dates above reflect her appointment as Chairman in 2018.

GovernanceLandsec Annual Report 2020
Annual Report on
Remuneration
continued

4. Application of Policy for 2020/21

4.1 Executive Directors’ base salaries
A formal salary benchmarking exercise was conducted in 2018 and refreshed in 2019 prior to the appointment of Mark Allan. Current remuneration
arrangements are competitive and the Committee expects to undertake a further benchmarking exercise in 2021. Colette O’Shea’s salary was adjusted
in January 2020 to reflect a change in responsibilities as explained on page 85. The annual salary review for Executive Directors, due in June 2020, was
cancelled due to the impact of Covid-19 and therefore no Executive Director will receive an annual increase in the 2020/21 financial year.

Executive Directors

Name

Robert Noel

Martin Greenslade

Colette O’Shea

Mark Allan1

1. From 14 April 2020.

Current salary
(£000)

New salary
(£000)

Percentage
increase

814

530

480

–

530

480

800

–

Table 46

Average annual
percentage increase

over five years
(including 2019/20)

1.5%

6.6%

–

4.2 Non-executive Directors’ fees
In December 2019, the fees for Non-executive Directors were reviewed by the Board and the Chairman’s fee was reviewed by this Committee.
From 1 April 2020, the fees below will apply. We review Non-executive Director fees annually and this year we concluded that the core fees remained
broadly competitive. Adjustments to the fees for the Remuneration Committee Chairman and the Senior Independent Director were deemed
necessary. In line with the Committee’s Terms of Reference, no individual was involved in the decisions relating to their own remuneration.

Non-executive Directors’ fees

Base fees
Chairman

Non-executive Director

Additional fees
Audit Committee Chairman

Remuneration Committee Chairman

Senior Independent Director

1 April 2020
(£000)

375

Table 47

1 April 2019
(£000)

375

Landsec Annual Report 20204.3 Performance targets for the coming year
Executive Directors are normally eligible for an annual bonus of up to 150% of salary. In response to the Covid-19 pandemic the Executive Directors
have agreed to waive annual bonus related to financial measures for at least the first quarter of 2020/21. Details will be provided in the 2021 report.

Annual bonus 2020/21: Performance criteria

Measure

Weighting

Description

Table 48

Performance range

Full details will be provided in the 2021 report.

Ungeared total
property return (TPR)

Revenue profit

Business KPIs

Total Group targets

Personal objectives

26%

35%

87%

13%

Total annual bonus

100%

The Group’s ungeared TPR relative to relevant MSCI benchmarks comprising March-valued
properties (excluding Landsec).

Once the Group has met a threshold revenue profit, 5% of the excess is contributed to the
bonus pool for the Group (capped at 26% of the overall award).

Full details will be provided in the 2021 report.

A mix of strategic and operational goals set at the beginning of the year.

Full details will be provided in the 2021 report.

A mix of short- and long-term individual goals set at the beginning of the year.

Full details will be provided in the 2021 report.

LTIP 2020/21: Performance criteria

Measure

Weighting

Description

Performance range

Table 49

Total shareholder
return (TSR)

Ungeared total
property return (TPR)

50%

TSR relative to the FTSE 350 Real Estate Index, weighted by market
capitalisation, measured over a three-year period, from 1 April 2020.

Threshold (10%)
Index

Target (25%)
Index +1.3% p.a.

Maximum (50%)
Index +3% p.a.

The Group’s ungeared TPR relative to an MSCI benchmark comprising
all March-valued properties (excluding Landsec), measured over a
three-year period, from April 2020.

Threshold (10%)
Benchmark

Target (25%)
Benchmark +0.4% p.a.

Maximum (50%)
Benchmark +1.0% p.a.

The Committee has considered the potential impact of stock market movements on the number of shares to be granted under the 2020 LTIP.
The Committee is aware of concerns expressed by some shareholder bodies that the recent general stock market decline may distort the numbers
of shares granted under companies’ LTIP plans in 2020. We have therefore ensured that the Remuneration Committee has discretion to apply a
downward adjustment to the level of LTIP vesting in 2023 if it considers that the vesting value represents an unjustified ‘windfall gain’ to Executive
Directors, taking account of the level of performance achieved over the relevant period.

Linking remuneration and our strategic objectives

Table 50

Remuneration measures

Strategic objectives

Total property return benchmark

Revenue profit growth

Business KPIs (a mix of strategic and operational goals)

Key

Deliver sustainable
long-term
shareholder value

Attract, develop,
retain and
motivate high
performance
individuals

Maximise the
returns from the
investment
portfolio

Be a best-in-class
counterparty
to our partners
and suppliers

Maximise
development
performance

Continually
improve
sustainability
performance

Ensure high levels
of customer
satisfaction

GovernanceLandsec Annual Report 2020
Annual Report on
Remuneration
continued

5. Comparison of Chief Executive pay to Total Shareholder Return
The following graph illustrates the performance of the Company measured by TSR (share price growth plus dividends paid) against a ‘broad equity
market index’ over a period of ten years. As the Company is a constituent of the FTSE 350 Real Estate Index, this is considered to be the most
appropriate benchmark for the purposes of the graph. An additional line to illustrate the Company’s performance compared with the FTSE 100 Index
over the previous ten years is also included.

This graph shows the value, by 31 March 2020, of £100 invested in Landsec on 31 March 2010, compared with the value of £100 invested in the FTSE 100
and FTSE 350 Real Estate Indices on the same date.

221.5

207.3

200.1

194.1

199.3

193.4

208.7

183.9

166.4

166.8

208.1

189.2

179.6

142.4

134.6

Chart 51

177.8

146.6

122.2

Total Shareholder Return

250

200

)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V

150

100

175.4

168.8

133.9

137.9

132.4

125.6

113.0

112.6

107.4

115.8

108.7

108.8

Mar-10

Mar-11

Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Mar-17

Mar-18

Mar-19

Mar-20

Land Securities Group PLC

FTSE 100

FTSE 350 Real Estate

The following table shows how the ‘single figure’ of total remuneration for the Chief Executive has moved over a period of ten years.

Chief Executive remuneration over ten years

Year

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

Chief Executive

Robert Noel

Francis Salway

Single figure
of total
remuneration
(£000)

Annual bonus
award against

maximum
opportunity1
(%)

Table 52

Long-term
incentive vesting
against amount
awarded
(%)

1,569

1,624

1,693

2,692

2,011

4,776

2,274

2,678

2,769

1,798

43.8

50.5

58.8

67.5

94.5

71.0

86.0

24.0

39.0

0.0

50.0

13.1

84.7

62.5

76.1

85.9

27.5

1. Under the policy covering the years 2011–2012 shown in the table, bonus arrangements for Executive Directors comprised three elements: an annual bonus with a maximum potential of 100%

of base salary, a discretionary bonus with a maximum potential of 50% of base salary and an additional bonus with a maximum potential of 200% of salary. The first two elements were
subject to an overall aggregate cap of 130% of base salary, with the overall amount of the three elements capped at 300% of base salary.

2012: 73.4% of the maximum opportunity was awarded under the annual bonus with no awards made under the discretionary bonus or additional bonus.
2011: 94.5% of the maximum opportunity was awarded under the annual bonus, discretionary bonus of 60% of the maximum opportunity with no awards made under the additional bonus.

Landsec Annual Report 2020

6. The context of pay in Landsec

6.1 Pay across the Group

a. Senior Management
For the year under review, performance-related pay for our 20 most senior employees (excluding the Executive Directors) is expected to range from
27% to 50% of salary (2019: 30% to 63%). The average bonus is expected to be 37% of salary (2019: 43%). The LTIP awards made to Senior Management
in June 2017 vested on the same basis as the awards made to Executive Directors.

b. All other employees
Due to the impact of the Covid-19, a decision on whether to award any pay increases to employees below the Board has been deferred to September 2020.
As at 31 March 2020, the ratio of the base salary of the Chief Executive to the average base salary across the Group (excluding Executive Directors) was 13:1
(£814,000: £64,602).

c. Change in base salary, benefits and bonus during the year

Chief Executive

Average employee

Salary change
(%)

No change

Benefits change
(%)

No change

Table 53

Bonus change
(%)

-11.9

1.7

d. CEO pay ratio
The tables below shows how pay for the CEO compares to employees at the lower, median and upper quartiles (calculated on a full-time equivalent
basis). The ratios have been calculated in accordance with Option A of The Companies (Miscellaneous Reporting) Regulations 2018, which uses the
total pay and benefits for all employees, and is the same methodology that is used to calculate the CEO’s single figure of the remuneration table
on page 88.

Year

2020

2019

Method

Option A

e. Total pay and benefits

Year

2020

2019

CEO

£1,569,474

£1,624,153

f. Salary component of total pay and benefits

Year

2020

2019

CEO

£811,6201

£797,108

1. Actual salary earned during the year ended 31 March 2020.

25th percentile pay ratio

Median pay ratio

75th percentile pay ratio

Table 54

36:1

38:1

23:1

25:1

15:1

16:1

Table 55

25th percentile pay

Median pay

75th percentile pay

£44,140

£42,859

£69,393

£64,694

£104,438

£98,886

25th percentile pay

Median pay

75th percentile pay

£29,785

£33,667

£58,565

£51,167

£79,203

£73,750

Table 56

The median pay ratio has fallen between 2019 and 2020 due to a 3.4% reduction in CEO total pay. The combination of a decrease in CEO pay and a 7%
increase in median employee pay has contributed to a narrowing in the ratio between total CEO remuneration and total employee remuneration at
the median, upper and low quartile levels.

Figures are calculated by reference to 31 March 2020 using actual pay data from April 2019 to March 2020. Excluded from our analysis are joiners,
leavers and long-term absentees from the Company during the year. As at the date of this analysis the annual bonus amounts were not known,
therefore estimates have been used for all employees.

The pay ratio is relatively low by comparison with other FTSE 100 companies and reflects both the profile of roles in our workforce and our policies which
are inclusive of bonus for all permanent employees and employer pension contributions of 10.5% for all employees.

6.2 The relative importance of spend on pay
The table below shows the total spend on pay for all Landsec employees, compared with our returns to shareholders in the form of dividends:

Spend on pay1

Dividend paid2

1. Including base salaries for all employees, bonus and share-based payments.
2. Dividend paid represents dividends declared for the year. See note 11 to the financial statements.

March 2020
(£m)

172

March 2019
(£m)

338

Table 57

change

–

-49%

GovernanceLandsec Annual Report 2020
Annual Report on
Remuneration
continued

7. Dilution
Awards granted under the Company’s long-term incentive arrangements, which cover those made under the LTIP, MSP, Deferred Share Bonus Plan
and the ESOP, are satisfied through the funding of an Employee Benefit Trust (administered by an external trustee) which acquires existing Land
Securities Group PLC shares in the market. The Employee Benefit Trust held 957,692 shares at 31 March 2020.

The exercise of share options under the Savings Related Share Option Scheme (SAYE), which is open to all employees who have completed more than
one month’s service with the Group, can be satisfied by the allotment of newly issued shares. At 31 March 2020, the total number of shares which could
be allotted under this Scheme was 440,322 shares, which represents less than 0.1% of the issued share capital of the Company.

8. Remuneration Committee meetings
The Committee met for four scheduled meetings over the course of the year, and for three additional meetings as a result of the CEO appointment
process. All members attended all the scheduled meetings. Edward Bonham Carter served as the Chairman. The other members during the year were
Cressida Hogg, Stacey Rauch and Christophe Evain. The Committee meetings were also attended by the Chief Executive, the Group Human Resources
Director, and the Group General Counsel and Company Secretary who acted as the Committee’s Secretary.

Over the course of the year, the Committee received advice on remuneration and ancillary legal matters from Aon plc’s executive remuneration
practice. It has also made use of various published surveys to help determine appropriate remuneration levels and relied on information and advice
provided by the Group General Counsel and Company Secretary and the Group Human Resources Director. Aon is a member of the Remuneration
Consultants Group and is a signatory to its Code of Conduct, which requires its advice to be impartial. The Committee is satisfied that the advice it
receives is independent and objective. Aside from some support in benchmarking remuneration and design of pay and grading structures for roles
below the Board, the Remuneration Advisors have no other connection with the Group. For the financial year under review, Aon received fees of
£129,269 in connection with its work for the Committee.

9. Shareholder voting

Annual Report on Remuneration (2019 AGM)

Directors’ Remuneration Policy (2018 AGM)

1. A vote withheld is not a vote at law.

The Directors’ Remuneration Report was approved by the Board on 11 May 2020 and signed on its behalf by:

Edward Bonham Carter
Chairman, Remuneration Committee

% of votes
For

% of votes
Against

Table 58

Number of
votes
withheld1

93.1

99.4

6.9

0.6

2,778,071

651,391

Landsec Annual Report 2020Summary of Directors’
Remuneration Policy

Approach to policy
Our Directors’ Remuneration Policy (DRP) was
approved at the 2018 AGM receiving a 99.4%
vote in favour.

The DRP includes the following key features:

— It is based on a pay-for-performance model

— Annual performance is assessed against
a scorecard of financial and strategic key
performance indicators (KPIs), with an
emphasis on financial outcomes

— Part of the annual bonus is deferred

into shares

— Long-term performance is assessed by the
delivery of long-term sustainable returns
to shareholders (Total Shareholder Return)
and superior relative investment returns on
the Company’s property portfolio

— A two-year LTIP post-vesting holding

period operates

— There is shareholding requirement of 300%
of salary for the new Chief Executive and
200% of salary for other Executive Directors.

There have been no material changes in
the nature or scope of the business over the
past three years, which remains focused on
the UK commercial real estate sector. We
believe the current DRP provides a competitive
and targeted remuneration package that
will only reward the Executive Directors for
achieving our objectives of long-term
sustainable returns to shareholders and
maximising investment returns.

The Committee will always operate within the
policy. It will also operate the various incentive
plans and schemes according to their respective
rules and consistent with normal market
practice, the UK Corporate Governance Code
and, as applicable, the Listing Rules. Within the
DRP, the Committee will retain the discretion
to look at performance ‘in the round’, including

withholding or deferring payments in certain
circumstances where the outcomes for Directors
are clearly misaligned with the outcomes for
shareholders. Any specific circumstances which
necessitate the use of discretion will always be
explained clearly in the following year’s Annual
Report on Remuneration.

More detail on the discretion reserved to the
Committee for each element of the remuneration
package can be found on page 102.

Payment schedule
The following table illustrates in which financial years the various payments in the charts are actually made or released to Executive Directors.
For illustration purposes only, the table assumes that the annual bonus payment is equivalent to at least 100% of salary.

Payment schedule

Base year

Base year +1

Base year +2

Base year +3

Base year +4

Base year +5

Fixed pay

Paid over financial
year

Base salary review
effective 1 June

Annual bonus

Performance period

Long-Term
Incentive

Share
ownership

The first portion of
the annual bonus
(i.e. up to 50% of
salary) is paid in cash

The remainder is
deferred into nil-cost
options

Performance period

The first deferred
portion of the annual
bonus (i.e. between
50% and 100% of
salary) vests

The second portion
of the annual bonus
(i.e. awards in
excess of 100%
of salary) vests

LTIP awards vest
but remain subject
to a two-year
holding period

Holding period on
LTIP awards ends

CEO 300% of salary

Other Executive Directors 200% of salary

Landsec Annual Report 2020Governance
Summary of Directors’
Remuneration Policy
continued

1. Executive Directors

Base salary

Purpose and link to strategy

— To aid the recruitment, retention and motivation of high performing Executive Directors
— To reflect the value of their experience, skills and knowledge, and importance to the business.

Operation

Reviewed annually, with effect from 1 June, and reflects:
— Increases throughout the rest of the business
— Market benchmarking exercise undertaken periodically to ensure salaries are set at around the median of the market competitive

level for people in comparable roles with similar levels of experience, performance and contribution
— Changes in the scope of an Executive Director’s role may also require a further adjustment to salary.

Opportunity

— The maximum annual salary increase will not normally exceed the average increase across the rest of the workforce (2019: 2.5%).

Higher increases will be exceptional, and made in specific circumstances, including:
— Increase in responsibilities or scope of the role
— To apply salary progression for a newly appointed Executive Director
— Where the Executive Director’s salary has fallen below the market positioning.

Benefits

Purpose and link to strategy

— To provide protection and market competitive benefits to aid recruitment and retention of high performing Executive Directors.

Operation

Opportunity

Pension

Executive Directors receive a combination of:
— Car allowance
— Private medical insurance
— Life assurance
— Ill health income protection
— Holiday and sick pay
— Professional advice in connection with their directorship
— Travel, subsistence and accommodation as necessary
— Occasional gifts, for example appropriate long service or leaving gifts.

— The value of benefits may vary from year to year depending on the cost to the Company.

Purpose and link to strategy

— To help recruit and retain high performing Executive Directors
— To reward continued contribution to the business by enabling Executive Directors to build retirement benefits.

Operation

Opportunity

Annual bonus

Purpose and link to strategy

— Participation into a defined contribution pension scheme or cash equivalent.

— Unless they choose to take membership of the occupational pension scheme, Directors receive a pension contribution or cash

allowance of 10.5% of salary, in line with the maximum employer contribution for all employees in the Company’s Group Personal
Pension Plan. Robert Noel and Martin Greenslade each received a cash contribution of 25% of salary, which was the previous policy.
Martin Greenslade’s pension cash allowance will reduce to 20% from 1 June 2020. Mark Allan and Colette O’Shea receive a cash
contribution of 10.5% of salary.

— To incentivise the achievement of stretching, near-term business targets and personal performance objectives
— To reward near-term outperformance relative to industry benchmarks
— Specific business measures and targets, for example development lettings targets, progress of new developments, and asset

management initiatives, will protect the value of our properties in the short term, provide future opportunity for the business and
create long-term revenue profit performance

— The inclusion of broader KPIs – for example sustainability and diversity targets, ensure that these important priorities get the

required focus from the executives

— The ability to recognise performance through variable remuneration enables the Group to control its cost base flexibly and react

to events and market circumstances

— Deferral of a portion of annual bonuses into shares encourages a longer-term focus aligned to shareholders’ interests and

discourages excessive risk taking.

100

Landsec Annual Report 2020Annual bonus – continued

Operation

— All measures and targets are reviewed and set by the Board at the beginning of the year and payments are determined by the

Committee after the year end, based on performance against the targets set

— Specific measures and targets will be set each year, but will always include a measure of total property return versus that of the market
— Other measures and targets will reflect the most critical business performance indicators for the year ahead and will be both

specific and measurable. Revenue profit performance will always feature as a key measure

— The achievement of on-target performance should result in a payment of 50% of the maximum opportunity (i.e. 75% of salary)
— A small proportion (no more than 20% of base salary) of an Executive Director’s bonus is based on the Committee’s assessment

of the achievement of pre-set personal performance objectives

— The structure of the plan incentivises outperformance by ensuring that the threshold targets are stretching
— Bonuses up to 50% of salary are paid in cash
— Any amounts in excess of 50% of salary are deferred into shares for one year. Any amounts in excess of 100% of salary are deferred

into shares for two years

— Deferred shares are potentially forfeitable if the individual leaves prior to the share release date
— Bonus payments are not pensionable
— Withholding and recovery provisions (malus and clawback) apply where any overpayment was made as a result of a material

misstatement of the Company’s results or a performance condition, or where there has been fraud or gross misconduct, whether
or not this caused the overpayment.

Opportunity

— Minimum bonus payable is 0% of salary
— Maximum bonus potential is 150% of salary.

Long-term incentive

Purpose and link to strategy

— Incentivises value creation over the long term in excess of that created by general market increases, and equally rewards

outperformance of our peer group when the overall market has declined

— Rewards execution of our strategy and the long-term outperformance of our competitors
— Aligns the long-term interests of Executive Directors and shareholders
— Promotes retention.

Operation

— The Committee may make an annual award of shares under the LTIP
— Vesting is determined on the basis of the Group’s achievements against stretching performance targets over a fixed three-year

financial period and continued employment. There is no re-testing

— The Committee reviews the measures, their relative weightings and targets prior to each award
— The measures selected are relative and directly aligned to the interests of shareholders. 50% of an award is weighted to a measure
of total property return versus the industry benchmark over a three-year period and 50% to total shareholder return versus our
listed comparator group over a three-year period

— For each measure, no awards vest for performance below that of the benchmark. Only a proportion (20%) will vest for matching

the performance of the benchmark and significant outperformance is required for the maximum award to vest

— In order to give the participants greater flexibility over the timing of exercise, the awards are given as nil-cost share options with

a seven-year exercise period. Any outstanding awards also vest as nil-cost options, and dividends accrue on vested options where
they are subject to a two-year holding period, but not thereafter

— Executive Directors are required to hold vested awards for a further two years (including post-employment) following the three-year

vesting period expiry

— Withholding and recovery provisions (malus and clawback) apply where any overpayment was made as a result of a material

misstatement of the Company’s results or a performance condition or where there has been fraud or gross misconduct, whether
or not this caused the overpayment.

Opportunity

— Award limit – 300% of salary.

Savings Related Share Scheme (SAYE)

Purpose and link to strategy

— To encourage all employees to make a long-term investment in the Company’s shares, through a savings-related arrangement.

Operation

— All employees, including Executive Directors, are entitled to participate in the SAYE Scheme operated by the Company in line with UK

HMRC guidelines currently prevailing.

Opportunity

— The maximum participation levels may vary in line with HMRC limits. For 2019/20, participants may save up to £500 per month for
either three or five years, using their accumulated savings at the end of the period to purchase shares at a 20% discount to the
market price at the date of grant.

Share ownership guidelines

Purpose and link to strategy

— To provide close alignment between the longer-term interests of Executive Directors and shareholders in terms of the Company’s

growth and performance.

Operation

— Executive Directors are expected to build up and maintain shareholdings with a value set at a percentage of base salary:

— Incoming Chief Executive – 300% of salary
— Outgoing Chief Executive – 250% of salary
— Other Executive Directors – 200% of salary
— These levels are normally required to be achieved within five years of appointment in order to qualify for future long-term

incentive awards. Deferred or unvested share awards not subject to performance conditions may count towards the ownership
levels on a net of tax basis

— Post cessation restriction of two years applies to the Minimum Shareholding levels.

Opportunity

— n/a

101

Landsec Annual Report 2020Governance
Summary of Directors’
Remuneration Policy
continued

Discretions retained by the Committee
The Committee operates the Group’s various
incentive plans according to their respective
rules and in accordance with HMRC regulations
where relevant. To ensure the efficient
administration and appropriate governance of
all remuneration arrangements the Committee
may apply certain operational discretions,
within the limits of the Directors’ Remuneration
Policy and relevant plan rules. These include, but
are not limited to, the following:

— selecting the participants in the plans

— determining the timing of awards and/or

payments

— determining the quantum of awards and/or

payments

— selecting appropriate performance criteria
and determining weightings, and adjusting
these if necessary

— setting performance targets for the various
criteria, and adjusting these if necessary

— adjusting the constituents of the TSR, TPR

or other comparator groups

— determining the extent of vesting based

on the assessment of performance

— determining ‘good leaver’ status and the
extent of vesting in the case of the share-
based plans and annual bonus

— determining the treatment of awards under
share-based plans in the event of a change
of control

2. Non-executive Directors

Base fee

— making the appropriate adjustments required
in certain circumstances (e.g. rights issues,
corporate restructuring events, variation of
capital, special dividends etc.).

In all cases, the Committee retains its absolute
discretion to override formulaic outcomes in
the bonus, LTIP and any other remuneration
arrangements should the payouts be excessive
in light of the performance of the Company in
the round (or in exceptional circumstances).

Purpose and link to strategy

— To aid the recruitment, retention and motivation of high performing Non-executive Directors
— To reflect the time commitment given by Non-executive Directors to the business.

Operation

— The Chairman is paid a single fee for all Board duties and the other Non-executive Directors receive a basic Board fee, with

supplementary fees payable for additional responsibilities

— Reviewed (but not necessarily changed) annually by the Board, having regard to independent advice and published surveys
— The Chairman’s fee is also reviewed by the Board rather than the Remuneration Committee.

Opportunity

— Any increases reflect relevant benchmark data for Non-executive Directors in companies of a similar size and complexity, and the

time commitment required.

Additional fees

Purpose and link to strategy

Operation

Opportunity

— To reflect the additional time commitment required from Non-executive Directors in chairing various Board sub-committees or
becoming the Board’s Senior Independent Director. Occasionally awarded to a Non-executive Director who completes a specific
additional piece of work on behalf of the Board.

— Reviewed (but not necessarily changed) annually by the Board, having regard to independent advice and published surveys.

— The opportunity depends on which, if any, additional roles are assumed by an individual Non-executive Director over the course of

their tenure

— Any increases reflect relevant benchmark data for Non-executive Directors in companies of a similar size and complexity, and the

Other incentives and benefits

time commitment required.

Operation

— Non-executive Directors do not receive any other remuneration or benefits beyond the fees noted above. Expenses in relation to

Company business will be reimbursed (including any tax thereon, where applicable)

— If deemed necessary, and in the performance of their duties, Non-executive Directors may take independent professional advice

at the Company’s expense.

Opportunity

— n/a

Share ownership

Purpose and link to strategy

— To provide close alignment between the longer-term interests of Non-executive Directors and shareholders in terms of the

Company’s growth and performance.

Operation

— The current share ownership guidelines require Non-executive Directors to achieve an ownership level of 100% of annual fees within

Opportunity

— n/a

three years of appointment.

102

Landsec Annual Report 20203. Directors’ Service Agreements
and Letters of Appointment

3.1 Service Agreements – Executive Directors
The Executive Directors have Service
Agreements with the Company which normally
continue until the Director’s agreed retirement
date or such other date as the parties agree.
In line with Group policy, the Executive Directors’
employment can be terminated at any time
by either party on giving 12 months’ prior
written notice.

The Company allows Executive Directors to hold
external non-executive directorships, subject to
the prior approval of the Board, and to retain
fees from these roles.

3.2 Termination Provisions –
Executive Directors
An Executive Director’s Service Agreement
may be terminated without notice and without
further payment or compensation, except for
sums earned up to the date of termination, on
the occurrence of certain events such as gross
misconduct. The circumstances of the
termination (taking into account the individual’s
performance) and an individual’s opportunity
to mitigate losses are taken into account by the
Committee when determining amounts payable
on termination, including pay in lieu of notice.
The Group’s normal approach is to stop or reduce
compensatory payments to former Executive
Directors when they receive remuneration from
other employment during the compensation
period. The Company does not make any
arrangements that guarantee pensions with
limited or no abatement on severance or early
retirement. There are no special provisions for
Executive Directors with regard to compensation
in the event of loss of office.

Any share-based entitlements granted under
the Company’s share plans will be determined
on the basis of the relevant plan rules. The
default position is that any outstanding
unvested awards automatically lapse on
cessation of employment. However, under
the rules of the LTIP, in certain prescribed
circumstances, such as redundancy, disability,
retirement or other circumstances at the
discretion of the Committee (taking into
account the individual’s performance and the
reasons for their departure), ‘good leaver’ status
can be applied. For example, if an Executive
Director’s role has effectively been made
redundant, and there are no significant
performance issues, the Committee is likely to
look favourably on the granting of some ‘good
leaver’ provisions. However, if an Executive
Director has resigned for a similar role in a
competitor organisation then such provisions
are extremely unlikely to apply. Where ‘good
leaver’ provisions in respect of share awards
are deemed to be appropriate, a participant’s
awards will vest on a pro-rated basis and
subject to the satisfaction of the relevant
performance criteria with the balance of the
awards lapsing. The Committee retains discretion
to decide not to pro-rate if it is inappropriate

to do so in particular circumstances. For the
avoidance of doubt, if the termination of
employment is not for one of the specified
reasons, and the Committee does not exercise
its discretion to allow an award to vest, all
outstanding awards automatically lapse.

3.3 Remuneration of newly appointed
Executive Directors
The remuneration package for a new externally
appointed Executive Director will be set in
accordance with the terms of the Company’s
approved DRP in force at the time of
appointment. The Committee has the flexibility
to set the base salary of a new hire at a
discount to the market level initially, with a
series of planned increases implemented over
the following few years (subject to performance
in the role) to bring the salary to the desired
positioning. Only in very exceptional
circumstances will the salary of a newly
appointed Executive Director exceed the market
median benchmark for the role.

The annual bonus will operate in accordance
with the terms of the approved DRP, albeit with
the opportunity pro-rated for the period of
employment in the first year. Depending on the
timing and responsibilities of the appointment,
it may be necessary to set different performance
measures and targets initially. The LTIP will also
operate in accordance with the DRP. The
maximum level of variable pay that may be
offered to a new Executive Director is therefore
at an aggregate maximum of 450% of salary,
but it may be lower. This limit does not include
the value of any buy-out arrangements deemed
appropriate.

In addition to the elements of the remuneration
package covered by the policy, the Committee
may ‘buy out’ certain existing remuneration
arrangements of an incoming Executive
Director through the offer of either additional
cash and/or share-based elements (on a one-
time basis or ongoing) when it considers these
to be in the best interests of the Company.
Any such payments will be based solely on
remuneration lost when leaving the former
employer and will take into account the existing
delivery mechanism (i.e. cash, shares, options),
time horizons and performance conditions.

In the case of an internally appointed Executive
Director, any variable pay element awarded
in respect of the prior role would be paid out
according to its terms, adjusted as relevant to
take into account the appointment. In addition,
any other ongoing remuneration obligations
existing prior to appointment will continue,
provided that they are put to shareholders for
approval at the earliest opportunity.

For external and internal appointments, the
Committee may agree that the Company will
meet certain relocation expenses, for a limited
period only, as appropriate. Where a Director
is recruited from overseas, flexibility is retained
to provide benefits that take account of
market practice in their country of residence.
The Company may offer a cash amount on

recruitment, payment of which may be
staggered over a period of up to two years,
to reflect the value of benefits a new recruit
may have received from a former employer.

Shareholders will be informed of the
remuneration package and all additional
payments to newly-appointed Executive
Directors at the time of their appointment.

3.4 Chairman and Non-executive
Directors’ Letters of Appointment
The Chairman and the Non-executive Directors
do not have Service Agreements with the
Company. Instead, each of them has a Letter
of Appointment which sets out the terms of
their appointment, including the three months’
prior written notice on which their appointment
can be terminated by either party at any time.
The dates of the current Letters of Appointment
are shown in the Annual Report on
Remuneration and these, together with the
Executive Directors’ Service Agreements, are
available for inspection at the Company’s
registered office.

On appointment, the fee arrangements
for a new Non-executive Director are set in
accordance with the approved remuneration
policy in force at that time.

103

Landsec Annual Report 2020Governance
Directors’
Report

Dividends
The results for the year are set out in the financial statements on pages 107-164.

The Company has paid two quarterly interim dividends to shareholders for the year under review,
each of 11.6p per ordinary share:

1st Interim
2019/20

Property Income Distribution
(PID)/Non-PID

PID

2nd Interim
2019/20

PID

3rd Interim
2019/20

Final 2019/20
(proposed)

Cancelled

Not proposed

Table 60

Record date

Payment date

6 September 2019 29 November 2019

4 October 2019

3 January 2020

Amount (per ordinary share)

11.6p

–

The third interim dividend was cancelled as
announced by the Board on 2 April 2020 as
part of the Company’s response to Covid-19.
The Board is not proposing a final dividend
for 2019/20. No decision has been made as
to when dividends will be resumed. Further
announcements will be made in due course.

A Dividend Reinvestment Plan (DRIP) election
is currently available in respect of all dividends
paid by Landsec.

Events since the balance sheet date
There were no significant events occurring after
the reporting period, but before the financial
statements were authorised for issue.

Directors
The names and biographical details of the
current Directors and the Board Committees
of which they are members are set out on
pages 62-64.

All the Directors proposed for re-election held
office throughout the year except Mark Allan
who joined the Board on 14 April 2020.

The Service Agreements of the Executive Directors
and the Letters of Appointment of the Non-
executive Directors are available for inspection
at Landsec’s registered office. A summary of
these documents is also included in the
Directors’ Remuneration Policy on page 103.

Appointment and removal of Directors
The appointment and replacement of Directors
is governed by Landsec’s Articles of Association
(Articles), the UK Corporate Governance Code
(Code), the Companies Act 2006 (Act) and
related legislation. The Board may appoint a
Director either to fill a vacancy or as an addition
to the Board so long as the total number of
Directors does not exceed the limit prescribed in
the Articles. An appointed Director must retire
and seek election to office at the next Landsec
AGM. In addition to any power of removal
conferred by the Act, Landsec may by ordinary
resolution remove any Director before the expiry
of their period of office and may, subject to the
Articles, by ordinary resolution appoint another
person who is willing to act as a Director in their
place. In line with the Code and the Board’s
policy, all Directors are required to stand for
re-election at each AGM.

Directors’ powers
The Board manages the business of Landsec
under the powers set out in the Articles. These
powers include the Directors’ ability to issue or
buy back shares. Shareholders’ authority to
empower the Directors to make market purchases
of up to 10% of its own ordinary shares is sought
at the AGM each year. The Articles can only
be amended, or new Articles adopted, by a
resolution passed by shareholders in general
meeting and being approved by at least three
quarters of the votes cast.

Directors’ interests
Save as disclosed in the Directors’ Remuneration
Report, none of the Directors, nor any person
connected with them, has any interest in the
share or loan capital of Landsec or any of its
subsidiaries. At no time during the year ended
31 March 2020 did any Director hold a material
interest, directly or indirectly, in any contract
of significance with Landsec or any subsidiary
other than the Executive Directors in relation
to their Service Agreements.

The Directors present their report for the year
ended 31 March 2020.

Additional disclosures
Other information that is relevant to this report,
and which is also incorporated by reference,
including information required in accordance
with the UK Companies Act 2006 and Listing
Rule 9.8.4R, can be located as follows:

Likely future developments in the
business

Employee engagement

Going concern and viability statement

Governance

Capitalised interest

Financial instruments

Credit, market and liquidity risks

Related party transactions

Energy and carbon reporting

Workforce engagement

Stakeholders

Section 172 Statement

Table 59
Pages

12-13

44-46

60-106

128

148

149-153

163

181-183

70-71

16-17

70-71

UK Corporate Governance Code
The Company has complied throughout the
year with all relevant provisions of the 2018
UK Corporate Governance Code. The Code
can be found on the FRC’s website: frc.org.uk.

Company status
Land Securities Group PLC is a public limited
liability company incorporated under the laws
of England and Wales. It has a premium listing
on the London Stock Exchange main market
for listed securities (LON:LAND) and is a
constituent member of the FTSE 100 Index.

Landsec is a Real Estate Investment Trust (REIT).
It is expected that the Company, which has
no branches, will continue to operate as the
holding company of the Group.

104

Landsec Annual Report 2020Directors’ indemnities and insurance
Landsec has agreed to indemnify each Director
against any liability incurred in relation to acts
or omissions arising in the ordinary course of
their duties. The indemnity applies only to the
extent permitted by law. A copy of the deed
of indemnity is available for inspection at
Landsec’s registered office. Landsec has in
place appropriate Directors’ & Officers’ Liability
insurance cover in respect of potential legal
action against its Directors.

Share capital
Landsec has a single class of share capital which
is divided into ordinary shares of nominal value
102/3p each ranking pari passu. No other securities
have been issued by the Company. At 31 March
2020, there were 751,313,063 ordinary shares
in issue and fully paid, of which 9,839,179 are
held in treasury. No shares were bought back
during the year. Further details relating to
share capital, including movements during
the year, are set out in note 35 to the
financial statements.

At the Company’s AGM held on 11 July 2019,
shareholders authorised the Company to make
market purchases of ordinary shares
representing up to 10% of its issued share
capital at that time and to allot shares within
certain limits approved by shareholders. These
authorities will expire at the 2020 AGM (see
below) and a renewal of that authority will be
sought. The Company received no other DTR
notifications by way of change to the
information set out below in the substantial
shareholders table during the period from 1 April
to 11 May 2020, being the period from the year
end through to the date on which this report
has been signed. Information provided to the
Company under the DTR is publicly available
to view via the regulatory information service
on the Company’s website.

Employee Benefit Trust
Equiniti Trust (Jersey) Limited continues as
trustee (Trustee) of Landsec’s Employee Benefit
Trust (EBT). The EBT is used to purchase Land
Securities Group PLC ordinary shares in the
market from time to time for the benefit of
employees, including to satisfy outstanding
awards under Landsec’s various employee share
plans. The EBT did not purchase any shares in
the market during the year. The EBT released
122,932 shares during the year to satisfy vested
share plan awards. At 31 March, the EBT held
957,692 Land Securities Group PLC shares.
A dividend waiver is in place from the Trustee
in respect of all dividends payable by Landsec
on shares which it holds.

Substantial shareholders
As at 31 March 2020, the Company had been notified under the Disclosure and Transparency Rules
(DTR 5) of the following holdings of voting rights in its issued share capital:

Shareholders holding 3% or more of the Company’s issued share capital

Table 61

Shareholder name

BlackRock, Inc.

Norges Bank Investment Management

State Street Global Advisors Ltd

The Vanguard Group, Inc.

Legal & General Investment Management Ltd

Number of ordinary shares

Percentage of total voting rights
attaching to issued share capital1

86,056,196

56,199,252

32,711,239

32,579,373

26,679,743

11.60

7.58

4.41

4.39

3.60

1. The total number of voting rights attaching to the issued share capital of the Company on 31 March 2020 was 741,473,884.

Further details regarding the EBT, and of shares
issued pursuant to Landsec’s various employee
share plans during the year, are set out in
notes 34-36 to the financial statements.

Shareholder voting rights and
restrictions on transfer of shares
All the issued and outstanding ordinary shares
of Landsec have equal voting rights with one
vote per share. There are no special control
rights attaching to them save that the control
rights of ordinary shares held in the EBT can be
directed by the Company to satisfy the vesting
of outstanding awards under its various
employee share plans.

In relation to the EBT, the Trustee has agreed
not to vote any shares held in the EBT at any
general meeting. If any offer is made to all
shareholders to acquire their shares in Landsec,
the Trustee will not be obliged to accept or
reject the offer in respect of any shares which
are at the time subject to subsisting awards,
but will have regard to the interests of the
award holders and will have power to consult
them to obtain their views on the offer. Subject
to the above, the Trustee may take such action
with respect to an offer as it thinks fit.

Landsec is not aware of any agreements or
control rights between existing shareholders
that may result in restrictions on the transfer
of securities or on voting rights. The rights,
including full details relating to voting of
shareholders and any restrictions on transfer
relating to Landsec’s ordinary shares, are set
out in the Articles and in the explanatory notes
that accompany the Notice of the 2020 AGM.
These documents are available on Landsec’s
website at: landsec.com/agm.

Change of control
There are a number of agreements that take
effect, alter or terminate upon a change of
control of the Company following a takeover.
None of these are considered significant. The
Company’s share plans contain provisions that
take effect in such an event but do not entitle
participants to a greater interest in the shares of
the Company than created by the initial grant
or award under the relevant plan. There are no
agreements between the Company and its
Directors or employees providing for compensation
for loss of office or employment or otherwise
that occurs specifically because of a takeover.

Human rights and equal opportunities
Landsec operates a Human Rights Policy which
aims to recognise and safeguard the human
rights of all citizens in the business areas under
our control. We support the principles set out
within both the UN Universal Declaration of
Human Rights and the International Labour
Organization’s Declaration on Fundamental
Principles and Rights at Work. Our Policy is
built on these foundations including, without
limitation, the principles of equal opportunities,
collective bargaining, freedom of association
and protection from forced or child labour.
The Policy takes account of the Modern Slavery
Act that came into force in October 2015 and
requires Landsec to report annually on its
workforce and supply chain, specifically to
confirm that workers are not enslaved or
trafficked. Landsec’s latest slavery and human
trafficking statement, relating to the financial
year ended 31 March 2019, was approved by the
Board on 25 September 2019 and posted on our
website on 30 September 2019.

Landsec is an equal opportunities employer and
our range of employment policies and guidelines
reflects legal and employment requirements
in the UK and safeguards the interests of
employees, potential employees and other
workers. We do not condone unfair treatment
of any kind and offer equal opportunities in all
aspects of employment and advancement
regardless of race, nationality, gender, age,
marital status, sexual orientation, disability,
religious or political beliefs. Landsec recognises
that it has clear obligations towards all its
employees and the community at large to
ensure that people with disabilities are afforded
equal opportunities to enter employment and
progress. Landsec has therefore established
procedures designed to provide fair consideration
and selection of disabled applicants and to
satisfy their training and career development
needs. If an employee becomes disabled,
wherever possible Landsec takes steps to
accommodate the disability by making
adjustments to their existing employment
arrangements, or by redeployment and
providing appropriate retraining to enable
continued employment in the Group. Further
information can be found in the Social review
on pages 44-46.

105

GovernanceLandsec Annual Report 2020
Disclaimer
The purpose of this Annual Report is to provide
information to the members of the Company
and it has been prepared for, and only for, the
members of the Company as a body, and no
other persons. The Company, its Directors and
employees, agents and advisers do not accept
or assume responsibility to any other person to
whom this document is shown or into whose
hands it may come and any such responsibility
or liability is expressly disclaimed.

A cautionary statement in respect of forward-
looking statements contained in this Annual
Report appears on the inside back cover of
this document.

The Directors’ Report was approved by the
Board on 11 May 2020.

By Order of the Board

Tim Ashby
Group General Counsel and Company Secretary

Land Securities Group PLC
Company number 4369054

Directors’ Report
continued

Political donations
The Company did not make any political
donations or expenditure in the year that
require disclosure (2019: nil).

Auditor and disclosure of information
to the auditor
So far as the Directors are aware, there is no
relevant audit information that has not been
brought to the attention of the Company’s
auditor. Each Director has taken all reasonable
steps to make himself or herself aware of any
relevant audit information and to establish that
such information was provided to the auditor.

A resolution to confirm the reappointment of
Ernst & Young LLP as auditor of the Company
will be proposed at the 2020 AGM. The
reappointment has been recommended to
the Board by the Audit Committee and EY
has indicated its willingness to remain in office.

2020 Annual General Meeting
This year’s AGM is scheduled to be held
at 10.00 am on Thursday, 9 July 2020 at
80 Victoria Street, London SW1E 5JL. Due to
social distancing measures imposed by the
Government as a response to Covid-19, this
will be a closed meeting and no shareholders
will be able to attend. We will continue to
monitor the impact of the pandemic as the
situation evolves, with the health and safety
of our shareholders as our priority. If it becomes
necessary or appropriate to make changes to
the proposed format of the AGM, we will inform
shareholders as soon as we can. Shareholders
are encouraged to monitor our website at
landsec.com/agm and London Stock Exchange
announcements for any updates regarding the
AGM arrangements.

A separate circular, comprising a letter from the
Chairman, Notice of Meeting and explanatory
notes in respect of the resolutions proposed,
can be found on our website: landsec.com/agm.

106

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108 Statement of Directors’ Responsibilities
109 Independent Auditor’s Report
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115 Statement of comprehensive income
116 Balance sheets
117 Statements of changes in equity
118 Statement of cash flows
119 Notes to the financial statements

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Landsec Annual Report 2020

107

Statement of
Directors’ Responsibilities

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 International Financial
Reporting Standards (IFRS) as adopted by
the European Union (EU). 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:

— select suitable accounting policies in

accordance with IAS 8 ‘Accounting Policies,
Changes in Accounting Estimates and Errors’
and then apply them consistently;

— make judgements and accounting estimates

that are reasonable and prudent;

— present information, including accounting

policies, in a manner that provides relevant,
reliable, comparable and understandable
information;

— state that the Group and Company has

complied with IFRS as adopted by the EU,
subject to any material departures disclosed
and explained in the financial statements;

— provide additional disclosures when

compliance with the specific requirements
of IFRS 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

— 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:

— the Group financial statements, which have
been prepared in accordance with IFRS as
adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and
profit of the Group;

— the Company financial statements, prepared
in accordance with IFRS as adopted by the
EU, give a true and fair view of the assets,
liabilities, financial position, performance and
cash flows of the Company; and

— 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 Annual Report are as
set out below:

— Cressida Hogg, Chairman*

— Mark Allan, Chief Executive

— Martin Greenslade, Chief Financial Officer

— Colette O’Shea, Managing Director, Portfolio

— Edward Bonham Carter, Senior Independent

Director*

— Nicholas Cadbury*

— Madeleine Cosgrave*

— Christophe Evain*

— Stacey Rauch*

* Non-executive Directors.

The Statement of Directors’ Responsibilities
was approved by the Board of Directors on
11 May 2020 and is signed on its behalf by:

Mark Allan
Chief Executive

Martin Greenslade
Chief Financial Officer

108

Landsec Annual Report 2020
Independent Auditor’s Report

To the members of Land Securities Group PLC

Opinion
In our opinion:
— Land Securities Group PLC’s Group financial statements and Parent company financial statements (the ’financial statements’) give a true and
fair view of the state of the Group’s and of the Parent company’s affairs as at 31 March 2020 and of the Group’s loss for the year then ended;

— The Group financial statements have been properly prepared in accordance with IFRS as adopted by the European Union;
— The Parent company financial statements have been properly prepared in accordance with IFRS as adopted by the European Union as applied

in accordance with the provisions of the Companies Act 2006; and

— The financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the Group financial

statements, Article 4 of the IAS Regulation.

We have audited the financial statements of Land Securities Group PLC which comprise:

Group

Parent company

Consolidated balance sheet as at 31 March 2020

Balance sheet as at 31 March 2020

Consolidated income statement for the year then ended

Consolidated statement of comprehensive income for the year then ended

Consolidated statement of changes in equity for the year then ended

Statement of changes in equity for the year then ended

Consolidated statement of cash flows for the year then ended

Statement of cash flows for the year then ended

Related notes 1 to 40 to the financial statements, including a summary
of significant accounting policies

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS)
as adopted by the European Union and as regards the Parent company financial statements as applied in accordance with the provisions of the
Companies Act 2006.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those
standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report below. We are independent
of the Group and Parent company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance
with these requirements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to principal risks, going concern and viability statement
We have nothing to report in respect of the following information in the Annual Report, in relation to which the ISAs (UK) require us to report to you
whether we have anything material to add or draw attention to:
— the disclosures in the Annual Report set out on pages 51-56 that describe the principal risks and explain how they are being managed or mitigated;
— the Directors’ confirmation set out on pages 48-49 in the Annual Report that they have carried out a robust assessment of the principal risks facing

the entity, including those that would threaten its business model, future performance, solvency or liquidity;

— the Directors’ statement set out on page 57 in the financial statements about whether they considered it appropriate to adopt the going concern

basis of accounting in preparing them, and their identification of any material uncertainties to the entity’s ability to continue to do so over a period
of at least 12 months from the date of approval of the financial statements;

— whether the Directors’ statement in relation to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially

inconsistent with our knowledge obtained in the audit; or

— the Directors’ explanation set out on page 57 in the Annual Report as to how they have assessed the prospects of the Group, over what period they
have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.

Overview of our audit approach

Key audit
matters

— The valuation of the property portfolio, including investment properties and investment properties held in joint ventures
— Revenue recognition, including the timing of revenue recognition, the treatment of rents, incentives and recognition of trading property proceeds
— (New in 2020) Going concern basis used in the preparation of the Annual Report and Accounts.

Audit scope

— The Group solely operates in the United Kingdom and operates through one portfolio, which is split into three segments, Office, Retail and

Specialist, all of which were subject to the same audit scope. This included the Group audit team performing direct audit procedures on joint
venture balances included within the Group financial statements.

Materiality

— Overall Group materiality of £131m which represents 1% of total assets in the Group balance sheet, adjusted for certain cash items, at 31 March 2020
— Specific materiality of £21m which represents 5% of revenue profit before tax at 31 March 2020 is applied to account balances not related to

investment properties (either wholly owned or held within joint ventures).

109

Financial statementsLandsec Annual Report 2020

Independent Auditor’s Report
continued

Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the
current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts
of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole and in our opinion thereon,
and we do not provide a separate opinion on these matters.

This year we have included a new key audit matter: Going concern basis used in the preparation of the Annual Report and Accounts. The audit partner
and other senior members of the audit team spent a significant amount of time assessing whether there was a material uncertainty over the
Company’s ability to continue as a going concern in light of the Covid-19 pandemic.

Key observations
communicated to the
Audit Committee

We have tested the
inputs, assumptions
and methodology
used by CBRE. We
have concluded that
the methodology
applied is reasonable
and that the external
valuations are
an appropriate
assessment of the
market value of
investment properties
at 31 March 2020.
We concluded
that the sample of
properties reviewed
by our Chartered
Surveyors was within
the reasonable range
of values as assessed
by them.
We consider that
management
provided an
appropriate level of
review and challenge
over the valuations,
but we did not
identify evidence of
undue management
influence.
We have reviewed the
disclosures in the
financial statements
relating to the
material uncertainty
paragraph included
by CBRE in their
valuation report
and consider
the disclosure
appropriate.

Risk

Our response to the risk

The valuation of the property
portfolio, including investment
properties and investment
properties held in joint ventures
2020: £11,297m in investment
properties and £946m (the Group’s
share) in investment properties held
in joint ventures (2019: £12,094m in
investment properties and £1,117m
in investment properties held in joint
ventures).
Refer to the Report of the Audit
Committee (pages 78-83);
Accounting policies (pages 131-133);
notes 14 & 16 of the financial
statements (pages 133-141).
The valuation of property including
investment properties, investment
properties held in joint ventures
and trading properties requires
significant judgement and estimation
by management and its external
valuers. Any input inaccuracies or
unreasonable bases used in these
judgements (such as in respect of
estimated rental value, yield profile
applied or costs to complete for
development properties) could result
in a material misstatement of the
income statement and balance sheet.
There is also a risk that management
may influence the significant
judgements and estimates in respect
of property valuations in order to meet
market expectations or bonus targets.
The uncertainties over the current
economic environment caused by
Covid-19 had an impact on the
valuation of the Group’s properties.
As referred to in note 14, CBRE has
highlighted in its assessment of the
fair value of the property portfolio
that there is limited transactional
evidence and less certainty with
regard to valuations and that market
values can change rapidly in the
context of current market conditions.
Accordingly, CBRE and management
have stated that it has been necessary
to make more judgements than
are usually required and the Group
has reported the valuation of the
property portfolio at 31 March 2020
on the basis of a ‘material valuation
uncertainty’.

110

Our audit procedures over the valuation of property included:
We tested the Group’s controls to determine that data used in the valuation of the property
portfolio and management’s review of the valuations was correct and complete.
We evaluated the competence of the Group’s external valuer, CBRE, which included
consideration of their qualifications and expertise.
We met with CBRE to discuss their valuation approach and the judgements they made in
assessing the property valuation. Such judgements included the estimated rental value, yield
profile and other assumptions that impact the value. We also discussed any adjustment to the
assumptions that were made to take into consideration the impact of the Covid-19 outbreak.
We assessed and challenged the judgements made by CBRE in light of the valuation
uncertainties they highlight in their report in respect of the limited transactional evidence
that can be used to inform their opinion of fair value in certain classes of assets. Our audit
procedures also considered the impact of Covid-19 as incorporated below.
We selected a sample based on a number of factors including size, risk (including Covid-19),
representation across asset classes and segments and including a further random selection
which in total comprised 73% of the market value of investment properties (including
investment properties held in joint ventures). For this sample of properties we tested source
documentation provided by the Group to CBRE. This included agreeing a sample back to
underlying lease data and vouching costs incurred to date in respect of development properties.
We included Chartered Surveyors on our audit team who reviewed and challenged the
valuation approach and assumptions for the same sample of properties. Our Chartered
Surveyors compared the yields applied to each property to an expected range of yields taking
into account available market data and asset specific considerations. They considered
whether the other assumptions applied by the external valuer, such as the estimated rental
values, voids, tenant incentives and development costs to complete were supported by
available data. They also considered the appropriateness of adjustments made to take into
consideration the impact of the Covid-19 outbreak.
Together with our Chartered Surveyors, we met with the external valuer to further discuss
the findings from our audit work described above and to seek further explanations as
required. We also discussed the impact of current market conditions, including Covid-19,
on the property valuations.
We conducted analytical procedures on the properties not included in the sample reviewed in
detail by our Chartered Surveyors by comparing assumptions and the value of each property in
the portfolio by reference to our understanding of the UK real estate market, external market
data and asset specific considerations to evaluate the appropriateness of the valuations
adopted by the Group. Where values or assumptions were not in line with our expectations
we investigated further by discussing with management and our Chartered Surveyors and,
where appropriate, obtaining further evidence to support the movement in values.
We attended meetings between management and CBRE to assess for evidence of undue
management influence and we obtained a confirmation from CBRE that they had not been
subject to undue influence from management.
We performed site visits accompanied by our Chartered Surveyors, including 21 Moorfields,
being the largest property in the development programme by value. This enabled us to
assess the stage of completion of, and gain specific insights into, the development.
We met with development directors and project managers for major properties in the
development programme and assessed project costs, progress of development and leasing
status and considered the reasonableness of the forecast costs to complete included
in the valuations as well as identified contingencies, exposures and remaining risks,
by comparing the total forecast costs to contractual arrangements and approved budgets.
We corroborated the information provided by the development directors and the project
managers through our review of cost analysis as well as the valuation outcome. We also
reviewed development feasibilities and reporting against budget.
We assessed the adequacy of the additional disclosures of estimates in note 14 and valuation
assumptions in note 14 that were made in accordance with IFRS 13 – Fair Value Measurement.
Scope of our procedures
We performed full scope audit procedures over valuation of all properties, including
investment properties, investment properties held in joint ventures and trading properties.

Landsec Annual Report 2020Risk

Our response to the risk

Our audit procedures over revenue recognition included:
We tested controls governing approvals and changes to lease terms and the upload of this
information to the Group’s property information management system (PIMS). We also
performed controls testing over the billings process.
We selected a sample of new or amended lease agreements in the year and agreed the
key lease terms input into PIMS, including lease incentive clauses.
We performed data analytics procedures to recalculate rental income across the whole
population of leases in the Group’s portfolio; this also covers the straight-lining rent
adjustment for lease incentives. We tested 98% of total rental income.
We obtained the schedules used to calculate straight-lining of revenue in accordance with
IFRS 16 Leases. We tested the arithmetical accuracy of these schedules and that the straight
lining was calculated in accordance with the guidance. For a sample of leases we agreed
the lease information per the schedules back to lease agreements.
We assessed the recoverability of the tenant lease incentives’ receivable balance by evaluating
the financial viability of the tenants with significant related lease incentive debtors. In doing
so, we considered the accounting impact of Covid-19 on rent concessions, the Group’s rent
relief fund as well as additional assumptions impacting management’s assessment of the
fair value of rent receivables.
We assessed whether the revenue recognition policies adopted complied with IFRS as
adopted by the European Union.
We performed audit procedures specifically designed to address the risk of management
override of controls including journal entry testing, which included a particular focus on
journal entries which impact revenue.
Scope of our procedures
The whole Group was subject to full scope audit procedures over revenue.

We obtained an understanding of the process followed by management to prepare the
Group’s going concern assessment, including identifying and assessing the impact of
Covid-19.
We obtained the base case cash flow and liquidity forecasts covering the going concern
period and the additional scenarios prepared by management including the extreme
downside scenario. We tested the mathematical accuracy of the models.
We challenged the appropriateness of those forecasts by assessing historical forecasting
accuracy, challenging management’s consideration of downside sensitivity analysis and
applying further sensitivities where appropriate to stress test the impact on liquidity.
We performed testing to evaluate whether the covenant requirements of the debt facilities
would be breached under either the base case or the stress scenarios. We reperformed
additional reverse stress testing on key assumptions and considered the likelihood of
outcomes including controllable mitigating actions over and above the scenarios modelled.
In doing so, we considered the perspective of our Chartered Surveyors.
We obtained evidence of the agreements with lenders setting out terms and conditions
of lending including covenant compliance.
We reviewed minutes of board meetings with a view to identifying any matters which may
impact the going concern assessment.
We reviewed the disclosures in the financial statements in relation to Covid-19 with a view
to confirming that they adequately disclose the risk, the impact on the Group’s operations
and results and potential mitigation actions.
Scope of our procedures
The Group was subject to full scope audit procedures over the use of the going concern
assumption.

Revenue recognition, including the
timing of revenue recognition and
the treatment of lease incentives
2020: £611m rental income
(2019: £619m rental income).
Refer to the Report of the Audit
Committee (pages 78-83);
Accounting policies (pages 124-125);
note 6 of the financial statements
(pages 124-125).
Market expectations and revenue
profit-based targets may place
pressure on management to distort
revenue recognition. This may result
in overstatement or deferral of
revenues to assist in meeting current
or future targets or expectations,
including through incorrect
treatment of lease incentives.

(New in 2020) Going concern basis
used in the preparation of the
Annual Report and Accounts
Refer to Going concern and viability
(page 57), the Report of the Audit
Committee (pages 78-83) and
note 1 Basis of preparation and
consolidation of the financial
statements (page 119).
The Group’s Annual Report and
Accounts are prepared on the going
concern basis of accounting. This basis
is dependent on a number of factors,
including the Group’s financial
performance, the Group’s continued
access to borrowing facilities and the
Group’s ability to continue to operate
within its financial covenants.
The Covid-19 pandemic is of an
unprecedented scale and has severely
impacted the global economy and
businesses across all industries. There
is a significant degree of uncertainty
about the further spread of the virus
and the state of the world economy
and a risk that this adversely impacts
the Group’s ability to continue to
operate as a going concern.
The value of Investment properties
support the Group’s borrowing
facilities which are secured against
a ring-fenced group of property
assets and are subject to financial
covenants, tested on a six-monthly
basis, including loan to value and
interest cover ratios.
There is also a risk that management
has not adequately disclosed the
impact of Covid-19 on the going
concern basis in the Annual Report
and Accounts.

Key observations
communicated to the
Audit Committee

We audited the
timing of revenue
recognition,
treatment of lease
incentives and
assessed the risk
of management
override.
Based upon the
audit procedures
performed, we
concluded that
revenue has been
recognised on an
appropriate basis
in the year.

Based on the
results of our audit
procedures, we
agreed with
management’s
conclusion that
there is no material
uncertainty related
to the Group’s ability
to continue as a
going concern.
The going concern
and viability
forecasts, including
stress testing
scenarios, are
consistent with
the results of our
audit procedures.
We concluded that
the disclosures were
fair, balanced and
understandable
having compared
the disclosure to the
knowledge gained
during the audit.

In the prior year, our auditor’s report included a key audit matter in relation to the valuation of the property portfolio, including investment properties,
investment properties held in joint ventures and trading properties. At 31 March 2020, we excluded trading properties from the key audit matter due to
materiality considerations, in the context of the overall property portfolio balance.

111

Financial statementsLandsec Annual Report 2020
Independent Auditor’s Report
continued

An overview of the scope of our audit
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each entity
within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements.

The Group solely operates in the United Kingdom and operates through three segments, Office, Retail and Specialist, all of which were subject to the
same audit scope. The Group audit team performed all the work necessary to issue the Group and Parent company audit opinion, including undertaking
all of the audit work on the risks of material misstatement identified above.

Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit and in
forming our audit opinion.

Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic
decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.

The table below sets out the materiality, performance materiality and threshold for reporting audit differences applied on our audit:

Overall

Specific – account balances not
related to investment properties
(either wholly owned or held within
joint ventures) or loans and borrowings

Basis

Materiality

Performance materiality

Audit differences

1% of total assets adjusted for certain
cash items (2019: 1% of the carrying
value of investment properties)

£131m
(2019: £121m)

5% of revenue profit before tax
(2019: 5% of revenue profit before tax)

£21m
(2019: £22m)

£98m
(2019: £91m)

£16m
(2019: £17m)

£7m
(2019: £6m)

£1m
(2019: £1m)

When establishing our overall audit strategy, we determined a magnitude of uncorrected misstatements that we judged would be material for the
financial statements as a whole. We determined that an asset-based measure would be the most appropriate basis for determining overall materiality
given that key users of the Group’s financial statements are primarily focused on the valuation of the Group’s assets. We benchmarked our basis for
overall materiality against other UK listed REITs and determined that it is appropriate to change the overall materiality basis from the carrying value of
investment property to total assets such that a comparable approach is applied. Based on this, we determined that it is appropriate to set the overall
materiality at 1% of total assets (2019: 1% of the carrying value of investment properties). We have adjusted this to remove cash drawn from facilities
close to the year end.

We also challenged the financial statement items to which we apply overall materiality. In a further change to prior year, we determined to apply
overall materiality to the balance sheet value of loans and borrowings as they directly relate to investment properties and they are secured against
the Group’s investment properties. This is also consistent with the approach to other UK listed REITs.

This provided a basis for determining the nature, timing and extent of risk assessment procedures, identifying and assessing the risk of material
misstatement and determining the nature, timing and extent of further audit procedures.

We have determined that for other account balances not related to investment properties (either wholly owned or held within joint ventures) or loans
and borrowings, a misstatement of less than materiality for the financial statements as a whole could influence the economic decisions of users.
We have determined that materiality for these areas should be based upon revenue profit before tax of £414m (2019: £442m). We believe that it is
appropriate to use a profit-based measure as profit is also a focus of users of the financial statements.

We reassessed initial materiality at the year end date and, as actual total assets were lower than that which we had used as the initial basis for
determining overall materiality, our final materiality was lower than the materiality we calculated initially.

Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability
that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement is that overall performance
materiality and specific performance materiality (i.e. our tolerance for misstatement in an individual account or balance) for the Group should be 75%
(2019: 75%) of the respective materiality. We have set performance materiality at this percentage due to our past experience of the audit that indicates
a lower risk of misstatements, both corrected and uncorrected.

Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to the Committee all uncorrected audit differences in excess of £7m (2019: £6m), as well
as audit differences in excess of £1m (2019: £1m) that relate to our specific testing of the other account balances not related to investment properties
or loans and borrowings which are set at 5% of their respective planning materiality. We also agreed to report differences below that threshold that,
in our view, warranted reporting on qualitative grounds.

112

Landsec Annual Report 2020We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.

Other information
The other information comprises the information included in the Annual Report, including the Strategic Report and Governance set out on pages 2-106
other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information.

Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in this report, we do
not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of the other information, we are required to report that fact.

We have nothing to report in this regard.

In this context, we also have nothing to report in regard to our responsibility to specifically address the following items in the other information and
to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

— Fair, balanced and understandable set out on page 108 – the statement given by the Directors that they consider the Annual Report and financial
statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s
performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

— Audit Committee reporting set out on pages 78-83 – the section describing the work of the Audit Committee does not appropriately address

matters communicated by us to the Audit Committee; or

— Directors’ statement of compliance with the UK Corporate Governance Code set out on page 108 – the parts of the Directors’ statement required under
the Listing Rules relating to the Company’s compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor
in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006.

In our opinion, based on the work undertaken in the course of the audit:

— the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared

is consistent with the financial statements; and

— the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent company and its environment obtained in the course of the audit,
we have not identified material misstatements in the Strategic Report or the Directors’ Report.

We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:

— adequate accounting records have not been kept by the Parent company, or returns adequate for our audit have not been received from branches

not visited by us; or

— the Parent company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

— certain disclosures of Directors’ remuneration specified by law are not made; or

— we have not received all the information and explanations we require for our audit.

Responsibilities of Directors
As explained more fully in the Directors’ Responsibilities Statement set out on page 108, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors determine is necessary
to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Directors are responsible for assessing the Group and Parent company’s ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate
the Group or the Parent company or to cease operations, or have no realistic alternative but to do so.

113

Financial statementsLandsec Annual Report 2020
Independent Auditor’s Report
continued

Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee
that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.

Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud;
to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing
appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the
prevention and detection of fraud rests with both those charged with governance of the entity and management.

Our approach was as follows:

— We obtained an understanding of the legal and regulatory frameworks that are applicable to the Group and determined that the most significant
frameworks which are directly relevant to specific assertions in the financial statements are those that relate to the reporting framework (IFRS, the
Companies Act 2006 and UK Corporate Governance Code) and the relevant tax regulations in the United Kingdom, including the UK REIT regulations.

— We understood how the Parent company is complying with those frameworks through enquiry with management, and by identifying the Parent

company’s policies and procedures regarding compliance with laws and regulations. We also identified those members of management who have
the primary responsibility for ensuring compliance with laws and regulations, and for reporting any known instances of non-compliance to those
charged with governance.

— We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by reviewing the

Companies risk register, enquiry with management and the Audit Committee during the planning and execution phases of our audit.

— Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved

the following:

— Inquire of members of Senior Management, and when appropriate, those charged with governance regarding their knowledge of any non-compliance

or potential non-compliance with laws and regulations that could affect the financial statements.

— Reading minutes of meetings of those charged with governance.

— Obtaining and reading correspondence from legal and regulatory bodies including HMRC.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditor’s Report.

Other matters we are required to address
— We were appointed by the Parent company at the AGM on 18 July 2013 to audit the financial statements for the year ending 31 March 2014 and

subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments is six years, covering
all year ends between 31 March 2014 and 31 March 2020. Our audit engagement letter was updated on 22 October 2019.

— The non-audit services prohibited by the FRC’s Ethical Standard were not provided to the Group or the Parent company and we remain independent

of the Group and the Parent company in conducting the audit.

— The audit opinion is consistent with the additional report to the Audit Committee.

Use of our report
This report is made solely to the Parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Parent company’s members those matters we are required to state to them
in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other
than the Parent company and the Parent company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Kathryn Barrow (Senior statutory auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
12 May 2020

Notes:
1. The maintenance and integrity of the Land Securities Group PLC website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

114

Landsec Annual Report 2020Income statement
for the year ended 31 March 2020

Revenue

Costs

Share of post-tax profit/(loss) from joint ventures

Loss on disposal of investment properties

Net deficit on revaluation of investment properties

Operating profit/(loss)

Finance income

Finance expense

Profit/(loss) before tax

Taxation

Loss attributable to shareholders

Loss per share attributable to shareholders:

Basic loss per share

Diluted loss per share

Revenue
profit
£m

Capital
and other
items
£m

Notes

740

(269)

471

–

493

(96)

414

(5)

(4)

(173)

(6)

(1,000)

(1,183)

(69)

(1,251)

2020

Total
£m

741

(274)

467

(151)

(6)

(1,000)

(690)

(165)

(837)

(832)

Revenue
profit
£m

Capital
and other
items
£m

748

(249)

499

–

521

(99)

442

(22)

(13)

(107)

–

(441)

(561)

(10)

(565)

2019

Total
£m

757

(271)

486

(85)

–

(441)

(40)

(109)

(123)

(119)

(112.4)p

(16.1)p

Statement of comprehensive income
for the year ended 31 March 2020

Loss attributable to shareholders

Items that may be subsequently reclassified to the income statement:

Movement in cash flow hedges

Items that will not be subsequently reclassified to the income statement:

Movement in the fair value of other investments

Net re-measurement gain on defined benefit pension scheme

Deferred tax charge on re-measurement above

Other comprehensive income attributable to shareholders

Notes

2020

Total
£m

2019

Total
£m

(832)

(119)

(1)

(3)

(1)

–

Total comprehensive loss attributable to shareholders

(831)

(119)

115

Financial statementsLandsec Annual Report 2020
Balance sheets
at 31 March 2020

Non-current assets
Investment properties
Intangible assets
Net investment in finance leases
Investments in joint ventures
Investments in subsidiary undertakings
Trade and other receivables
Other non-current assets
Total non-current assets

Current assets
Trading properties
Trade and other receivables
Monies held in restricted accounts and deposits
Cash and cash equivalents
Other current assets
Total current assets

Total assets

Current liabilities
Borrowings
Trade and other payables
Other current liabilities
Total current liabilities

Non-current liabilities
Borrowings
Trade and other payables
Other non-current liabilities
Redemption liability
Total non-current liabilities

Total liabilities

Net assets

Equity
Capital and reserves attributable to shareholders
Ordinary shares
Share premium
Other reserves
Merger reserve
Retained earnings
Total equity

Notes

2020
£m

14
19
18
16
28
26
29

15
26
22
23
30

21
27
31

21
27
32

Group

2019
£m

12,094
20
159
1,031
–
176
30
13,510

23
437
36
14
14
524

2020
£m

–
–
–
–
6,213
–
–
6,213

–
–
4
–
–
4

Company

2019
£m

–
–
–
–
6,213
–
–
6,213

–
–
4
–
–
4

11,297
14
156
824
–
178
32
12,501

24
433
9
1,345
48
1,859

14,360

14,034

6,217

(977)
(270)
(2)
(1,249)

(4,355)
(1)
(5)
–
(4,361)

(934)
(273)
(18)
(1,225)

(2,847)
(1)
(5)
(36)
(2,889)

–
(2,406)
–
(2,406)

–
(1,978)
–
(1,978)

–
–
–
–
–

(5,610)

(4,114)

(2,406)

(1,978)

8,750

9,920

3,811

4,239

80
317
27
–
8,326
8,750

80
317
26
–
9,497
9,920

80
317
27
374
3,013
3,811

80
317
26
374
3,442
4,239

The loss for the year of the Company was £89m (2019: profit of £700m).

The financial statements on pages 115 to 164 were approved by the Board of Directors on 11 May 2020 and were signed on its behalf by:

M F Greenslade

M C Allan
Directors

116

Landsec Annual Report 2020
Statements of changes in equity
for the year ended 31 March 2020

At 1 April 2018

Total comprehensive loss for the financial year

Transactions with shareholders:

Share-based payments

Dividends paid to shareholders

Total transactions with shareholders

Ordinary
shares
£m

Share
premium
£m

317

Attributable to shareholders

Other
reserves
£m

Retained
earnings
£m

Group

Total
equity
£m

9,963

10,386

–

(119)

(349)

(347)

(349)

(347)

At 31 March 2019

317

9,497

9,920

Total comprehensive loss for the financial year

Transactions with shareholders:

Share-based payments

Dividends paid to shareholders

Total transactions with shareholders

–

(831)

(342)

(340)

(342)

(339)

At 31 March 2020

317

8,326

8,750

At 1 April 2018

Total comprehensive income for the financial year

Transactions with shareholders:

Share-based payments

Dividends paid to shareholders

Total transactions with shareholders

Attributable to shareholders

Company

Ordinary
shares
£m

Share
premium
£m

317

Other
reserves
£m

Merger
reserves
£m

374

Retained
earnings1
£m

3,089

Total
equity
£m

3,886

–

700

(349)

(347)

(349)

(347)

At 31 March 2019

317

374

3,442

4,239

Total comprehensive loss for the financial year

Transactions with shareholders:

Share-based payments

Dividends paid to shareholders

Total transactions with shareholders

At 31 March 2020

1. Available for distribution.

–

(89)

(342)

(340)

(342)

(339)

317

374

3,013

3,811

117

Financial statementsLandsec Annual Report 2020
Statement of cash flows
for the year ended 31 March 2020

Cash flows from operating activities

Net cash generated from operations

Interest received

Interest paid

Rents paid

Capital expenditure on trading properties

Disposal of trading properties

Other operating cash flows

Net cash inflow from operating activities

Cash flows from investing activities

Investment property development expenditure

Other investment property related expenditure

Acquisition of investment properties

Disposal of investment properties

Cash contributed to joint ventures

Cash distributions from joint ventures

Other investing cash flows

Net cash outflow from investing activities

Cash flows from financing activities

Proceeds from new borrowings (net of finance fees)

Repayment of medium term notes

Redemption of medium term notes

Repayment of bank debt

Premium paid on redemption of medium term notes

Net cash outflow from derivative financial instruments

Settlement of redemption liability

Dividends paid to shareholders

Decrease/(increase) in monies held in restricted accounts and deposits

Other financing cash flows

Net cash inflow/(outflow) from financing activities

Increase/(decrease) in cash and cash equivalents for the year

Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year

Notes

2020
£m

504

(108)

(12)

(2)

–

401

(154)

(47)

(16)

(13)

–

2019
£m

528

(114)

(12)

(2)

424

(54)

(46)

(136)

(29)

(4)

(116)

(166)

1,701

(47)

(196)

–

(59)

(1)

(36)

(342)

(1)

1,046

1,331

1,345

–

(8)

(3)

(2)

(15)

–

(338)

(21)

–

(306)

(48)

The Company did not hold any cash and cash equivalents balances at 31 March 2020 (2019: none) and therefore did not have any cash flows in the
year then ended (2019: none).

118

Landsec Annual Report 2020 Notes to the financial statements
for the year ended 31 March 2020

Section 1 – General
This section contains a description of the Group’s significant accounting policies that relate to the financial statements as a whole. A description
of accounting policies specific to individual areas (e.g. investment properties) is included within the relevant note to the financial statements.

This section also includes a summary of new accounting standards, amendments and interpretations that have been applied in the year and those
not yet adopted, and their actual or expected impact on the reported results of the Group.

1. Basis of preparation and consolidation

Basis of preparation
These financial statements have been prepared on a going concern basis and in accordance with International Financial Reporting Standards as
adopted by the EU (IFRS), IFRIC Interpretations and the Companies Act 2006 applicable to companies reporting under IFRS. 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 other comprehensive income (without recycling), 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.

Land Securities Group PLC (the Company) has not presented its own statement of comprehensive income (and separate income statement), as
permitted by section 408 of Companies Act 2006. The merger reserve arose on 6 September 2002 when the Company acquired 100% of the issued
share capital of Land Securities PLC. The merger reserve represents the excess of the cost of acquisition over the nominal value of the shares issued by
the Company to acquire Land Securities PLC. The merger reserve does not represent a realised or distributable profit. Other reserves includes the Capital
redemption reserve, which represents the nominal value of cancelled shares, the Share-based payment reserve and Own shares held by the Group.

Going concern
Given the significant impact of Covid-19 on the macro-economic conditions in which the Group is operating, the Directors have placed a particular
focus on the appropriateness of adopting the going concern basis in preparing the financial statements for the year ended 31 March 2020. The
Group’s going concern assessment considers the Group’s principal risks (see pages 51-56) and is dependent on a number of factors, including financial
performance, continued access to borrowing facilities and the ability to continue to operate the Group’s secured debt structure within its financial
covenants. The secured debt structure has a tiered operating covenant regime which gives the Group substantial flexibility when the loan-to-value
and interest cover in the Security Group are less than 65% and more than 1.45x respectively. If either of these limits are exceeded, the allowed
operating environment becomes more restrictive with provisions coming into effect to encourage a reduction in gearing. However, it is not until the
loan-to-value exceeds 100% or the interest cover ratio falls below 1.0x that a breach occurs, at which point the Group would enter a remedy period.

The going concern assessment is based on the first 12 months of the Group’s viability model, which is based on a severe but plausible downside
scenario including the anticipated impact of Covid-19, reflecting the following key assumptions:

— GDP growth declines significantly in the short term, with a recession in 2021 and increased rates of inflation from 1 April 2021

— Rental yields expand by up to 70bps and rental values decline by up to 10% across the Combined Portfolio, driving a further decline in capital values

— 75% reduction in rent receipts from our Retail and Specialist tenants and a 20% reduction in rent receipts from our Office tenants over a majority

of the going concern assessment period

— A three-month pause in committed developments, and no new developments progressing

— No asset sales

— No new financing is assumed in the assessment period, but existing facilities are assumed to remain available.

Throughout this severe but plausible downside scenario the Group has sufficient cash reserves, with the loan-to-value covenant remaining less than
65% and interest cover above 1.45x, for a period of at least 12 months from the date of authorisation of these financial statements. The Directors have
also considered an extreme downside scenario, which assumes no further rent will be received, to determine when our available cash resources are
exhausted. Even in this extreme downside scenario, the Group continues to have sufficient cash reserves to continue in operation throughout the going
concern assessment period.

Based on these considerations, together with available market information and the Directors’ knowledge and experience of the Group’s property
portfolio and markets, the Directors have adopted the going concern basis in preparing the accounts for the year ended 31 March 2020.

119

Financial statementsLandsec Annual Report 2020
Basis of consolidation
The consolidated financial statements for the year ended 31 March 2020 incorporate the financial statements of the Company and all its subsidiary
undertakings. Subsidiary undertakings are those entities controlled by the Company. Control exists where an entity is exposed to variable returns and
has the ability to affect those returns through its power over the investee.

The results of subsidiaries and joint ventures acquired or disposed of during the year are included from the effective date of acquisition or to the effective
date of disposal. Accounting policies of subsidiaries and joint ventures which differ from Group accounting policies are adjusted on consolidation.

Where instruments in a subsidiary held by third parties are redeemable at the option of the holder, these interests are classified as a financial liability,
called the redemption liability. The liability is carried at fair value; the value is reassessed at the balance sheet date and movements are recognised
in the income statement.

Joint arrangements are those entities over whose activities the Group has joint control, established by contractual agreement. Interests in joint
arrangements are accounted for as either a joint venture or a joint operation. A joint arrangement is accounted for as a joint venture when the Group,
along with the other parties that have joint control of the arrangement, have rights to the net assets of the arrangement. Interests in joint ventures
are equity accounted. The equity method requires the Group’s share of the joint venture’s post-tax profit or loss for the year to be presented separately
in the income statement and the Group’s share of the joint venture’s net assets to be presented separately in the balance sheet. A joint arrangement
is accounted for as a joint operation when the Group, along with the parties that have joint control of the arrangement, have rights to the assets and
obligations for the liabilities relating to the arrangement. Joint operations are accounted for by including the Group’s share of the assets, liabilities,
income and expenses on a line-by-line basis.

Intra-group balances and any unrealised gains and losses arising from intra-group transactions are eliminated in preparing the consolidated financial
statements. Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group’s interest in the joint venture
concerned. Unrealised losses are eliminated in the same way, but only to the extent that there is no evidence of impairment.

2. Significant accounting judgements and estimates

The preparation of financial statements in conformity with IFRS requires management to exercise judgement in applying the Group‘s accounting
policies. The areas where the Group considers the judgements to be most significant involve assumptions or estimates in respect of future events,
where actual results may differ from these estimates.

Judgements
— Recognising revenue where property management activities are performed by a third party (note 6)

— Compliance with the Real Estate Investment Trust (REIT) taxation regime and the recognition of deferred tax assets and liabilities (note 12)

— Accounting for property acquisitions and disposals (note 14)

Estimates
— Valuation of investment and trading properties (note 14)

— Impairment of trade receivables (note 26)

3. Changes in accounting policies and standards

The accounting policies used in these financial statements are consistent with those applied in the last annual financial statements, as amended
where relevant to reflect the adoption of new standards, amendments and interpretations which became effective in the year, the impact of which
is outlined below.

Changes in accounting policy
The Group adopted IFRS 16 Leases on 1 April 2019. As a result of adopting this standard, the Group now reports separately service charge income for
leases where a single payment is received to cover both rent and service charge. The total payment received was previously included within rental
income, but the service charge component has now been separated and reported as service charge income in notes 4 and 6. In the year ended
31 March 2019, £6m was separated from rental income and reported as service charge income. There has been no net impact on profit attributable
to shareholders or on the Group’s balance sheet. The Group’s revised accounting policies and the impact of the change in accounting policies on the
financial statements is detailed in notes 6, 7 and 14.

Amendments to IFRS
A number of new standards, amendments to standards and interpretations have been issued but are not yet effective for the Group. The application of
these new standards, amendments and interpretations are not expected to have a significant impact on the Group’s income statement or balance sheet.

120

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Section 2 – Performance
This section focuses on the performance of the Group for the year, including segmental information, earnings per share and net assets per share,
together with further details on specific components of the income statement and dividends paid.

Our property portfolio is a combination of properties that are wholly owned by the Group, part owned through joint arrangements and properties
owned by the Group but where a third party holds a non-controlling interest. Internally, management review the results of the Group on a basis that
adjusts for these different forms of ownership to present a proportionate share. The Combined Portfolio, with assets totalling £12.8bn, is an example
of this approach, reflecting the economic interest we have in our properties regardless of our ownership structure. We consider this presentation
provides further understanding to stakeholders of the activities and performance of the Group, as it aggregates the results of all of the Group’s
property interests which under IFRS are required to be presented across a number of line items in the statutory financial statements.

The same principle is applied to many of the other measures we discuss and, accordingly, a number of our financial measures include the results of
our joint ventures and subsidiaries on a proportionate basis. Measures that are described as being presented on a proportionate basis include the
Group’s share of joint ventures on a line-by-line basis and are adjusted to exclude the non-owned elements of our subsidiaries. This is in contrast to
the Group’s statutory financial statements, where the Group’s interest in joint ventures is presented as one line on the income statement and balance
sheet, and all subsidiaries are consolidated at 100% with any non-owned element being adjusted as a non-controlling interest or redemption liability,
as appropriate. Our joint operations are presented on a proportionate basis in all financial measures.

Our income statement has two key components: the income we generate from leasing our investment properties net of associated costs (including
interest expense), which we refer to as revenue profit, and items not directly related to the underlying rental business, principally valuation changes,
profits or losses on the disposal of properties, refinancing activity and exceptional items, which we refer to as Capital and other items. Our income
statement is presented in a columnar format, split into those items that relate to revenue profit and Capital and other items. The total column
represents the Group’s results presented in accordance with IFRS; the other columns provide additional information. We believe revenue profit provides
further understanding of the results of the Group’s operational performance to stakeholders as it focuses on the rental income performance of the
business and excludes Capital and other items which can vary significantly from year to year. A full definition of revenue profit is given in the Glossary.
The components of revenue profit are presented on a proportionate basis in note 4.

4. Segmental information

The Group’s operations are managed across three operating segments, being Office, Retail and Specialist.

The Office segment includes all our offices, substantially all of which are located in London. The Retail segment includes all our shopping centres,
outlets, retail parks and the retail units within our London office buildings. The Specialist segment includes our leisure and hotel assets, Piccadilly Lights
and other specialist assets which do not fall within either of the other segments. All of the Group’s operations are in the UK.

Management has determined the Group’s operating segments based on the information reviewed by Senior Management to make strategic decisions.
During the year, the chief operating decision maker was the Executive Committee (ExecCom), which comprised the Executive Directors, the Group
General Counsel and Company Secretary, the Group HR Director and until December 2019, the Corporate Affairs and Sustainability Director. The
information presented to the ExecCom includes reports from all functions of the business as well as strategy, financial planning, succession planning,
organisational development and Group-wide policies.

In previous years, our segmental reporting reflected that our operations were organised into a London Portfolio and a Retail Portfolio. In the year
ended 31 March 2020, we merged these two business units and amended our reporting to the ExecCom to reflect this. In order to maintain a detailed
level of financial disclosure, our segmental reporting now reflects the predominant use class of our assets, grouped into Office, Retail and Specialist.
The comparative year has been presented in the new format and a reconciliation to the previous presentation has been provided on our website.

The Group’s primary measure of underlying profit before tax is revenue profit. However, Segment net rental income is the lowest level to which the
profit arising from the on-going operations of the Group is analysed between the three segments. Previously the Group reported Segment profit,
which for the year ended 31 March 2019 was £56m lower than the Segment net rental income for the same year as it included indirect property costs,
including depreciation, as well as the net finance costs directly incurred by our joint ventures. The indirect costs, which are predominantly staff costs,
have now all been treated as indirect expenses and are not allocated to individual segments. Depreciation previously included within Group Services
expenses has also been separated and reported together with the depreciation previously included in Segment profit.

The Group manages its financing structure, with the exception of joint ventures, on a pooled basis. Individual joint ventures may have specific financing
arrangements in place. Since the use class of individual joint ventures may span more than one segment, debt facilities and finance expenses are not
specific to a particular segment. Unallocated income and expenses are items incurred centrally which are not directly attributable to one of the segments.

All items in the segmental information note are presented on a proportionate basis. A reconciliation from the Group income statement to the
information presented in the segmental information note is included in table 106.

121

Financial statementsLandsec Annual Report 2020
4. Segmental information continued

Revenue profit

Rental income

Finance lease interest

Gross rental income (before rents payable)

Rents payable2

Gross rental income (after rents payable)

Service charge income

Service charge expense

Net service charge expense

Other property related income

Direct property expenditure

Provisions related to 2020/21 rent

Segment net rental income

Other income

Indirect expense

Depreciation

Revenue profit before interest

Finance income

Finance expense

Joint venture finance expense

Revenue profit

Office
£m

261

270

(5)

265

(45)

(21)

–

261

Retail
£m

310

–

310

(10)

300

(55)

(3)

(50)

(19)

243

Specialist
£m

–

(2)

(15)

(4)

Office
£m

256

265

(3)

262

(43)

(20)

–

258

Retail
£m

319

–

319

(10)

309

(53)

(2)

(48)

–

276

Specialist
£m

–

(2)

(15)

–

2020

Total
£m

669

678

(15)

663

(102)

(4)

(86)

(23)

583

(72)

(4)

509

(96)

(16)

414

1. Restated for changes in accounting policies. See note 3 for details.
2. Included within rents payable is lease interest payable of £3m (2019: £1m) and £1m (2019: £1m) for the Office and Retail segments respectively.

Reconciliation of revenue profit to loss before tax

Revenue profit

Capital and other items

Valuation and profits on disposals
Net deficit on revaluation of investment properties
Loss on disposal of investment properties
Profit on disposal of trading properties

Net finance expense
Fair value movement on interest-rate swaps
Premium and fees on redemption of medium term notes (MTNs)
Other net finance income

Exceptional items
Impairment of intangible asset
Impairment of goodwill

Other
Fair value movement prior to acquisition of non-owned element of a joint venture
Profit from long-term development contracts
Other

Loss before tax

122

2020
Total
£m

414

(1,179)
(6)
7
(1,178)

(9)
(59)
–
(68)

(4)
(1)
(5)

–
3
(3)
–

(837)

20191

Total
£m

674

683

(13)

670

(98)

(3)

(83)

–

618

(76)

(5)

540

(99)

(19)

442

2019
Total
£m

442

(557)
(2)
–
(559)

(6)
(2)
4
(4)

(12)
(2)
(14)

9
3
–
12

(123)

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 20205. Performance measures

In the tables below, we present earnings per share and net assets per share calculated in accordance with IFRS, together with our own adjusted
measure and certain measures defined by the European Public Real Estate Association (EPRA), which have been included to assist comparison
between European property companies. Three of the Group’s key financial performance measures are adjusted diluted earnings per share, EPRA
net tangible assets per share and total business return.

During the year, EPRA issued new best practice reporting guidelines incorporating three new measures of net asset value: EPRA Net Tangible Assets
(NTA), Net Reinvestment Value (NRV) and Net Disposal Value (NDV). We have adopted these guidelines in the year ended 31 March 2020 and EPRA
NTA is considered to be the most relevant measure for our business. EPRA NTA is now our primary measure of net asset value, replacing our previously
reported EPRA net assets and EPRA net assets per share metrics. Total business return is now calculated based on EPRA NTA. Refer to the EPRA
disclosures on page 166 for more details, including calculations of EPRA NRV, EPRA net assets and EPRA triple net assets.

Adjusted earnings, which is a tax adjusted measure of revenue profit, is the basis for the calculation of adjusted earnings per share. We believe
adjusted earnings and adjusted earnings per share provide further insight into the results of the Group’s operational performance to stakeholders
as they focus on the rental income performance of the business and exclude Capital and other items which can vary significantly from year to year.

Earnings per share

Year ended 31 March 2020

Year ended 31 March 2019

Loss attributable to shareholders

Taxation

Valuation and profits on disposals

Net finance expense

Exceptional items

Other

(Loss)/profit used in per share calculation

Basic (loss)/earnings per share

Diluted (loss)/earnings per share1

Loss for
the year
£m

(832)

–

(832)

EPRA
earnings
£m

(832)

(5)

Adjusted
earnings
£m

(832)

(5)

1,178

–

414

–

414

IFRS

EPRA

Adjusted

(112.4)p

55.9p

Loss for
the year
£m

(119)

–

(119)

IFRS

(16.1)p

EPRA
earnings
£m

Adjusted
earnings
£m

(119)

(4)

559

(12)

442

EPRA

59.7p

(119)

(4)

559

(12)

442

Adjusted

59.7p

1. In the years ended 31 March 2019 and 2020, share options are excluded from the weighted average diluted number of shares when calculating IFRS diluted loss per share because they

are not dilutive.

Net assets per share

Net assets attributable to shareholders

Excess of fair value over net investment in finance lease book value

Deferred tax liability on intangible asset

Goodwill on deferred tax liability (note 19)

Other intangible assets (note 19)

Fair value of interest-rate swaps

Excess of fair value of debt over book value (note 21)

Net assets used in per share calculation

Net assets per share

Diluted net assets per share

31 March 2020

31 March 20191

Net assets
£m

EPRA NDV
£m

EPRA NTA
£m

8,750

Net assets
£m

9,920

EPRA NDV
£m

9,920

EPRA NTA
£m

9,920

–

8,750

–

(1)

–

(274)

8,565

(1)

(7)

–

8,834

9,920

–

(2)

–

(239)

9,759

(2)

(11)

–

9,989

IFRS

EPRA NDV

EPRA NTA

IFRS

EPRA NDV

EPRA NTA

1,182p

1,181p

n/a

1,156p

1,192p

1,341p

1,339p

n/a

1,317p

1,348p

1. New metrics presented as a result of the change in EPRA best practice recommendations. See table 62 in the Business analysis section for more details. EPRA net assets at 31 March 2019

as previously reported were £9,920m and EPRA triple net assets were £9,679m (1,339p and 1,306p per share respectively).

123

Financial statementsLandsec Annual Report 2020
5. Performance measures continued

Number of shares

Ordinary shares

Treasury shares

Own shares

Number of shares – basic

Dilutive effect of share options

Number of shares – diluted

Weighted
average
million

2020

31 March
million

Weighted
average
million

2019

31 March
million

751

(10)

(1)

740

741

751

(10)

(1)

740

741

751

(10)

(1)

740

–

740

751

(10)

(1)

740

741

Total business return is calculated as the cash dividends per share paid in the year plus the change in EPRA NTA per share, divided by the opening EPRA
NTA per share. We consider this to be a useful measure for shareholders as it gives an indication of the total return on equity over the year.

Total business return

Decrease in EPRA NTA per share

Dividend paid per share in the year (note 11)

Total return (a)

EPRA NTA per share at the beginning of the year (b)

Total business return (a/b)

Year ended
31 March
2020
pence

Year ended
31 March
20191
pence

(156)

(110)

1,348

–8.2%

(62)

(15)

1,410

–1.1%

1. Restated for change in net asset metric from EPRA net assets to EPRA NTA. See table 62 in the Business analysis section for further details. Total business return at 31 March 2019 based on

EPRA net assets per share as previously reported was -1.2%.

6. Revenue

Accounting policy

Rental income, including fixed rental uplifts, is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives
being offered to occupiers to enter into a lease, such as an initial rent-free period or a cash contribution to fit out or similar costs, are an integral part
of the net consideration for the use of the property and are therefore recognised on the same straight-line basis. Contingent rents, being lease payments
that are not fixed at the inception of a lease, for example turnover rents, are variable consideration and are recorded as income in the year in which
they are earned. Where a single payment is received from a tenant to cover both rent and service charge, the service charge component is separated
and reported as service charge income.

The Group’s revenue from contracts with customers, as defined in IFRS 15, includes service charge income, other property related income, trading
property sales proceeds and long-term development contract income.

Service charge income and management fees are recorded as income over time in the year in which the services are rendered. Revenue is recognised
over time because the tenants benefit from the services as soon as they are rendered by the Group. The actual service provided during each reporting
period is determined using cost incurred as the input method.

Other property related income includes development and asset management fees. These fees are recognised over time, using time elapsed as the
input method which measures the benefit simultaneously received and consumed by the customer, over the period the development or asset
management services are provided.

Proceeds received on the sale of trading properties are recognised when control of the property transfers to the buyer, i.e. the buyer has the ability to
direct the use of the property and the right to the cash inflows and outflows generated by it. This generally occurs on unconditional exchange or on
completion. If completion is expected to occur significantly after exchange or if the Group has significant outstanding obligations between exchange
and completion, the Group assesses whether there are multiple performance obligations in the contract and recognises revenue as each performance
obligation is satisfied.

When property is let under a finance lease, the Group recognises a receivable equal to the net investment in the lease at inception of the lease. Rentals
received are accounted for as repayments of principal and finance income as appropriate. Finance income is allocated to each period during the lease
term so as to produce a constant periodic rate of interest on the remaining net investment in the finance lease and is recognised within revenue.

Revenue on long-term development contracts is recognised over time over the period of the contract as the Group creates or enhances an asset that
the customer controls. Progress towards completion of the development, by reference to the value of work completed using the costs incurred to date
as a proportion of total costs expected to be incurred over the term of the contract, is used as the input method.

124

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020 Significant accounting judgement

For those properties where the property management activities are performed by a third party, the Group considers the third party to be the principal
delivering the service. The key factors considered by the Group when making this judgement include the following responsibilities of the third party:

— selecting suppliers and ensuring all services are delivered

— establishing prices and seeking efficiencies

— risk management and compliance

In addition, the residual rights residing with the Group are generally protective in nature.

All revenue is classified within the ‘Revenue profit’ column of the income statement, with the exception of proceeds from the sale of trading properties,
income from long-term development contracts and the non-owned element of the Group’s subsidiaries which are presented in the ‘Capital and other
items’ column.

20191

Total
£m

618

619

757

20191

Total
£m

674

Rental income (excluding adjustment for lease incentives)

Adjustment for lease incentives

Rental income

Service charge income

Other property related income

Trading property sales proceeds

Finance lease interest

Other income

Revenue per the income statement

1. Restated for changes in accounting policies. See note 3 for details.

Revenue
profit
£m

Capital
and other
items
£m

630

(20)

610

–

740

–

2020

Total
£m

631

(20)

611

–

Revenue
profit
£m

Capital
and other
items
£m

616

617

–

741

748

The following table reconciles revenue per the income statement to the individual components of revenue presented in note 4.

Rental income

Service charge income

Other property related income

Trading property sales proceeds

Finance lease interest

Long-term development contract income

Other income

Group
£m

611

–

Revenue in the segmental information note

741

Joint
ventures
£m

–

Adjustment
for
non-wholly
owned
subsidiaries2
£m

(1)

–

2020

Total
£m

669

Adjustment
for
non-wholly
owned
subsidiaries2
£m

(2)

–

Joint
ventures
£m

–

Group
£m

619

–

(1)

835

757

129

(2)

884

1. Restated for changes in accounting policies. See note 3 for details.
2. This represents the interest in X-Leisure which we did not own, but which is consolidated in the Group numbers. In December 2019, the Group settled the redemption liability which

represented this interest resulting in 100% ownership.

125

Financial statementsLandsec Annual Report 2020
7. Costs

Accounting policy

The carrying amounts of the Group’s non-financial assets, other than investment properties, are reviewed at each reporting date to determine whether
there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised in the
income statement whenever the carrying amount of an asset exceeds its recoverable amount. The recoverable amount of an asset is the greater of its
fair value less costs to sell and its value in use. The value in use is determined as the net present value of the future cash flows expected to be derived
from the asset, discounted using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to
the asset. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset’s carrying amount after the reversal does not exceed the amount that would have been determined, net of
applicable depreciation, if no impairment loss had been recognised.

Rents payable reflect amounts due under head leases. Where rents payable are variable and do not depend on an index or rate, the payments are
recognised in the income statement as incurred. Where these rents are fixed, or in-substance fixed, at the inception of the agreement, or become fixed
or in-substance fixed at some point over the life of the agreement, an asset representing the right to use the underlying land and a corresponding
liability for the present value of the minimum future lease payments are recognised on the Group’s balance sheet within Investment properties and
Borrowings respectively.

All costs are classified within the ‘Revenue profit’ column of the income statement, with the exception of the cost of sale of trading properties, costs
arising on long-term development contracts, amortisation and impairments of intangible assets arising on business combinations and the non-owned
element of the Group’s subsidiaries which are presented in the ‘Capital and other items’ column.

Rents payable

Service charge expense

Direct property expenditure

Provisions related to 2020/21 rent

Indirect expense

Cost of trading property disposals

Amortisation of other intangible asset

Impairment of intangible asset

Impairment of goodwill

Costs per the income statement

Revenue
profit
£m

Capital
and other
items
£m

–

269

–

Revenue
profit
£m

Capital
and other
items
£m

2020

Total
£m

–

274

249

The following table reconciles costs per the income statement to the individual components of costs presented in note 4.

Rents payable

Service charge expense

Direct property expenditure

Provisions related to 2020/21 rent

Indirect expense

Cost of trading property disposals

Long-term development contract expenditure

Amortisation of other intangible asset

Impairment of intangible asset

Impairment of goodwill

Group
£m

Joint
ventures
£m

–

2020

Total
£m

102

–

Costs in the segmental information note

274

321

Group
£m

–

271

126

2019

Total
£m

–

271

2019

Total
£m

–

356

–

Joint
ventures
£m

–

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020The Group’s costs include employee costs for the year of £59m (2019: £62m), of which £7m (2019: £7m) is within service charge expense and £52m
(2019: £55m) is within indirect expense, of which £23m relates to Group Services (2019: £24m).

Employee costs

Salaries and wages

Employer payroll taxes

Other pension costs (note 33)

Share-based payments (note 34)

The average monthly number of employees during the year was:

Indirect property or contract and administration

Direct property or contract services:

Full-time

Part-time

2020
£m

2019
£m

2020
Number

2019
Number

429

130

568

432

135

578

With the exception of the Executive Directors and two employees who are deferred members of the Defined Benefit Pension scheme, who are
employed by Land Securities Group PLC, all employees are employed by subsidiaries of the Group. The employee costs for Land Securities Group PLC
are borne by another Group company.

During the year, one (2019: one) of the Executive Directors had retirement benefits accruing under the defined contribution pension scheme.
None (2019: none) of the Executive Directors had retirement benefits accruing under the defined benefit scheme. Information on Directors’ emoluments,
share options and interests in the Company’s shares is given in the Directors’ Remuneration Report on pages 84 to 103.

Details of the employee costs associated with the Group’s key management personnel are included in note 38.

8. Auditor remuneration

Services provided by the Group’s auditor

Audit fees:

Audit of parent company and consolidated financial statements

Audit of subsidiary undertakings

Audit of joint ventures

Non-audit fees:

Other assurance services

2020
£m

2019
£m

0.5

0.3

0.1

0.9

0.2

1.1

0.4

0.3

0.1

0.8

0.1

0.9

It is the Group’s policy to employ the Group’s auditor on assignments additional to their statutory duties where their expertise and experience with
the Group are important. Where appropriate the Group seeks tenders for services. If fees for an assignment are expected to be greater than £25,000,
they are pre-approved by the Audit Committee.

127

Financial statementsLandsec Annual Report 2020
9. External valuer remuneration

Services provided by the Group’s external valuer

Year end and half-yearly valuations – Group

– Joint ventures

Other consultancy and agency services

2020
£m

0.7

0.1

0.8

1.6

2019
£m

0.7

0.1

1.7

2.5

CBRE Limited (CBRE) is the Group’s principal valuer. The fee arrangement with CBRE for the valuation of the Group’s properties is fixed, subject to an
adjustment for acquisitions and disposals. CBRE undertakes other consultancy and agency work on behalf of the Group. CBRE has confirmed to us that
the total fees paid by the Group represented less than 5% of its total revenues in the current year.

10. Net finance expense

Finance income

Interest receivable from joint ventures

Fair value movement on other derivatives

Other

Finance expense

Bond and debenture debt

Bank and other short-term borrowings

Fair value movement on interest-rate swaps

Fair value movement on other derivatives

Redemption of medium term notes

Revaluation of redemption liabilities

Other interest payable

Interest capitalised in relation to properties under development

Net finance expense

Joint venture net finance expense

Net finance expense included in revenue profit

Revenue
profit
£m

Capital
and other
items
£m

Revenue
profit
£m

Capital
and other
items
£m

2020

Total
£m

–

(80)

(22)

(9)

–

(59)

(1)

(172)

(165)

–

(9)

–

(59)

(1)

–

(69)

–

(69)

–

(81)

(22)

–

(103)

(99)

(79)

(19)

(98)

–

(80)

(22)

–

(1)

(103)

(96)

(79)

(16)

(95)

2019

Total
£m

(81)

(22)

(6)

(1)

(2)

(1)

–

(113)

(109)

–

(6)

(1)

(2)

(1)

–

(10)

–

(10)

(68)

(147)

(4)

(83)

Lease interest payable of £4m (2019: £2m) is included within rents payable as detailed in note 4.

128

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 202011. Dividends

Accounting policy

Interim dividend distributions to shareholders are recognised in the financial statements when paid. Final dividend distributions are recognised
as a liability in the period in which they are approved by shareholders.

Dividends paid

Pence per share

Year ended 31 March

For the year ended 31 March 2018:

Third interim

Final

For the year ended 31 March 2019:

First interim

Second interim

Third interim

Final

For the year ended 31 March 2020:

First interim

Second interim

Gross dividends

Dividends in the statement of changes in equity

Timing difference on payment of withholding tax

Dividends in the statement of cash flows

Payment date

PID

Non-PID

Total

6 April 2018

27 July 2018

5 October 2018

4 January 2019

12 April 2019

25 July 2019

4 October 2019

3 January 2020

9.85

14.65

11.30

11.65

11.60

–

9.85

14.65

11.30

11.65

11.60

2020
£m

342

–

342

2019
£m

108

349

(11)

338

A third interim dividend of 11.6p per ordinary share was declared on 5 February 2020 (2019: 11.30p or £84m paid in total). As announced on 2 April 2020,
in light of extreme market uncertainty due to Covid-19, the Board took the decision to cancel the third interim dividend that was due to be paid on
9 April 2020. The Board is not proposing a final dividend for the year ended 31 March 2020 (2019: 11.65p). The total dividend paid and recommended
in respect of the year ended 31 March 2020 was 23.2p per ordinary share (2019: 45.55p) resulting in a total distribution of £172m (2019: £338m).

A Dividend Reinvestment Plan (DRIP) has been available in respect of all dividends paid during the year.

12. Income tax

Accounting policy

Income tax on the profit for the year comprises current and deferred tax. Current tax is the tax payable on the taxable income for the year and any
adjustment in respect of previous years. Deferred tax is provided in full using the balance sheet liability method on temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is determined
using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the asset is realised, or the
liability is settled.

No provision is made for temporary differences (i) arising on the initial recognition of assets or liabilities, other than on a business combination, that affect
neither accounting nor taxable profit and (ii) relating to investments in subsidiaries to the extent that they will not reverse in the foreseeable future.

Significant accounting judgement

The Group is a Real Estate Investment Trust (REIT). As a result, the Group does not pay UK corporation tax on its profits and gains from the qualifying
rental business in the UK. Non-qualifying profits and gains of the Group continue to be subject to corporation tax as normal. In order to maintain
group REIT status, certain ongoing criteria must be met. The main criteria are as follows:

— at the start of each accounting period, the assets of the tax exempt business must be at least 75% of the total value of the Group’s assets;

— at least 75% of the Group’s total profits must arise from the tax exempt business; and

— at least 90% of the notional taxable profit of the property rental business must be distributed.

129

Financial statementsLandsec Annual Report 2020
12. Income tax continued

The Directors intend that the Group should continue as a REIT for the foreseeable future, with the result that deferred tax is no longer recognised on
temporary differences relating to the property rental business.

Deferred tax assets and liabilities require management judgement in determining the amounts, if any, to be recognised. In particular, judgement
is required when assessing the extent to which deferred tax assets should be recognised, taking into account the expected timing and level of future
taxable income. Deferred tax assets are only recognised when management believe they will be recovered against future taxable profits.

The income tax credit in the income statement comprises tax credits received and a payment for losses surrendered to one of the Group’s joint ventures
of £4m (2019: £nil) and a deferred tax credit of £1m (2019: £4m). There is also a deferred tax charge of £1m (2019: £nil) included within Other comprehensive
income. The current tax credit relates to land remediation relief received and payment for losses surrendered to a joint venture company.

The tax for the year is lower than the standard rate of corporation tax in the UK of 19%. The differences are explained in the table below.

Loss before tax

Loss before tax multiplied by the rate of corporation tax in the UK of 19%

Exempt property rental losses and revaluations in the year

Effects of:

Timing difference on repurchase of medium term notes

Interest rate fair value movements and other temporary differences

Non-allowable expenses and non-taxable items

Movement in unrecognised tax losses

Other tax adjustments

Total income tax credit in the income statement

The Group’s deferred tax liability is analysed as follows:

Arising on business combination

Arising on pension surplus

Total deferred tax liability

Deferred tax is calculated at the rate substantively enacted at the balance sheet date of 19%. The movement in the deferred tax liability arising
on the re-measurement gain on the defined benefit pension scheme surplus is included within Other comprehensive income in the Statement of
comprehensive income.

There are unrecognised deferred tax assets on the following items due to the high degree of uncertainty as to their future utilisation by non-REIT
qualifying activities.

Revenue losses

Capital losses

Other unrecognised temporary differences

Total unrecognised items

2020
£m

272

447

765

The other unrecognised temporary differences relate to the premium paid on the redemption of the Group’s medium term notes. For further details
see note 21.

130

2020
£m

(837)

159

(158)

–

(1)

2019
£m

(123)

(27)

(4)

(2)

(3)

–

2020
£m

2019
£m

237

445

729

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 202013. Net cash generated from operations

Reconciliation of operating loss to net cash generated from operations

Operating loss

Adjustments for:

Net deficit on revaluation of investment properties

Loss on disposal of investment properties

Share of loss from joint ventures

Share-based payment charge

Impairment of intangible asset

Impairment of goodwill

Impairment of investment in subsidiary

Rents payable

Other

Changes in working capital:

Decrease in receivables

Increase/(decrease) in payables and provisions

Net cash generated from operations

2020
£m

(690)

1,000

151

–

493

504

Group

2019
£m

(40)

2020
£m

(21)

Company

2019
£m

(30)

441

–

522

(19)

(30)

(14)

528

–

Section 3 – Properties
This section focuses on the property assets which form the core of the Group’s business. It includes details of investment properties, investments
in joint ventures and trading properties.

Our property portfolio is a combination of properties that are wholly owned by the Group, part owned through joint arrangements and properties
owned by the Group but where a third party holds a non-controlling interest. In the Group’s IFRS balance sheet, wholly owned properties are presented
as either ‘Investment properties’ or ‘Trading properties’. The Group applies equity accounting to its investments in joint ventures, which requires the
Group’s share of properties held by joint ventures to be presented within ‘Investments in joint ventures’.

Internally, management review the results of the Group on a basis that adjusts for these forms of ownership to present a proportionate share. The
Combined Portfolio, with assets totalling £12.8bn, is an example of this proportionate share, reflecting the economic interest we have in our properties
regardless of our ownership structure. We consider this presentation provides further insight to stakeholders about the activities and performance of
the Group, as it aggregates the results of all of the Group’s property interests which under IFRS are required to be presented across a number of line
items in the statutory financial statements.

The Group’s investment properties are carried at fair value and trading properties are carried at the lower of cost and net realisable value. Both of
these values are determined by the Group’s external valuers. The combined value of the Group’s total investment property portfolio (including the
Group’s share of investment properties held through joint ventures) is shown as a reconciliation in note 14.

Accounting policy

Investment properties
Investment properties are properties, either owned or leased by the Group, that are held either to earn rental income or for capital appreciation, or both.
Investment properties are measured initially at cost including related transaction costs, and subsequently at fair value. Fair value is based on market
value, as determined by a professional external valuer at each reporting date. The difference between the fair value of an investment property at the
reporting date and its carrying amount prior to re-measurement is included in the income statement as a valuation surplus or deficit. Investment
properties are presented on the balance sheet within non-current assets.

Some of the Group’s investment properties are owned through long-leasehold arrangements, as opposed to the Group owning the freehold. Where
the Group is a lessee, a right-of-use asset is recognised at the commencement date of the lease and accounted for as investment property. Initially,
the cost of investment properties held under leases includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments
made at or before the commencement date less any lease incentives received. The investment properties held under leases are subsequently carried
at their fair value. A corresponding liability is recorded within Borrowings. Each lease payment is allocated between repayment of the liability and
a finance charge to achieve a constant interest rate on the outstanding liability.

131

Financial statementsLandsec Annual Report 2020
Trading properties
Trading properties are those properties held for sale, or those being developed with a view to sell. Trading properties are recorded at the lower of cost
and net realisable value. The net realisable value of a trading property is determined by a professional external valuer at each reporting date. If the net
realisable value of a trading property is lower than its carrying value, an impairment loss is recorded in the income statement. If, in subsequent periods,
the net realisable value of a trading property that was previously impaired increases above its carrying value, the impairment is reversed to align the
carrying value of the property with the net realisable value. Trading properties are presented on the balance sheet within current assets.

Acquisition of properties
Properties are treated as acquired when the Group assumes control of the property.

Capital expenditure and capitalisation of borrowing costs
Capital expenditure on properties consists of costs of a capital nature, including costs associated with developments and refurbishments. Where
a property is being developed or undergoing major refurbishment, interest costs associated with direct expenditure on the property are capitalised.
The interest capitalised is calculated using the Group’s weighted average cost of borrowings. Interest is capitalised from the commencement of the
development work until the date of practical completion. Certain internal staff and associated costs directly attributable to the management of
major schemes are also capitalised. The total staff and associated costs are capitalised based on the proportion of time spent on the relevant scheme.
Internal staff costs are capitalised from the date the Group determines it is probable that the development will progress until the date of practical
completion.

Transfers between investment properties and trading properties
When the Group begins to redevelop an existing investment property for continued future use as an investment property, the property continues to be
held as an investment property. When the Group begins to redevelop an existing investment property with a view to sell, the property is transferred to
trading properties and held as a current asset. The property is re-measured to fair value as at the date of the transfer with any gain or loss being taken
to the income statement. The re-measured amount becomes the deemed cost at which the property is then carried in trading properties.

Disposal of properties
Properties are treated as disposed when control of the property is transferred to the buyer. Typically, this will either occur on unconditional exchange
or on completion. Where completion is expected to occur significantly after exchange, or where the Group continues to have significant outstanding
obligations after exchange, the control will not usually transfer to the buyer until completion.

The profit on disposal is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning of the
accounting period plus capital expenditure to the date of disposal. The profit on disposal of investment properties is presented separately on the face
of the income statement. Proceeds received on the sale of trading properties are recognised within Revenue, and the carrying value at the date of
disposal is recognised within Costs.

Significant accounting judgement

Acquisition and disposal of properties
Property transactions can be complex in nature and material to the financial statements. To determine when an acquisition or disposal should be
recognised, management consider whether the Group assumes or relinquishes control of the property, and the point at which this is obtained or
relinquished. Consideration is given to the terms of the acquisition or disposal contracts and any conditions that must be satisfied before the contract
is fulfilled. In the case of an acquisition, management must also consider whether the transaction represents an asset acquisition or business
combination.

Significant accounting estimates

Valuation of the Group’s properties
The valuation of the Group’s property portfolio is inherently subjective due to, among other factors, the individual nature of each property, its location
and the expected future rental revenues from that particular property. As a result, the valuations the Group places on its property portfolio are subject
to a degree of uncertainty and are made on the basis of assumptions which may not prove to be accurate, particularly in periods of volatility or low
transaction flow in the property market.

The investment property valuation contains a number of assumptions upon which the Group’s valuer has based its valuation of the Group’s properties.
The assumptions on which the property valuation reports have been based include, but are not limited to, matters such as the tenure and tenancy
details for the properties, ground conditions at the properties, the structural condition of the properties, prevailing market yields and comparable
market transactions. These assumptions are market standard and accord with the Royal Institution of Chartered Surveyors (RICS) Valuation –
Professional Standards UK 2014 (revised April 2015).

The estimation of the net realisable value of the Group’s trading properties, in particular the development land and infrastructure programmes,
is inherently subjective due to a number of factors, including their complexity, unusually large size, the substantial expenditure required and long
timescales to completion. In addition, as a result of these timescales to completion, the plans associated with these programmes could be subject
to significant variation. As a result, and similar to the valuation of investment properties, the net realisable values of the Group’s trading properties
are subject to a degree of uncertainty and are determined on the basis of assumptions which may not prove to be accurate.

132

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020If the assumptions upon which the external valuer has based its valuations prove to be inaccurate, this may have an impact on the value of the
Group’s investment and trading properties, which could in turn have an effect on the Group’s financial position and results.

The valuer’s report for the year ended 31 March 2020 contained a ‘material uncertainty’ clause due to the disruption to the market at that date caused
by Covid-19. The inclusion of this clause indicates that there is substantially more uncertainty than normal and therefore a higher likelihood that the
assumptions upon which the external valuer has based its valuations prove to be inaccurate. As a result of this increased uncertainty, sensitivities for
more extensive changes in assumptions have been disclosed in the tables on page 134.

14. Investment properties

Net book value at the beginning of the year

Acquisitions

Capital expenditure

Capitalised interest

Net movement in head leases capitalised1

Disposals

Net deficit on revaluation of investment properties

Net book value at the end of the year

2020
£m

2019
£m

12,094

12,336

199

136

–

(49)

(1,000)

11,297

(36)

(441)

12,094

1. See note 21 for details of the amounts payable under head leases and note 10 for details of the associated rents payable in the income statement.

The market value of the Group’s investment properties, as determined by the Group’s external valuer, differs from the net book value presented in the
balance sheet due to the Group presenting tenant finance leases, capitalised head leases and lease incentives separately. The following table reconciles
the net book value of the investment properties to the market value.

Market value

Less: properties treated as finance leases

Plus: head leases capitalised

Less: tenant lease incentives

Net book value

Group
(excl. joint
ventures)
£m

11,802

(249)

(316)

11,297

Joint
ventures1
£m

979

–

(42)

946

Net deficit on revaluation of
investment properties

(1,000)

(181)

Adjustment
for
proportionate
share2
£m

–

2020

Combined
Portfolio
£m

12,781

(249)

(358)

Group
(excl. joint
ventures)
£m

12,637

(239)

(334)

12,243

12,094

Adjustment
for
proportionate
share2
£m

2019

Combined
Portfolio
£m

(36)

13,750

–

(238)

(373)

(34)

13,177

Joint
ventures1
£m

1,149

–

(40)

1,117

(1,179)

(441)

(117)

(557)

1. Refer to note 16 for a breakdown of this amount by entity.
2. This represents the interest in X-Leisure which we did not own, but which is consolidated in the Group numbers. In December 2019, the Group settled the redemption liability which

represented this interest resulting in 100% ownership.

The net book value of leasehold properties where head leases have been capitalised is £2,561m (2019: £2,110m).

Investment properties include capitalised interest of £221m (2019: £214m). The average rate of interest capitalisation for the year is 2.6% (2019: 3.5%).
The historical cost of investment properties is £7,463m (2019: £7,277m).

Valuation process
The fair value of investment properties at 31 March 2020 was determined by the Group’s external valuer, CBRE. The valuations are in accordance with
RICS standards and were arrived at by reference to market evidence of transactions for similar properties. The valuations performed by the valuer are
reviewed internally by Senior Management and other relevant people within the business. This process includes discussions of the assumptions used
by the valuer, as well as a review of the resulting valuations. Discussions of the valuation process and results are held between Senior Management,
the Audit Committee and the valuer on a half-yearly basis.

The valuer’s opinion of fair value was primarily derived using comparable recent market transactions on arm’s length terms and using appropriate
valuation techniques. The fair value of investment properties is determined using the income capitalisation approach. Under this approach, forecast
net cash flows, based upon current market derived estimated rental values (market rents) together with estimated costs, are discounted at market
derived capitalisation rates to produce the valuer’s opinion of fair value. The average discount rate, which, if applied to all cash flows would produce
the fair value, is described as the equivalent yield.

133

Financial statementsLandsec Annual Report 2020
14. Investment properties continued

Properties in the development programme are typically valued using a residual valuation method. Under this methodology, the valuer assesses the
completed development value using income and yield assumptions. Deductions are then made for estimated costs to complete, including finance and
developer’s profit, to arrive at the valuation. Costs include future estimated costs associated with refurbishment or development (excluding finance
costs), together with an estimate of cash incentives to be paid to tenants. As the development approaches completion, the valuer may consider the
income capitalisation approach to be more appropriate.

The Group considers all of its investment properties to fall within ‘Level 3’, as defined by IFRS 13 and as explained in note 25(iii). Accordingly, there have
been no transfers of properties within the fair value hierarchy in the financial year.

The table below summarises the key unobservable inputs used in the valuation of the Group’s wholly owned investment properties at 31 March 2020:

Office

West End

City

Mid-town

Southwark and other

Total Office (excluding developments)

Retail

London retail

Regional retail

Outlets

Retail parks

Market
value
£m

2,794

1,247

1,423

431

5,895

1,206

1,286

871

444

Total Retail (excluding developments)

3,807

Specialist

Leisure and hotels

Other2

1,137

417

Total Specialist (excluding developments)

1,554

Developments: residual method

Development programme

546

Market value at 31 March 2020 – Group

11,802

Estimated rental value
£ per sq ft

Equivalent yield
%

2020

Costs
£ per sq ft

Low

Average

High

Low

Average

High

Low

Average1

High

n/a

–

n/a

123

n/a

124

4.0%

4.3%

4.5%

4.0%

3.4%

5.3%

5.4%

5.1%

3.4%

3.8%

n/a

3.8%

4.0%

4.6%

4.5%

4.9%

4.6%

4.5%

6.2%

5.9%

7.4%

5.7%

5.9%

n/a

5.9%

4.4%

5.0%

5.9%

6.2%

8.5%

7.5%

7.3%

8.6%

10.0%

7.8%

n/a

7.8%

4.5%

–

n/a

–

n/a

–

378

456

300

–

300

–

n/a

–

1. The calculation for average costs excludes those properties which are assumed by the Group’s external valuer to be substantially refurbished or redeveloped, but which do not yet form

part of the development programme.

2. The ‘Other’ category contains a range of low value properties of a diverse nature. As a result, it is not meaningful to present assumptions used in valuing these properties.

The sensitivities illustrate the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s properties:

Sensitivities

Total Office (excluding developments)

Total Retail (excluding developments)

Total Specialist (excluding developments)

Developments: residual method

Market value at 31 March 2020 – Group

134

2020

Impact on valuations
of 10% change in
estimated rental value

Impact on valuations
of 50 bps change
in equivalent yield

Impact on valuations
of 10% change
in costs

Increase
£m

Decrease
£m

Increase
£m

Decrease
£m

Increase
£m

435

293

125

908

(416)

(275)

(116)

(55)

801

395

161

133

(633)

(327)

(131)

(106)

(862)

1,490

(1,197)

(30)

(3)

(4)

(40)

(77)

Market
value
£m

5,895

3,807

1,554

546

11,802

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020The table below summarises the key unobservable inputs used in the valuation of the Group’s wholly owned investment properties at 31 March 2019:

Office

West End

City

Mid-town

Southwark and other

Total Office (excluding developments)

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail (excluding developments)

Specialist

Leisure and hotels

Other3

Market
value
£m

2,838

1,221

1,400

446

5,905

1,423

1,780

971

636

4,810

1,267

385

Total Specialist (excluding developments)

1,652

Developments: residual method

Development programme

270

Market value at 31 March 2019 – Group

12,637

Estimated rental value
£ per sq ft

Equivalent yield
%

20191

Costs
£ per sq ft

Low

Average

High

Low

Average

High

Low

Average2

High

n/a

179

n/a

4.0%

4.2%

4.3%

1.8%

3.1%

4.5%

4.7%

4.8%

3.1%

3.8%

n/a

3.8%

4.4%

4.5%

4.9%

4.5%

4.2%

5.1%

5.4%

6.2%

5.0%

5.5%

n/a

5.5%

4.4%

4.9%

5.8%

4.6%

8.2%

7.3%

6.3%

7.1%

9.0%

8.9%

n/a

8.9%

4.4%

–

n/a

–

n/a

–

937

610

937

n/a

–

1. Restated as a result of changes in segmental reporting. See note 4 for details.
2. The calculation for average costs excludes those properties which are assumed by the Group’s external valuer to be substantially refurbished or redeveloped, but which do not yet form

part of the development programme.

3. The ‘Other’ category contains a range of low value properties of a diverse nature. As a result, it is not meaningful to present assumptions used in valuing these properties.

The sensitivities illustrate the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s properties:

Sensitivities

Total Office (excluding developments)

Total Retail (excluding developments)

Total Specialist (excluding developments)

Developments: residual method

Market value at 31 March 2019 – Group

1. Restated as a result of changes in segmental reporting. See note 4 for details.

20191

Impact on valuations
of 5% change in
estimated rental value

Impact on valuations
of 25 bps change
in equivalent yield

Impact on valuations
of 5% change
in costs

Increase
£m

Decrease
£m

Increase
£m

Decrease
£m

Increase
£m

208

207

494

(206)

(198)

(66)

(11)

347

273

(308)

(241)

(77)

(34)

(481)

742

(660)

(19)

(3)

(2)

(12)

(36)

Market
value
£m

5,905

4,810

1,652

270

12,637

135

Financial statementsLandsec Annual Report 2020
15. Trading properties

At 1 April 2018

Acquisitions

Capital expenditure

Disposals

31 March 2019

Capital expenditure

At 31 March 2020

Development
land and
infrastructure
£m

Residential
£m

–

(7)

–

Total
£m

(7)

There were no cumulative impairment provisions in respect of either Development land and infrastructure or Residential at 31 March 2020 and
31 March 2019.

16. Joint arrangements

Accounting policy

Joint arrangements are those entities over whose activities the Group has joint control, established by contractual agreement. Interests in joint
arrangements are accounted for as either a joint venture or a joint operation. The treatment as either a joint venture or a joint operation will depend
on whether the Group has rights to the net assets, or a direct interest in the assets and liabilities of the arrangement.

A joint arrangement is accounted for as a joint venture when the Group, along with the other parties that have joint control of the arrangement, has
rights to the net assets of the arrangement. Interests in joint ventures are accounted for using the equity method of accounting. The equity method
requires the Group’s share of the joint venture’s post-tax profit or loss for the year to be presented separately in the income statement and the Group’s
share of the joint venture’s net assets to be presented separately in the balance sheet.

A joint arrangement is accounted for as a joint operation when the Group, along with the parties that have joint control of the arrangement, has rights
to the assets and obligations for the liabilities relating to the arrangement. The Group’s share of jointly controlled assets, related liabilities, income and
expenses are combined with the equivalent items in the financial statements on a line-by-line basis.

136

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020The Group’s principal joint arrangements are described below:

Joint ventures

Held at 31 March 2020

Nova, Victoria2

Southside Limited Partnership

St. David’s Limited Partnership

Westgate Oxford Alliance Limited Partnership

Harvest3, 4

The Ebbsfleet Limited Partnership3, 5

West India Quay Unit Trust3, 6

Joint operation

Held at 31 March 2020

Bluewater, Kent

Percentage owned
and voting rights

Business segment

Year end date1

Joint venture partner

50%

Office, Retail, Specialist 31 March

Canada Pension Plan Investment Board

Retail

Specialist

31 March

Invesco Real Estate European Fund

31 December

Intu Properties plc

31 March

The Crown Estate Commissioners

J Sainsbury plc

Ebbsfleet Property Limited

Schroder Exempt Property Unit Trust

Ownership interest

Business segment

Year end date1

Joint operation partners

30%

Retail

31 March

M&G Real Estate and GIC
Lendlease Retail LP
Royal London Asset Management
Aberdeen Standard Investments

1. The year end date shown is the accounting reference date of the joint arrangement. In all cases, the Group’s accounting is performed using financial information for the Group’s own

reporting year and reporting date.

2. Nova, Victoria includes the Victoria Circle Limited Partnership, Nova Residential Limited Partnership, Victoria Circle Developer Limited, Victoria Circle GP Limited, LS Victoria Circle GP

Investments Limited, LS Victoria Circle Development Management Limited, Victoria Circle Business Manager Limited, Nova Residential (GP) Limited and Nova Developer Limited.

3. Included within Other in subsequent tables.
4. Harvest includes Harvest 2 Limited Partnership, Harvest Development Management Limited, Harvest 2 Selly Oak Limited, Harvest 2 GP Limited and Harvest GP Limited.
5. On 15 October 2019, The Ebbsfleet Limited Partnership disposed of its interest in development land for £17m.
6. West India Quay Unit Trust is held in the X-Leisure Unit Trust (X-Leisure). Until 5 December 2019 the Group held a 95% share in X-Leisure, but settled the redemption liability on that date.

The Group owned 100% of X-Leisure at 31 March 2020.

All of the Group’s joint arrangements have their principal place of business in the United Kingdom. All of the Group’s joint arrangements own and
operate investment property, with the exception of The Ebbsfleet Limited Partnership which held development land as a trading property and Harvest
which is engaged in long-term development contracts. Nova, Victoria is also engaged in the development of investment properties. The activities of
all the Group’s joint arrangements are therefore strategically important to the business activities of the Group.

All joint ventures are registered in England and Wales with the exception of Southside Limited Partnership and West India Quay Unit Trust which are
registered in Jersey.

137

Financial statementsLandsec Annual Report 2020
16. Joint arrangements continued

Joint ventures

Comprehensive income statement

Revenue1

Gross rental income (after rents payable)

Net rental income

Revenue profit before interest

Finance expense

Net finance expense

Revenue profit

Capital and other items

Nova,
Victoria
100%
£m

Southside
Limited
Partnership
100%
£m

St. David’s
Limited
Partnership
100%
£m

Westgate
Oxford
Alliance
Partnership
100%
£m

(27)

(6)

–

Net deficit on revaluation of investment properties

(12)

(72)

(139)

(135)

Movement in impairment of trading properties

Profit on disposal of trading properties

Profit on long-term development contracts

(Loss)/profit before tax

Taxation

Post-tax (loss)/profit

Total comprehensive (loss)/income

–

(9)

–

(9)

–

(71)

–

(71)

–

(118)

(117)

–

(118)

–

(117)

Other
100%
£m

–

(3)

–

(3)

Group share of (loss)/profit before tax

Group share of post-tax (loss)/profit

Group share of total comprehensive (loss)/income

50%

(5)

(35)

(59)

Year ended 31 March 2020

Total
100%
£m

189

113

(33)

Total
Group
share
£m

(16)

(361)

(181)

(298)

(3)

(301)

50%

(149)

(151)

–

(149)

(2)

(151)

(149)

(151)

1. Revenue includes gross rental income (before rents payable), service charge income, other property related income, trading properties disposal proceeds and income from long-term

development contracts.

138

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Joint ventures

Year ended 31 March 2019

Comprehensive income statement

Revenue1

Gross rental income (after rents payable)

Net rental income

Revenue profit before interest

Finance expense

Net finance expense

Revenue (loss)/profit

Capital and other items

Net deficit on revaluation of investment properties

Movement in impairment of trading properties

Loss on disposal of investment properties

Fair value movement prior to acquisition of non-owned element
of a joint venture

(Loss)/profit on disposal of trading properties

Profit on long-term development contracts

(Loss)/profit before tax

Post-tax (loss)/profit

Total comprehensive (loss)/income

Group share of (loss)/profit before tax

Group share of post-tax (loss)/profit

Group share of total comprehensive (loss)/income

Nova,
Victoria
100%
£m

Southside
Limited
Partnership
100%
£m

St. David’s
Limited
Partnership
100%
£m

Westgate
Oxford
Alliance
Partnership
100%
£m

(33)

(8)

(25)

(1)

–

(3)

–

(37)

50%

(19)

(6)

–

(32)

(101)

(74)

–

(28)

50%

(14)

–

(75)

50%

(38)

–

(54)

50%

(27)

Other
100%
£m

–

(1)

–

(4)

50%

Total
100%
£m

258

109

(39)

Total
Group
share
£m

129

(19)

(233)

(117)

(1)

(4)

(169)

50%

(85)

1. Revenue includes gross rental income (before rents payable), service charge income, other property related income, trading properties disposal proceeds and income from long-term

development contracts.

–

(2)

–

(85)

139

Financial statementsLandsec Annual Report 2020
16. Joint arrangements continued

Joint ventures

Balance sheet

Investment properties1

Non-current assets

Cash and cash equivalents

Other current assets

Current assets

Total assets

Trade and other payables and provisions

Current liabilities

Non-current liabilities

Total liabilities

Net assets

Market value of investment properties1

Net cash/(debt)

Balance sheet

Investment properties1

Non-current assets

Cash and cash equivalents

Other current assets

Current assets

Total assets

Trade and other payables and provisions

Current liabilities

Non-current liabilities

Total liabilities

Net assets

Market value of investment properties1

Net cash/(debt)

Nova,
Victoria
100%
£m

Southside
Limited
Partnership
100%
£m

St. David’s
Limited
Partnership
100%
£m

Westgate
Oxford
Alliance
Partnership
100%
£m

Other
100%
£m

2020

Total
Group
share
£m

946

Total
100%
£m

1,891

110

157

2,048

1,024

(62)

(339)

(401)

1,647

1,958

2,234

272

304

(31)

(169)

(200)

824

979

2019

1,117

136

152

2,538

1,269

(141)

(336)

(477)

(70)

(168)

(238)

358

387

(12)

–

(12)

375

372

495

530

(13)

–

(1)

–

(1)

161

165

236

(85)

–

(13)

(85)

517

511

151

2,061

1,031

2,298

1,149

849

941

(33)

(179)

(212)

729

908

843

921

(26)

(178)

(204)

717

893

192

197

(4)

(144)

(148)

425

450

(12)

(16)

(28)

422

193

263

271

(6)

(142)

(148)

123

265

417

(4)

562

580

(11)

(16)

(27)

553

557

(13)

1. The difference between the book value and the market value of investment properties is the amount recognised in respect of lease incentives, head leases capitalised, and properties treated

as finance leases, where applicable.

140

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Joint ventures

Net investment

At 1 April 2018

Total comprehensive (loss)/income

Cash contributed

Cash distributions

Disposal of investment

At 31 March 2019

Total comprehensive (loss)/income

Cash contributed

Cash distributions

At 31 March 2020

17. Capital commitments

Contracted capital commitments at the end of the year in respect of:

Investment properties

Joint ventures (our share)

Total capital commitments

Nova,
Victoria
50%
£m

Southside
Limited
Partnership
50%
£m

St. David’s
Limited
Partnership
50%
£m

Westgate
Oxford
Alliance
Partnership
50%
£m

393

(19)

(28)

–

359

(5)

(2)

365

(14)

–

(3)

–

(35)

–

(1)

328

(38)

–

(13)

–

277

(59)

–

(7)

211

282

(27)

(11)

–

258

(59)

–

(12)

187

Other
50%
£m

(7)

(2)

–

(47)

2020
£m

323

334

Total
Group
share
£m

1,151

(85)

(62)

(2)

1,031

(151)

(69)

824

2019
£m

Capital commitments include contractually committed obligations to purchase goods or services used in the construction, development, repair,
maintenance or other enhancement of the Group’s properties.

141

Financial statementsLandsec Annual Report 2020
18. Net investment in finance leases

Accounting policy

Where the Group’s leases transfer the significant risks and rewards incidental to ownership of the underlying asset to the tenant, the lease is accounted
for as a finance lease. At the outset of the lease the fair value of the asset is de-recognised from investment property and recognised as a finance lease
receivable. Lease income is recognised over the period of the lease, reflecting a constant rate of return. The difference between the gross receivable and
the present value of the receivable is recognised as finance income within Revenue over the lease term.

Non-current

Finance leases – gross receivables

Unearned finance income

Unguaranteed residual value

Current

Finance leases – gross receivables

Unearned finance income

Net investment in finance leases

Gross receivables from finance leases due:

No later than one year

Later than one year but not more than five years

More than five years

Unearned finance income

Unguaranteed residual value

Net investment in finance leases

2020
£m

237

(115)

156

(9)

159

185

249

(124)

159

2019
£m

250

(125)

159

(9)

162

199

262

(134)

162

The Group has leased out a number of investment properties under finance leases, which range from 30 to 99 years in duration from the inception
of the lease.

142

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 202019. Intangible assets

Accounting policy

Intangible assets comprise goodwill and other intangible assets arising on business combinations and software used internally within the business.
Intangible assets arising on business combinations are initially recognised at fair value. Goodwill is not amortised but is tested at least annually for
impairment. Other intangible assets arising on business combinations are amortised to the income statement over their expected useful lives.
Software assets are stated at cost less accumulated amortisation and are amortised on a straight-line basis over their estimated useful economic
lives, normally three to five years.

At 1 April 2018

Capital expenditure

Amortisation

Impairment

At 31 March 2019

Capital expenditure

Amortisation

Impairment

At 31 March 2020

Goodwill
£m

Software
£m

Other
intangible
asset
£m

–

(2)

–

(1)

(3)

–

(3)

–

(1)

(12)

–

(4)

Total
£m

(4)

(14)

(3)

(5)

The other intangible asset relates to the Group’s acquisition of its interest in Bluewater, Kent in 2014 and represents the estimated fair value of the
management rights for the centre. The fair value at the date of acquisition was £30m and the asset is being amortised over a period of 20 years. On
recognition of the intangible asset, the Group recognised a deferred tax liability of £6m, and corresponding goodwill of the same amount. The deferred
tax liability is being released to the income statement as the intangible asset is amortised or impaired, and the corresponding element of the goodwill
is being tested for impairment.

In the year ended 31 March 2020, the intangible asset has been impaired by £4m (2019: £12m) as a result of a decline in the management fees
expected to be earned by the Group for managing the asset following a decline in its valuation. As a result of this impairment, £1m (2019: £2m)
of the deferred tax liability has also been released in the year and the corresponding goodwill has therefore also been impaired by £1m (2019: £2m).
The recoverable amount of the intangible asset has been based on its value in use, using a discount rate of 4.0%.

143

Financial statementsLandsec Annual Report 2020
Section 4 – Capital structure and financing
This section focuses on the Group’s financing structure, including borrowings and financial risk management.

The total capital of the Group consists of shareholders’ equity and net debt. The Group’s strategy is to maintain an appropriate net debt to total
equity ratio (gearing) and loan-to-value ratio (LTV) to ensure that asset level performance is translated into enhanced returns for shareholders
whilst maintaining an appropriate risk reward balance to accommodate changing financial and operating market cycles. The table in note 20 details
a number of the Group’s key metrics in relation to managing its capital structure.

A key element of the Group’s capital structure is that the majority of our borrowings are secured against a large pool of our assets (the Security Group).
This enables us to raise long-term debt in the bond market, as well as shorter-term flexible bank facilities, both at competitive rates. In general, we follow
a secured debt strategy as we believe this gives the Group better access to borrowings at a lower cost.

In addition, the Group holds a number of assets outside the Security Group structure (in the Non-restricted Group). By having both the Security Group
and the Non-restricted Group, and considerable flexibility to move assets between the two, we are able to raise the most appropriate finance for each
specific asset or joint venture.

20. Capital structure

Property portfolio

Market value of investment properties

Trading properties and long-term contracts

Total property portfolio (a)

Net debt

Borrowings

Monies held in restricted accounts and deposits

Cash and cash equivalents

Fair value of interest-rate swaps

Fair value of foreign exchange swaps and forwards

Net debt (b)

Less: Fair value of interest-rate swaps

Adjusted net debt (c)

Adjusted total equity

Total equity (d)

Fair value of interest-rate swaps

Adjusted total equity (e)

Gearing (b/d)

Adjusted gearing (c/e)

Group LTV (c/a)

Security Group LTV

Weighted average cost of debt

Group
£m

11,802

11,826

5,332

(9)

(1,345)

(37)

3,942

(1)

3,941

8,750

8,751

45.1%

45.0%

33.3%

32.5%

1.8%

Adjustment
for
non-wholly
owned
subsidiaries1
£m

Joint
ventures
£m

979

982

–

(23)

–

(15)

–

(15)

–

2020

Combined
£m

Group
£m

12,781

12,637

12,808

12,660

Adjustment
for
non-wholly
owned
subsidiaries1
£m

2019

Combined
£m

(36)

13,750

–

(36)

13,791

Joint
ventures
£m

1,149

1,167

(2)

(16)

–

(10)

–

(10)

–

5,340

3,781

(9)

(1,368)

(37)

(36)

(14)

–

3,927

3,747

(1)

–

3,926

3,747

8,750

9,920

–

8,751

9,920

44.9%

30.7%

1.8%

37.8%

29.6%

28.6%

2.7%

–

3,789

(38)

(30)

–

3,737

–

3,737

9,920

–

9,920

37.7%

27.1%

2.7%

1. This represents the interest in X-Leisure which we did not own, but which is consolidated in the Group numbers. In December 2019, the Group settled the redemption liability which

represented this interest resulting in 100% ownership.

144

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 202021. Borrowings

Accounting policy

Borrowings, other than bank overdrafts, are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition,
borrowings are stated at amortised cost with any difference between the amount initially recognised and the redemption value being recognised in
the income statement over the period of the borrowings, using the effective interest method.

When debt refinancing exercises are carried out, existing liabilities will be treated as being extinguished when the new liability is substantially different
from the existing liability. In making this assessment, the Group will consider the transaction as a whole, taking into account both qualitative and
quantitative characteristics.

Secured/
unsecured

Fixed/
floating

Effective
interest rate
%

Nominal/
notional
value
£m

Fair
value
£m

2020

Book
value
£m

Nominal/
notional
value
£m

Unsecured

Floating

LIBOR + margin

Unsecured

Floating

LIBOR + margin

Unsecured

Floating

LIBOR + margin

Secured

Fixed

5.5

5.0

2.0

5.4

2.5

2.4

5.4

5.1

2.6

2.7

796

177

977

–

400

350

300

500

796

177

977

–

406

113

366

314

111

521

542

796

177

977

–

399

347

299

494

495

–

729

205

934

400

186

350

300

156

500

2019

Book
value
£m

–

729

205

934

399

186

347

299

156

493

494

Fair
value
£m

–

729

205

934

405

224

362

310

209

508

515

2,368

2,559

2,350

2,611

2,799

2,592

Secured

Floating

LIBOR + margin

1,944

Unsecured

Fixed

4.6

126

225

4,373

4,629

4,355

2,866

3,086

2,847

Current borrowings

Commercial paper

Sterling

Euro

US Dollar

Total current borrowings

Non-current borrowings

Medium term notes (MTN)

A3 5.425% MTN due 2022

A10 4.875% MTN due 2025

A12 1.974% MTN due 2026

A4 5.391% MTN due 2026

A5 5.391% MTN due 2027

A6 5.376% MTN due 2029

A16 2.375% MTN due 2029

A13 2.399% MTN due 2031

A7 5.396% MTN due 2032

A11 5.125% MTN due 2036

A14 2.625% MTN due 2039

A15 2.750% MTN due 2059

Syndicated and bilateral
bank debt

Amounts payable under
head leases

Total non-current borrowings

Total borrowings

5,350

5,606

5,332

3,800

4,020

3,781

145

Financial statementsLandsec Annual Report 2020
21. Borrowings continued

Reconciliation of the movement in borrowings

At the beginning of the year

Proceeds from new borrowings

Repayment of MTNs

Redemption of MTNs

Foreign exchange movement on non-Sterling borrowings

Other

At 31 March

Reconciliation of movements in liabilities arising from financing activities

Borrowings

Derivative financial instruments

Borrowings

Derivative financial instruments

2020
£m

3,781

1,701

(47)

(196)

2019
£m

3,730

–

(8)

(25)

–

5,332

3,781

At the
beginning
of the year
£m

3,781

3,797

At the
beginning
of the year
£m

3,730

3,731

Cash flows
£m

1,458

1,459

Non-cash changes

2020

Foreign
exchange
movements
£m

Other
changes in
fair values
£m

Other
changes
£m

At the end
of the year
£m

(60)

–

Non-cash changes

5,332

(36)

5,296

2019

Cash flows
£m

(15)

Foreign
exchange
movements
£m

Other
changes in
fair values
£m

(25)

–

Other
changes
£m

At the end
of the year
£m

–

3,781

3,797

Medium term notes
The MTNs are secured on the fixed and floating pool of assets of the Security Group (see note 25). The Security Group includes investment properties,
development properties, the X-Leisure fund, and the Group’s investment in Westgate Oxford Alliance Limited Partnership, Nova, Victoria, St. David’s
Limited Partnership and Southside Limited Partnership, in total valued at £12.1bn at 31 March 2020 (31 March 2019: £13.2bn). The secured debt structure
has a tiered operating covenant regime which gives the Group substantial flexibility when the loan-to-value and interest cover in the Security are less
than 65% and more than 1.45x respectively. If these limits are exceeded, the operating environment becomes more restrictive with provisions to
encourage a reduction in gearing. The interest rate of each MTN is fixed until the expected maturity, being two years before the legal maturity date of
the MTN. The interest rate for the last two years may either become floating on a LIBOR basis plus an increased margin (relative to that at the time of
issue), or subject to a fixed coupon uplift, depending on the terms and conditions of the specific notes.

The effective interest rate is based on the coupon paid and includes the amortisation of issue costs. The MTNs are listed on the Irish Stock Exchange
and their fair values are based on their respective market prices.

During the year, the Group purchased £196m (2019: £8m) of MTNs for a total premium of £59m (2019: £2m). Details of the purchases and associated
premium by series are as follows:

MTN purchases

A10 4.875% MTN due 2025

A4 5.391% MTN due 2026

A5 5.391% MTN due 2027

A6 5.376% MTN due 2029

A7 5.396% MTN due 2032

A11 5.125% MTN due 2036

146

Purchases
£m

2020

Premium
£m

Purchases
£m

2019

Premium
£m

196

–

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Syndicated and bilateral bank debt

Syndicated debt

Bilateral debt

Maturity as
at 31 March
2020

2024-25

2023-24

2020
£m

2,490

225

2,715

Authorised

2019
£m

2,490

225

2,715

2020
£m

1,797

147

1,944

Drawn

2019
£m

100

125

225

2020
£m

693

771

Undrawn

2019
£m

2,390

100

2,490

At 31 March 2020, the Group’s committed revolving facilities totalled £2,715m (31 March 2019: £2,715m).

All syndicated and bilateral facilities are committed and secured on the assets of the Security Group. During the year ended 31 March 2020, the amounts
drawn under the Group’s facilities increased by £1,719m.

The terms of the Security Group funding arrangements require undrawn facilities to be reserved where syndicated and bilateral facilities mature within
one year, or when commercial paper is issued. The total amount of cash and available facilities at 31 March 2020 were £1,139m (2019: £1,570m).

22. Monies held in restricted accounts and deposits

Accounting policy

Monies held in restricted accounts and deposits represent cash held by the Group in accounts with conditions that restrict the use of these monies
by the Group and, as such, does not meet the definition of cash and cash equivalents. Restrictions include funds held by the Group’s captive insurer
and the Employee Benefit Trust. Holding cash in restricted accounts does not prevent the Group from optimising returns by putting these monies on
short-term deposit.

Cash at bank and in hand

Short-term deposits

2020
£m

Group

2019
£m

2020
£m

–

Company

2019
£m

–

The credit quality of monies held in restricted accounts and deposits can be assessed by reference to external credit ratings of the counterparty where
the account or deposit is placed.

Counterparties with external credit ratings

A+

BBB+

2020
£m

Group

2019
£m

–

2020
£m

Company

2019
£m

–

147

Financial statementsLandsec Annual Report 2020
23. Cash and cash equivalents

Accounting policy

Cash and cash equivalents comprise cash balances, deposits held at call with banks and other short-term highly liquid investments with original
maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are
deducted from cash and cash equivalents for the purpose of the statement of cash flows.

Cash at bank and in hand

2020
£m

1,345

Group

2019
£m

2020
£m

–

Company

2019
£m

–

As a result of the uncertainty created by Covid-19, the Group drew down on its facilities in March 2020 in order to cover the short-term commercial
paper in issue at 31 March 2020 and to provide additional liquid funds.

The credit quality of cash and cash equivalents can be assessed by reference to external credit ratings of the counterparty where the account or
deposit is placed.

Counterparties with external credit ratings

A+

2020
£m

1,345

2019
£m

The Group’s cash and cash equivalents and bank overdrafts are subject to cash pooling arrangements. The following table provides details of cash
balances and bank overdrafts which are subject to offsetting agreements.

2020

Net
amounts
recognised
in the
balance
sheet
£m

Gross
amounts
of
financial
liabilities
£m

Gross
amounts
of
financial
assets
£m

Gross
amounts
of
financial
liabilities
£m

2019

Net
amounts
recognised
in the
balance
sheet
£m

(18)

1,345

(49)

Gross
amounts
of
financial
assets
£m

1,363

Assets

Cash and cash equivalents

24. Derivative financial instruments

Accounting policy

The Group uses interest-rate and foreign exchange swaps and forwards to manage its market risk. In accordance with its treasury policy, the Group
does not hold or issue derivatives for trading purposes.

All derivatives are recognised on the balance sheet at fair value. The fair value of interest-rate and foreign exchange swaps is based on counterparty
or market quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each
contract and using market rates for similar instruments at the measurement date. The gain or loss on derivatives are recognised immediately in the
income statement, within net finance expense.

Carrying value of derivative financial instruments

Current assets

Non-current assets

Current liabilities

Non-current liabilities

148

2020
£m

–

(2)

(1)

Group

2019
£m

(18)

(1)

(16)

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Notional amount

Interest-rate swaps1

Foreign exchange swaps

2020
£m

675

996

2019
£m

400

993

1,671

1,393

1. At 31 March 2020, the Group held forward starting pay-fixed interest-rate swaps of £275m (2019: £nil) which are included in the notional amounts above.

25. Financial risk management

Introduction
A review of the Group’s objectives, policies and processes for managing and monitoring risk is set out in ’Managing risk’ and ’Our principal risks
and uncertainties’ (pages 48 to 56). This note provides further detail on financial risk management and includes quantitative information on specific
financial risks.

The Group is exposed to a variety of financial risks: market risks (principally interest rate risk), credit risk and liquidity risk. The Group’s overall risk
management strategy seeks to minimise the potential adverse effects of these on the Group’s financial performance and includes the use of derivative
financial instruments to hedge certain risk exposures.

Financial risk management is carried out by the Group’s treasury function under policies approved by the Board of Directors.

The Group assesses whether it intends to hold its financial assets to collect the contractual cash flows, or whether it intends to sell them before
maturity and classifies its financial instruments into the appropriate categories. The following table summarises the Group’s financial assets and
liabilities into the categories required by IFRS 7 Financial Instruments: Disclosures:

Financial assets at amortised cost

Cash and cash equivalents

Financial assets at fair value through other comprehensive income (without recycling)

Financial liabilities at amortised cost

Financial instruments at fair value through profit or loss

2020
£m

741

1,345

Group

2019
£m

738

2020
£m

–

Company

2019
£m

–

(5,461)

(3,910)

(2,406)

(1,978)

(52)

–

(3,330)

(3,198)

(2,402)

(1,974)

Financial risk factors

(i) Credit risk
The Group’s principal financial assets are cash and cash equivalents, trade and other receivables, net investment in finance leases and amounts due
from joint ventures. Further details concerning the credit risk of counterparties is provided in the note that specifically relates to each type of asset.

Bank and financial institutions
The principal credit risks of the Group arise from financial derivative instruments and deposits with banks and financial institutions. In line with the
policy approved by the Board of Directors, where the Group manages the deposit, only independently rated banks and financial institutions with a
minimum rating of A- are accepted. For UK banks and financial institutions with which the Group has a committed lending relationship, the minimum
rating is lowered to BBB+. The Group’s treasury function currently performs regular reviews of the credit ratings of all financial institution counterparties.
Furthermore, the treasury function ensures that funds deposited with a single financial institution remain within the Group’s policy limits.

Trade receivables
Trade receivables are presented in the balance sheet net of allowances for doubtful receivables. The Group assesses on a forward-looking basis the
expected credit losses associated with its trade receivables. A provision for impairment is made for the lifetime expected credit losses on initial
recognition of the receivable. In determining the expected credit losses the Group takes into account any recent payment behaviours and future
expectations of likely default events (i.e. not making payment on the due date) based on individual customer credit ratings, actual or expected
insolvency filings or company voluntary arrangements, likely deferrals of payments due and those tenants expected to be offered a period of rent free
as a result of temporary closures imposed in order to limit the spread of Covid-19 and market expectations and trends in the wider macro-economic
environment in which our customers operate. These assessments are made on a customer by customer basis.

While the balance has increased in the year ended 31 March 2020, it remains low relative to the scale of the balance sheet. The long-term nature and
diversity of the Group’s tenancy arrangements mean the credit risk of trade receivables is usually considered to be low. This risk has increased at
31 March 2020 following reduced rent collections as a result of Covid-19.

To limit the Group’s exposure to credit risk on trade receivables, a credit report is usually obtained from an independent rating agency prior to the
inception of a lease with a new counterparty. This report, alongside the Group’s internal assessment of credit risk, is used to determine the size of the
deposit that is required, if any, from the tenant at inception. In general, these deposits represent between three and six months’ rent.

149

Financial statementsLandsec Annual Report 2020
25. Financial risk management continued

Net investment in finance leases
This balance relates to amounts receivable from tenants in respect of tenant finance leases. This is not considered a significant credit risk as the
tenants are generally of good financial standing.

(ii) Liquidity risk
The Group actively maintains a mixture of notes with final maturities between 2025 and 2059, commercial paper and medium-term committed bank
facilities that are designed to ensure that the Group has sufficient available funds for its operations and its committed capital expenditure programme.

Management monitors the Group’s available funds as follows:

Cash and cash equivalents

Commercial paper

Undrawn facilities

Cash and available undrawn facilities

As a proportion of drawn debt

2020
£m

1,345

(977)

771

1,139

21.5%

2019
£m

(934)

2,490

1,570

41.7%

The Group’s core financing structure is in the Security Group, although the Non-restricted Group may also secure independent funding.

Security Group
The Group’s principal financing arrangements utilise the credit support of a ring-fenced group of assets (the Security Group) that comprises the
majority of the Group’s investment property portfolio and certain investments in joint ventures. These arrangements operate in ‘tiers’ determined by
LTV and interest cover ratio (ICR). This structure is most flexible at lower tiers (with a lower LTV and a higher ICR) and allows property acquisitions,
disposals and developments to occur with relative freedom. In higher tiers, the requirements become more prescriptive. No financial covenant default
is triggered until the applicable LTV exceeds 100% or the ICR is less than 1.0x.

As at 31 March 2020, the reported LTV for the Security Group was 32.5% (2019: 28.6%), meaning that the Group was operating in Tier 1 and benefited
from maximum operational flexibility.

Management monitors the key covenants attached to the Security Group on a monthly basis, including LTV, ICR, sector and regional concentration
and disposals.

Non-restricted Group
The Non-restricted Group obtains funding when required from a combination of inter-company loans from the Security Group, equity and external
bank debt. Bespoke credit facilities are established with banks when required for the Non-restricted Group and joint ventures, usually on a limited-
recourse basis.

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet date to
the expected maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Less than
1 year
£m

1,058

Between
1 and 2
years
£m

Between
2 and 5
years
£m

2,698

1,191

–

2020

Total
£m

6,394

352

Over
5 years
£m

2,556

337

–

2,708

2,893

6,879

Borrowings (excluding lease liabilities)

Lease liabilities

Derivative financial instruments

Trade payables

Capital accruals

Accruals

Amounts owed to joint ventures

Other payables

150

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Borrowings (excluding lease liabilities)

Lease liabilities

Derivative financial instruments

Trade payables

Capital accruals

Accruals

Amounts owed to joint ventures

Other payables

Redemption liability

Less than
1 year
£m

1,064

–

Between
1 and 2
years
£m

–

Between
2 and 5
years
£m

902

–

1,212

909

Over
5 years
£m

2,929

199

–

3,164

2019

Total
£m

4,976

208

5,368

(iii) Market risk
The Group is exposed to market risk through interest rates, availability of credit and foreign exchange movements.

Interest rates
The Group uses derivative products to manage its interest rate exposure and has a hedging policy that generally requires at least 70% of its existing debt
plus increases in debt associated with net committed capital expenditure to be at fixed interest rates for the coming five years. Due to a combination of
factors, including the degree of certainty required under IFRS 9 Financial instruments, the Group does not apply hedge accounting to hedging instruments
used in this context. Specific interest-rate hedges are also used from time to time to fix the interest rate exposure on our debt. Where specific hedges are
used to fix the interest exposure on floating rate debt, these may qualify for hedge accounting.

At 31 March 2020, the Group (including joint ventures) had pay-fixed interest-rate swaps in place with a nominal value of £400m (2019: £400m) and
forward starting pay-fixed interest-rate swaps of £275m (2019: £nil). The Group’s net debt was 71.3% fixed (2019: 81.5%) and based on the Group’s
debt balances at 31 March 2020, a 1% increase/(decrease) in interest rates would increase/(decrease) the annual net finance expense in the income
statement and reduce/(increase) equity by £12m (2019: £7m). The sensitivity has been calculated by applying the interest rate change to the variable
rate borrowings, net of interest-rate swaps and cash and cash equivalents.

Foreign exchange
Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the
Group’s functional currency.

As it is solely UK based, the Group’s foreign exchange risk is low. The vast majority of the Group’s foreign currency transactions relate to foreign currency
borrowing under the Group’s commercial paper programme. It is the Group’s policy to hedge 100% of this exposure. At 31 March 2020, the Group had
issued €901m (2019: €847m) and $220m (2019: $268m) of commercial paper, fully hedged through foreign exchange swaps. A 10% weakening or
strengthening of Sterling would therefore have £nil (2019: £nil) impact in the income statement and equity arising from foreign currency borrowings.

Where additional foreign exchange risk is identified (not linked to commercial paper borrowing), it is the Group’s policy to assess the likelihood of the
risk crystallising and if deemed appropriate use derivatives to hedge some or all of the risk. At 31 March 2020, the Group had €29m (2019: €50m) and
CHF12m (2019: CHFnil) of foreign currency exposures being managed using foreign currency derivative contracts. These were entered into in order to
economically hedge our exposure to movements in foreign currencies. A 10% weakening of Sterling would reduce the loss before tax and increase total
equity by £7m (2019: £5m). A 10% strengthening in Sterling would increase the loss before tax and reduce equity by £5m (2019: £4m).

Financial maturity analysis
The interest rate profile of the Group’s borrowings is set out below (based on notional values):

Sterling

Euro

US Dollar

Fixed
rate
£m

2,429

–

Floating
rate
£m

1,948

796

177

2020

Total
£m

4,377

796

177

Fixed
rate
£m

2,641

–

Floating
rate
£m

225

729

205

2019

Total
£m

2,866

729

205

2,429

2,921

5,350

2,641

1,159

3,800

151

Financial statementsLandsec Annual Report 2020
25. Financial risk management continued

The expected maturity profiles of the Group’s borrowings are as follows (based on notional values):

One year or less, or on demand

More than two years but not more than five years

More than five years

Borrowings

Effect of hedging

Borrowings net of interest-rate swaps

Fixed
rate
£m

–

522

1,907

2,429

400

2,829

Floating
rate
£m

977

1,944

–

2,921

(400)

2,521

2020

Total
£m

977

2,466

1,907

5,350

–

5,350

The expected maturity profiles of the Group’s derivative instruments are as follows (based on notional values):

One year or less, or on demand

More than one year but not more than two years

Two years but not more than five years

More than five years

Foreign
exchange
swaps
£m

981

–

996

Fixed
rate
£m

439

2,156

2,641

400

3,041

2020

Interest-
rate
swaps
£m

–

675

–

675

Floating
rate
£m

934

225

–

1,159

(400)

759

Foreign
exchange
swaps
£m

993

–

993

2019

Total
£m

980

664

2,156

3,800

–

3,800

2019

Interest-
rate
swaps
£m

–

400

Valuation hierarchy
Derivative financial instruments, financial assets at fair value through other comprehensive income (other investments) and the redemption liability
are the only financial instruments which are carried at fair value. For financial instruments other than borrowings disclosed in note 21, the carrying value
in the balance sheet approximates their fair values. The table below shows the aggregate assets and liabilities carried at fair value by valuation method:

Assets

Liabilities

Level 1
£m

Level 2
£m

Level 3
£m

–

(3)

–

2020

Total
£m

(3)

Level 1
£m

–

Level 2
£m

(19)

Level 3
£m

(36)

2019

Total
£m

(55)

Note:
Level 1: valued using unadjusted quoted prices in active markets for identical financial instruments.
Level 2: valued using techniques based on information that can be obtained from observable market data.
Level 3: valued using techniques incorporating information other than observable market data.

The fair value of the amounts payable under the Group’s lease obligations, using a discount rate of 1.8% (31 March 2019: 2.7%) is £126m (31 March
2019: £62m). The fair value of the Group’s net investment in tenant finance leases using a discount rate of 1.8% (31 March 2019: 2.7%), is £247m
(31 March 2019: £235m).

The fair values of any floating rate financial liabilities are assumed to be equal to their nominal value. The fair values of the MTNs fall within Level 1,
the syndicated and bilateral facilities, commercial paper, interest-rate swaps and foreign exchange swaps fall within Level 2, and the amounts payable
and receivable under leases fall within Level 3.

The fair values of the financial instruments have been determined by reference to relevant market prices, where available. The fair values of the Group’s
outstanding interest-rate swaps have been estimated by calculating the present value of future cash flows, using appropriate market discount rates.
These valuation techniques fall within Level 2.

The fair value of the redemption liability was determined as the present value of the amount the Group would be required to pay to settle the liability
(an exit price). The fair value was calculated by reference to the net assets of the underlying subsidiary. The valuation was not based on observable
market data and therefore the redemption liability was considered to fall within Level 3 of the fair value hierarchy.

The fair value of the other investments is calculated by reference to the net assets of the underlying entity. The valuation is not based on observable
market data and therefore the other investments are considered to fall within Level 3 of the fair value hierarchy.

152

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Section 5 – Working capital
This section focuses on our working capital balances, including trade and other receivables, trade and other payables, and provisions.

26. Trade and other receivables

Accounting policy

Trade and other receivables are recognised initially at fair value, subsequently at amortised cost and, where relevant, adjusted for the time value of
money. The Group assesses on a forward-looking basis the expected credit losses associated with its trade receivables. A provision for impairment is
made for the lifetime expected credit losses on initial recognition of the receivable. If collection is expected in more than one year, the balance is
presented within non-current assets.

In determining the expected credit losses the Group takes into account any recent payment behaviours and future expectations of likely default events
(i.e. not making payment on the due date) based on individual customer credit ratings, actual or expected insolvency filings or company voluntary
arrangements and market expectations and trends in the wider macro-economic environment in which our customers operate.

Trade and other receivables are written off once all avenues to recover the balances are exhausted and the lease has ended. Receivables written off are
no longer subject to any enforcement activity.

Significant accounting estimate

Impairment of trade receivables
The Group’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assessments, in particular, the
Group’s assessment of expected insolvency filings or company voluntary arrangements, likely deferrals of payments due and those tenants expected
to be offered a period of rent free as a result of temporary closures imposed to limit the spread of Covid-19. As a result, the value of the provisions for
impairment of the Group’s trade receivables are subject to a degree of uncertainty and are made on the basis of assumptions which may not prove
to be accurate, particularly in the year ended 31 March 2020, with the unprecedented uncertainty caused by Covid-19. See note 25 for further details
of the Group’s assessment of the credit risk associated with trade receivables.

Net trade receivables

Tenant lease incentives (note 14)

Prepayments

Accrued income

Amounts due from joint ventures

Other receivables

Total current trade and other receivables

Non-current amounts due from joint ventures

Non-current property sales receivables

Total trade and other receivables

2020
£m

316

433

161

611

2019
£m

334

437

160

613

The accounting for lease incentives is set out in note 6. The value of the tenant lease incentives, included in current trade and other receivables,
is spread over the non-cancellable life of the lease.

The non-current amounts due from joint ventures have maturity dates ranging from April 2022 to the dissolution of the joint venture. Interest is charged
at rates ranging from 4% to 5% (2019: 4% to 5%).

Ageing of trade receivables

As at 31 March 2020

Not impaired

Impaired

Gross trade receivables

As at 31 March 2019

Not impaired

Impaired

Gross trade receivables

Not
past due
£m

Up to
30 days
past due
£m

Up to 6
months
past due
£m

Up to 12
months
past due
£m

More than
12 months
past due
£m

–

Group

Total
£m

107

153

Financial statementsLandsec Annual Report 2020
26. Trade and other receivables continued

A significant proportion of the Group’s trade receivables are considered not past due as they relate to rents receivable from tenants which are billed
in the current year for periods commencing in the following year. None of the Group’s other receivables are past due and therefore no ageing has been
shown (2019: £nil).

Movement in allowances for doubtful debts

At the beginning of the year

Increase to provision1

Decrease to provision

Utilised in the year

At 31 March

2020
£m

(4)

(1)

2019
£m

(4)

(2)

1. Of the £27m increase to provision in the year ended 31 March 2020, £21m relates to rents receivables from tenants which are payable in advance and therefore relate to revenue which will

be recognised in the year ending 31 March 2021.

Movement in tenant lease incentives

At the beginning of the year

Revenue recognised

Capital incentives granted

Provision for doubtful receivables

Disposal of properties

At 31 March

27. Trade and other payables

Trade payables

Capital accruals

Other payables

Accruals

Deferred income

Amounts owed to joint ventures

Loans from subsidiary undertakings

Total current trade and other payables

Non-current other payables

Total trade and other payables

2020
£m

334

(20)

(3)

(2)

316

2020
£m

–

2,393

2,406

–

2019
£m

337

–

(4)

–

334

Company

2019
£m

–

1,953

1,978

–

2,406

1,978

2020
£m

142

–

270

271

Group

2019
£m

145

–

273

274

Capital accruals represent amounts due under contracts to purchase properties, which were unconditionally exchanged at the year end, and for work
completed on investment properties but not paid for at the year end. Deferred income principally relates to rents received in advance.

The Loans from Group undertakings are repayable on demand with no fixed repayment date. Interest is charged at 4.1% per annum (2019: 4.1%).

154

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020Section 6 – Other required disclosures
This section gives further disclosure in respect of other areas of the financial statements, together with mandatory disclosures required in accordance
with IFRS.

28. Investments in subsidiary undertakings

Accounting policy

Investments in subsidiary undertakings are stated at cost in the Company’s balance sheet, less any provision for impairment in value.

In accordance with IFRS 2 Share Based Payments the equity settled share-based payment charge for the employees of the Company’s subsidiaries
is treated as an increase in the cost of investment in the subsidiaries, with a corresponding increase in the Company’s equity.

At the beginning of the year

Capital contributions relating to share-based payments (note 34)

Impairment charge

At 31 March

A full list of subsidiary undertakings at 31 March 2020 is included on pages 192 to 194.

29. Other non-current assets

Other property, plant and equipment

Net pension surplus (note 33)

Derivative financial instruments

Total other non-current assets

2020
£m

6,213

(2)

2019
£m

6,211

–

6,213

2020
£m

–

2019
£m

155

Financial statementsLandsec Annual Report 2020
2020
£m

2020
£m

2019
£m

30. Other current assets

Derivative financial instruments

Other investments

Total other current assets

31. Other current liabilities

Derivative financial instruments

Total other current liabilities

32. Other non-current liabilities

Derivative financial instruments

Deferred tax liability (note 12)

Total other non-current liabilities

156

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 202033. Net pension surplus

Accounting policy

Contributions to defined contribution schemes are charged to the income statement as incurred.

The pension obligations arising under the Group’s defined benefit pension scheme are measured at discounted present value. The scheme assets are
measured at fair value, except annuities which are valued to match the liability or benefit value. The operating and financing costs of the scheme are
recognised separately in the income statement. Service costs are spread using the projected unit credit method. Past service costs are recognised
immediately in the income statement in the period in which they are identified. Net financing costs are recognised in the period in which they arise,
calculated with reference to the discount rate, and are included in finance income or expense on a net basis. Re-measurement gains and losses arising
from either experience differing from previous actuarial assumptions, or changes to those assumptions, are recognised immediately in other
comprehensive income.

Defined contribution schemes
The charge to operating profit for the year in respect of defined contribution schemes was £2m (2019: £2m).

Defined benefit scheme
The Pension & Assurance Scheme of the Land Securities Group of Companies (the Scheme) is a registered defined benefit final salary scheme subject
to the UK regulatory framework for pensions, including the Scheme Specific Funding requirements. The Scheme is operated under trust and as such,
the Trustees of the Scheme are responsible for operating the Scheme and they have a statutory responsibility to act in accordance with the Scheme’s
Trust Deed and Rules, in the best interest of the beneficiaries of the Scheme and UK legislation (including trust law). The Trustees and the Group have
the joint power to set the contributions that are paid to the Scheme.

In setting contributions to the Scheme, the Trustees and the Group are guided by the advice of a qualified independent actuary on the basis of triennial
valuations using the projected unit credit method. The Scheme is closed to new members (and was closed to future accrual on 31 October 2019). A full
actuarial valuation of the Scheme was undertaken on 30 June 2018 by the independent actuaries, Hymans Robertson LLP. This valuation was updated
to 31 March 2020 using, where required, assumptions prescribed by IAS 19 Employee Benefits. The next full actuarial valuation will be performed as at
30 June 2021.

There have been no employer contributions following the closure of the Scheme to future accrual. Prior to this, the employer contribution rate was
43.1% of pensionable salary to cover the costs of accruing benefits. It was also agreed that no further deficit contributions were required from the
Group. Employee contributions are paid by salary sacrifice, and therefore appear as Group contributions. In the year ended 31 March 2020, employee
contributions were 8.0% (2019: 8.0%) of monthly pensionable salary. The Group expects to make no employee or employer contributions to the
Scheme in the year to 31 March 2021 (2019: £1m).

All death-in-service and incapacity benefits arising during employment are wholly insured. No post-retirement benefits other than pensions are made
available to employees of the Group.

Analysis of the amounts charged to the income statement

Analysis of the amount charged to operating profit

Current service costs

Past service costs

Charge to operating profit

Analysis of amount credited to net finance expense

Interest income on plan assets

Interest expense on defined benefit scheme liabilities

Net credit to finance income

Analysis of the amounts recognised in other comprehensive income

Analysis of gains and losses

Net re-measurement losses on scheme assets

Net re-measurement gains on scheme liabilities

Net re-measurement gain

Cumulative net re-measurement loss recognised in other comprehensive income

2020
£m

2019
£m

–

(5)

–

2020
£m

(10)

(34)

(6)

–

2019
£m

(2)

(40)

157

Financial statementsLandsec Annual Report 2020
33. Net pension surplus continued

The net surplus recognised in respect of the defined benefit scheme can be analysed as follows:

Equities

Bonds – Government

Bonds – Corporate

Insurance contracts

Cash and cash equivalents

Fair value of scheme assets

Fair value of scheme liabilities

Net pension surplus

100

2020
£m

226

(208)

100

2019
£m

105

238

(226)

In the year ended 31 March 2020, £8m (2019: £8m) of benefits were paid to members.

Insurance contracts are annuities which are unquoted assets. All other Scheme assets have quoted prices in active markets. The Scheme assets do not
include any directly owned financial instruments issued by the Group. Indirectly owned financial instruments had a fair value of £nil (2019: £nil).

The defined benefit scheme liabilities are split 9% (2019: 9%) in respect of active scheme participants, 24% (2019: 24%) in respect of deferred scheme
participants, and 67% (2019: 67%) in respect of retirees. The weighted average duration of the defined benefit scheme liabilities at 31 March 2020 is
15.8 years (2019: 15.7 years).

The assumptions agreed with the Trustees of the Scheme for the triennial valuation at 30 June 2018 have been restated to the assumptions described
by IAS 19 Employee Benefits. The major assumptions used in the valuation were (in nominal terms):

Rate of increase in pensionable salaries

Rate of increase in pensions with no cap

Rate of increase in pensions with 5% cap

Discount rate

Inflation – Retail Price Index

– Consumer Price Index

The mortality assumptions used in this valuation were:

Life expectancy at age 60 for current pensioners – Men

– Women

Life expectancy at age 60 for future pensioners (current age 40) – Men

– Women

2020
%

2.80

2.75

2.30

2.80

2.00

2020
Years

27.6

29.1

29.8

31.6

2019
%

3.45

3.30

2.35

3.45

2.65

2019
Years

27.4

29.0

29.7

31.5

158

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020The sensitivities regarding the principal assumptions used to measure the Scheme liabilities are set out below. These were calculated using approximate
methods taking into account the duration of the Scheme liabilities.

Assumption

Discount rate

Life expectancy

Rate of inflation

Change in assumption

Decrease by 0.5%

Increase by 1 year

Increase by 0.5%

Impact on Scheme liabilities

Increase by £16m

Increase by £8m

Increase by £14m

As the above table demonstrates, changes in assumptions can have a significant impact on the Scheme liabilities. The assumptions agreed with the
Trustees of the Scheme for the triennial valuation and subsequent interim updates differ from those prescribed by IAS 19 Employee Benefits. Using the
assumptions agreed with the Trustees would result in a balance sheet deficit for the Scheme of £4m at 31 March 2020, as opposed to a surplus of £18m.

In order to reduce risk within the Scheme, 43% (2019: 44%) of the Scheme assets are invested in annuities that match the liabilities of some pensioners.
The assets that the Scheme holds are designed to match a significant proportion of the Scheme liabilities and the Scheme has hedged over 80%
(2019: 72%) of the interest rate risk and 80% (2019: 79%) of the inflation risk (when measured on a gilts flat discount rate) to which it is exposed.

The Company did not operate any defined contribution schemes or defined benefit schemes during the financial years ended 31 March 2020 or
31 March 2019.

34. Share-based payments

Accounting policy

The cost of granting shares, options over shares and other share-based remuneration to employees and Executive Directors is recognised through
the income statement. All awards are equity settled and therefore the fair value is measured at the grant date. Where the awards have non-market
related performance criteria, the Group uses the Black-Scholes option valuation model to establish the relevant fair values. Where the awards have
Total Shareholder Return (TSR) market related performance criteria, the Group has used the Monte Carlo simulation valuation model to establish
the relevant fair values. The resulting values are amortised through the income statement over the vesting period of the awards. For awards with
non-market related criteria, the charge is reversed if it appears probable that the performance or service criteria will not be met.

The following table analyses the total cost recognised in the income statement for the year between each plan, together with the number of
options outstanding.

Long-Term Incentive Plan

Deferred bonus share plan

Share award plan

Executive share option scheme

Restricted share option plan

Charge
£m

2020

Number
(millions)

Charge
£m

2019

Number
(millions)

–

A summary of the main features of each type of plan is given below. The plans have been split into two categories: Executive plans and Other plans.
For further details on the Executive plans, see the Directors’ Remuneration Report on pages 84-103.

159

Financial statementsLandsec Annual Report 2020
34. Share-based payments continued

Executive plans:
Long-Term Incentive Plan (LTIP)
The LTIP is open to Executive Directors and ExecCom members with awards made at the discretion of the Remuneration Committee. The LTIP was
previously also open to Senior Management. In addition, other than for Executive Directors, an award of ‘matching shares’ could be made where
the individual acquired shares in Land Securities Group PLC and pledged to hold them for a period of three years. The awards are issued at nil
consideration, subject to performance and vesting conditions being met. Awards of LTIP shares and matching shares are subject to the same
performance criteria and normally vest after three years. Awards are satisfied by the transfer of existing shares held by the Employee Benefit Trust
(EBT). The weighted average share price at the date of vesting during the year was 988p (2019: 899p). The estimated fair value of awards granted
during the year under the scheme was £2m (2019: £3m).

Deferred bonus share plan
The Executive Directors’ annual bonus is structured in two distinct parts made up of an initial payment and deferred shares. The shares are deferred
for one or two years and are not subject to additional performance criteria. Awards are satisfied by the transfer of existing shares held by the EBT at
nil consideration. The weighted average share price at the date of vesting during the year was 745p (2019: 937p). The estimated fair value of awards
granted during the year under the scheme was £nil (2019: £nil).

Other plans:
Executive share option scheme (ESOS)
The 2005 ESOS was previously open to managers not eligible to participate in the LTIP, but has largely been replaced by the new Restricted Share
Option Plan in the year ended 31 March 2020. Awards are discretionary and are granted over ordinary shares of the Company at the middle market
price on the three dealing days immediately preceding the date of grant. Awards normally vest after three years and are not subject to performance
conditions. Awards are satisfied by the transfer of shares from the EBT and lapse ten years after the date of grant. The weighted average share price
at the date of exercise for awards exercised during the year was 927p (2019: 918p). The estimated fair value of awards granted during the year under
the scheme was £nil (2019: £nil).

Savings related share option plan
Under the savings related share option plan, Executive Directors and other eligible employees are invited to make regular monthly contributions into
a Sharesave plan operated by Equiniti. On completion of the three- or five-year contract period, ordinary shares in the Company may be purchased
at a price based upon the market price at date of invitation less 20% discount. The weighted average share price at the date of exercise for awards
exercised during the year was 944p (2019: 930p). The estimated fair value of awards granted during the year under the scheme was £nil (2019: £nil).

Restricted share option plan (RSP)
The RSP started in the year ended 31 March 2020. It is open to qualifying management level employees with awards granted as nil cost options.
Awards are discretionary and are granted over ordinary shares of the Company at the middle market price on the day immediately preceding date
of grant. Awards normally vest after three years and are not subject to performance conditions. Awards are satisfied by the transfer of shares from
the EBT and lapse ten years after the date of grant. There were no awards exercised during the year (2019: none). The estimated fair value of awards
granted during the year under the scheme was £1m (2019: £nil).

The aggregate number of awards outstanding, and the weighted average exercise price, are shown below:

Executive plans1

Number of awards

2020
Number
(millions)

2019
Number
(millions)

2020
Number
(millions)

2019
Number
(millions)

–

(1)

–

(1)

–

Years

–

(1)

Years

Other plans

Weighted average
exercise price

2020

Pence

976

–

884

873

1,039

2019

Pence

947

891

–

1,035

976

1,033

At the beginning of the year

Granted

Exercised

Lapsed

At 31 March

Exercisable at the end of the year

Weighted average remaining contractual life

1. Executive plans are granted at nil consideration.

160

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020The number of share awards outstanding for the Group by range of exercise prices is shown below:

Exercise price – range

Pence

Nil1

400 – 599

600 – 799

800 – 999

1,000 – 1,199

1,200 – 1,399

Outstanding at 31 March 2020

Outstanding at 31 March 2019

Weighted
average
remaining
contractual
life

Weighted
average
exercise
price

Years

Pence

Number of
awards

Number
(millions)

Weighted
average
remaining
contractual

life

Years

Number of
awards

Number
(millions)

–

529

763

899

1,022

1,328

–

Weighted
average
exercise
price

Pence

–

584

720

899

1,022

1,328

1. Executive plans are granted at nil consideration.

Fair value inputs for awards with non-market performance conditions
Fair values are calculated using the Black-Scholes option pricing model for awards with non-market performance conditions. The weighted average
inputs into this model for the grants under each plan in the financial year are as follows:

Year ended 31 March

Share price at grant date

Exercise price

Expected volatility

Expected life

Risk-free rate

Expected dividend yield

Year ended 31 March

Share price at grant date

Exercise price

Expected volatility

Expected life

Risk-free rate

Expected dividend yield

Long-Term Incentive Plan

Deferred bonus share plan

2005 ESOS

2020

820p

n/a

20%

3 years

0.53%

5.55%

2019

953p

n/a

20%

3 years

0.75%

4.64%

2020

820p

n/a

20%

1 year

0.66%

nil

2019

953p

n/a

20%

1 year

0.68%

nil

2020

n/a

2019

953p

20%

3 years

0.75%

4.64%

Restricted share

option plan

Savings related share
option plan

2020

820p

n/a

20%

3 years

0.53%

5.55%

2019

n/a

2020

837p

670p

20%

2019

948p

759p

20%

3 to
5 years

0.56%
to 0.62%

0.75%

to 1.04%

5.44%

4.66%

Expected volatility is determined by calculating the historical volatility of the Group’s share price over the previous ten years. The expected life used
in the model has been determined based upon management’s best estimate for the effects of non-transferability, vesting/exercise restrictions and
behavioural considerations. The risk-free rate is the yield at the date of the grant of an award on a gilt-edged stock with a redemption date equal
to the anticipated vesting of that award.

Fair value inputs for awards with market performance conditions
Fair values are calculated using the Monte Carlo simulation option pricing model for awards with market performance conditions. Awards made under
the 2005 LTIP which were granted after 31 March 2009 include a TSR condition, which is a market-based condition. The weighted average inputs into
this model for the scheme are as follows:

Share price at date of grant

Exercise price

Year ended 31 March

Long-Term Incentive Plan

2020

820p

2019

953p

2020

n/a

2019

n/a

2020

20%

Group

2019

20%

Expected volatility –

Expected volatility – index
of comparator companies

Correlation –
Group vs. index

2020

20%

2019

20%

2020

85%

2019

85%

161

Financial statementsLandsec Annual Report 2020
35. Ordinary share capital

Accounting policy

Ordinary shares are classified as equity. External costs directly attributable to the issue of new shares are shown in equity as a deduction from the proceeds.

The consideration paid by any Group entity to acquire the Company’s equity share capital, including any directly attributable incremental costs,
is deducted from equity until the shares are cancelled, reissued or sold. Where own shares are sold or reissued, the net consideration received is
included in equity.

Ordinary shares of 102/3p each

At the beginning of the year

Issued on the exercise of options

At 31 March

Group and Company
Allotted and fully paid

2020
£m

2019
£m

Number of shares

2019

751,298,964

2,029

751,300,993

2020

751,300,993

12,070

751,313,063

The number of options over ordinary shares from Executive plans that were outstanding at 31 March 2020 was 1,877,442 (2019: 2,267,391). If all the
options were exercised at that date then 1,877,442 (2019: 2,267,391) shares would be required to be transferred from the Employee Benefit Trust (EBT).
The number of options over ordinary shares from Other plans that were outstanding at 31 March 2020 was 1,999,167 (2019: 2,150,274). If all the options
were exercised at that date then 440,322 new ordinary shares (2019: 355,095) would be issued and 1,558,845 shares would be required to be transferred
from the EBT (2019: 1,795,179).

Shareholders at the Annual General Meeting have previously authorised the acquisition of shares by the Company representing up to 10% of its share
capital, to be held as treasury shares. During the years ended 31 March 2020 and 2019, there were no ordinary shares acquired to be held as treasury
shares. At 31 March 2020 the Group held 9,839,179 ordinary shares (2019: 9,839,179) with a market value of £55m (2019: £90m) in treasury.

36. Own shares

Accounting policy

Shares acquired by the EBT are presented on the Group and Company balance sheets within ‘Other reserves’. Purchases of treasury shares are
deducted from retained earnings.

At the beginning of the year

Transfer of shares to employees on exercise of share options

At 31 March

Group and Company

2020
£m

(1)

2019
£m

(2)

Own shares consist of shares in Land Securities Group PLC held by the EBT in respect of the Group’s commitment to a number of its employee share
option schemes (note 34).

The number of shares held by the EBT at 31 March 2020 was 957,692 (2019: 1,080,624). The market value of these shares at 31 March 2020 was £5m
(2019: £10m).

162

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 202037. Contingencies

The Group has contingent liabilities in respect of legal claims, guarantees, and warranties arising in the ordinary course of business. It is not anticipated
that any material liabilities will arise from the contingent liabilities.

38. Related party transactions

Subsidiaries
During the year, the Company entered into transactions, in the normal course of business, with related parties as follows:

Transactions with subsidiary undertakings1:

Recharge of costs

Dividends received

Interest paid

1. All cash payments, including dividend payments, are made by another Group company.

2020
£m

(353)

–

(89)

Company

2019
£m

(344)

800

(93)

Joint arrangements
As disclosed in note 16, the Group has investments in a number of joint arrangements. Details of transactions and balances between the Group and
its joint arrangements are as follows:

Nova, Victoria

Southside Limited Partnership

St. David’s Limited Partnership

Westgate Oxford Alliance Limited Partnership

The Oriana Limited Partnership

Harvest

The Ebbsfleet Limited Partnership

West India Quay Unit Trust

Year ended and as at 31 March 2020

Year ended and as at 31 March 2019

Group

Net
investments
into joint
ventures
£m

Amounts
owed by
joint
ventures
£m

Amounts
owed to
joint
ventures
£m

(1)

(7)

(12)

–

(28)

(17)

(2)

(56)

–

163

–

(1)

Income
£m

–

Income
£m

–

Net
investments
into joint
ventures
£m

Amounts
owed by
joint
ventures
£m

Amounts
owed to
joint
ventures
£m

(15)

(3)

(13)

(5)

–

(2)

(33)

–

162

–

(1)

–

(2)

(3)

Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the Group and Company, is set out below in aggregate for each of
the applicable categories specified in IAS 24 ‘Related Party Disclosures’. Further information about the remuneration of individual Directors is provided
in the audited part of the Directors’ Remuneration Report on pages 84 to 103.

Short-term employee benefits

Share-based payments

2020
£m

2019
£m

163

Financial statementsLandsec Annual Report 2020
39. Operating lease arrangements

Accounting policy

The Group earns rental income by leasing its properties to tenants under non-cancellable operating and finance leases. Leases in which substantially
all risks and rewards of ownership are retained by the Group as the lessor are classified as operating leases. Payments, including prepayments, received
under operating leases (net of any incentives paid) are charged to the income statement on a straight-line basis over the period of the lease.

At the balance sheet date, the Group had contracted with tenants to receive the following future minimum lease payments:

Not later than one year

Later than one year but not more than two years

Later than two years but not more than three years

Later than three years but not more than four years

Later than four years but not more than five years

More than five years

2020
£m

537

499

451

437

408

2019
£m

559

528

487

441

427

3,550

5,882

3,852

6,294

The total of contingent rents recognised as income during the year was £38m (2019: £38m).

40. Events after the reporting period

There were no significant events occurring after the reporting period, but before the financial statements were authorised for issue.

164

Notes to the financial statementsfor the year ended 31 March 2020 continuedLandsec Annual Report 2020l

a
n
o
i
t
i
d
d
A

166 Business analysis – EPRA disclosures
172 Business analysis – Group
176 Business analysis – Office
177 Business analysis – Retail
177 Business analysis – Specialist
178 Sustainability performance
184 Combined Portfolio analysis
186 Lease lengths
187 Development pipeline
187 Alternative performance measures
188 Reconciliation of segmental

information note to statutory
reporting

190 Ten year summary
192 Subsidiaries, joint ventures and

associates

195 Shareholder information
198 Key contacts and advisers
199 Glossary
IBC Cautionary statement

n Contents
o
i
t
a
m
r
o
f
n

A
d
d
i
t
i
o
n
a

n
f
o
r
m
a
t
i
o
n

Landsec Annual Report 2020

165

Business analysis – EPRA disclosures

In October 2019, the European Public Real Estate Association (EPRA) published new best practice recommendations (BPR) for financial disclosures
by public real estate companies. The Group supports this reporting standardisation approach designed to improve the quality and comparability of
information for investors.

The BPR introduced three new measures of net asset value: EPRA net tangible assets (NTA), EPRA net reinvestment value (NRV) and EPRA net disposal
value (NDV). The Group has adopted these new guidelines early and applies them in our 2020 Annual Report. EPRA NTA is considered to be the most
relevant measure for our business and therefore now acts as our primary measure of net asset value. Total business return is now calculated based on
EPRA NTA. The previously reported EPRA measures of net assets are also included below for comparative purposes.

EPRA net asset measures

Net assets attributable to shareholders

Excess of fair value over net investment in finance lease book value1

Deferred tax liability on intangible asset

Goodwill on deferred tax liability (note 19)

Other intangible assets (note 19)

Fair value of interest-rate swaps

Excess of fair value of debt over book value (note 21)

Purchasers’ costs2

Net assets used in per share calculation

Current measures

EPRA
NRV
£m

EPRA
NTA
£m

EPRA
NDV
£m

8,750

(1)

–

768

9,609

(1)

(7)

–

(1)

–

(274)

–

Table 62

31 March 2020

Previously reported
measures

EPRA net
assets
£m

8,750

EPRA triple
net assets
£m

8,750

–

(1)

–

(1)

–

(274)

–

8,834

8,565

8,751

8,475

Diluted net assets per share

EPRA
NRV

EPRA
NTA

EPRA
NDV

1,297p

1,192p

1,156p

EPRA net
assets

1,181p

EPRA triple
net assets

1,144p

Net assets attributable to shareholders

Excess of fair value over net investment in finance lease book value1

Deferred tax liability on intangible asset

Goodwill on deferred tax liability (note 19)

Other intangible assets (note 19)

Excess of fair value of debt over book value (note 21)

Purchasers’ costs2

Net assets used in per share calculation

EPRA
NRV
£m

Current measures

EPRA
NTA
£m

EPRA
NDV
£m

9,920

(2)

–

829

10,829

(2)

(11)

–

(2)

–

(239)

–

31 March 2019

Previously reported
measures

EPRA net
assets
£m

9,920

EPRA triple
net assets
£m

9,920

–

(2)

–

(2)

–

(239)

–

9,989

9,759

9,920

9,679

Diluted net assets per share

EPRA
NRV

EPRA
NTA

EPRA
NDV

1,461p

1,348p

1,317p

EPRA net
assets

1,339p

EPRA triple
net assets

1,306p

1. While the previous definition of EPRA net assets included this adjustment, it has historically not been considered material to adjust. As the value of this difference has grown in recent years,

the adjustment will now be included when calculating EPRA NTA.

2. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers’ costs. Purchasers’ costs are added back when calculating EPRA NRV.

166

Landsec Annual Report 2020EPRA performance measures

Measure

Adjusted earnings

Definition for EPRA measure

Recurring earnings from core operational activity

Adjusted earnings per share

Adjusted earnings per weighted number of ordinary shares

Adjusted diluted earnings per share

Adjusted diluted earnings per weighted number of ordinary shares

EPRA net tangible assets (NTA)

Net assets adjusted to exclude the fair value of interest-rate swaps, intangible
assets and excess of fair value over net investment in finance lease book value

EPRA net tangible assets per share

Diluted net tangible assets per share

EPRA net disposal value (NDV)

Net assets adjusted to exclude the fair value of debt and goodwill on deferred tax
and to include excess of fair value over net investment in finance lease book value

EPRA net disposal value per share

Diluted net disposal value per share

Voids/vacancy rate

Net initial yield (NIY)

Topped-up NIY

Cost ratio

ERV of vacant space as a % of ERV of Combined Portfolio excluding the
development programme1

Annualised rental income less non-recoverable costs as a % of market value plus
assumed purchasers’ costs2

NIY adjusted for rent-free periods2

Total costs as a percentage of gross rental income (including direct vacancy costs)3

Total costs as a percentage of gross rental income (excluding direct vacancy costs)3

Table 63

31 March 2020

EPRA
measure

£414m

55.9p

Notes

Landsec
measure

£414m

55.9p

5 £8,834m

£8,834m

1,192p

5 £8,565m

£8,565m

1,156p

Table

2.4%

4.8%

5.0%

18.6%

n/a

2.4%

4.7%

4.9%

22.5%

20.5%

1. Our measure reflects voids in our like-for-like portfolio only. The EPRA measure reflects voids in the Combined Portfolio excluding only properties under development.
2. Our NIY and Topped-up NIY relate to the Combined Portfolio, excluding properties in the development programme that have not yet reached practical completion, and are calculated by
our external valuer. EPRA NIY and EPRA Topped-up NIY calculations are consistent with ours but exclude only properties currently under development. Topped-up NIY reflects adjustments
of £21m and £21m for rent-free periods and other incentives for the Landsec measure and EPRA measure, respectively.

3. The EPRA cost ratio is calculated based on gross rental income after rents payable and excluding costs recovered through rents but not separately invoiced, whereas our measure is based
on gross rental income before rents payable and costs recovered through rents but not separately invoiced. We do not calculate a cost ratio excluding direct vacancy costs as we do not
consider this to be helpful.

EPRA vacancy rate
The EPRA vacancy rate is based on the ratio of the estimated market rent for vacant properties versus total estimated market rent, for the Combined
Portfolio excluding properties under development. There are no significant distorting factors influencing the EPRA vacancy rate.

ERV of vacant properties

ERV of Combined Portfolio excluding properties under development

EPRA vacancy rate (%)

Change in net rental income from the like-for-like portfolio
(before provisions related to 2020/21 rent)

Office

Retail

Specialist

2020
£m

250

246

579

2019
£m

243

256

583

£m

(10)

(1)

(4)

Table 64

2020
£m

699

2.4%

Table 65

Change

2.9

–3.9

–1.2

–0.7

167

Additional informationLandsec Annual Report 2020

Business analysis – EPRA disclosures
continued

Acquisitions, disposals and capital expenditure

Investment properties

Net book value at the beginning of the year

Acquisitions

Capital expenditure

Capitalised interest

Net movement in head leases capitalised

Disposals

Net deficit on revaluation of investment properties

Net book value at the end of the year

Loss on disposal of investment properties

Trading properties

Net book value at the beginning of the year

Acquisitions

Capital expenditure

Disposals

Net book value at the end of the year

Profit on disposal of trading properties

Acquisitions, development and other capital expenditure

Acquisitions3

Development capital expenditure4

Other capital expenditure

Capitalised interest

Acquisitions, development and other capital expenditure

Disposals

Net book value – investment property disposals

Net book value – trading property disposals

Loss on disposal – investment properties

Profit on disposal – trading properties

Total disposal proceeds

Year ended 31 March 2020

Table 66

Year ended
31 March 2019

Group
(excl. joint
ventures)

£m

12,094

199

(49)

(1,000)

11,297

(6)

£m

–

Joint
ventures

£m

1,117

–

(181)

946

–

£m

–

(15)

Adjustment
for
proportionate
share1

£m

(34)

–

£m

–

Combined
Portfolio

£m

13,177

13,536

207

136

117

–

(49)

(1,179)

12,243

(60)

(557)

13,177

(6)

(2)

£m

–

(15)

£m

(39)

–

Investment
properties2

Trading
properties

Combined
Portfolio

£m

165

263

£m

–

£m

165

264

£m

(6)

£m

140

264

£m

(2)

–

1. This represents the interest in X-Leisure which we did not own, but which is consolidated in the Group numbers. In December 2019, the Group settled the redemption liability which

represented this interest resulting in 100% ownership.

2. See EPRA analysis of capital expenditure table 67 for further details.
3. Properties acquired in the year.
4. Development capital expenditure for investment properties comprises expenditure on the development pipeline and completed developments.

168

Landsec Annual Report 2020EPRA analysis of capital expenditure

Other capital expenditure

Acquisitions1
£m

Development
capital

expenditure2

£m

Incremental
lettable
space3
£m

No
incremental
lettable
space
£m

Tenant
improvements
£m

Total
£m

Capitalised
interest
£m

Table 67

Year ended 31 March 2020

Total
capital
expenditure –
Combined
Portfolio
£m

Total capital
expenditure
– joint
ventures
(Group
share)
£m

Total capital
expenditure –
Group
£m

Office

West End

City

Mid-town

Southwark and other

Total Office

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail

Specialist

Leisure and hotels

Other

Total Specialist

–

113

–

159

–

Total capital expenditure

165

Conversion from accrual
to cash basis

Total capital expenditure
on a cash basis

1. Investment properties acquired in the year.
2. Expenditure on the development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least 10%.

–

122

181

231

237

–

122

172

222

(5)

217

169

Additional informationLandsec Annual Report 2020
Business analysis – EPRA disclosures
continued

EPRA net initial yield (NIY) and topped up NIY

Combined Portfolio

Trading properties at market value

Less: Properties under development, trading properties under development and land

Like-for-like investment property portfolio, proposed and completed developments, and completed trading properties

Plus: Allowance for estimated purchasers’ costs

Grossed-up completed property portfolio valuation (b)

Annualised cash passing rental income1

Net service charge expense2

Other irrecoverable property costs

Annualised net rents (a)

Plus: Rent-free periods and other lease incentives

Topped-up annualised net rents (c)

EPRA net initial yield (a/b)

EPRA topped-up initial yield (c/b)

1. Annualised cash passing rental income as calculated by the Group’s external valuer.
2. Including costs recovered through rents but not separately invoiced.

Table 68

2020
£m

12,781

(583)

12,227

735

12,962

654

(10)

(33)

611

632

4.7%

4.9%

170

Landsec Annual Report 2020Cost analysis

Gross rental income (before rents payable)

Rents payable

Gross rental income (after rents payable)

Net service charge expense

Net direct property expenditure

Provisions related to 2020/21 rent

Segment net rental income

Net indirect expenses

Segment profit before finance expense

Net finance expense – Group

Net finance expense – joint ventures

Revenue profit

£m

678

(15)

663

(4)

(53)

(23)

583

(74)

509

(79)

(16)

414

Direct
property
costs
£80m

Net
indirect
expenses3
£74m

Gross rental income
(before rents payable)

Costs recovered through rents
but not separately invoiced

Adjusted gross rental
income

Rents payable

EPRA gross rental income

Managed operations

Tenant default

Tenant default – 2020/21 rent

Void related costs

Other direct property costs

Development expenditure

Asset management,
administration and
compliance

Total (incl. direct
vacancy costs)

Costs recovered through rents

Tenant default – 2020/21 rent

Total cost ratio2

18.6%

Adjusted total costs

Tenant default – 2020/21 rent

EPRA costs (incl. direct
vacancy costs)

Less: Direct vacancy costs

EPRA (excl. direct
vacancy costs)

2020

Cost ratio
%2

1.5

3.4

1.9

2.8

1.3

10.4

Total
£m

678

(6)

672

(15)

657

Table 69

20191

Cost ratio
%2

1.5

–

1.9

2.4

1.8

10.2

Total
£m

683

(7)

676

(13)

663

–

154

22.9

130

19.2

(6)

(23)

125

148

(13)

135

18.6

22.5

20.5

(7)

–

123

–

123

(13)

110

18.2

18.6

16.6

1. Restated for changes in accounting policies (see note 3 of the financial statements).
2. Percentages represent costs divided by Adjusted gross rental income, except for EPRA measures which represent costs divided by EPRA gross rental income.
3. Net indirect expenses amounting to £7m (2019: £5m) have been capitalised as development costs and are excluded from table 69. See note 14 of the financial statements for the Group’s

policy on capitalising indirect expenses.

171

Additional informationLandsec Annual Report 2020

Office
%

53.3

–

0.1

–

53.4

Retail
%

10.9

12.2

0.4

2.7

6.0

1.8

Specialist
%

6.2

2.8

0.6

0.5

1.7

0.8

Table 70

Total
%

70.4

15.0

1.0

3.2

7.8

2.6

34.0

12.6

100.0

Table 71

MSCI
%

3.51

-9.82

n/a3

-0.44

Landsec
%

4.5

-17.3

-3.9

-4.5

Table 72
% of Group rent1

5.0

4.7

4.0

1.6

1.5

1.4

1.2

1.1

1.0

0.9

24.6

Business analysis – Group

Combined Portfolio value by location at 31 March 20201

Central, inner and outer London

South East and East

Midlands

Wales and South West

North, North West, Yorkshire and Humberside

Scotland and Northern Ireland

Total

1. % figures calculated by reference to the Combined Portfolio value of £12.8bn.

For a full list of the Group’s properties please refer to our website landsec.com.

Combined Portfolio performance relative to MSCI
Total property return – year ended 31 March 2020

Office

Retail

Specialist

Combined Portfolio

1. MSCI Central and Inner London Office benchmark.
2. MSCI All Retail benchmark.
3. No benchmark available.
4. MSCI All Property Quarterly Universe.

Top 12 occupiers at 31 March 2020

Central Government

Deloitte

Accor

Cineworld

Mizuho Bank

Boots

Sainsbury’s

Taylor Wessing

Equinix

H&M

M&S

1. On a proportionate basis.

172

Landsec Annual Report 2020Property Income Distribution (PID) calculation

Loss before tax per accounts

Accounting loss/(profit) on residual operations

Accounting loss on residual operations – prior year adjustment

Loss attributable to tax-exempt operations

Adjustments

Capital allowances

Capitalised interest

Revaluation deficit

Tax exempt disposals

Capital expenditure

Other tax adjustments

Goodwill amortisation

Estimated tax-exempt income for the year

PID thereon (90%)

Table 73

Year ended

31 March 2020
£m

31 March 2019
£m

(837)

–

(832)

(47)

(5)

1,179

313

282

(123)

(20)

(120)

(57)

(5)

557

(13)

(2)

377

339

The table above provides a reconciliation of the Group’s loss before tax to its estimated tax-exempt income, 90% of which the Company is required
to distribute as a PID to comply with REIT regulations.

The Company has 12 months after the year end to make the minimum distribution. Accordingly, PID dividends paid in the year may relate to the
distribution requirements of previous periods. The table below sets out the dividend allocation for the years ended 31 March 2020 and 31 March 2019:

Dividends paid in year to 31 March 2019

Dividends paid in year to 31 March 2020

Minimum PID to be paid by 31 March 2021

Total PID required

PID allocation

Ordinary
dividend

Year ended
31 March 2020
£m

Year ended
31 March 2019
£m

Pre-
31 March 2019
£m

–

204

282

202

138

–

340

147

–

n/a

£m

–

n/a

Table 74

Total
dividend

£m

349

342

n/a

173

Additional informationLandsec Annual Report 2020
Business analysis – Group
continued

Total shareholder returns1

Land Securities Group PLC

FTSE 100

FTSE 350 Real Estate Index

Table 75

Period to 31 March 2020

5 years
£

54.3

102.9

85.8

3 years
£

60.3

88.1

91.9

1 year
£

63.5

81.6

85.5

1. Historical TSR performance for a hypothetical investment of £100 – source: Datastream.

Voids and units in administration – like-for-like (%)

Chart 76 Analysis of performance

Chart 77

4.0

3.9

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

1.3

1.0

e
c
ffi
O

l
i

a
t
e
R

31 March 2020

31 March 2019

Voids

relative to MSCI (%)

0.1

-4.3

0.1

–

-4.1

-0.7

2.4 2.4

a
t
o
T

–

e
c
ffi
O

1.9

0.9

l
i

a
t
e
R

1.5

1.2

t
s
i
l

a
c
e
p
S

0.8

0.4

a
t
o
T

0.2

0.1

t
s
i
l

a
c
e
p
S

h
t
w
o
r
g

a
t
i
p
a
C

n
r
u
t
e
r

e
m
o
c
n

e
v
i
t
a
e
R

s
t
n
e
m
p
o
e
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In administration

Attribution analysis, ungeared total return, 12 months to 31 March 2020,
relative to MSCI Quarterly Universe – source: MSCI.

REIT balance of business
To retain the Group’s REIT status, it must meet conditions from the REIT legislation. At least 75% of the Group’s assets and 75% of the Group’s income
must relate to qualifying activities. The results of these tests at the balance sheet date are below:

Table 78

Year ended 31 March 2020

Year ended 31 March 2019

Tax-
exempt
business

390

100.0%

13,762

95.9%

Residual
business

Adjusted
results

(4)

386

0.0%

598

4.1%

14,360

Tax-
exempt
business

421

99.2%

13,502

94.9%

Residual
business

0.8%

726

5.1%

Adjusted
results

424

14,228

Profit before tax (£m)1

Balance of business – 75% profits test

Adjusted total assets (£m)1

Balance of business – 75% assets test

1. Calculated according to REIT rules.

174

Landsec Annual Report 2020

Annual net rent breakdown by occupier business sector (%) Chart 79

■ Services
33.8%
■ Retail trade
34.2%
■ Financial services
15.1%
■ Public administration
5.6%
■ Wholesale trade
3.3%
■ Manufacturing
1.6%
■ Transport, communications 2.5%
■ Other
3.9%

Floor space (million sq ft)1

Chart 80

■ Office
■ Retail
■ Specialist
Total

5.8
12.7
5.5

24.0

1. Joint ventures are reflected at 100% values, not Group share.

% portfolio by value and number of
property holdings at 31 March 2020

£m

0 - 10

10 - 25

25 - 50

50 - 100

100 - 150

150 - 200

200+

Total

Table 81

Number of
properties

119

Value
%

0.7

3.4

5.5

13.5

3.7

10.6

62.6

100.0

Estimated future development spend on
approved developments (£m)

Chart 82

300

250

200

150

100

288

230

2021

2022

2023

–

2024+

Estimated future spend excludes interest costs.

175

Additional informationLandsec Annual Report 2020

Business analysis – Office

Office segment (%)

Chart 83

Office floor space (million sq ft)

Chart 84

■ West End
■ City
■ Mid-town
■ Southwark and other

47.8%
20.9%
24.4%
6.9%

£6.8bn

■ West End
■ City
■ Mid-town
■ Southwark and other

Total

2.8
1.0
1.2
0.8

5.8

5.8m
sq ft

West End
Our £3.3bn West End office portfolio is dominated by our Victoria assets
which include Cardinal Place, Queen Anne’s Gate, 62 Buckingham Gate,
The Zig Zag Building, Portland House and Nova, all SW1.

Top 10 office customers

Central Government

City
Our £1.7bn City office portfolio includes 1 & 2 New Ludgate, EC4,
One New Change, EC4 and the development at 21 Moorfields, EC2.

Mid-town
Positioned between the City and West End, our cluster of buildings
at New Street Square, EC4 represent our major assets in Mid-town.

Southwark and other
Includes our assets at Docklands, E14 and Southwark, SE1.

Deloitte

Mizuho Bank

Taylor Wessing

Equinix

Bain & Co

Deutsche Bank

K&L Gates

Schlumberger

Alix Partners

Office other

Total

Table 85

% of Group rent

5.0

4.7

1.5

1.2

1.1

0.8

0.7

0.6

16.8

23.0

39.8

176

Landsec Annual Report 2020
Business analysis – Retail

Retail segment (%)

Chart 86

Retail floor space (million sq ft)

Chart 87

■ London retail
■ Regional retail
■ Outlets
■ Retail parks

31.5%
38.2%
20.0%
10.3%

£4.3bn

■ London retail
■ Regional retail
■ Outlets
■ Retail parks

Total

2.5
6.5
1.6
2.1

12.7

12.7m
sq ft

London retail
This sector comprises the retail space in our Office segment assets and at
One New Change, as well as our retail space at The O2 Centre, Southside,
Lewisham and Shepherd’s Bush with potential for re-purposing.

Regional retail
Comprises our portfolio of shopping centres in major retail locations
across the UK including Bluewater, Trinity Leeds and Westgate Oxford.

Outlets
Our five outlets offer a vibrant and engaging experience in locations such
as Gunwharf Quays, Braintree Village and Clarks Village, Street.

Retail parks
Our ten retail parks are typically located away from town centres and offer
a range of retail and leisure with parking providing convenient shopping.
Assets include Westwood Cross, Lakeside Retail Park and Bexhill Retail Park.

Business analysis – Specialist

Specialist segment (%)

Chart 89

■ Leisure and hotels
■ Other

74.0%
26.0%

£1.6bn

Top 10 retail customers

Table 88

% of Group rent

Boots

Sainsbury’s

H&M

M&S

Tesco

Primark

Dixons Carphone

Gap

Arcadia

Retail other

Total

1.4

1.2

1.0

0.9

0.8

0.7

0.6

8.8

36.9

45.7

Leisure and hotels
We own five stand-alone leisure assets and the entire share capital
of the X-Leisure Fund which comprises 15 schemes of prime leisure and
entertainment space.

We also own 21 Accor hotels in the UK. They are leased to Accor until 2091
with a break clause in 2031 and 12 yearly thereafter.

Other
Comprises Piccadilly Lights and our residential space.

Specialist floorspace (million sq ft)
Leisure and hotels

Total

Table 90

5.5

177

Additional informationLandsec Annual Report 2020

Sustainability performance

Commitments

Existing commitment

New commitment

Updated commitment

For us, sustainability is about the actions we take to fulfil our purpose
so Landsec prospers far into the future. We want customers to prefer
our spaces. We want communities to be pleased it’s us operating in their
area. We want partners to share our priorities. And we want employees
to invest their energy and ambition here. When we get all this right,
we create value for our investors.

In response to the 2017 Grenfell fire, we reviewed fire safety across our
entire portfolio and invested over £7m in rectifying approximately 125,000
firestopping defects in our buildings, and £4.3m in resolving cladding risks.

Efficient use of natural resources

To deliver this we’ve set 12 long-term sustainability commitments,
covering each of our priority areas of creating jobs and opportunities,
efficient use of natural resources and sustainable design and innovation.
This section includes a summary of our performance against those
commitments and our key disclosures.

Carbon
Commitment: Reduce carbon emissions (tCO2e) by 70% by 2030
compared with a 2013/14 baseline, for property under our management
for at least two years.

For more information please visit www.landsec.com/sustainability.

Landsec carbon reduction target performance

Chart 91

Creating jobs and opportunities

Social Value
Commitment: Create £25m of social value through our community
programmes by 2025.

Performance: On track
This year we have created more than £4.8m of social value through our
community programmes, exceeding our in-year target to create £4m.

Our social value creation has included helping 180 people into jobs through
our employment programme, engaging 298 students in our education
programmes and donating nearly £2m to our charity partners. It also
includes our volunteering activity with over 40% of our employees (more
than 250 people) having volunteered this year, benefiting 3,400 people.

Fairness
Commitment: By 2020, ensure everyone working on our behalf, in an
environment we control, is given equal opportunities, protected from
discrimination and paid at least the Real Living Wage.

Performance: On track
Landsec continues to be an accredited Real Living Wage employer, both
for our employees and those working on our behalf on our sites, including
construction and service partners.

We are on track to meet our 2020 commitment to ensure everyone
working on our behalf in an environment we control will be paid the
Real Living Wage by the end of 2020.

Diversity
Commitment: Make measurable improvements to the profile – in terms
of gender, ethnicity and disability – of our employee mix.

Performance: On track
Across the whole organisation 52% of our employees are female, exceeding
our 2025 target of 50%. In the representation of women at leader level,
we increased to 24% this year (2019: 19.5%) but at senior-leader level,
we moved backwards to 30% (2019: 38%).

Health and safety
Commitment: Maintain an exceptional standard of health, safety and
security in all the working environments we control.

90,000

80,000

79,614

–4%
76,718

70,000

60,000

50,000

40,000

e
2
O
C
t

30,000

20,000

10,000

–19%
64,703

–32%
54,333

–42%
46,297

–70%
23,884

2013/14
Baseline

2016/17

2017/18

2018/19

2019/20

2030

Scope 1

Scope 2

Scope 3

Performance: On track
This year we achieved our original target to reduce carbon intensity by
40% by 2030, 11 years early, having reduced our carbon intensity by 48%
compared to 2013/14. We therefore updated our target in line with the
Science Based Targets initiative’s new methodology for 1.5°C targets.
In line with our updated target, we have reduced our absolute carbon
emissions by 42% compared to a 2013/14 baseline.

We also launched our new net zero carbon strategy, setting out
our five-stage plan to achieve this, including setting an internal price
for carbon.

Renewable energy
Commitment: Ensure 100% of our electricity supplies through our
corporate contract are from REGO-backed renewable sources.

Performance: Complete
We continue to procure 100% renewable electricity across our portfolio.
We are looking to move our procurement towards direct purchasing from
renewable projects through Power Purchase Agreements (PPA).

Commitment: Achieve 3 MW of renewable electricity capacity by 2030.

Performance: On track
Our current on-site renewable electricity capacity is 1.5 MW. We are
currently reviewing solar PV feasibility studies for Bluewater and Hatfield
Galleria Outlet Centre, and progressing feasibility study for on-site
renewable technologies in our strategic land development pipeline.

Performance: On track
In February 2020, we successfully migrated from the British Standard
OHSAS 18001 to the international H&S standard ISO 45001. We’ve also
launched an ambitious programme of mandatory health, safety and
security training for all our employees, including contingent workers.

Energy
Commitment: Reduce energy intensity (kWh/m2) by 40% by 2030
compared with a 2013/14 baseline, for property under our management
for at least two years.

178

Landsec Annual Report 2020
Landsec energy intensity target performance

Chart 92

129

–13%
112

–14%
111

–18%
106

–22%
100

140

120

100

m
/
h
W
k

2013/2014
Baseline

2016/17

2017/18

2018/2019

2019/20

2030

Performance: On track
We have reduced energy intensity by 22% compared to 2013/14.

We continue to use our bespoke energy reduction plans to optimise our
buildings to use less energy. This year at our Hatfield Galleria Outlet Centre
we installed corridor temperature sensors allowing closer monitoring of
energy usage. This has achieved a 75.5% reduction is gas use and an
overall reduction of 13% in energy use at the site. Within our commercial
developments, we are using the Design for Performance approach to set
energy intensity targets for our base building performance, in line with
achieving our 2030 targets.

Waste
Commitment: Send zero operational waste to landfill.

Performance: Complete
We continue to divert 100% from landfill across our operational activities.

chilled still or sparkling water, and since September 2019 they have
dispensed the equivalent of over 21,000 plastic bottles. As managing
waste responsibly becomes an increasingly important issue, we have
also expanded our waste management commitments to cover both
operational and construction activities with demanding targets for
re-use and reduction.

–40%
77

Sustainable design and innovation

Resilience
Commitment: Assess and mitigate physical and financial climate change
adaptation risks that are material across our portfolio.

Performance: On track
To continue aligning our disclosures with the TCFD recommendations, we have
commissioned Willis Tower Watson to update the physical climate change
impact research conducted in 2017 and 2019 and to undertake a quantitative
assessment of climate-related transition risks during the summer 2020.

In our development pipeline we undertake climate change adaptation risk
reviews, addressing structural and fabric resilience as well as building services.

Materials
Commitment: Source core construction products and materials from
ethical and sustainable sources.

Performance: On track
Our developments continue to make good progress against this target.

All our live developments are targeting 100% of core construction
materials to be manufactured within UK and Europe, to reduce emissions
from transportation and reduce risk of ethical issues in manufacture
and extraction. Projects on site are sourcing 99.9% of core construction
materials with responsible sourcing certification.

Landsec waste performance

Chart 93

A new Prohibited Materials List has been developed with a clear focus on
modern slavery and is now published on our website.

74.9%

74.7%

7,838

23,359

8,477

25,001

50,000

45,000

35,000

30,000

25,000

70.8%

10,165

s
e
n
n
o
T

20,000

24,732

15,000

20,000

10,000

5,000

72.7%

9,860

26,203

80%

70%

60%

50%

40%

30%

20%

10%

2016/17

2017/18

2018/19

2019/20

Recycling

Combustion

Landfill

Recycling rate

Commitment: At least 75% waste recycled across all our operational
activities by 2020.

Performance: On track
This year we recycled 73% of operational waste.

We continue to support our customers in reducing single use plastic by
partnering with Ape2o and installing two filtered water dispensers within
the public areas of our One New Change and New Street Square sites.
The machines allow the public to refill their own water bottles with

Biodiversity
Commitment: Maximise the biodiversity potential of all our development
and operational sites and achieve a 25% biodiversity net gain across our
five operational sites currently offering the greatest potential by 2030.

Performance: On track
We continue to partner with The Wildlife Trusts to enhance biodiversity
net gain at five retail centres. Since 2016 we’ve implemented biodiversity
enhancements including over half a square kilometre of wildflower
planting. We’re undertaking an ecological survey at each site to assess
the effectiveness of these enhancements, and to measure progress
toward our biodiversity net gain target of 25% by 2030.

Our developments embed ecological net gain as part of their brief and
progressing designs. All developments are on target with significant net
gain and we have published our new Biodiversity Brief for developments.

Wellbeing
Commitment: Ensure our buildings are designed and managed to
maximise wellbeing and productivity.

Performance: On track
The WELL recertification process for our HQ is progressing and we’re
targeting a Platinum level. Where we provide HQ space for our customers,
we’re making sure the quality of our design enables them to achieve
certification to the WELL Building Standard for their operations.

179

Additional informationLandsec Annual Report 2020

Benchmarking scores

Taking part in rigorous external benchmarking of our performance helps us to track and assess our progress. It also provides stakeholders with confidence
that we’re turning our commitments and targets into action, and that we’re delivering on our ambition to be a sustainability leader in our industry.

Benchmark performance

Activity

CDP

Performance

2019: A-list (top 2%). The only A-list UK REIT
2018: A-list (Leadership)
2017: A-list (Leadership)

Table 94

Global Real Estate Sustainability Benchmark (GRESB)

2019: score 90%. Sector leader, ranking 1st in Europe and UK diversified office/retail (mixed)
2018: score 90%
2017: score 78%

Dow Jones Sustainability Index (DJSI)

FTSE4Good

EPRA

Workforce Disclosure Initiative (WDI)

MSCI

Sustainalytics

EcoAct (previously Carbon Clear)

Social value data 2019/20

2019: score 82/percentile ranking 98
2018: score 73/percentile ranking 93
2017: score 75/percentile ranking 92

Percentile ranking 89. We continue to retain our established position in the FTSE4Good Index.

Received our sixth Gold Award from EPRA for best practice sustainability reporting

2019: score 51% (average score for all companies: 40%)
2018: score 73% (average score for all companies: 53%)

ESG rating AA

Score 82/percentile ranking 97

We’ve again been named a climate leader, ranking 5th for all FTSE 100 companies and
1st for our sector

Total social value created through our community programmes

Community employment

Social value created

Social value created by supporting offenders and ex-offenders into employment

Social value created by supporting 18-24 NEETS (not in education, employment or training) into employment

Social value created by helping people in supported accommodation into employment

Total number of people helped into employment

Education

Total number of students engaged

% female students

% BAME students

% of students reporting feeling more prepared for labour market (of 138 students who were asked this question on their feedback form)

% students reporting teamwork increase (of 138 students who were asked this question on their feedback form)

Volunteering

Social value created

Total number of people benefitted by Landsec volunteering programme

Total number of volunteer engagements

Total Landsec employees who have volunteered (at least once)

Total volunteering hours by Landsec staff

Charity partnerships

Total value of support given to charities

Total value directly donated to charities by Landsec

Value of in-kind space donated to local charity partners

180

Table 95

2019/20

£4,822,053

£2,594,380

£929,694

£648,697

£226,461

180

298

63%

32%

95%

97%

£402,256

3,400

539

253

8,527

£1,823,184

£293,255

£1,110,262

Sustainability performancecontinuedLandsec Annual Report 2020
Streamlined energy and carbon reporting

Our streamlined energy and carbon reporting figures include energy
consumption and carbon emissions associated with all properties under
our operational control (i.e. absolute portfolio). Energy consumption
is reported as kWh and no normalisation technique is applied. Carbon
emissions are reported as tonnes of carbon dioxide equivalent (tCO2e).
We report our full greenhouse gas (GHG) emissions annually in
accordance to the WRI GHG Protocol.

GHG emissions are broken down into three scopes: scope 1,2 and 3.

Scope 1 emissions are direct emissions from activities controlled by us
that release emissions into the atmosphere, while scope 2 emissions are
indirect emissions associated with our consumption of purchased energy.

At Landsec, scope 1 comprises emissions from natural gas and refrigerant
gases. Scope 2 emissions are from electricity, heating and cooling purchased
for common areas and shared services. All material sources of scope 1
and 2 emissions are reported. As the remaining sources (e.g. diesel used
in generator testing) represent such a small proportion of total emissions,
we do not report them.

Scope 2 emissions are reported using both the “location-based” and
“market-based” accounting methods. Location-based emissions are
reported using the UK Government’s ‘Greenhouse gas reporting:
conversion factors 2019’. Scope 2 market-based emissions are reported
using the conversion factor associated with each individual electricity,
heating and cooling supply, either obtained directly from the supplier
or from their official company website.

Between April 2017 and March 2019, at least 15% of our gas purchases
were from green sources (i.e. biogas). Scope 1 emissions for this period
were also reported using both the “location-based” and “market-based”
accounting methods. Our market-based emissions from biogas were
reported as following: the CH4 or N2O emissions from biogas were
reported as scope 1, and the CO2 portion of the biogas was reported
outside of the scopes, as a memo line. Therefore, our scope 1 market-
based emissions were based on the emissions from the remaining 85% of
our gas purchases, as well as the CH4 or N2O conversion factors associated
with biogas. As we didn’t purchase biogas in the current year, scope 1
emissions for 2019/20 are reported using only “location-based” method.

Scope 3 emissions are those that are a consequence of our business
activities, but which occur at sources we do not own or control and
which are not classified as scope 2 emissions. The GHG Protocol identifies
15 categories of which eight are directly relevant for Landsec.

Landsec – Scope 1 and 2 emissions 2017-2020

Table 96

Location-based emission

Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Scope 1 and 2 tCO2e

Intensity

2017/18

14,755

36,620

51,374

2018/19

11,490

30,518

42,008

2019/20

9,158

25,382

34,540

Scope 1 and 2 tCO2e/m2

0.03

0.02

Market-based emission

Emissions

Scope 1 tCO2e
Scope 2 tCO2e
Scope 1 and 2 tCO2e

Intensity

2017/18

12,550

2,200

14,749

2018/19

2019/20

9,879

3,517

9,158

2,223

13,396

11,381

Scope 1 and 2 tCO2e/m2

0.01

Scope 1 and 2 GHG emissions using location-based emission factors have
dropped by 18% compared with previous year. This has been primarily
driven by a combination of energy efficiency initiatives and a reduction in
the UK’s emission factors due a cleaner energy mix. The detailed breakdown
of main factors driving the change in our scope 1 and scope 2 can be seen
in the waterfall chart 97 below. In terms of market-based emissions we
have seen a reduction of 15%. This has been due to a significant reduction
in gas consumption.

Landsec Scope 1 and 2 emissions – year-on-year driving factors Chart 97

42,008

146

–64

–203

–354

–4,502

34,540

–2,491

45,000

40,000

35,000

30,000

e
2
O
C
t

25,000

20,000

15,000

10,000

5,000

2018/19

Divestments

Site
additions

Operational
changes

External
temperature

Energy
performance

Emission
factor

2019/20

The table 98 shows the absolute energy consumption with a breakdown
by landlord and tenant consumption. This year absolute energy intensity
has reduced by 6% compared with previous year. This has been achieved
by savings realised from our active energy management programme.
This year we identified and committed to implement energy efficiency
projects across our portfolio that will lead to over 5,500 MWh of savings
per annum. Amongst these initiatives, at Hatfield Galleria Outlet Centre
we have installed corridor temperature sensors which has allowed closer
monitoring of our energy usage and allowed early switch-off of gas
burning boilers. This has achieved a 75.5% reduction is gas use and
an overall reduction of 13% in energy use at the site. More information
on our energy programme can be found on page 39 (Physical review).

181

Additional informationLandsec Annual Report 2020
Landsec – Energy consumption 2017-2020
Energy consumption (kWh)
Natural Gas

Electricity

District Heating and Cooling

Total Energy Consumption

Energy intensity

For landlord shared services
(Sub)metered to tenants
Total Natural Gas consumption
For landlord shared services
(Sub)metered to tenants
Total Electricity consumption
For landlord shared services
(Sub)metered to tenants
Total Heating and Cooling consumption
For landlord shared services
(Sub)metered to tenants
Total Energy consumption

2017/18
70,393,965
15,943,826
86,337,791
101,815,934
65,691,130
167,507,064
5,238,035
6,641,102
11,879,137
177,447,934
88,276,059
265,723,992
144

2018/19
53,714,180
27,595,980
81,310,160
102,604,274
64,985,746
167,590,020
9,607,784
7,063,310
16,671,094
165,926,238
99,645,036
265,571,274
142

Table 98
2019/20
43,015,309
28,576,514
71,591,823
95,695,817
68,977,474
164,673,291
5,312,441
7,356,140
12,668,581
144,023,567
104,910,128
248,933,695
134

Every year we report our full carbon footprint, including indirect emissions from our value chain activities (i.e. scope 3 emissions). By developing a full
GHG emissions inventory, incorporating scope 1, scope 2, and scope 3 emissions, we’re able to understand the total emissions associated with our business.
The GHG Protocol identifies 15 categories for scope 3 emissions of which eight are directly relevant to our business. The table below provides a breakdown
of our entire emissions inventory. Our scope 3 reporting methodology is detailed in the 2020 Sustainability Performance and Data report available at
landsec.com/sustainability.

Landsec – Carbon footprint

GHG Scope Category
Scope 1
Scope 1
Scope 2
Scope 2
Scope 3
Scope 3
Purchased goods and services (PG&S)
Capital goods
Fuel- and energy-related activities
Upstream transportation and distribution

Waste generated in operations
Business travel
Employee commuting
Upstream leased assets
Downstream transportation and distribution
Processing of sold products
Use of sold products
End-of-life treatment of sold products
Downstream leased assets
Franchises
Investments
Total emissions

Emissions
(tCO2e)
14,755
36,620
353,099
59,936
128,551
11,699
Grouped
under PG&S
769
366
182
n/a
n/a
n/a
n/a
n/a
151,596
n/a
n/a
404,473

2017/18

% of total
value chain
3.6%
9.1%
87.3%
14.8%
31.8%
2.9%
0.0%

0.2%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
37.5%
0.0%
0.0%

Emissions
(tCO2e)
11,490
30,518
272,938
48,123
89,149
8,764
Grouped
under PG&S
785
324
180
n/a
n/a
n/a
n/a
n/a
125,612
n/a
n/a
314,945

2018/19

% of total
value chain
3.6%
9.7%
86.7%
15.3%
28.3%
2.8%
0.0%

0.2%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
39.9%
0.0%
0.0%

Emissions
(tCO2e)
9,158
25,382
235,031
48,787
69,123
6,919
Grouped
under PG&S
770
270
166
n/a
n/a
n/a
n/a
n/a
108,995
n/a
n/a
269,571

Table 99
2019/20

% of total
value chain
3.4%
9.4%
87.2%
18.1%
25.6%
2.6%
0.0%

0.3%
0.1%
0.1%
0.0%
0.0%
0.0%
0.0%
0.0%
40.4%
0.0%
0.0%

Our scope 3 reporting allows us to identify the most significant areas in
our value chain to focus on reducing emissions. The chart below shows
the largest categories.

Landsec – Scope 3 GHG emissions 2019/20

Chart 100

■ Downstream leased assets
■ Capital goods
■ Purchased goods and services (PG&S)
■ Fuel- and energy-related activities
■ Others

46%
29%
21%
3%
1%

The two largest scope 3 categories are Capital goods and Downstream
leased assets, making up over 66% of our total emissions.

Capital goods include the emissions associated with the manufacture
and transport of materials used within our development activities
and portfolio projects. Downstream leased assets are those emissions
associated with energy consumed by our customers within our assets.
In addition to working closely with partners and customers to reduce
these emissions, there are additional reasons for year-on-year reduction
in both categories.

182

Sustainability performancecontinuedLandsec Annual Report 2020
For Downstream leased assets, lower absolute emissions in 2019/20 are associated with reduction in the UK’s emission factors. The reduction in
emissions for Capital goods, on the other hand, is partly explained by the fact that we have concluded a number of developments in previous years
and most of our current projects were still in the design stage during the reporting year. Once these developments progress to construction phase,
carbon emissions are expected to become more significant. The table below provides the amount of embodied carbon emissions reported for each
development in 2019/20.

Because both categories represent a significant proportion of our total carbon footprint, we are committed to understanding the impacts of our
buildings as much as we can to ensure that we build and run them as efficiently as possible. We therefore undertake full life-cycle assessments (LCAs)
on all our development projects, following the RICS guidance document ‘Whole life carbon assessment for the built environment’ 1st Edition and
BS EN 15978. The assessment considers both the embodied carbon emissions from our supply chain and construction activities (stages A1 to A5) as
well as anticipated emissions from a building’s operations and embodied carbon associated with maintenance and repairs over the lifetime of the
building (stages B1 to C4). To minimise our construction impacts, we set targets on the embodied carbon emissions from supply chain (A1-A5) on a
project-by-project basis, measured against design stage baseline (RIBA stage 3), and track these through to the completion of our buildings. The table
below shows that we’ll avoid nearly 30,000 tCO2e by targeting an overall reduction of 16% in the embodied carbon across four developments. We also
carefully design our buildings to minimise the energy demand of our operations and meet the remaining demand through renewable energy contracts.

Embodied carbon – development pipeline

Development

21 Moorfields

Lucent

Nova East

Sumner Street

Landsec development pipeline

Assurance

Total embodied carbon
baseline tCO2
108,451

Forecasted total embodied
carbon tCO2
92,776

27,120

24,780

24,741

185,092

21,773

21,470

19,110

155,129

Target reduction %

–14%

–20%

–13%

–23%

–16%

Table 101

Embodied carbon reported
in 2019/20 tCO2
21,152

424

564

103

22,243

Landsec’s auditor, EY, has once again conducted sustainability assurance. This is part of our journey to embed sustainability across the business and
enhance the integrity, quality and usefulness of the information we provide. EY performed a limited assurance engagement on selected performance
data and qualitative statements in the Physical and Social sections of the Strategic Report on pages 38-47; the sustainability content in the ‘Additional
information’ section of the Landsec 2020 Annual Report on pages 178-183; and the online Landsec 2020 Sustainability Performance and Data Report,
which can be found at www.landsec.com/sustainability/reports-benchmarking. The full assurance statement is available at www.landsec.com/
sustainability/governance-policies.

183

Additional informationLandsec Annual Report 2020
Combined Portfolio analysis

Like-for-like segmental analysis

Like-for-like segmental analysis continued

Market value1

Valuation movement1

Rental income1

Net estimated
rental value2

31 March
2020
£m

31 March
2019
£m

Surplus/
(deficit)
£m

Surplus/
(deficit)
%

31 March
2020
£m

31 March
2019
£m

31 March
2020
£m

31 March
2019
£m

2,994
1,247
1,422
346
6,009

1,307
1,494
871
444
4,116

1,153
398
1,551
11,676
218
558
169
160
–
12,781

2,944
1,221
1,400
336
5,901

1,547
2,058
971
585
5,161

1,288
377
1,665
12,727
248
374
235
115
51
13,750

53
28
21
1
103

(242)
(562)
(100)
(147)
(1,051)

(143)
7
(136)
(1,084)
(38)
19
(63)
(13)
–
(1,179)

1.9%
2.4%
1.6%
0.5%
1.9%

–15.8%
–27.5%
–10.3%
–25.5%
–20.5%

–10.9%
1.7%
–8.0%
–8.8%
–14.7%
3.5%
–28.1%
–9.3%
–
–8.8%

12,781

13,750

(1,179)

-8.8%

132
51
60
15
258

69
124
61
38
292

76
22
98
648
12
–
14
2
2
678
(9)
669

128
49
60
15
252

70
130
61
39
300

79
20
99
651
13
1
13
1
4
683
(9)
674

144
63
72
21
300

69
108
62
36
275

76
20
96
671
–
68
11
4
–
754

136
61
69
19
285

73
120
62
39
294

78
18
96
675
22
40
13
1
4
755

Market value1

Valuation movement1

Rental income1

Net estimated
rental value2

31 March
2020
£m

31 March
2019
£m

Surplus/
(deficit)
£m

3,264
1,668
1,423
471
6,826

1,370
1,663
871
444
4,348

3,248
1,491
1,400
446
6,585

1,591
2,292
971
636
5,490

1,188
419
1,607
12,781

1,288
387
1,675
13,750

(10)
61
20
(1)
70

(239)
(625)
(100)
(147)
(1,111)

(143)
5
(138)
(1,179)

Surplus/
(deficit)
%

–0.3%
3.9%
1.5%
–0.4%
1.1%

–15.0%
–27.6%
–10.3%
–25.5%
–20.5%

–10.9%
1.3%
–8.0%
–8.8%

12,781

13,750

(1,179)

–8.8%

11,802
979
12,781

12,603
1,147
13,750

(998)
(181)
(1,179)

–8.1%
–16.1%
–8.8%

31 March
2020
£m

31 March
2019
£m

31 March
2020
£m

31 March
2019
£m

144
51
60
15
270

70
138
61
40
309

77
22
99
678
(9)
669

610
59
669

141
49
60
15
265

72
142
62
43
319

79
20
99
683
(9)
674

617
57
674

160
101
72
31
364

73
120
62
36
291

79
20
99
754

688
66
754

158
100
69
19
346

76
133
62
42
313

78
18
96
755

693
62
755

Office

West End
City
Mid-town
Southwark and other

Total Office
Retail

London retail
Regional retail
Outlets
Retail parks

Total Retail
Specialist

Leisure and hotels
Other

Total Specialist
Like-for-like portfolio6
Proposed developments1
Development programme7
Completed developments8
Acquisitions9
Sales10
Combined Portfolio
Properties treated as finance leases
Combined Portfolio

Total portfolio analysis

Office

West End
City
Mid-town
Southwark and other

Total Office
Retail

London retail
Regional retail
Outlets
Retail parks

Total Retail
Specialist

Leisure and hotels
Other

Total Specialist
Combined Portfolio
Properties treated as finance leases
Combined Portfolio

Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio

184

Southwark and other

Office

West End

City

Mid–town

Total Office

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail

Specialist

Leisure and hotels

Other

Total Specialist

Like–for–like portfolio6

Proposed developments1

Development programme7

Completed developments8

Acquisitions9

Sales10

Combined Portfolio

Southwark and other

Office

West End

City

Mid–town

Total Office

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail

Specialist

Leisure and hotels

Other

Total Specialist

Combined Portfolio

Represented by:

Investment portfolio

Share of joint ventures

Combined Portfolio

Gross estimated

rental value3

31 March

Net initial yield4

Equivalent yield5

Voids (by ERV)1

Table 102

2020

£m

144

303

116

283

–

2020

£m

161

105

370

128

300

769

702

769

683

686

769

770

4.5%

4.2%

2019

£m

136

288

128

302

2019

£m

158

103

351

142

323

770

707

770

2019

4.0%

4.2%

3.2%

4.1%

3.9%

4.1%

4.9%

5.0%

6.2%

4.9%

5.2%

3.0%

4.7%

4.4%

4.8%

3.9%

0.7%

–

2019

4.0%

3.5%

3.2%

3.7%

4.1%

4.8%

5.0%

6.2%

4.8%

5.2%

3.0%

4.7%

4.2%

2020

4.5%

4.0%

4.3%

4.2%

4.3%

4.6%

6.4%

5.6%

7.5%

5.8%

4.3%

3.3%

4.1%

4.8%

–

6.1%

2.2%

2020

4.1%

3.0%

4.3%

3.1%

3.8%

4.6%

6.4%

5.6%

7.5%

5.8%

4.3%

3.3%

4.1%

4.5%

4.6%

4.4%

4.5%

2020

4.6%

4.5%

5.0%

4.6%

6.2%

5.9%

7.4%

5.8%

4.4%

5.4%

5.1%

n/a

4.3%

6.0%

4.8%

n/a

5.1%

2019

4.5%

5.2%

4.5%

4.3%

5.2%

5.4%

6.2%

5.0%

5.5%

4.2%

5.2%

4.8%

n/a

4.3%

4.9%

4.5%

n/a

4.8%

2020

0.3%

4.2%

–

2.9%

1.3%

3.0%

4.3%

4.5%

3.3%

3.9%

1.4%

0.5%

1.2%

2.4%

n/a

2019

1.5%

–

4.8%

1.0%

2.3%

5.2%

4.1%

3.1%

4.0%

1.5%

1.1%

1.5%

2.4%

n/a

Notes

1. Refer to Glossary for definition.

2. Net estimated rental value is gross estimated rental

value, as defined in the Glossary, after deducting

expected rent payable.

3. Gross estimated rental value (ERV) – refer to Glossary

for definition. The figure for proposed developments

relates to the existing buildings and not the schemes

proposed.

4. Net initial yield – refer to Glossary for definition. This

calculation includes all properties including those sites

with no income.

5. Equivalent yield – refer to Glossary for definition.

Proposed developments are excluded from the

calculation of equivalent yield on the Combined

Portfolio.

6. The like-for-like portfolio – refer to Glossary for

definition. Capital expenditure on refurbishments,

acquisitions of head leases and similar capital

expenditure has been allocated to the like-for-like

portfolio in preparing this table.

7. The development programme – refer to Glossary for

definition. Net initial yield figures are only calculated

for properties in the development programme that

4.3%

3.5%

4.2%

have reached practical completion.

8. Completed developments – refer to Glossary for

definition. Comprises Westgate Oxford.

Includes all properties acquired since 1 April 2018.

10. Includes all properties sold since 1 April 2018.

Total portfolio analysis continued

Gross estimated

rental value3

Net initial yield4

31 March

Landsec Annual Report 2020

Like-for-like segmental analysis

Like-for-like segmental analysis continued

Market value1

Valuation movement1

Rental income1

31 March

Net estimated

rental value2

Surplus/

(deficit)

£m

Surplus/

(deficit)

Office

West End
City
Mid–town
Southwark and other

Total Office
Retail

London retail
Regional retail
Outlets
Retail parks

Total Retail
Specialist

Leisure and hotels
Other

Total Specialist
Like–for–like portfolio6
Proposed developments1
Development programme7
Completed developments8
Acquisitions9
Sales10
Combined Portfolio

Total portfolio analysis continued

Office

West End
City
Mid–town
Southwark and other

Total Office
Retail

London retail
Regional retail
Outlets
Retail parks

Total Retail
Specialist

Leisure and hotels
Other

Total Specialist
Combined Portfolio

Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio

Southwark and other

Office

West End

City

Mid-town

Total Office

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail

Specialist

Leisure and hotels

Other

Total Specialist

Like-for-like portfolio6

Proposed developments1

Development programme7

Completed developments8

Acquisitions9

Sales10

Combined Portfolio

Properties treated as finance leases

Combined Portfolio

Total portfolio analysis

Southwark and other

Office

West End

City

Mid-town

Total Office

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail

Specialist

Leisure and hotels

Other

Total Specialist

Combined Portfolio

Represented by:

Investment portfolio

Share of joint ventures

Combined Portfolio

Properties treated as finance leases

12,781

13,750

(1,179)

–8.8%

754

755

12,781

13,750

(1,179)

-8.8%

Market value1

Valuation movement1

Rental income1

31 March

Net estimated

rental value2

4,116

5,161

(1,051)

(143)

–10.9%

2020

£m

2,994

1,247

1,422

346

6,009

1,307

1,494

871

444

1,153

398

1,551

11,676

218

558

169

160

–

2020

£m

3,264

1,668

1,423

471

6,826

1,370

1,663

871

444

2019

£m

2,944

1,221

1,400

336

5,901

1,547

2,058

971

585

1,288

377

1,665

12,727

248

374

235

115

2019

£m

3,248

1,491

1,400

446

6,585

1,591

2,292

971

636

103

(242)

(562)

(100)

(147)

(136)

(1,084)

(38)

(63)

(13)

–

Surplus/

(deficit)

£m

(10)

(1)

(239)

(625)

(100)

(147)

1.9%

2.4%

1.6%

0.5%

1.9%

–15.8%

–27.5%

–10.3%

–25.5%

–20.5%

1.7%

–8.0%

–8.8%

–14.7%

3.5%

–28.1%

–9.3%

–

Surplus/

(deficit)

–0.3%

3.9%

1.5%

–0.4%

1.1%

–15.0%

–27.6%

–10.3%

–25.5%

–20.5%

4,348

5,490

(1,111)

1,188

419

1,607

12,781

1,288

387

1,675

13,750

(143)

–10.9%

(138)

(1,179)

1.3%

–8.0%

–8.8%

12,781

13,750

(1,179)

–8.8%

11,802

979

12,781

12,603

1,147

13,750

(998)

(181)

(1,179)

–8.1%

–16.1%

–8.8%

651

671

675

2020

£m

132

258

124

292

648

–

678

(9)

669

2020

£m

144

270

138

309

678

(9)

669

610

669

2019

£m

128

252

130

300

683

(9)

674

2019

£m

141

265

142

319

683

(9)

674

617

674

2020

£m

144

300

108

275

–

2020

£m

160

101

364

120

291

754

688

754

2019

£m

136

285

120

294

2019

£m

158

100

346

133

313

755

693

755

Gross estimated
rental value3

Net initial yield4

Equivalent yield5

Voids (by ERV)1

31 March
2020
£m

31 March
2019
£m

31 March
2020
%

31 March
2019
%

31 March
2020
%

31 March
2019
%

31 March
2020
%

31 March
2019
%

Table 102

144
64
74
21
303

69
116
62
36
283

77
20
97
683
–
70
12
4
–
769

136
62
71
19
288

73
128
62
39
302

78
18
96
686
22
43
14
1
4
770

4.5%
4.0%
4.3%
4.2%
4.3%

4.6%
6.4%
5.6%
7.5%
5.8%

4.3%
3.3%
4.1%
4.8%
–
–
6.1%
2.2%
–
4.5%

4.0%
4.2%
3.2%
4.1%
3.9%

4.1%
4.9%
5.0%
6.2%
4.9%

5.2%
3.0%
4.7%
4.4%
4.8%
–
3.9%
0.7%
–
4.2%

4.6%
4.5%
4.5%
5.0%
4.6%

4.6%
6.2%
5.9%
7.4%
5.8%

5.8%
4.4%
5.4%
5.1%
n/a
4.3%
6.0%
4.8%
n/a
5.1%

4.5%
4.5%
4.5%
5.2%
4.5%

4.3%
5.2%
5.4%
6.2%
5.0%

5.5%
4.2%
5.2%
4.8%
n/a
4.3%
4.9%
4.5%
n/a
4.8%

0.3%
4.2%
–
2.9%
1.3%

3.0%
4.3%
4.5%
3.3%
3.9%

1.4%
0.5%
1.2%
2.4%
n/a
n/a
n/a
n/a
n/a
n/a

1.5%
–
–
4.8%
1.0%

2.3%
5.2%
4.1%
3.1%
4.0%

1.5%
1.1%
1.5%
2.4%
n/a
n/a
n/a
n/a
n/a
n/a

Gross estimated
rental value3

Net initial yield4

31 March
2020
£m

31 March
2019
£m

31 March
2020
%

31 March
2019
%

161
105
74
30
370

74
128
62
36
300

79
20
99
769

702
67
769

158
103
71
19
351

76
142
62
43
323

78
18
96
770

707
63
770

4.1%
3.0%
4.3%
3.1%
3.8%

4.6%
6.4%
5.6%
7.5%
5.8%

4.3%
3.3%
4.1%
4.5%

4.0%
3.5%
3.2%
3.2%
3.7%

4.1%
4.8%
5.0%
6.2%
4.8%

5.2%
3.0%
4.7%
4.2%

4.6%
4.4%
4.5%

4.3%
3.5%
4.2%

Notes
1. Refer to Glossary for definition.
2. Net estimated rental value is gross estimated rental
value, as defined in the Glossary, after deducting
expected rent payable.

3. Gross estimated rental value (ERV) – refer to Glossary
for definition. The figure for proposed developments
relates to the existing buildings and not the schemes
proposed.

4. Net initial yield – refer to Glossary for definition. This

calculation includes all properties including those sites
with no income.

5. Equivalent yield – refer to Glossary for definition.
Proposed developments are excluded from the
calculation of equivalent yield on the Combined
Portfolio.

6. The like-for-like portfolio – refer to Glossary for

definition. Capital expenditure on refurbishments,
acquisitions of head leases and similar capital
expenditure has been allocated to the like-for-like
portfolio in preparing this table.

7. The development programme – refer to Glossary for
definition. Net initial yield figures are only calculated
for properties in the development programme that
have reached practical completion.

8. Completed developments – refer to Glossary for

definition. Comprises Westgate Oxford.
Includes all properties acquired since 1 April 2018.

9.
10. Includes all properties sold since 1 April 2018.

185

Additional informationLandsec Annual Report 2020

Lease lengths

Office

West End

City

Mid-town

Southwark and other

Total Office

Retail

London retail

Regional retail

Outlets

Retail parks

Total Retail

Specialist

Leisure and hotels

Other

Total Specialist

Combined Portfolio

Table 103

Weighted average unexpired lease term at 31 March 2020

Like-for-like portfolio
Mean1

Like-for-like portfolio,
completed developments
and acquisitions
Mean1

Years

7.5

7.6

9.0

10.7

8.1

6.5

4.9

3.5

5.6

5.1

11.5

n/a

11.5

7.2

Years

7.5

7.6

9.0

10.5

8.1

6.5

5.2

3.5

5.6

5.3

11.5

n/a

11.5

7.3

1. Mean is the rent weighted average of the unexpired lease term across all leases (excluding short-term leases). Term is defined as the earlier of tenant break or expiry.

186

Landsec Annual Report 2020
Development pipeline

Development pipeline at 31 March 2020

Property

Developments approved or in progress

Description

of use

Ownership
interest

Size
sq ft

Letting
status

Market
value
£m

Net income/
ERV
£m

Estimated
completion
date1

Table 104

Total
development
costs to date
£m

Forecast total
development
cost
£m

21 Moorfields, EC2

105 Sumner Street, SE1

Nova East, SW1

Lucent, W1

Proposed developments

Castle Lane, SW1

Portland House, SW1

Office

Retail

Office

Retail

Residential

100

564,000

139,000

1,000

166,000

111,000

30,000

3,000

Residential

Office

Retail

100

54,000

360,000

40,000

100

–

421

38 Mar 2022

10 Mar 2022

Jul 2022

14 Oct 2022

285

100

576

140

101

239

n/a

n/a Dec 2022

n/a

Feb 2023

n/a

1. The estimated completion dates shown in this table reflect our pre-Covid-19 expectation of practical completion. It is too early to assess the impact of Covid-19 with any certainty. However,

our current estimate is a delay to the completion dates shown of up to two months for schemes in the development programme and up to seven months for proposed developments.

Where the property is not 100% owned, floor areas and letting status shown above represent the full scheme whereas all other figures represent our
proportionate share. Letting % is measured by ERV and shows letting status at 31 March 2020. Trading property development schemes are excluded
from the development pipeline.

Total development cost
Refer to the Glossary for definition. Of the properties in the development pipeline at 31 March 2020, the only property on which interest was capitalised
on the land cost was 21 Moorfields, EC2.

Net income/ERV
Net income/ERV represents headline annual rent on let units plus ERV at 31 March 2020 on unlet units, both after rents payable.

Alternative performance measures

The Group has applied the European Securities and Markets Authority (ESMA) ‘Guidelines on Alternative Performance Measures’ in these results.
In the context of these results, an alternative performance measure (APM) is a financial measure of historical or future financial performance, position
or cash flows of the Group which is not a measure defined or specified in IFRS.

The table below summarises the APMs included in these results, where the definitions and reconciliations of these measures can be found and where
further discussion is included. The definitions of all APMs are included in the Glossary and further discussion of these measures can be found in the
Financial review.

Alternative performance measure

Revenue profit

Adjusted earnings

Adjusted earnings per share

Adjusted diluted earnings per share

EPRA net tangible assets

EPRA net tangible assets per share

Total business return

Combined Portfolio

Adjusted net debt

Group LTV

Nearest IFRS measure

Reconciliation

Table 105

Profit before tax

Profit attributable to shareholders

Basic earnings per share

Diluted earnings per share

Net assets attributable to shareholders

n/a

Investment properties

Borrowings

n/a

Note 4

Note 5

Note 14

Note 20

187

Additional informationLandsec Annual Report 2020

Reconciliation of segmental information
note to statutory reporting

The table below reconciles the Group’s income statement to the segmental information note (note 4 to the financial statements). The Group’s income
statement is prepared using the equity accounting method for joint ventures and includes 100% of the results of the Group’s non-wholly owned subsidiaries.
In contrast, the segmental information note is prepared on a proportionately consolidated basis and excludes the non-wholly owned share of the Group’s
subsidiaries. This is consistent with the financial information reviewed by management.

Rental income

Finance lease interest

Gross rental income (before rents payable)

Rents payable

Gross rental income (after rents payable)

Service charge income

Service charge expense

Net service charge expense

Other property related income

Direct property expenditure

Provisions related to 2020/21 rent

Segment net rental income

Other income

Indirect expense

Depreciation

Revenue profit before interest

Share of post-tax loss from joint ventures

Net deficit on revaluation of investment properties

Loss on disposal of investment properties

Profit on disposal of trading properties

Profit from long-term development contracts

Exceptional items

Other

Operating (loss)/profit

Finance income

Finance expense

Joint venture tax

(Loss)/profit before tax

Taxation

Loss attributable to shareholders

Group
income
statement
£m

Joint
ventures1
£m

Proportionate
share of
earnings2
£m

611

620

(13)

607

(90)

(2)

(72)

(21)

543

(69)

(4)

472

(151)

(1,000)

(6)

–

(5)

–

(690)

(165)

–

(837)

(832)

–

(2)

(12)

(2)

(14)

(2)

–

(3)

–

151

(181)

–

(16)

(2)

–

(1)

–

(1)

–

(1)

–

(1)

–

(1)

–

(1)

–

Table 106

Year ended 31 March 2020

Revenue
profit
£m

Capital
and other
items
£m

669

678

(15)

663

(102)

(4)

(86)

(23)

583

(72)

(4)

509

–

509

(112)

–

414

–

(1,179)

(6)

(5)

(1)

(1,181)

(69)

(2)

(1,251)

Total
£m

669

678

(15)

663

(102)

(4)

(86)

(23)

583

(72)

(4)

509

–

(1,179)

(6)

(5)

(1)

(672)

(181)

(2)

(837)

(832)

1. Reallocation of the share of post-tax loss from joint ventures reported in the Group income statement to the individual line items reported in the segmental information note.
2. Removal of the non-wholly owned share of results of the Group’s subsidiaries. The non-wholly owned subsidiaries are consolidated at 100% in the Group’s income statement, but only

the Group’s share is included in revenue profit reported in the segmental information note.

188

Landsec Annual Report 2020Rental income

Finance lease interest

Gross rental income (before rents payable)

Rents payable

Gross rental income (after rents payable)

Service charge income

Service charge expense

Net service charge expense

Other property related income

Direct property expenditure

Net rental income

Indirect property expenditure

Other income

Revenue profit before interest

Share of post-tax loss from joint ventures

Net deficit on revaluation of investment properties

Loss on disposal of investment properties

Fair value movement prior to acquisition of non-owned element of a joint venture

Profit from long-term development contracts

Exceptional items

Other

Operating (loss)/profit

Finance income

Finance expense

(Loss)/profit before tax

Taxation

Loss attributable to shareholders

Group
income
statement
£m

Joint
ventures2
£m

Proportionate
share of
earnings3
£m

619

628

(10)

618

(88)

(2)

(72)

577

(79)

501

(85)

(441)

–

(14)

(1)

(40)

(109)

(123)

(119)

–

(3)

(10)

(1)

(11)

(2)

–

(117)

(2)

–

(19)

–

(2)

–

(2)

–

(2)

–

(2)

–

(2)

–

Table 106
Year ended 31 March 20191

Revenue
profit
£m

Capital
and other
items
£m

674

683

(13)

670

(98)

(3)

(83)

618

(81)

540

–

540

(118)

442

–

(557)

(2)

(14)

–

(561)

(10)

(565)

Total
£m

674

683

(13)

670

(98)

(3)

(83)

618

(81)

540

–

(557)

(2)

(14)

–

(21)

(128)

(123)

(119)

1. Restated for changes in accounting policies. See note 3 of the financial statements for details.
2. Reallocation of the share of post-tax loss from joint ventures reported in the Group income statement to the individual line items reported in the segmental information note.
3. Removal of the non-wholly owned share of results of the Group’s subsidiaries. The non-wholly owned subsidiaries are consolidated at 100% in the Group’s income statement, but only

the Group’s share is included in revenue profit reported in the segmental information note.

189

Additional informationLandsec Annual Report 2020
Ten year summary

Income statement

Revenue

Costs

Share of post-tax (loss)/profit from joint ventures

Profit/(loss) on disposal of investment properties

Profit/(loss) on disposal of investments in
joint ventures

Profit on disposal of other investments

Net (deficit)/surplus on revaluation of
investment properties

Operating (loss)/profit

Net finance expense

Net gain on business combination

Impairment of investment in joint ventures

(Loss)/profit before tax

Taxation

Net (deficit)/surplus on revaluation
of investment properties1:

Investment portfolio

Share of joint ventures

Total

Revenue profit

Results per share

Total dividend payable in respect of the
financial year

Basic (loss)/earnings per share

Diluted (loss)/earnings per share

Adjusted earnings per share

Adjusted diluted earnings per share

Net assets per share

Diluted net assets per share

2020
£m

741

2019
£m

757

(274)

(271)

467

(151)

(6)

–

486

(85)

–

2018
£m

830

(321)

509

–

2017
£m

781

(260)

521

(2)

2016
£m

936

2015
£m

765

2014
£m

712

(404)

(329)

(244)

532

199

–

436

326

107

–

468

196

–

607

(1,000)

(441)

(98)

(186)

739

1,771

Table 107

Year ended and as at 31 March

2013
£m

734

(281)

453

(3)

–

2012
£m

670

(240)

430

–

2011
£m

701

(271)

430

144

–

197

170

794

434

1,545

2,643

1,289

(268)

(185)

(207)

(165)

707

(157)

697

1,443

(162)

(198)

(690)

(147)

–

(40)

(83)

–

(837)

(123)

505

(548)

–

(43)

(1)

(44)

–

166

167

–

1,360

2,438

1,129

–

1,362

2,438

1,137

–

551

–

551

197

218

–

(2)

533

541

170

191

–

1,245

1,262

794

115

909

(998)

(181)

(1,179)

(440)

(117)

(557)

(98)

(187)

(91)

(147)

736

171

907

1,768

269

2,037

609

155

764

414

442

406

382

362

329

320

291

299

275

23.2p

45.55p

44.2p

38.55p

35.0p

31.85p

30.7p

29.8p

29.0p

28.2p

(112.4)p

(16.1)p

(112.4)p

(16.1)p

55.9p

59.7p

(5.8)p

53.1p

21.1p

48.4p

48.3p

172.4p

308.6p

144.8p

171.8p

307.4p

144.3p

45.9p

45.7p

41.7p

41.5p

40.7p

40.5p

1,182p

1,341p

1,404p

1,418p

1,434p

1,293p

1,016p

1,181p

1,339p

1,404p

1,416p

1,431p

1,288p

1,012p

70.7p

70.5p

37.0p

36.8p

903p

900p

906p

69.9p

69.7p

38.5p

863p

860p

866p

165.0p

164.8p

35.5p

824p

823p

828p

(Loss)/profit attributable to shareholders

(832)

(119)

EPRA net tangible assets per share2

1,192p

1,348p

1,410p

1,422p

1,433p

1,296p

1,016p

1. Includes our non-wholly owned subsidiaries on a proportionate basis.
2. New metric presented as a result of the change in EPRA best practice recommendations. Refer to table 62 for further details.

190

Landsec Annual Report 2020Balance sheet

Investment properties

Intangible assets

Net investment in finance leases

Loan investments

Investment in joint ventures

Trade and other receivables

Other non-current assets

Total non-current assets

Table 108

As at 31 March

2020
£m

2019
£m

2018
£m

2017
£m

2016
£m

2015
£m

2014
£m

2013
£m

2012
£m

2011
£m

11,297

12,094

12,336

12,144

12,358

12,158

9,848

9,652

8,453

8,889

156

–

824

178

159

–

162

–

165

–

183

–

185

–

187

–

188

–

185

1,031

1,151

1,734

1,668

1,434

1,443

1,301

1,138

176

165

123

–

117

940

12,501

13,510

13,897

14,253

14,377

13,944

11,577

11,216

9,868

10,116

Trading properties and long-term development
contracts

Trade and other receivables

Monies held in restricted accounts and deposits

Cash and cash equivalents

Other current assets

Total current assets

433

1,345

1,859

437

471

–

122

418

–

124

445

–

222

404

–

193

366

–

152

345

–

133

760

–

129

352

–

524

572

591

613

650

595

570

952

554

Non-current assets held for sale

–

283

–

Borrowings

Trade and other payables

Other current liabilities

Total current liabilities

Borrowings

Trade and other payables

Other non-current liabilities

Redemption liability

Total non-current liabilities

Net assets

Net debt

(977)

(270)

(2)

(934)

(273)

(18)

(872)

(294)

(14)

(404)

(302)

(7)

(1,249)

(1,225)

(1,180)

(713)

(19)

(289)

(19)

(327)

(191)

(367)

(10)

(568)

(513)

(320)

(12)

(845)

(436)

(364)

(37)

(837)

(11)

(361)

(30)

(402)

(33)

(423)

(43)

(499)

(4,355)

(2,847)

(2,858)

(2,859)

(3,222)

(3,985)

(3,262)

(3,748)

(3,676)

(3,819)

(1)

(5)

–

(1)

(5)

(36)

–

(8)

(37)

(25)

(9)

(36)

(28)

(47)

(35)

(30)

(45)

(35)

(23)

(4)

(33)

(18)

(11)

(118)

(28)

(9)

–

(6)

(2)

–

(4,361)

(2,889)

(2,903)

(2,929)

(3,332)

(4,095)

(3,322)

(3,895)

(3,713)

(3,827)

8,750

9,920

10,386

11,202

11,331

10,214

8,005

7,054

6,705

6,344

(3,942)

(3,747)

(3,654)

(3,219)

(3,229)

(4,193)

(3,744)

(4,132)

(3,634)

(3,782)

Market value of the Combined Portfolio

12,781

13,750

14,103

14,439

14,471

14,031

11,859

11,446

10,331

10,559

Adjusted net debt

(3,926)

(3,737)

(3,652)

(3,261)

(3,239)

(4,172)

(3,948)

(4,290)

(3,981)

(4,186)

191

Additional informationLandsec Annual Report 2020
Subsidiaries, joint ventures and associates

As at 31 March 2020, the Company had a 100%
interest, direct or indirect, in the ordinary share
capital of the following subsidiaries, all of which
are registered in the UK at 100 Victoria Street,
London, SW1E 5JL.

192

Name

Alan House (Nottingham) (No. 1) Limited

Land Securities Trading Limited

Alan House (Nottingham) (No. 2) Limited

Land Securities Trinity Limited

Arundel Great Court Development
Management Limited

Blueco Limited

Bluewater Ground Lease Limited

Bluewater Outer Area Limited

Castleford (UK) Limited

Landsec Limited

LC25 Limited

Leisure II (West India Quay LP) Shareholder
Limited

Leisure Parks I Limited

Leisure Parks II Limited

Cedric (New Fetter Lane) (No.1) Limited

LS (Bracknell) Limited

Cedric (New Fetter Lane) (No.2) Limited

LS (Eureka Two) Limited

Clock Tower (Canterbury) (No.1) Limited

LS (Eureka) Limited

Clock Tower (Canterbury) (No.2) Limited

LS (Finchley Road) Limited

Crossways 2000 Limited

Crossways 3065 Limited

Crossways 7055 Limited

Dashwood House Limited

Gunwharf Quays Limited

L.& P. Estates Limited

LS (Fountain Park Two) Limited

LS (Fountain Park) Limited

LS (Jaguar) GP Investments Limited

LS (Parrswood Two) Limited

LS (Parrswood) Limited

LS (Riverside Two) Limited

Land Securities (BH) Limited

LS (Riverside) Limited

Land Securities (Finance) Limited

LS (Victoria) Nominee No.1 Limited

Land Securities (Hotels) Limited

LS (Victoria) Nominee No.2 Limited

Land Securities (Insurance Services) Limited

LS 1 New Street Square Developer Limited

Land Securities (Media Services) BH Limited

LS 1 New Street Square Limited

Land Securities (Media Services) PQ Limited

LS 1 Sherwood Street Developer Limited

Land Securities Buchanan Street Developments
Limited

LS 1 Sherwood Street Limited

LS 105 Sumner Street Developer Limited

Land Securities Business Services Limited

Land Securities Capital Markets PLC

Land Securities Consulting Limited

LS 130 Wood ST Limited

LS 21 Moorfields Development Management
Limited

Land Securities Development Limited

LS 21 Moorfields Limited

Land Securities Ebbsfleet (No.2) Limited

LS 25 Lavington Street Developer Limited

Land Securities Ebbsfleet (No.3) Limited

LS 60-78 Victoria Street Limited

Land Securities Ebbsfleet Limited

LS 62 Buckingham Gate Limited

Land Securities Intermediate Limited1

LS Aldersgate Limited

Land Securities Investment Trust Limited

LS Ashdown Limited

Land Securities Lakeside Limited

LS Banbridge Phase Two Limited

Land Securities Management Limited

LS Bankside Development Limited

Land Securities Management Services Limited

LS Bexhill Limited

Land Securities Partnerships Limited

LS Braintree Limited

Land Securities PLC

LS Buchanan Limited

Land Securities Portfolio Management Limited

LS Canterbury Limited

Land Securities Properties Limited

LS Cardiff (GP) Investments Limited

Land Securities Property Holdings Limited1

LS Cardiff (Holdings) Limited

Land Securities SPV’s Limited

LS Cardiff Limited

Landsec Annual Report 2020Name

LS Cardinal Limited

LS Castleford Limited

Name

LS Nominees Holdings Limited

Oxford Castle Apartments Limited

LS Occupier Limited

QAM Nominee No 1 Limited

LS Chadwell Heath Limited

LS One New Change Developments Limited

QAM Nominee No 2 Limited

LS Chattenden Marketing Limited

LS One New Change Limited

Ravenseft Properties Limited

LS Chesterfield Limited

LS City & West End Limited

LS City Gate House Limited

LS Company Secretaries Limited

LS Cornerhouse Limited

LS Director Limited

LS Dundas Square Limited

LS Eastbourne Terrace Limited

LS Easton Park Investments Limited

LS Entertainment Venues Limited

LS Fenchurch Development Management
Limited

LS Galleria Limited

LS Oxygen Limited

Ravenside Investments Limited

LS Park House Development Management
Limited

LS Poole Retail Limited

LS Portfolio Investments Limited

LS Portland House Developer Limited

LS Property Finance Company Limited

LS QAM Limited

Retail Property Holdings Trust Limited

Roebuck House (GP) Limited

Rosefarm Leisure Limited

Sevington Properties Limited

Stag Place (GP) Limited

The City of London Real Property Company
Limited

LS Red Lion Court Limited

The Imperial Hotel Hull Limited

LS Retail Warehouses Limited

Westminster Trust Limited(The)

LS Rose Lane Limited

LS Shepherds Bush Limited

LS Soho Square Limited

LS Greenwich Investments Limited

LS Southside Limited

LS Greenwich Limited

LS Gunwharf Limited

LS Street Limited

LS Street GP Limited

The X-Leisure (General Partner) Limited

The X-Leisure Limited Partnership

Tops Estates Limited

Tops Shop Estates Limited

Trinity Quarter Developments Limited

Wallace City Limited

LS Harbour Exchange Option Limited

LS Sumner Street Limited

Watchmaker Finance Limited

LS Harrogate Limited

LS Harrow Properties Limited

LS Taplow Limited

LS Taplow No.2 Limited

Whitecliff Developments Limited

Willett Developments Limited

LS Harvest (GP) Investments Limited

LS Tottenham Court Road Limited

X-Leisure (Bentley Bridge) Limited

LS Harvest 2 Limited

LS Harvest Limited

LS Hill House Limited

LS Howard Centre Welwyn Limited

LS Nova Development Management Limited

X-Leisure (Boldon) Limited

LS Nova GP Investments Limited

X-Leisure (Brighton I) Limited

LS Nova LP1 Limited

LS Nova LP2 Limited

X-Leisure (Brighton II) Limited

X-Leisure (Brighton Cinema II) Limited

LS Kings Gate Residential Limited

LS Victoria Properties Limited

X-Leisure (Brighton Cinema) Limited

LS Kingsmead Limited

LS Lavington Street Limited

LS Lewisham Limited

LS London Holdings One Limited

LS London Holdings Three Limited

LS Ludgate (No.1) Limited

LS Ludgate (No.2) Limited

LS Ludgate (No.3) Limited

LS Voyager Limited

LS Westminster Limited

LS White Rose Limited

LS Whitefriars Limited

LS Wood Lane Limited

LS Workington Limited

LS Zig Zag Limited

X-Leisure (Cambridge I) Limited

X-Leisure (Cambridge II) Limited

X-Leisure (Edinburgh) Limited

X-Leisure (Leeds I) Limited

X-Leisure (Leeds II) Limited

X-Leisure Management Limited

X-Leisure (Poole) Limited

L.S.I.T.(Management) Limited

X-Leisure Limited

LS Ludgate Development Limited

Nova Estate Management Company Limited

Xscape Castleford Limited Liability Partnership

LS Maidstone Limited

LS Mirage Limited

LS Moorgate Limited

LS Myo Limited

O2 Retail & Leisure UK Partnership No.1 LLP

Xscape Castleford Partnership

Oriana GP Limited

Oriana LP Limited

Oriana Residential Nominee No.1 Limited

Xscape Milton Keynes Limited Liability
Partnership

Xscape Milton Keynes Partnership

LS New Street Square Investments Limited

Oriana Residential Nominee No.2 Limited

1. Subsidiary directly held by the Company, Land Securities

Group PLC.

193

Additional informationLandsec Annual Report 2020
Subsidiaries, joint ventures and associates
continued

As at 31 March 2020, the Company had an interest (as shown), direct or indirect, in the ordinary share capital of the following subsidiaries, joint ventures
and associates, each of which is registered in the country indicated. The address for all entities included below is 100 Victoria Street, London, SW1E 5JL,
except for entities with a footnote. Where the Group share of ordinary share capital is 100%, these entities are subsidiaries of the Company. Where the
share of ordinary share capital between 50% and 100%, these entities are joint venture interests. All other holdings are associate interests.

Group share %

Country of
registration

Name

Group share %

Country of
registration

Jersey1

Westgate Oxford Alliance Nominee No.1 Limited

Westgate Oxford Alliance Nominee No.2 Limited

Wood Lane Nominee No.1 Limited

Wood Lane Nominee No.2 Limited

UK2

Xscape Castleford Limited

Xscape Castleford No.2 Limited

Xscape Castleford Property Unit Trust

Xscape Milton Keynes (Jersey) No.2 Limited

Xscape Milton Keynes Limited

Xscape Milton Keynes Property Unit Trust

50.00%

100.00%

Jersey3

100.00%

Jersey3

100.00% Guernsey4

1. 44 Esplanade, St Helier, Jersey, JE4 9WG.
2. Suite 1, 3rd Floor, 11-12 St. James’s Square, London, SW1Y 4LB.
3. IFC 5, St Helier, Jersey, JE1 1ST.
4. PO Box 384, The Albany South Esplanade, St Peter Port, Guernsey, GY1 4NF.
5. 13-14 Esplanade, St Helier, Jersey, JE1 1EE.

Name

Ebbsfleet Investment (GP) Limited

Ebbsfleet Nominee No.1 Limited

Greenhithe Holdings Limited

Greenhithe Investments Limited

Harbour Exchange Management Company Limited

Harvest 2 GP Limited

Harvest 2 Limited Partnership

Harvest 2 Selly Oak Limited

Harvest Development Management Limited

Harvest GP Limited

Harvest Nominee No. 1 Limited

Harvest Nominee No. 2 Limited

Kent Retail Investments Limited

Land Securities Insurance Limited

Leisure II (North Finchley Two) Limited

Leisure II (North Finchley) Limited

Leisure II (West India Quay Two) Limited

Leisure II (West India Quay) Limited

Metro Shopping Fund Management Limited

Nova Business Manager Limited

Nova Developer Limited

Nova GP Limited

Nova Limited Partnership

Nova Nominee 1 Limited

Nova Nominee 2 Limited

NOVA Residential (GP) Limited

NOVA Residential Intermediate Limited

NOVA Residential Limited Partnership

Queens Links Unit Trust

Southside General Partner Limited

Southside Limited Partnership

Southside Nominees No.1 Limited

Southside Nominees No.2 Limited

St David’s (Cardiff Residential) Limited

St David’s (General Partner) Limited

St. David’s (No. 1) Limited

St. David’s (No. 2) Limited

St. David’s Limited Partnership

The Ebbsfleet Limited Partnership

The X-Leisure Unit Trust

Victoria Circle Developer Limited

West India Quay Limited

West India Quay Management Company Limited

West India Quay Unit Trust

Westgate Oxford Alliance GP Limited

Westgate Oxford Alliance Limited Partnership

194

50.00%

100.00%

25.73%

50.00%

100.00%

50.00%

100.00%

50.00%

Jersey3

UK
Jersey3

Jersey5

100.00%

Jersey3

50.00%

62.99%

50.00%

Jersey3

St David’s Dewi Sant Merchant’s Association Limited Limited by
guarantee

Landsec Annual Report 2020
Shareholder information

Financial calendar

Final dividend1

Annual General Meeting2

2020/21 Half-yearly results announcement

2020/21 Financial year end

2020/21 Annual results announcement3

Table 109

2020

9 July

10 November

2021

31 March

11 May

1. The Board is not proposing a final dividend for 2019/20. No decision has been made as to when dividends will be resumed. Further announcements will be made in due course.
2. The Annual General Meeting is scheduled to be held at 10.00 am on Thursday, 9 July 2020 at 80 Victoria Street, London SW1E 5JL. Due to Covid-19 social distancing measures, this will be
a closed meeting with no shareholders able to attend. For further details, please see the Notice of Meeting, comprising a letter from the Chairman, resolutions proposed and explanatory
notes which can be found on the Company’s website: landsec.com/agm.

3. Provisional.

Share register analysis as at 31 March 2020

Holding range:

1–1,000

1,001–5,000

5,001–10,000

10,001–50,000

50,001–100,000

100,001–500,000

500,001–highest1

Total

Share register analysis as at 31 March 2020

Held by:

Private shareholders

Nominee and institutional investors1

Total

1. Including 9,839,179 shares held in treasury by the Company.

Number of
holders

7,382

2,488

369

447

129

228

189

65.7

22.2

3.3

3.9

1.2

2.0

1.7

11,232

100.0

Number of
holders

8,569

2,663

76.3

23.7

Number of

ordinary shares

2,827,348

5,107,110

2,634,645

10,641,921

9,236,023

52,137,529

Table 110

0.4

0.7

0.4

1.4

1.2

6.9

668,728,487

751,313,063

89.0

100.0

Number of

ordinary shares

9,848,623

741,464,440

Table 111

1.3

98.7

11,232

100.0

751,313,063

100.0

195

Additional informationLandsec Annual Report 2020
Shareholder information
continued

Ordinary shares
The Company’s ordinary shares of nominal value 102/3p each are traded
on the main market for listed securities on the London Stock Exchange
(LON:LAND).

Company website: landsec.com
The Company’s Annual Report, results announcements and presentations
are available to view and download from its website.

The website also includes information about the latest Landsec share
price and dividend information, news about the Company, its properties
and operations, and how to obtain further information.

Registrar: Equiniti
For assistance with queries about administration of shareholdings,
such as lost share certificates, change of address or personal details,
amalgamation of accounts and dividend payments, please contact
the Company’s Registrar:

Equiniti Group plc
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: 0371 384 21281
International dialling: +44 121 415 70491
www.shareview.co.uk

An online share management service is available which enables
shareholders to access details of their Land Securities Group PLC
shareholdings electronically. This is available on our website:
landsec.com/investors or www.shareview.co.uk.

Electronic communications
We encourage shareholders to consider receiving their communications
from the Company electronically as this will enable you to receive them
more quickly and securely. It also allows Landsec to communicate in
a more environmentally friendly and cost-effective manner. To register
for this service, you should go to our website: landsec.com/investors or
www.shareview.co.uk.

UK Real Estate Investment Trust (REIT) taxation and status on
payment of dividends
As a UK REIT, Landsec does not pay corporation tax on Qualifying
Activities, which are rental profits and chargeable gains relating to its
property rental business.

At least 90% of income derived from Qualifying Activities must be
distributed as Property Income Distributions (PIDs). For most shareholders,
PIDs will be paid after deducting withholding tax at 20%. However,
certain categories of shareholder may be able to receive PIDs gross
(i.e. without deduction of withholding tax). These categories are principally
UK companies, charities, local authorities, UK pension schemes and
managers of ISAs, PEPs and Child Trust Funds.

A REIT may additionally pay ordinary dividends which will be treated in
the same way as dividends from non-REIT companies.

Further information on UK REITs and the forms required to be completed to
apply for PIDs to be paid gross are available on the Landsec website or from
the Registrar. www.landsec.com/investors/shareholders-equity-investors.

196

Payment of dividends to UK resident shareholders
Shareholders whose dividends are currently sent to their registered
address will need to change this arrangement with effect from October
2020 and will need to have their dividends paid directly into their personal
bank or building society account or alternatively sign up to our Dividend
Reinvestment Plan (see below). Receiving dividends directly into your bank
account has a number of advantages, including the crediting of cleared
funds on the actual dividend payment date. To arrange for your future
dividends to be paid in this way, please contact the Registrar or complete
a mandate instruction available on our website: landsec.com/investors
and return it to the Registrar. Under this arrangement, dividend
confirmations are still sent to your registered address. Dividend payments
will no longer be paid by cheque with effect from October 2020.

Payment of dividends to non-UK resident shareholders
Shareholders will need to request that their dividends be paid directly
to a personal bank account overseas, with effect from the October 2020
dividend. It’s a service we can arrange in over 90 countries worldwide
and it normally costs less than paying in a Sterling cheque. The dividend
will be credited to your account automatically – normally just a few days
after the Company’s dividend payment date. For more information,
you should contact the Registrar on +44 (0)121 415 70491 or download an
application form online at www.shareview.co.uk. Alternatively, you can
contact the Registrar at the address given above. Dividend payments
will no longer be paid by cheque with effect from October 2020.

Dividend Reinvestment Plan (DRIP)
The DRIP gives shareholders the opportunity to use cash dividends to
increase their shareholding in Land Securities Group PLC. It is a convenient
and cost-effective facility provided by Equiniti Financial Services Limited.
Under the DRIP, cash dividends are used to buy shares in the market as
soon as possible after the dividend payment, with any residual cash being
carried forward to the next dividend payment.

Details of the DRIP, including terms and conditions and participation
election forms, are available on our website: landsec.com/investors.

They are also available from:

Dividend Reinvestment Plans
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: 0371 384 22681
International dialling: +44 121 415 71731

Share dealing facilities
Equiniti provides both existing and prospective UK shareholders with an
easy to access and simple-to-use share dealing facility for buying and
selling shares in Land Securities Group PLC by telephone, online or post.
The telephone and online dealing service allows shareholders to trade
‘real-time’ at a known price that will be given to them at the time they
give their instruction.

For telephone dealing, call 0345 603 7037 between 8.00am and 4.30pm,
Monday to Friday (excluding public holidays in England and Wales). Calls
are charged at the standard geographic rate and will vary by provider.
Calls outside the UK will be charged at the applicable international rate.
For online dealing, log on to www.shareview.co.uk/dealing. For postal
dealing, call 0371 384 22481 for full details and a dealing instruction form.
Existing shareholders will need to provide the account/shareholder
reference number shown on their share certificate. Other brokers,
banks and building societies also offer similar share dealing facilities.

Landsec Annual Report 2020ShareGift
Shareholders with only a small number of shares, the value of which
makes it uneconomic to sell them, may wish to consider donating
them to the charity through ShareGift, a registered charity (No. 1052686)
which specialises in using such holdings for charitable benefit. A ShareGift
donation form can be obtained from the Registrar and further information
about ShareGift is available at www.sharegift.org.uk or by writing to:

ShareGift
PO Box 72253, London SW1P 9LQ
Telephone: +44 (0)20 7930 3737

Corporate Individual Savings Account (ISA)
The Company has in place a Corporate ISA which is managed by:

Equiniti Financial Services Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: 0371 384 22441

Capital Gains Tax
For the purpose of Capital Gains Tax, the price of a Land Securities share
at 31 March 1982, adjusted for the capitalisation issue in November 1983
and the Scheme of Arrangement in September 2002, was 203p. On the
assumption that the 5 for 8 Rights Issue in March 2009 was taken up in
full and there were no fractional shares in the 2017 share consolidation,
the adjusted price, post consolidation, for Capital Gains Tax purposes
would be 229p per share. For further details www.landsec.com/
investorsshareholders-equity-investors/uk-tax-gains-sale-landsec-shares.

Unsolicited mail
The Company is obliged by law to make its share register available on
request to other organisations and this may result in shareholders receiving
unsolicited mail. To limit the receipt of unsolicited mail, shareholders may
register with the Mailing Preference Service, an independent organisation
whose services are free, by visiting www.mpsonline.org.uk.

Shareholder security
In the past, some of our shareholders have received unsolicited telephone
calls or correspondence concerning investment matters from organisations
or persons claiming or implying that they have some connection with the
Company. These are typically from purported ‘brokers’ who offer to buy
shares at a price often far in excess of their market value. These operations
are commonly known as ‘boiler rooms’.

Shareholders are advised to be very wary of any offers of unsolicited
advice, discounted shares, premium prices for shares they own or free
reports into the Company. If you receive any such unsolicited calls,
correspondence or investment advice:

— ensure you get the correct name of the person and firm;

— check that the firm is on the Financial Conduct Authority (FCA)

— use the details on the FCA Register to contact the firm;

— call the FCA Consumer Helpline (0800 111 6768) if there are no contact

details in the Register or you are told they are out of date; and

— if you feel uncomfortable with the call or the calls persist,

simply hang up.

General Data Protection Regulation (GDPR)
On 25 May 2018, the General Data Protection Regulation came into force
which gives individuals improved clarity and rights over personal data.
We have updated our Shareholder Privacy Notice to make it easier to
understand how Landsec uses and protects shareholder information.
A copy of the Shareholder Privacy Notice can be found on our website:
landsec.com/policies/privacy-policy/shareholders.

Additionally, feel free to report and/or discuss any shareholder security
matters with the Company. To do this, please call: +44 (0)20 7413 9000
and ask to be put through to a member of the Company Secretariat
department.

1. Lines are open 8.30am to 5.30pm (UK time), Monday to Friday, excluding public holidays.
Please note that due to Covid-19, the hours have reduced in line with market opening,
currently 8.30am-4.30pm. Calls are charged at the standard geographic rate and will vary
by provider. Calls from outside the UK will be charged at the applicable international rate.

Unclaimed Assets Register
The Company participates in the Unclaimed Assets Register, which
provides a search facility for financial assets which may have been
forgotten. For further information, contact:

The Unclaimed Assets Register Telephone: +44 (0)333 000 0182
email: uarenquiries@uk.experian.com www.uar.co.uk.

197

Additional informationLandsec Annual Report 2020
Key contacts and advisers

Registered office and principal UK address

Land Securities Group PLC
100 Victoria Street
London SW1E 5JL
Registered in England and Wales No. 4369054

Company Secretary

Tim Ashby
Group General Counsel and Company Secretary

Investor Relations

Edward Thacker
Head of Investor Relations

Telephone: +44 (0)20 7413 9000
Email: investor.relations@landsec.com
www.landsec.com

Registrar

Equiniti Group plc
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA

Telephone: 0371 384 2128
Textel: 0371 384 2255
International dialling: +44 121 415 7049
www.shareview.co.uk

Auditor

Ernst & Young LLP
1 More London Place
London SE1 2AF

Telephone: +44 (0)20 7951 2000
www.ey.com

External advisers

Valuer: CBRE
Financial adviser: Citigroup
Solicitors: Slaughter and May
Joint brokers: JP Morgan Cazenove and UBS

198

Landsec Annual Report 2020Glossary

Adjusted earnings per share (Adjusted EPS)
Earnings per share based on revenue profit after related tax.

Adjusted net debt
Net debt excluding cumulative fair value movements on
interest-rate swaps and amounts payable under head leases.
It generally includes the net debt of subsidiaries and joint
ventures on a proportionate basis.

Book value
The amount at which assets and liabilities are reported in the
financial statements.

BREEAM
Building Research Establishment’s Environmental
Assessment Method.

Combined Portfolio
The Combined Portfolio comprises the investment properties
of the Group’s subsidiaries, on a proportionately consolidated
basis when not wholly owned, together with our share of
investment properties held in our joint ventures.

Completed developments
Completed developments consist of those properties
previously included in the development programme, which
have been transferred from the development programme
since 1 April 2018.

Development pipeline
The development programme together with proposed
developments.

Development programme
The development programme consists of committed
developments (Board approved projects), projects under
construction and developments which have reached
practical completion within the last two years but are not
yet 95% let.

Diluted figures
Reported results adjusted to include the effects of potentially
dilutive shares issuable under employee share schemes.

Dividend Reinvestment Plan (DRIP)
The DRIP provides shareholders with the opportunity to
use cash dividends received to purchase additional ordinary
shares in the Company immediately after the relevant
dividend payment date. Full details appear on the
Company’s website.

Earnings per share
Profit after taxation attributable to owners divided by the
weighted average number of ordinary shares in issue during
the year.

EPRA
European Public Real Estate Association.

EPRA net disposal value (NDV) per share
Diluted net assets per share adjusted to remove the impact
of goodwill arising as a result of deferred tax, and to include
the difference between the fair value and the book value of
the net investment in tenant finance leases and fixed interest
rate debt.

EPRA net initial yield
EPRA net initial yield is defined within EPRA’s best practice
recommendations as the annualised rental income based
on the cash rents passing at the balance sheet date, less
non-recoverable property operating expenses, divided by
the gross market value of the property. It is consistent with
the net initial yield calculated by the Group’s external valuer.

EPRA net tangible assets (NTA) per share
Diluted net assets per share adjusted to remove the
cumulative fair value movements on interest-rate swaps
and similar instruments, the carrying value of goodwill
arising as a result of deferred tax and other intangible
assets, deferred tax on intangible assets and to include
the difference between the fair value and the book value
of the net investment in tenant finance leases.

Equivalent yield
Calculated by the Group’s external valuer, equivalent yield
is the internal rate of return from an investment property,
based on the gross outlays for the purchase of a property
(including purchase costs), reflecting reversions to current
market rent and such items as voids and non-recoverable
expenditure but ignoring future changes in capital value.
The calculation assumes rent is received annually in arrears.

ERV – Gross estimated rental value
The estimated market rental value of lettable space as
determined biannually by the Group’s external valuer.
For investment properties in the development programme,
which have not yet reached practical completion, the
ERV represents management’s view of market rents.

Fair value movement
An accounting adjustment to change the book value of an
asset or liability to its market value (see also mark-to-market
adjustment).

Finance lease
A lease that transfers substantially all the risks and rewards
of ownership from the Group as lessor to the lessee.

Gearing
Total borrowings, including bank overdrafts, less short-term
deposits, corporate bonds and cash, at book value, plus
cumulative fair value movements on financial derivatives
as a percentage of total equity. For adjusted gearing, see
note 20.

Gross market value
Market value plus assumed usual purchaser’s costs at the
reporting date.

Head lease
A lease under which the Group holds an investment property.

Interest Cover Ratio (ICR)
A calculation of a company’s ability to meet its interest
payments on outstanding debt. It is calculated using revenue
profit before interest, divided by net interest (excluding the
mark-to-market movement on interest-rate swaps, foreign
exchange swaps, capitalised interest and interest on the
pension scheme assets and liabilities). The calculation
excludes joint ventures.

Interest-rate swap
A financial instrument where two parties agree to exchange
an interest rate obligation for a predetermined amount of
time. These are generally used by the Group to convert
floating-rate debt or investments to fixed rates.

Investment portfolio
The investment portfolio comprises the investment
properties of the Group’s subsidiaries on a proportionately
consolidated basis where not wholly owned.

Joint venture
An arrangement in which the Group holds an interest and
which is jointly controlled by the Group and one or more
partners under a contractual arrangement. Decisions on
the activities of the joint venture that significantly affect
the joint venture’s returns, including decisions on financial
and operating policies and the performance and financial
position of the operation, require the unanimous consent
of the partners sharing control.

Lease incentives
Any incentive offered to occupiers to enter into a lease.
Typically, the incentive will be an initial rent-free year, or a
cash contribution to fit-out or similar costs. For accounting
purposes, the value of the incentive is spread over the
non-cancellable life of the lease.

LIBOR
The London Interbank Offered Rate, the interest rate charged
by one bank to another for lending money, often used as a
reference rate in bank facilities.

Like-for-like portfolio
The like-for-like portfolio includes all properties which have
been in the portfolio since 1 April 2018 but excluding those
which are acquired or sold since that date. Properties in the
development pipeline and completed developments are also
excluded.

Loan-to-value (LTV)
Group LTV is the ratio of adjusted net debt, including
subsidiaries and joint ventures, to the sum of the market
value of investment properties and the book value of trading
properties of the Group, its subsidiaries and joint ventures,
all on a proportionate basis, expressed as a percentage.
For the Security Group, LTV is the ratio of net debt lent to
the Security Group divided by the value of secured assets.

Market value
Market value is determined by the Group’s external valuer,
in accordance with the RICS Valuation Standards, as an
opinion of the estimated amount for which a property
should exchange on the date of valuation between a willing
buyer and a willing seller in an arm’s-length transaction
after proper marketing.

Mark-to-market adjustment
An accounting adjustment to change the book value
of an asset or liability to its market value (see also fair
value movement).

MSCI
Refers to the MSCI Direct Property indexes which measure
the property level investment returns in the UK.

Net assets per share
Equity attributable to owners divided by the number of
ordinary shares in issue at the year end. Net assets per share
is also commonly known as net asset value per share (NAV
per share).

Net initial yield
Net initial yield is a calculation by the Group’s external valuer
of the yield that would be received by a purchaser, based on
the Estimated Net Rental Income expressed as a percentage
of the acquisition cost, being the market value plus assumed
usual purchasers’ costs at the reporting date. The calculation
is in line with EPRA guidance. Estimated Net Rental Income
is determined by the valuer and is based on the passing cash
rent less rent payable at the balance sheet date, estimated
non-recoverable outgoings and void costs including service
charges, insurance costs and void rates.

Net rental income
Net rental income is the net operational income arising from
properties, on an accruals basis, including rental income,
finance lease interest, rents payable, service charge income
and expense, other property related income, direct property
expenditure and bad debts. Net rental income is presented
on a proportionate basis.

Net zero carbon building
A building for which an overall balance has been achieved
between carbon emissions produced and those taken out
of the atmosphere, including via offset arrangements.
This relates to operational emissions for all buildings while,
for a new building, it also includes supply-chain emissions
associated with its construction.

Over-rented
Space where the passing rent is above the ERV.

Passing rent
The estimated annual rent receivable as at the reporting
date which includes estimates of turnover rent and estimates
of rent to be agreed in respect of outstanding rent review
or lease renewal negotiations. Passing rent may be more or
less than the ERV (see over-rented, reversionary and ERV).
Passing rent excludes annual rent receivable from units in
administration save to the extent that rents are expected to
be received. Void units at the reporting date are deemed to
have no passing rent. Although temporary lets of less than
12 months are treated as void, income from temporary lets
is included in passing rents.

Passing cash rent
Passing cash rent is passing rent excluding units that are
in a rent-free year at the reporting date.

Planning permission
There are two common types of planning permission:
full planning permission and outline planning permission.
A full planning permission results in a decision on the detailed
proposals on how the site can be developed. The grant
of a full planning permission will, subject to satisfaction
of any conditions, mean no further engagement with the
local planning authority will be required to build the consented
development. An outline planning permission approves
general principles of how a site can be developed. Outline
planning permission is granted subject to conditions known
as ‘reserved matters’. Consent must be sought and achieved
for discharge of all reserved matters within a specified
time-limit, normally three years from the date outline
planning permission was granted, before building can begin.
In both the case of full and outline planning permission,
the local planning authority will ‘resolve to grant permission’.
At this stage, the planning permission is granted subject
to agreement of legal documents, in particular the s106
agreement. On execution of the s106 agreement, the
planning permission will be issued. Work can begin on
satisfaction of any ‘pre-commencement’ planning conditions.

Pre-let
A lease signed with an occupier prior to completion of
a development.

Pre-development properties
Pre-development properties are those properties within
the like-for-like portfolio which are being managed to align
vacant possession within a three-year horizon with a view
to redevelopment.

Property Income Distribution (PID)
A PID is a distribution by a REIT to its shareholders paid out
of qualifying profits. A REIT is required to distribute at least
90% of its qualifying profits as a PID to its shareholders.

199

Additional informationLandsec Annual Report 2020
Total development cost (TDC)
Total development cost refers to the book value of the site
at the commencement of the project, the estimated capital
expenditure required to develop the scheme from the start
of the financial year in which the property is added to our
development programme, together with capitalised interest,
being the Group’s borrowing costs associated with direct
expenditure on the property under development. Interest
is also capitalised on the purchase cost of land or property
where it is acquired specifically for redevelopment. The TDC
for trading property development schemes excludes any
estimated tax on disposal.

Total property return (TPR)
The change in market value, adjusted for net investment,
plus the net rental income of our investment properties
expressed as a percentage of opening market value plus the
time weighted capital expenditure incurred during the year.

Total Shareholder Return (TSR)
The growth in value of a shareholding over a specified year,
assuming that dividends are reinvested to purchase
additional units of the stock.

Trading properties
Properties held for trading purposes and shown as current
assets in the balance sheet.

Turnover rent
Rental income which is related to an occupier’s turnover.

Valuation surplus/deficit
The valuation surplus/deficit represents the increase or
decrease in the market value of the Combined Portfolio,
adjusted for net investment and the effect of accounting
for lease incentives under IFRS 16 (previously SIC-15).
The market value of the Combined Portfolio is determined
by the Group’s external valuer.

Voids
Voids are expressed as a percentage of ERV and represent
all unlet space, including voids where refurbishment work is
being carried out and voids in respect of pre-development
properties. Temporary lettings for a period of one year or
less are also treated as voids. The screen at Piccadilly Lights,
W1 is excluded from the void calculation as it will always
carry advertising although the number and duration of our
agreements with advertisers will vary. Commercialisation
lettings are also excluded from the void calculation.

Weighted average cost of capital (WACC)
Weighted average cost of debt and notional cost of equity,
used as a benchmark to assess investment returns.

Weighted average unexpired lease term
The weighted average of the unexpired term of all leases
other than short-term lettings such as car parks and
advertising hoardings, temporary lettings of less than
one year, residential leases and long ground leases.

Yield shift
A movement (negative or positive) in the equivalent yield
of a property asset.

Zone A
A means of analysing and comparing the rental value of
retail space by dividing it into zones parallel with the main
frontage. The most valuable zone, Zone A, is at the front
of the unit. Each successive zone is valued at half the rate
of the zone in front of it.

Glossary
continued

Proposed developments
Proposed developments are properties which have not yet
received Board approval or are still subject to main planning
conditions being satisfied, but which are more likely to
proceed than not.

Qualifying activities/Qualifying assets
The ownership (activity) of property (assets) which is held
to earn rental income and qualifies for tax-exempt treatment
(income and capital gains) under UK REIT legislation.

Real Estate Investment Trust (REIT)
A REIT must be a publicly quoted company with at least
three-quarters of its profits and assets derived from a
qualifying property rental business. Income and capital gains
from the property rental business are exempt from tax but
the REIT is required to distribute at least 90% of those profits
to shareholders. Corporation tax is payable on non-qualifying
activities in the normal way.

Rental income
Rental income is as reported in the income statement, on
an accruals basis, and adjusted for the spreading of lease
incentives over the term certain of the lease in accordance
with IFRS 16 (previously, SIC-15). It is stated gross, prior to
the deduction of ground rents and without deduction for
operational outgoings on car park and commercialisation
activities.

Rental value change
Increase or decrease in the current rental value, as determined
by the Group’s external valuer, over the reporting year on
a like-for-like basis.

Return on average capital employed
Group profit before net finance expense, plus joint venture
profit before net finance expense, divided by the average
capital employed (defined as shareholders’ funds plus
adjusted net debt).

Return on average equity
Group profit before tax plus joint venture tax divided by the
average equity shareholders’ funds.

Revenue profit
Profit before tax, excluding profits on the sale of non-current
assets and trading properties, profits on long-term
development contracts, valuation movements, fair value
movements on interest-rate swaps and similar instruments
used for hedging purposes, debt restructuring charges,
and any other items of an exceptional nature.

Reversionary or under-rented
Space where the passing rent is below the ERV.

Reversionary yield
The anticipated yield to which the initial yield will rise (or fall)
once the rent reaches the ERV.

Security Group
Security Group is the principal funding vehicle for the Group
and properties held in the Security Group are mortgaged for
the benefit of lenders. It has the flexibility to raise a variety
of different forms of finance.

Temporary lettings
Lettings for a period of one year or less. These are included
within voids.

Topped-up net initial yield
Topped-up net initial yield is a calculation by the Group’s
external valuer. It is calculated by making an adjustment
to net initial yield in respect of the annualised cash rent
foregone through unexpired rent-free years and other lease
incentives. The calculation is consistent with EPRA guidance.

Total business return
Dividend paid per share in the year plus the change in EPRA
net tangible assets per share, divided by EPRA net tangible
assets per share at the beginning of the year.

Total cost ratio
Total cost ratio represents all costs included within revenue
profit, other than rents payable, financing costs and
provisions related to 2020/21 rent, expressed as a percentage
of gross rental income before rents payable adjusted for
costs recovered through rents but not separately invoiced.

200

Landsec Annual Report 2020Cautionary statement

This 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, strategy, 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 this 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 this Annual Report or Landsec’s website should
be construed as a profit forecast or an invitation to deal in the securities
of the Company.

Land Securities Group PLC

Landsec, Land Securities, the
Cornerstone logo and the ‘L’ logo are
trade marks of the Land Securities
Group of companies.

Landsec is the trading name of Land
Securities Group PLC.

All other trade marks and registered
trade marks are the property of their
respective owners.

This report has been printed on
Heaven 42 – an FSC® certified paper
containing 100% ECF pulp and
manufactured at a mill accredited
with the ISO 14001 and EMAS
environmental standards.

Printed by CPI Colour. CPI Colour are
ISO 14001 certified, CarbonNeutral®,
Alcohol Free and are FSC® Chain of
Custody certified. The inks used are
vegetable oil based.

Design:
MSL Salterbaxter

Words:
Landsec, Tim Rich
and Richard Owsley

Photography:
Landsec
Andrew Urwin
Luke Hayes
Philippa Langley
James Gowdy

Land Securities Group PLC
100 Victoria Street London SW1E 5JL
+44 (0)20 7413 9000
www.landsec.com