LANDSEC
ANNUAL
REPORT 2021
Resilient and responsive
In 2020/21, the global pandemic caused
extraordinary upheaval and changed our
world, probably forever. It had a significant
impact on our business, our customers,
and our other stakeholders.
However, we took a proactive and
responsible approach to the challenges,
establishing business resilience by staying
true to our purpose. We remained
responsive and supportive to all our
customers and communities.
But looking ahead...
...we see opportunities. People will still work,
shop, play, live life. The spaces we create are
forward-looking, bright, airy, safe and healthy
– built with these essential activities in mind.
With our scale, experience, skills and portfolio,
we can help shape the new landscape.
More than that, we have a positive purpose
as an ambition. We believe it will attract more
customers, talented people, valued partners.
With this as its foundation, our new strategy
aims to grow value for Landsec and all our
stakeholders. And, full circle, the more we
grow, the closer we will come to truly
achieving our purpose.
In this way we will grow, with purpose.
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CONTENTS
STRATEGIC REPORT
02 Responding to the present,
planning for the future
06 Chairman’s statement
08 Chief Executive’s statement
12 Our market
16 Our stakeholders
18 Our business model
20 Our strategy for growth
30 Our strategy: summary
32 Key performance indicators
34 Our culture
36 Operating and portfolio review
46 Financial review
54 Our approach to sustainability
56 Social review
64 Environmental review
68 Managing risk
71 Our principal risks and uncertainties
78 Going concern and viability
80 Non-financial information statement
GOVERNANCE
82 Introduction from the Chairman
83 Board of Directors
88 Executive Leadership Team
90 Our governance structure
92 Board activities
94 The Board and our stakeholders
97 Our investors
98 Governance and culture
100 Introduction from the Chairman of
the Nomination Committee
102 Report of the Nomination Committee
106 Introduction from the Chairman of the Audit
Committee
108 Report of the Audit Committee
115 Directors’ Remuneration Report –
Chairman’s Annual Statement
118 Remuneration at a glance
120 Annual Report on Remuneration
132 Directors’ Remuneration Policy
142 Directors’ Report
FINANCIAL STATEMENTS
145 Statement of Directors’ Responsibilities
146 Independent Auditor’s Report
154 Income statement
154 Statement of comprehensive income
155 Balance sheets
156 Statements of changes in equity
157 Statement of cash flows
158 Notes to the financial statements
ADDITIONAL INFORMATION
205 Business analysis – EPRA disclosures
210 Business analysis – Group
214 Business analysis – Central London
215 Business analysis – Regional retail
216 Business analysis – Urban opportunities
216 Business analysis – Subscale sectors
217 Sustainability performance
224 Combined Portfolio analysis
226 Lease lengths
226 Development pipeline
227 Alternative performance measures
228 Reconciliation of segmental information
note to statutory reporting
230 Ten year summary
232 Subsidiaries, joint ventures and associates
235 Shareholder information
238 Key contacts and advisers
239 Glossary
IBC Cautionary statement
Landsec // Annual Report 2021 » Strategic Report WHO WE ARE
OUR PURPOSE
We are one of the leading real estate
companies in the UK. We create places
that make a lasting positive contribution
to our communities and our planet.
We bring people together, forming
connections with each other and the
spaces we create.
Sustainable places. Connecting
communities. Realising potential.
Three principles to live by, they
articulate what we want to achieve,
and the benefits and experiences
we will create for our stakeholders,
now and in the future.
OUR PORTFOLIO
CENTRAL LONDON
This includes all of our assets in
central London where we have a
high-quality, best-in-class portfolio
comprising offices, retail and
Piccadilly Lights.
REGIONAL RETAIL
Not all parts of the retail sector
are the same. Our portfolio of
regional shopping centres and
outlets includes some of the
most attractive retail in the UK.
URBAN OPPORTUNITIES
Assets within our portfolio, or
potential investments, that can
provide a blank canvas for new,
balanced mixed-use communities
in suburban London or other major
UK cities.
SUBSCALE SECTORS
This category includes our leisure,
hotels and retail parks. Good
businesses fundamentally, but
sectors where we have little scale
or competitive advantage.
£7.3bn
Valuation
£1.8bn
Valuation
£0.4bn
Valuation
£1.3bn
Valuation
6.2m sq ft
Floorspace
8.1m sq ft
Floorspace
1.8m sq ft
Floorspace
7.4m sq ft
Floorspace
Read more on pages 36-45
OUR PERFORMANCE
2020
2021
VALUATION
REVENUE PROFIT
GROUP LOAN-TO-VALUE
3 2 . 2%
3 0 . 7%
£12.8bn £10.8bn
£414m
£251m
Page
1
Landsec // Annual Report 2021 » Strategic Report
Page
2
Responding to the
present, planning
for the future
The past year brought unprecedented
challenges for everyone. In response, we
focused on two clear outcomes. The first
was to do everything we could to ensure
Landsec emerged from Covid-19 in as
strong a position as possible.
The second was to re-examine
the purpose, strategy and
culture that will position us to
achieve growth and make the
most of Landsec’s undoubted
potential. Here we describe
what we did in these two areas
of focus.
A global pandemic may not
seem the best time to reconsider
strategy, but Covid-19 has
accelerated trends in retail and
offices that otherwise may have
taken many years to play out.
We have formed a strategy that
responds to these trends, and
we have already started to
implement it.
But while we planned for
the future at Landsec, we
also focused on the present
challenges of Covid-19. Our
response for our customers
was rapid, flexible and always
with safety at its heart.
Inevitably, the impact on our
customers and our business was
still significant. Our like-for-like
net rental income was down
30.4% and revenue profit was
39.4% lower at £251m. However,
the action we have taken
means our business remains
healthy, we have retained
strong relationships with our
customers, and have a clear
strategy for growth.
OUR RESPONSE TO COVID-19
1 OUR CUSTOMERS
We were in regular contact
with our customers to support
them through the pandemic.
We provided information packs
and advice on how to establish
safe working environments, and
we explained what we would
do to ensure our assets were
Covid-secure. At each phase of
lockdown and subsequent easing
of restrictions, we worked with
our customers to help them
respond and operate in a safe
and effective way.
In early April 2020, we established
a customer support fund of £80m
for occupiers who most needed
our help to survive. To date,
we have agreed £42m of rent
concessions for customers.
In other cases, we allowed
some customers to pay their
rent monthly to help with cash
flow, or deferred payment to
a later date.
2 OUR PEOPLE
The health and wellbeing of
our people remains our priority.
Communication is crucial,
so we established a business
resilience team to guide our
people during the year, with
regular updates on how our
offices and assets would operate,
mental health and wellbeing
support, additional advice for
line managers to help them
support their teams, and
resource planning to ensure
everyone could take their
holidays and not miss out on
vital family time. Throughout
the pandemic, our recruitment
remained focused on maintaining
an inclusive workplace.
3 OUR COMMUNITIES
We continued with our
community employment and
education programmes
throughout the last year. In
addition, we gave grants
totalling £500,000 to our
existing charity partners who
were most in need.
Our directors waived 20% of
their base salaries or fees for
three months of the year,
and we used this money to
supplement these grants.
4 OUR PARTNERS
Our on-site developments are
controlled and operated by our
contractors. We remained in
constant communication with
them throughout the year, to
ensure our developments could
progress while maintaining
the safety of their people.
We provided financial help too,
paying £0.9m in topped-up
furlough funds to service
partners to allow them to pay
100% of wages.
Landsec // Annual Report 2021 » Strategic Report Fresh thinking
to address new
opportunities
WE ARE FOCUSED
ON A CLEAR
PURPOSE...
“ Sustainable places.
Connecting
Communities.
Realising potential.”
Our purpose encompasses a set
of principles we live by in our
business decisions and our desire
to create great experiences for
people, now and in the future.
Marrying these principles with
our competitive advantages
and market drivers, we have
developed a new strategy to
grow our business. And by
growing our business, we get
daily closer to achieving our
purpose. Growth with purpose.
E
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I am confident we are
well placed to capitalise
on opportunities as
they emerge.”
MARK ALLAN
CHIEF EXECUTIVE
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...THAT SHAPES OUR NEW
STRATEGY...
Our strategy focuses on four
priorities: “Optimise” our central
London business; “Reimagine”
our retail business; “Grow”
through Urban opportunities;
and “Realise” capital from
Subscale sectors. By working
towards these priorities, we will
position Landsec for growth.
…AND HAVE THE RIGHT TEAM
AND CULTURE IN PLACE
Culture is as important as
strategy – after all, it is our
people who will pursue the
strategy and our culture that
will enable them to do so.
We have engaged with our
people to create a culture
that is authentic, supportive
and built on empowerment
and accountability.
Organisational structure is also
important. We have created a
leaner, more agile organisation
with a flatter structure; one
which promotes cross-functional
team work, collaboration and
innovation. And we have
established an Executive
Leadership Team (ELT) to oversee
the execution of our strategy.
Read more about
the ELT on pages 88-89
2021 IN NUMBERS
27.0p
Dividend, up 16.4%
985p
EPRA net tangible
assets per share,
down 17.4%
33.9p
Adjusted diluted
earnings per share
(2020: 55.9p)
-15.9%
Total business return
(2020: -8.2%)
£(1,393)m
Loss before tax
(2020: £(837)m)
11.5 years
Weighted average
maturity of debt
32.2%
Group loan-to-value
£6.5m
Social value created
during the year
55%
Reduction in carbon
emissions (tCO2e)
compared with
2013/14 baseline
£11.7bn
Total contribution to
the UK economy each
year from people
based at our assets
100%
100%
We continue to
procure 100%
renewable electricity
across our portfolio
We continue to divert
100% of waste from
landfill across our
operational activities
Page
3
Page
4
Responding to the
present, planning
for the future
continued
OUR TOP 10 ASSETS
(LISTED BY VALUE)
2
Cardinal Place, SW1
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4
One New Change, EC4
5
Nova, SW1
6
Queen Anne’s Mansions, SW1
7
Gunwharf Quays,
Portsmouth
8
62 Buckingham Gate, SW1
9
Piccadilly Lights, W1
10
The Zig Zag Building, SW1
Landsec // Annual Report 2021 » Strategic Report
AMBITIOUS
targets in line with limiting global warming
to 1.5°C – a demanding but essential task.
LEADER
in ESG within Europe
and globally.
MAINTAINING OUR ESG LEADERSHIP
One of the key enablers of our strategy is
ESG leadership. In a year when a single virus
created global disruption, the vulnerability
of our planet and the important role we all
play in protecting it, became all too clear.
It also brought home to us the inequalities
in society, with the vulnerable and low-paid
suffering disproportionately, and therefore
how important our role is in connecting
communities. We are proud of our record
on ESG and always strive to act in an
ethical and sustainable way. But it is more
than ethics – businesses that integrate
sustainability into the way they behave, and
the way they connect with their customers,
partners and the communities where they
operate, will have a ‘sustainable’, long-term
future and, ultimately, will outperform.
We continue to be a leader in ESG within
Europe and globally. We were the first
commercial real estate company in the
world to have a carbon emission target
approved by the Science Based Targets
initiative and, in 2019, we set ourselves
ambitious targets in line with limiting
global warming to 1.5°C – a demanding
but essential task.
This year, in addition to the financial
support we have given to our charity
partners, we’ve continued many of our
employment and education programmes
virtually. And we continue to engage with
our communities, providing help and
volunteering on issues including mental
health, youth education, employability skills
for prison leavers and support for people
suffering domestic abuse. In all, we have
created £6.5m of social value this year.
We have also made sure we have supported
our people, not only in relation to the
challenges posed by Covid-19, but with
training and our approach to diversity
and inclusion (D&I). We have developed
our first D&I strategy. We recognise we still
have more to do in this area, but we are
committed to being an inclusive employer.
Read more on pages 56-63
Page
5
BENCHMARK
LATEST PERFORMANCE
GRESB 2020
› Real Estate Sector leader – 5 star rated
entity and Regional Listed Sector Leader
for Europe within Diversified – Office/Retail
(score 85%)
› Global Listed Development Sector Leader
for Office (score 94%)
CDP 2020
› A-list (top 2.8%) for the fourth consecutive year
› Inclusion on the 2020 Supplier Engagement
Leaderboard (top 7%)
DJSI 2020
› Score 85/top 99th percentile
› European Real Estate leader, ranking
4th globally
› Silver Class distinction in the S&P Global
Sustainability Awards
WDI Awards
› WDI Award winner
(most complete overall response)
› Contingent Workforce Data Award winner
› Supply Chain Data Award winner
Our drive and commitment to ESG will
ensure our portfolio meets the needs
of today’s customers while satisfying
increasingly demanding environmental
standards over time. To us, this is simply
the right way to run our business.
It means providing the right space
and environments for our customers,
communities and employees; maintaining
the long-term sustainability of our business;
achieving above-market returns; and
contributing to managing the long-term
health of the planet.
The pandemic has further raised the
importance of wellbeing and sustainability
in our assets. It is becoming clear that
secondary quality space is letting more
slowly as occupiers look for modern healthy
space to accommodate their people and
to operate their business activities.
In 2019, we committed to becoming a net
zero carbon business by 2030, one of the
first companies in the industry to do so.
Starting with The Forge, all our future
developments will be net zero carbon.
And to show our commitment to healthy
office environments, we aim to achieve
a WELL portfolio rating across our entire
London office portfolio.
During 2020, we published our net
zero carbon pathway and participated
in a number of net zero initiatives
and consultations.
Landsec // Annual Report 2021 » Strategic Report
Chairman’s
statement
A crisis like the Covid-19 pandemic tests
the culture and resilience of any business,
and it has been heartening to see how
well Landsec has responded.
CRESSIDA HOGG
CHAIRMAN
Page
6
AN EXTRAORDINARY YEAR
The last year has been an extraordinary
one, with unprecedented challenges at
a global and national level. The Covid-19
pandemic has resulted in tragic loss of life,
and caused widespread economic and
social disruption. As our financial year
closed however, we could see that the UK
vaccination programme had already
allowed for a relaxation of controls, and
it is possible to see a path to more normal
life going forward.
Our business has been affected in many
ways by the pandemic, and the lockdown
restrictions imposed across the UK. Most
of our buildings have had usage restrictions
for the majority of this financial year, as
retail and hospitality venues were required
to shut and workers encouraged to work
from home where possible. Clearly these
restrictions have had a serious financial
impact on many of our customers,
especially those dependent on consumer
footfall. You will see in this report the
impact that this has had on our financial
results, and like many of our peers our share
price has also been affected.
For Landsec this has also been a year of
significant management change. At the
start of it we welcomed Mark Allan as our
new CEO, and after many years as CFO
Martin Greenslade leaves us after the end
of the financial year, handing over to
Vanessa Simms who joined Landsec in May.
Under Mark the Executive Leadership team
has been redefined, with new faces from
inside and outside Landsec taking up roles
at this level. It has been exciting to see how
our new leaders have already created fresh
momentum in the business, despite the
challenges of working remotely for much
of the year.
LANDSEC’S RESPONSE
A crisis like the Covid-19 pandemic tests the
culture and resilience of any business, and
it has been heartening to see how well
Landsec has responded.
Throughout the last year the company
has been very focused on how it can help
customers and other stakeholders to
mitigate the impact of the pandemic.
We have worked with customers across
the portfolio to help restructure leases
where appropriate, and at the start of
the pandemic set up an £80m customer
support fund to help the most vulnerable.
To support our long term charitable
partners we created a dedicated charitable
support fund of £0.5m, partly funded by
the reduction in salary taken by our
Executive Directors and the Board. Where
restrictions allowed we have continued our
Landsec // Annual Report 2021 » Strategic Report With our new strategic priorities clear,
there are parts of the portfolio that are
no longer core to our business, and when
we can realise appropriate values for
these assets they will be sold. We will also
continue to recycle capital from more
mature assets into office and mixed-use
development projects.
Landsec’s culture and values are key to
the successful implementation of our new
Stakeholder
engagement will
be more important
than ever.
strategy. As we have seen
clearly over the last year
our corporate culture is a
great strength, especially
in adversity. However, the
Board supports Mark’s
aim to re-invigorate our
culture to make the
business more responsive,
and help our employees
to feel more empowered
to make the right
decisions quickly.
employment and education programmes
virtually. Piccadilly Lights has been used
to help communicate key messages from
charities and public bodies, and we have
given over £2m worth of free advertising to
registered charities at the Lights this year.
The Board has been proud of how the
management team and our colleagues
have shown resilience and creativity in
response to all the issues they have faced.
The health and wellbeing
of our staff is always very
important to us, and
working remotely has
been difficult for many.
We have tried hard to
help colleagues address
issues around physical
wellbeing and mental
health, and it has been
heartening to see the
mutual support that
our staff have shown,
through the networks we
have, and in more informal ways. I would like
to thank all our staff for the commitment
and resilience they have shown through this
challenging year.
REFOCUSING FOR THE FUTURE
During the first half of the year Mark led a
strategic review of our business, presenting
a new vision and strategy for Landsec in
October. The Board was closely involved
in this review, and over several months
discussed market evolution and its
implications for Landsec’s portfolio and
strategy for the future. While the structural
changes in both the retail and office
market will continue, it is clear that
Landsec will be best positioned for the
future by focusing on what our customers
want. Stakeholder engagement will be
more important than ever.
Across our office customers, while most
have managed working remotely surprisingly
well, the benefits of collaborative working
have become more fully appreciated.
While customers will undoubtedly adapt
how they use office space, surveys show
that most employees welcome a physical
return to the office for part of the week.
We remain committed to providing our
customers with safe, flexible and modern
space as their working practices adapt.
As retail starts to re-open across the UK
many of the lasting impacts of the
pandemic are not yet fully understood.
However, across the portfolio we are
focusing on developing a realistic view
of sustainable rents, rethinking our guest
experience and reshaping the size of our
retail footprint.
Page
7
We remain very committed to the targets
we have already set out to help Landsec
become carbon net zero by 2030. The
long-term effects of climate change will
be more significant for business than the
pandemic has been, and we are working to
understand the impacts on Landsec more
fully, and adapt accordingly. You can read
more about our progress in this area on
page 64. Our desire to have a positive
impact on the wider communities and
environments in which we have a presence
remains, and elsewhere in this report we
show case studies of how we create social
value around our developments.
It remains our goal to make our Board,
senior leadership team and employee base
a truly diverse reflection of the customers
and communities we work with. We will
continue to drive our recruitment, training,
remuneration and promotion policies
towards this, whilst ensuring that they
remain fair and transparent to all our
colleagues.
BOARD CHANGES
As I have already mentioned, we welcomed
Mark to the Board at the start of April,
and his impact is already clear, despite
the restrictions of virtual working for much
of the year. The appointment of Vanessa
Simms as our new CFO was announced in
October. Vanessa joined the Board in May
and we look forward to working with her.
Martin has been CFO of Landsec since 2005
and has made a significant contribution
to our business over his long tenure. He will
be missed by the Board and more widely
across the business, and we have all valued
his clarity of thought, his deep knowledge
of Landsec and his great sense of humour.
I am personally particularly grateful to
him for becoming interim CEO at the start
of the pandemic for a short period that
was more eventful than either of us had
anticipated! We wish him all the best for
the future.
We welcomed Manjiry Tamhane to the
Board as the year came to a close. Manjiry’s
experience in data management and
strategy and evolving consumer behaviour
is particularly relevant to our business at
this time. Stacey Rauch, who has served as
a Director for over nine years will step down
before the AGM, and will be much missed.
Stacey is a valued and insightful colleague,
and we have particularly benefited from her
strategic perspectives and human insights.
LOOKING FORWARD
Overall, as we emerge from the pandemic,
the Board is confident that Landsec is in
a robust position with a strategy that is fit
for the future. We have clear priorities for
all parts of our business, building on our
strengths. We are confident that we will be
ready to respond to the challenges we will
undoubtedly face in our markets and have
a firm base on which to build shareholder
value for the future. Thank you for your
continued support.
CRESSIDA HOGG
CHAIRMAN
Landsec // Annual Report 2021 » Strategic Report Chief Executive’s
statement
As a result of our proactive approach to the
challenges posed by the pandemic, Landsec
is poised for recovery with a strategy that
positions the business for long-term growth.
MARK ALL AN
CHIEF EXECUTIVE
Page
8
OVERVIEW
I joined Landsec as Chief Executive in April
2020, in the early days of the Covid-19
pandemic, and our results for the year to
March 2021 clearly reflect the challenges of
both the pandemic and the government’s
policy response. However, from the very
outset of the first lockdown we have been
focused on ensuring that the business
emerges from the pandemic in as strong
a position as possible. The positive effects
of this decisive action will become clearer
in the years ahead.
Lockdowns meant that the vast majority
of our portfolio was either closed or
substantially unoccupied for over half
of the year. Social distancing and other
restrictions meant that, even when open,
capacity and utilisation across all assets
was still heavily impacted. Our key priorities
throughout were (i) ensuring the safety
of our employees and visitors to our
properties; (ii) working collaboratively
with our customers to support their
businesses as effectively as possible; and
(iii) maintaining our financial strength and
flexibility. Our success and progress against
each of these objectives, in the face of
heightened uncertainty and persistent
challenges, has gone some way to offset
the significant negative financial impact of
the pandemic. We did not benefit from any
Government sponsored financial assistance.
We are now entering the recovery phase.
Government action to support the
economy was swift and the speed of
the ongoing vaccination programme
impressive. As a result, there is the real
Landsec // Annual Report 2021 » Strategic Report prospect of a strong consumption led
recovery across the remainder of 2021
and 2022, although this is not without risk.
Businesses will fail, jobs will be lost and
management of the public finances will
require a deft hand. However, as a result of
our proactive approach to the challenges
posed by the pandemic, Landsec is poised
for the recovery with a strategy that
positions the business for long-term growth.
RESULTS AND DIVIDEND
EPRA NTA was 985p at 31 March, a fall
of 17.4% over the year attributable
primarily to the effect of the global
Covid-19 pandemic on our property values.
Adjusted net debt fell £437m to £3,489m as
a result of proactive asset disposals more
than offsetting capex on our development
programme. As a result, despite the
valuation weakness, our Group LTV only
increased marginally to 32.2%. Our balance
sheet remains in a
strong position.
This strategy is captured in four strategic
priorities, set out below, and each is covered
in more detail later in the Operating and
portfolio review, together with a clear
update on progress made to date and
more detail on near-term objectives.
1 OPTIMISE CENTRAL LONDON
2 REIMAGINE RETAIL
3 GROW THROUGH URBAN OPPORTUNITIES
4 REALISE CAPITAL FROM SUBSCALE SECTORS
In line with our strategy, we intend to
increase portfolio recycling in the near term
to effect our desired reallocation of capital
and are prepared to take, in a considered
way, more operational risk to create value
and drive returns, with financial leverage
managed accordingly. We have earmarked
approximately £4bn of assets for disposal
over the next few years, focused initially
on high quality but defensive prime central
Revenue profit for
the year was £251m,
down 39.4% relative
to the prior year. The
decline was almost
entirely attributable
to Covid-19, either
as a result of lower
operating income
(such as rent on
turnover leases) or
as a result of rent
concessions granted
and bad debt
provisioning.
Performance in the
coming year will be
determined by the shape
of economic recovery
from Covid-19 and the
early signs are positive.
London assets and,
in due course, assets
in Subscale sectors
where we have little
or no competitive
advantage (hotels,
leisure and retail
parks).
When reinvesting
capital from this
portfolio recycling
programme, we have
identified two main
areas of focus – value
add opportunities in
central London and
urban mixed-use regeneration projects.
We also believe that opportunities could
begin to emerge in the retail sector in the
short to medium term following the very
substantial downward correction in asset
values in that sector over the past few years.
Culture is as important as strategy.
Successful execution of our strategy will be
built on a reinvigorated culture at Landsec
to ensure that we make the most of the
considerable capability and expertise of our
people and look to augment it in a targeted
way. Clarity of strategic direction, coupled
with a properly aligned organisational
design, will allow us to foster a culture of
greater empowerment and accountability.
As a result, we will be better placed to
assess and manage risk, make decisions
more quickly and drive better returns.
Where we judge that new or additional
skills are required, for example in elements
of our retail business or in regeneration and
placemaking, we are moving quickly to
address those needs.
We are proposing a final dividend for the
year of 9.0p per share which, together with
interim dividends already paid, makes for
total dividends of 27.0p per share for the
full year.
STRATEGY, CULTURE AND PEOPLE
We launched our new strategy in October
2020, confirming our intention to focus on
creating long-term value for shareholders,
as measured by total business return.
We will achieve this by concentrating our
activities and our capital on those sectors
and opportunities where we believe we
have sustainable or attainable competitive
advantage. Importantly, it is a strategy
grounded in a clear purpose – Sustainable
Places. Connecting Communities. Realising
Potential – which aims to create sustainable
value for all our stakeholders.
Page
9
Bridging both strategy and culture for
Landsec are five key performance drivers
that will underpin our competitive
advantage for the long term: customer
centricity; data-driven decisions; ESG
leadership; capital discipline and
development expertise. Our level of existing
capability in each area is varied –
development expertise and ESG leadership
are already key strengths on which we can
build further. Our capital discipline – both
in the sourcing and allocation of capital –
can be sharper and customer centricity and
data-driven decisions are both areas where
significant progress is needed. But these are
areas where the wider real estate sector
itself is not particularly strong and so both
still represent opportunities to establish
competitive advantage if we move quickly.
The past twelve months have been
challenging for everyone. Across Landsec,
as with many organisations, our teams
have had to adapt quickly to ever changing
conditions and have had to work harder
than ever to balance the pressures of their
roles with other priorities. It is testament,
therefore, to their skill and dedication that
so much has been achieved, and so much
value protected, despite these persistent
challenges. I have been deeply impressed
by both the performance and potential of
my new colleagues.
1
STRATEGIC PRIORITY:
OPTIMISE CENTRAL LONDON
Our Central London business represents
68% of our portfolio by value and is
characterised by the quality, resilience
and liquidity of our London office assets.
These assets are a clear example of the
value creation capabilities inherent in the
Landsec business, given that the majority
have been developed or refurbished and
leased by us in the past 15 years. However,
a number of the assets now have limited
further value creation potential and so we
intend to increase asset disposals over the
next few years and recycle our investment
out of these high quality, more defensive
assets and increase our exposure to assets
that offer greater upside, for example either
through redevelopment or repositioning.
This strategy better aligns our capital
and capability, leading to greater value
creation opportunities in the medium
to longer term. Our sale of 1 & 2 New
Ludgate for £552m in December and the
subsequent acquisition of 55 Old Broad
Street for £87m demonstrate the progress
we are already making.
Landsec // Annual Report 2021 » Strategic Report Chief Executive’s
statement
continued
Central London has been one of the areas
hardest hit by the effects of the pandemic
and social distancing restrictions, with
physical office occupancy for the portfolio as
a whole ranging from 1% to 21% at different
times across the year and footfall across our
Central London portfolio down by around
82%. We expect physical office occupancy to
recover substantially across the second and
third quarters of 2021. However, with tourism
likely to be constrained, future office working
patterns still unclear and residual concern
about the safety of public transport likely
to persist for a while yet, it will take longer
for central London footfall to recover fully.
Given the pandemic related challenges,
our Central London performance was
remarkably resilient in valuation terms,
falling only 6.5% to £7.3bn and reflecting a
like-for-like equivalent yield of 4.6%. Investor
demand for long let, prime London assets
was strong and we expect it to remain so,
reflecting both investors’ willingness to look
through near-term uncertainty and the
relative value of London compared with
other major cities around the world. Yields
for prime assets appear well supported at
current levels and we could even see some
compression in the year ahead.
The nearer term prospects for office
occupier markets are more difficult to
judge. Vacancy rates are high but
concentrated in second hand space. Hybrid
working models are here to stay but the
effect on occupiers’ space requirements
is far from clear and will not be uniform.
And demand seems likely to be strongest
for prime space, the recent and speculative
supply of which has been muted. Overall we
expect some weakness in rent levels but for
this to be most significant for secondary
space, of which we have very little.
Against this backdrop, there will be a clear
opportunity for owners and occupiers to
work together collaboratively to determine
and deliver tailored requirements and this
will offer potential for investors, developers
and occupiers alike. Landsec’s long track
record and deep, strategic relationships
with its customers should translate into
clear competitive advantage. Besides our
high quality development programme, it
is also a particularly interesting time for us
to be broadening the range of propositions
we can offer to occupiers – our Myo,
Customised and Blank Canvas offerings.
Flexibility, adaptability and strong customer
relationships are going to be critical
attributes going forward.
From a development perspective, we
worked hard during the year to preserve
optionality on our speculative projects for
as long as possible, allowing us time to
assess and better understand the outlook
for the occupier market. Taking all of our
analysis into account, and having stress
tested prospective returns, we have now
committed to three of our five near-term
office development opportunities and will
be delivering them during 2022 and 2023.
These three projects total 0.5 million sq ft
and, including pre-let or pre-sold projects,
take our total committed development
programme to 1.1 million sq ft, of which
57% is either pre-let or pre-sold.
2
STRATEGIC PRIORITY:
REIMAGINE RETAIL
The pandemic has materially accelerated
structural trends that were already underway
in retail and, for most of the retail sector,
it is clear that online is now the primary
growth channel and will remain so. This
does not, however, signal the end for retail
property. Instead, it means that its role must
change in an omnichannel world to offer
something sufficiently compelling – either
to be complementary to online or to offer
something that cannot be easily replicated
online. It is this reality that underpins our
‘Reimagine retail’ vision and we are confident
that, with effective execution, we have a
retail business that can thrive longer term.
Our outlets portfolio (£0.7bn value)
serves a real purpose, offering visitors the
opportunity to enjoy a day out shopping
a variety of brands, with a great value offer
and experience that isn’t easily replicated
online. The outlet model is fundamentally
Page
10
based on collaborative partnerships with
our brand partners, most obviously through
turnover based leases. During the year, our
outlets have been relatively resilient, but
values fell 18.5% and like-for-like equivalent
yields moved out to 6.8%. However, based
on their strong relative performance after
each lockdown, we expect outlets to
perform strongly in the recovery.
The picture for shopping centres remains
more complex. Over the year, the value
of our regional shopping centres fell on
average 38.2% to £1.0bn, taking the decline
from the peak to approximately 60%. The
realities remain that going forward there
will be fewer physical retail stores, rents will
be lower and, in order to remain relevant,
shopping centres will need to offer a
combination of attributes that are either
complementary to online or not easily
replicated online.
Much more of this is now reflected in
valuations than was the case a year ago,
largely as a result of the accelerating effect
of the pandemic. The vast majority of our
forecast 40% decline in rents from peak to
achieve a sustainable level has now been
recognised. It is of course currently difficult
to assess rental values given the effects
of the pandemic and the increasing
prevalence of turnover components to
leases, and it is possible that the downward
correction in rents overshoots in the short
term. However, we remain confident in our
sustainable rent forecasts overall.
All of this means that retail property will
continue to become more operational
in nature and our priorities reflect this.
To be successful in the long term we need
to be able to combine strong, strategic
relationships with brand partners,
effectively tailored guest experiences and
deep asset management expertise. Landsec
has always had strong asset management
credentials but brand partner management
and more tailored guest experiences are
areas where we are targeting rapid
enhancements. We have made good early
progress and our appointment in December
last year of Bruce Findlay as Managing
Director – Retail, bringing considerable
international retail experience from a range
of global brands, is an important example
of how we are enhancing the ‘retailer
perspective’ in our approach.
The near-term outlook for retail remains
challenging, particularly for shopping
centres. We are likely to see a sharp
increase in insolvency processes (such
as CVAs, business restructurings or
administrations) amongst occupiers as the
Government’s pandemic related support
tapers off and businesses that were
Landsec // Annual Report 2021 » Strategic Report Against this backdrop, we expect to make
good progress in executing our strategy. We
took advantage of strong investor demand
for prime London office assets to make
two disposals in the year, with combined
proceeds of £0.6bn, and more disposals are
likely over the course of the next financial
year. With improving economic prospects,
we can now pursue opportunities to
reinvest this capital with confidence.
Our reinvestment agenda includes our
committed Central London development
programme, but we also have capacity to
pursue new acquisition opportunities in a
targeted way. Our main target areas for
investment are value add opportunities in
central London and mixed-use, multi-phase
urban regeneration projects, both of which
offer the potential for above average total
returns for shareholders. In addition, we
are carefully monitoring the retail sector
to determine whether this could provide
interesting opportunities at potentially
compelling returns.
Of course, our strategy is about more
than capital allocation. We also intend to
continue the reinvigoration of our culture
in line with the principles of empowerment
and accountability and to enhance some
of the more operational and customer-
oriented foundations that we believe will
be critical to our long-term success. These
include the continued roll out of a wider
range of propositions for our Central
London office customers, further investment
in strategic brand partnerships and guest
experience capability in retail and proving
our placemaking credentials in Urban
opportunities.
The Landsec business is poised for recovery
with a strategy that positions the business
for long-term growth.
MARK ALLAN
CHIEF EXECUTIVE
struggling before the pandemic continue
to do so afterwards. As this happens, it will
accelerate the fall in passing rents towards
our forecast sustainable rent levels,
increasingly reflected in valuations already.
It will also open up opportunities for new
brands and different propositions, including
digitally native ones, to take space instead
and help improve longer-term prospects.
Our longer-term view of retail is more
positive. With the downward correction
in rents and values now happening much
more quickly than would have been the
case before Covid-19, it represents an
opportunity for the sector to recalibrate.
Landsec’s combination of a strong retail
platform, deep asset management and
development expertise and a strong
balance sheet marks us out as increasingly
unique in the sector and well positioned
to take advantage of any appropriate
opportunities should they emerge.
3
STRATEGIC PRIORITY:
GROW THROUGH URBAN
OPPORTUNITIES
Our Urban opportunities portfolio currently
consists of five suburban London shopping
centres with significant repurposing
potential in the medium to longer term.
These assets offer the raw material for
mixed-use, multi-phase developments that
can offer a compelling blend of income,
development and rental growth driven
returns throughout their life. Well designed,
mixed-use spaces can also cater for the
increasing focus on the need for balanced
communities and spaces that contribute
positively to quality of life, both of which
have been brought into sharper relief by the
pandemic. With our existing development
and asset management capabilities, we
believe that Landsec is well placed to
become a leading player in this sector,
both through the realisation of existing
opportunities within our own portfolio
but also through targeted acquisitions.
The longer-term redevelopment potential
of our Urban opportunities portfolio helped
to support values during the year to some
extent but they still saw a meaningful
decline of 23.3% to £0.4bn as a result
of their predominantly existing retail
nature. Our focus in the year ahead is on
progressing our redevelopment plans, with
the submission of a planning application
on our first project a key target. We are
also actively evaluating potential new
investment opportunities that can offer the
right blend of income, development and
rental growth driven returns, ideally in a
way that can accelerate the return profile
of this segment of the business.
Page
11
4
STRATEGIC PRIORITY:
REALISE CAPITAL FROM SUBSCALE
SECTORS
Subscale sectors describes those parts of
the portfolio where we have relatively little
capital invested and judge ourselves to
have little or no competitive advantage –
hotels, leisure assets and retail parks.
Our objective remains to realise capital
from these assets over time and to
reinvest that capital into new value
creation opportunities.
Of course, these types of assets have been
amongst the hardest hit by the pandemic,
particularly hotels and leisure, and over the
past 12 months the aggregate value of our
investment in Subscale sectors fell 16.4% to
£1.3bn. We do, however, expect these assets
to be well placed beneficiaries of a strong
consumption led recovery in the months
and years ahead and for values to grow
meaningfully as a result. Our anticipated
timescale for disposals reflects this, with
hotels and leisure assets unlikely to be sold
for at least a couple of years so that we
can capture a sensible proportion of the
expected valuation upside ahead. Retail
parks, which were more resilient in the
pandemic and where investment markets
have staged a recovery, may offer sale
opportunities sooner. In all cases, we
will be working hard to maximise value
creation opportunities across the portfolio
in the meantime.
THE YEAR AHEAD
Performance in the coming year will be
determined by the shape of economic
recovery from Covid-19 and the early signs
are positive. The 12 April re-opening of
non-essential retail saw some very strong
trading for retailers across our portfolio
and highlighted the potential for a strong
consumer-led recovery over the remainder
of 2021 and 2022. Our retail, leisure and
hotel assets are well placed to benefit
from such a recovery and, after a period
of material downward movements in
retail valuations in particular, the outlook
for this part of our portfolio now appears
under significantly less pressure.
We expect activity in central London
to recover more slowly, with office
occupational markets remaining more
subdued for the time being, which could
translate into some rental weakness.
The London investment market, conversely,
seems likely to display continued resilience
with a significant amount of capital seeking
prime investment opportunities and this
could go some way to offsetting any rental
weakness from a valuation perspective.
Landsec // Annual Report 2021 » Strategic Report Our market
Page
12
The Landsec property portfolio is invested in a number
of sectors within the UK. We own high-quality offices
in London, six regional shopping centres, five retail
outlet centres and five suburban London retail assets,
aiming to redevelop this final group into urban
mixed-use schemes over time.
MARKET AT A GLANCE
232m sq ft
of office space in
central London
732m sq ft1
of retail space
in the UK
8.9%
vacancy rate in
central London offices
(2020: 4.5%)
17.9%2
shopping centre
vacancy rate
(2020: 14.1%)
£7.2bn
of investment
transactions in
central London
in 2020
1. Source: JLL/GOAD
2. Source: LDC
In addition, we have assets in three sectors
we will seek to exit over the medium term:
retail parks, stand-alone leisure parks and
hotels. The dynamics in each of these
market sectors vary, as do the specific
locations and assets.
MARKET DYNAMICS
LONDON OFFICES
The London office market comprises 232m
sq ft of space. Some assets offer exclusively
office facilities, but typically an office
building will usually incorporate a collection
of space for retail, food and beverage, and
ancillary services and amenities such as
health services. Office customers’ needs
are changing, with a greater demand
for flexible space, healthier working
environments, sustainable buildings and
more services and amenities.
Office space requires regular refurbishment,
and buildings are defined as grade A –
new or recently refurbished space – and
secondary – older space which needs
investment. London is a global financial
centre with a dynamic office market that is
constantly renewed by development. It is a
cyclical market, from both an investment
and occupier perspective, and sees periods
of rental and valuation growth with periods
of decline. Successful property companies
manage their assets, time their investment
and development activity, and consider
risk in relation to the supply and demand
conditions in the market. The cycle is a
consideration when making investment
and disposal decisions, but it should not
constrain a business from taking contrarian
views when opportunities emerge.
Despite the recent impact of Covid-19 on
its investment and occupational markets,
London will remain a global financial
centre, and its office market has long-term
potential from both an asset-management
and development perspective.
RETAIL
Retail space ranges from individual units on
the high street through to large, regionally
dominant shopping centres. In addition,
retail space can be designed to satisfy
different reasons to shop: retail parks focus
on the convenience-led trip, whereas large
shopping centres are destinations that
provide a mix of retail, food and beverage,
and leisure activities such as cinemas.
The vast majority of retailers have an
omnichannel strategy which uses online
as well as physical space to market and
deliver their products and services to their
customers. Physical stores are destinations,
but are also used to support online retail
through click & collect and returns services.
Retailers have adapted their store networks
in response to this, and in many cases now
operate from a smaller number of larger
units. The type of product and service
offered by retailers ranges from the essential,
such as food and healthcare, through to
discretionary sectors such as luxury products
and jewellery. Such a diverse range of
products means particular parts of the
retail sector can be affected by economic
cycles and consumers’ disposable income.
Landsec // Annual Report 2021 » Strategic Report During the past 10 to 20 years, landlords
have had to manage their retail assets
during a period when retailers faced both
cyclical and structural pressures. The nature
and length of leases is changing, with
landlords having to be more flexible in
tailoring leases to the specific needs of
their customers. Leisure services, such as
cinemas, have become an increasingly
important part of the mix of offers found
in destination centres.
URBAN MIXED-USE
Urban mixed-use schemes represent a
major growth opportunity for Landsec,
underpinned by the global trends we have
identified (see below). Rapid urbanisation,
demographic and social change, and
technologically advanced living are
increasing the need for modern, well-
configured places to live, shop, work
and socialise.
Such schemes often have a large residential
component, both of rented and owned
apartments. The ‘build to rent’ market
in the UK is still relatively nascent, and
opportunities exist for larger operators to
establish scale in this area. Opportunities
exist to develop suburban sites in London
as well as in larger UK cities such as
Manchester and Birmingham.
Six ‘Global Forces of Change’ will impact
our business over the next 10+ years.
MACRO TRENDS SHAPING OUR FUTURE MARKETS, CUSTOMERS AND COMPETITORS
1
2
3
4
5
6
RAPID
URBANISATION
One in three people
will live in cities of
at least 500,000
habitants by the year
2030 (source: UN).
DEMOGRAPHIC
AND SOCIAL
CHANGE
A global population
boom, paired with
people living longer
and having fewer
children, will
drive significant
demographic shifts.
TECHNOLOGICALLY
ADVANCED LIVING
The digital landscape
will continue to
disrupt how we live,
work, communicate,
shop and beyond.
CLIMATE CHANGE
AND RESOURCE
SCARCITY
Growing energy,
water and food
demands, alongside
rising weather and
health events, show
the global need to
reverse environmental
degradation.
BORDERLESS
ACCESS
SHIFTS IN GLOBAL
ECONOMIC POWER
The liberalisation
of global economic
policy and the
accessibility of air
travel have opened
borders, supply
chains and trade
patterns.
Political unrest,
populism, trade wars
and mounting
recessions are
reshaping the map
of economic power
and driving new
culture clashes.
COVID-19 IMPACT
ACCELERATING
Covid-19 has
accelerated adoption
of convenience
culture, tech usage
and urbanised
consumption
expectations.
DECELERATING
Covid-19 has created
a fear of densely
populated areas.
DECELERATING
Covid-19 has been
more detrimental to
ageing citizens and
BAME populations.
A Covid-19 economic
downturn may also
decelerate a focus
on an evolved and
more inclusive
landscape.
ACCELERATING
We are likely to see
accelerated demand
for new products and
greater connectivity.
Fibre technology
and 5G networks will
increase accessibility
leading to new
applications for
the way we work,
communicate and
live our lives.
DECELERATING
Covid-19 has
followed a decade
of austerity, and
political turmoil, and
now health concerns
may entirely reshape
the globalisation of
trade, commerce
and attitudes.
Nationalism will
continue to flourish
with added fuel.
ACCELERATING
A Covid-19 economic
downturn will widen
the wealth gap.
Nationalistic
attitudes fostered
by ‘alternative
governments’ will
drive wider trade
rifts, while Covid-19
fast-movers may
gain the upper hand
globally.
ACCELERATING
Although we were
expecting a
decelerating trend
at the beginning of
the pandemic, we’ve
seen the opposite.
More companies
are increasing their
efforts to address
climate change and
committing to net
zero. Climate change
continues to top the
Government agenda,
with frequent
announcements
of related plans.
While Covid-19 is having immediate and unpredictable effects on citizens, businesses and markets globally,
the pandemic is also accelerating and decelerating aspects of change that have long been growing.
Page
13
Landsec // Annual Report 2021 » Strategic Report
Our market
continued
THE PAST 12 MONTHS
The last year has been dominated by the
impact of the Covid-19 pandemic, with
retailers, food and beverage, leisure operators
and the hotel industry particularly hard hit.
The vast majority of offices in London
remained open during the year, to provide
a safe environment for those who could not
work elsewhere. In addition, office occupiers
continued to pay their rent during the year,
with rent collection rates above 90% for the
major office operators.
Occupational demand in the London office
market was below the long-term average
(see chart right). There is a growing
distinction between demand for new, prime
office space – which meets wellbeing as well
as branding and operational requirements
for its occupiers – and secondary space,
which is difficult to adapt to more
progressive requirements. The pandemic
has increased this divergence.
The London office investment market
remained active over the last year, with
demand for larger assets coming mainly
from overseas investors. There was less
demand for secondary assets, and these
may become buying opportunities for office
developers who can redevelop the space to
meet the needs of today’s customers.
The retail and leisure sectors were hit
very hard by Covid-19, with non-essential
retailers forced to close their stores for
parts of the year during the lockdowns.
The sector saw a number of retailers go
into administration, including the Arcadia
brands and Debenhams. Rent collection
levels were significantly lower than normal,
and landlords have provided support
through rental payment holidays and
deferrals where appropriate.
The impact of Covid-19 was not uniform
across the retail sector. Outlets, retail parks
and some suburban shopping centres with
a larger proportion of essential retail were
relatively resilient but still saw valuation
declines in the year.
In contrast, central London retail, heavily
dependent on tourism and office workers,
was one of the most significantly affected
segments.
Encouragingly, footfall recovered strongly
when shopping centres were allowed to
open but, with social-distancing measures
in place, it was still below pre-Covid levels.
The food and beverage, cinema and hotels
sectors were affected by social-distancing
restrictions and the lockdowns in similar
ways to the retail sector. It is likely these
sectors will rebound quickly when
restrictions ease.
Online is now the primary growth channel
for retailers. To remain relevant and
successful, retail space will have to be
compelling in its own right, complementary
to online (e.g. through fulfilment services
such as click & collect) or offer products,
services and experiences which cannot be
replicated online.
Page
14
The pandemic has also accelerated a
number of trends which will provide
opportunities for Landsec:
› CVAs and administrations are likely
to increase following the end of the
moratorium. This is an unwelcome event,
but one which ultimately leads to the
renewal of the sector.
› There is a flight to prime space as retailers
demand the right space in the best
locations.
› Retail winners are looking for fewer,
larger stores.
› Digital native businesses are looking
for prime physical space.
› Brand mix is changing to become more
relevant and sustainable.
› Property companies need to be more
operational to respond to changing
customer needs.
As a result of these trends, struggling
space will fall in value more quickly,
enabling property companies to repurpose
space earlier than would otherwise have
been the case.
Landsec // Annual Report 2021 » Strategic Report CENTRAL LONDON INVESTMENT MARKET
Investment volumes
Investment volumes in London were lower in 2020, partly reflecting the impact of Covid-19 on viewings particularly by overseas investors.
Demand held up for prime, long let assets.
£bn
25
20
15
10
5
0
Q1
Q2
Q3
Q4
0
9
9
1
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
CENTRAL LONDON OFFICE TAKE UP IN 2020 WAS A HISTORIC ANNUAL LOW OF 5.6M SQ FT
Source: CBRE Research
Covid-19 had a dramatic impact on central London office take-up with levels reaching a record low of 5.6m sq ft.
Million sq ft
10-year average: 12.2m sq ft
20
16
12
8
4
0
0
9
9
1
1
9
9
1
2
9
9
1
3
9
9
1
4
9
9
1
5
9
9
1
6
9
9
1
7
9
9
1
8
9
9
1
9
9
9
1
0
0
0
2
1
0
0
2
2
0
0
2
3
0
0
2
4
0
0
2
5
0
0
2
6
0
0
2
7
0
0
2
8
0
0
2
9
0
0
2
0
1
0
2
1
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
7
1
0
2
8
1
0
2
9
1
0
2
0
2
0
2
ONLINE SALES AS A SHARE OF TOTAL RETAIL SALES
Source: ONS
Online share of total UK retail sales has grown at a pace of 13% p.a. since 2008.
Short of any policy changes, online penetration is set to rise steadily.
%
40
35
30
25
20
15
10
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Landsec // Annual Report 2021 » Strategic Report Our
stakeholders
Page
16
Our vision is to be the best
property company in the UK
in the eyes of our stakeholders.
OUR FIVE KEY
STAKEHOLDERS
To achieve this, we have to understand
the needs of those stakeholders, and the
most effective way to engage with them.
Successful, sustainable companies know
their stakeholders and value their input
and support. The nature of commercial real
estate is becoming much more operational,
so we need to work even more closely with
our customers and other stakeholders.
OUR SECTION 172 STATEMENT
You can find our Section 172 statement,
which sets out how the Board takes
stakeholder interests into account when
making decisions, in our Governance
section on pages 94-96.
Please also see commentary on
Our culture on pages 34-35 and 98-99
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OUR INVESTORS
Landsec // Annual Report 2021 » Strategic Report
WHO ARE THEY?
WHY ARE THEY
IMPORTANT TO US?
WHAT DO THEY
WANT FROM US?
HOW DO WE
ENGAGE WITH
THEM?
OUR CUSTOMERS
Everyone who uses our
buildings. Our office
occupiers’ employees and
their visitors. Our brand
partners and guests in our
retail and leisure assets,
and residents in the
accommodation we build.
All are our customers.
Serving our customers
is the reason we exist.
Our occupiers provide
us with rental income.
Our reputation depends
on meeting the needs
of all our customers.
Customers want us to
understand and respond
to their changing needs so
their businesses can thrive.
That means providing
sustainable, efficient space
and customer service.
Customers, visitors and
residents want us to provide
fabulous space and services
that enhance their working,
shopping, leisure and living
experiences.
Through regular contact
with our retail and office
occupiers to understand
what’s important to them,
and to evaluate the service
we provide. During the
pandemic, our engagement
has been particularly
important, with regular
updates and guidance to
help our customers respond
to the challenges it has
presented.
OUR EMPLOYEES
Everyone employed directly
by Landsec.
Our people and our culture
are our most important
assets. Our people put our
strategy into practice and
enable us to achieve our
purpose. Ultimately they
create value for our
stakeholders.
Our employees want a
great career, and a positive
and motivating work
environment where they
can thrive, all underpinned
by a supportive culture
which embraces diversity
and inclusion.
OUR COMMUNITIES
Those who live in areas
where we work or where we
have assets. For example,
local residents, businesses,
schools and charities.
Part of our purpose is
connecting communities.
We want our buildings and
activities to have a positive
impact on the local
community. To achieve this,
we need to have good
relationships and understand
local people’s needs.
Local people want us to
enhance the physical and
social infrastructure in
their area, helping their
community to thrive. They
also want us to provide the
right mix of services to
meet their needs.
Investors want a clearly
articulated long-term
strategy together with
shorter-term plans and
effective communication
of our progress. We are
a total return business,
seeking to deliver above-
market returns while being
prudent borrowers.
Our partners want us to
be trustworthy and live up
to our promises.
OUR INVESTORS
Those who own shares
in Landsec and our
bondholders.
Investors provide capital
to the business, as well
as valuable feedback on
our performance and
strategic options.
OUR PARTNERS
Those who have a direct
working or contractual
relationship, or share mutual
interest with us. This
includes our joint-venture
partners, service providers,
suppliers, local and central
government, NGOs, trade
bodies and industry
organisations.
Their vital contributions
to our business range from
providing services and
advice, through to granting
the planning permission
and approvals that allow
us to develop buildings and
run our business.
Page
17
We use engagement
surveys, our Employee
Forum, weekly updates
from across the business
and ‘town-hall’
presentations, alongside
relevant training and
development programmes.
Over the past year, we
invited all our employees
to be involved in developing
our culture.
Our activity ranges from
providing work experience
and routes to employment,
to helping students and
addressing social needs. We
consult local communities
ahead of all development
activity, and maintain the
relationship following
completion.
Formal results presentations
every six months plus
regular capital market days
as appropriate. Financial
institutions and debt
providers meet our
management regularly.
We hold an AGM every year.
We work to find mutually
effective ways to
communicate and
collaborate with each
group. The highest
standards of health, safety
and security underpin
everything we do.
Landsec // Annual Report 2021 » Strategic Report Our business model
CREATING AND
PROTECTING VALUE
We aim to be a sustainable business
by anticipating and responding to
the changing needs of our customers,
communities, partners and employees.
We position our business in good
time for the conditions we see ahead,
and we take a long-term view in creating
value. For us, it’s about transforming
financial, physical and social resources
into financial, physical and social value
for all our stakeholders.
Page
18
To create value, we
buy, develop, manage
and sell property,
drawing on a range of
financial, physical and
social resources.
INPUT
CORE ACTIVITIES
OUTPUT
GOAL
FINANCIAL
The different types of
funding deployed, from
shareholder capital to
borrowings.
PHYSICAL
Our land and buildings,
the materials and
technologies we use,
and the natural
environment.
SOCIAL
The relationships we
have with customers,
communities and
partners and the
capabilities of our
employees.
C A PIT A L R EIN V EST M E N T
BUY
SELL
DEVELOP
MANAGE
C A PIT A L R EIN V EST M E N T
FINANCIAL
Long-term growth in asset values
and income, creating value and
the capacity for us to increase
dividends for our shareholders.
To read our Financial
review go to pages 46-53
PHYSICAL
Space that creates value for
us by meeting the changing
requirements of our customers
and communities and being
a healthy environment for all.
To read more go to
pages 64-67
SOCIAL
Our ability to help businesses
and people to thrive – including
our own employees.
To read more go to
pages 56-63
FINANCIAL AIMS
Growth in asset value
OUTCOME
Capital return
The increase in the value of our
The overall change in the value of
portfolio generated by the market
our portfolio.
or our asset management.
Growth in income
Dividend
The payments we make to our
The total rent our customers
shareholders.
pay us.
MEASURE
Total business return
Change in net asset value
The overall change in value of
our net assets.
Plus
Dividend
shareholders.
The payments we make to our
PORTFOLIO QUALITY
NATURAL RESOURCES
We constantly look to strengthen our portfolio to ensure
When we buy, use and reuse resources efficiently we
it meets the changing needs of our customers and
reduce costs for our customers, our partners and us,
communities. We always bring social, economic and
helping to minimise our impact on the environment and
environmental benefits to the areas where we operate.
enhance our resilience to a warming planet.
CLIMATE CHANGE
SUSTAINABLE DESIGN AND INNOVATION
We’re part of the transition to a low-carbon economy.
Great design increases efficiency, encourages people to
This helps mitigate our current and future risk and
spend time in our spaces and enables buildings to adapt
presents significant opportunities for our customers
to changing customer needs. We design with long-term
and us.
value in mind.
CUSTOMERS
COMMUNITIES AND PARTNERS
We design our buildings to support wellbeing
We help those furthest from the jobs market access
and productivity. From office occupiers to brand partners
opportunities in our industry. We believe that everyone
and guests, we aim to provide our customers with a
who works on our behalf must be treated and paid
fabulous experience – creating value for our shareholders.
fairly and our business should reflect and support our
EMPLOYEES
We invest to attract and develop great people who
add value to our business. We focus on engagement,
wellbeing, diversity and reward, and conduct
regular reviews.
diverse communities.
We work to maintain an exceptional standard of
health, safety and security in all the working
environments we control, and we work with our
partners to help raise standards in our industry.
TOTAL BUSINESS
RETURN
Our aim is to deliver
above-market total
business returns,
together with
significant social and
economic value for all
of our stakeholders
Landsec // Annual Report 2021 » Strategic Report
CREATING SUSTAINABLE
LONG-TERM VALUE
WITH A FOCUS ON TOTAL
BUSINESS RETURN
Landsec is a business with the potential to
add significant value through our portfolio
and activities, and we match our capital
and capabilities to ensure we focus on
areas where we can add the most value.
We prioritise delivering above-market total
returns through the cycle. Income is an
important component of our property
return but it should not be the key driver.
Our strategy is designed to deliver improved
total returns for shareholders over time
and significant value for all stakeholders.
This is the foundation of a successful,
sustainable business.
INPUT
CORE ACTIVITIES
OUTPUT
GOAL
FINANCIAL
The different types of
funding deployed, from
shareholder capital to
borrowings.
PHYSICAL
Our land and buildings,
the materials and
technologies we use,
and the natural
environment.
SOCIAL
The relationships we
have with customers,
communities and
partners and the
capabilities of our
employees.
C A PIT A L R EIN V EST M E N T
BUY
SELL
DEVELOP
MANAGE
C A PIT A L R EIN V EST M E N T
FINANCIAL
Long-term growth in asset values
and income, creating value and
the capacity for us to increase
dividends for our shareholders.
To read our Financial
review go to pages 46-53
PHYSICAL
Space that creates value for
us by meeting the changing
requirements of our customers
and communities and being
a healthy environment for all.
To read more go to
pages 64-67
SOCIAL
Our ability to help businesses
and people to thrive – including
our own employees.
To read more go to
pages 56-63
FINANCIAL AIMS
Growth in asset value
The increase in the value of our
portfolio generated by the market
or our asset management.
Growth in income
The total rent our customers
pay us.
OUTCOME
Capital return
The overall change in the value of
our portfolio.
Dividend
The payments we make to our
shareholders.
MEASURE
Total business return
Change in net asset value
The overall change in value of
our net assets.
Plus
Dividend
The payments we make to our
shareholders.
PORTFOLIO QUALITY
We constantly look to strengthen our portfolio to ensure
it meets the changing needs of our customers and
communities. We always bring social, economic and
environmental benefits to the areas where we operate.
NATURAL RESOURCES
When we buy, use and reuse resources efficiently we
reduce costs for our customers, our partners and us,
helping to minimise our impact on the environment and
enhance our resilience to a warming planet.
CLIMATE CHANGE
We’re part of the transition to a low-carbon economy.
This helps mitigate our current and future risk and
presents significant opportunities for our customers
and us.
SUSTAINABLE DESIGN AND INNOVATION
Great design increases efficiency, encourages people to
spend time in our spaces and enables buildings to adapt
to changing customer needs. We design with long-term
value in mind.
CUSTOMERS
We design our buildings to support wellbeing
and productivity. From office occupiers to brand partners
and guests, we aim to provide our customers with a
fabulous experience – creating value for our shareholders.
EMPLOYEES
We invest to attract and develop great people who
add value to our business. We focus on engagement,
wellbeing, diversity and reward, and conduct
regular reviews.
COMMUNITIES AND PARTNERS
We help those furthest from the jobs market access
opportunities in our industry. We believe that everyone
who works on our behalf must be treated and paid
fairly and our business should reflect and support our
diverse communities.
We work to maintain an exceptional standard of
health, safety and security in all the working
environments we control, and we work with our
partners to help raise standards in our industry.
Page
19
TOTAL BUSINESS
RETURN
Our aim is to deliver
above-market total
business returns,
together with
significant social and
economic value for all
of our stakeholders
Landsec // Annual Report 2021 » Strategic Report
Page
20
Our strategy
for growth
GROWTH
Our strategy comprises four priority
areas as we look to reshape our portfolio
to position Landsec for growth.
OPTIMISE
...OUR CENTRAL LONDON BUSINESS
This priority includes all of our assets in
central London. By optimise, we mean
taking steps towards greater alignment
with growth sectors and districts in the
capital, evolving a broader range of
propositions for our customers, continued
deployment of our development
expertise and judicious sales of assets
to fund long-term growth.
More detail on pages 22-23
GROW
…THROUGH URBAN OPPORTUNITIES
We will target enhanced returns through
significant investment in mixed-use
urban opportunities, both from within
our portfolio and through new
investments in London and potentially
other major UK cities.
More detail on pages 26-27
REIMAGINE
…OUR RETAIL BUSINESS
This priority focuses on our regional
retail business. Our outlets have solid
growth potential. However, there is an
opportunity to significantly reshape
the models of our six regional shopping
centres – understanding sustainable
rent levels for these customers is
fundamental to our approach.
More detail on pages 24-25
REALISE
...CAPITAL FROM SUBSCALE SECTORS
Our leisure, hotels and retail parks are
sectors where we don’t have scale or
competitive advantage on our side.
Although these sectors have potential,
our capital is better deployed elsewhere.
We will therefore dispose of these assets
in a managed way over time.
More detail on pages 28-29
FIVE KEY
LANDSEC
ATTRIBUTES
SUPPORT OUR
STRATEGY
1 Development
2 Capital discipline
expertise – building
sector-leading
knowledge and
capabilities.
– positioning
our portfolio
for growth.
3 Customer centricity
– creating positive
experiences based
on understanding
our customers.
4 Data-driven
5 ESG leadership –
decision-making
– making data a
strategic asset for
our business.
leading the industry
with our science-
based environmental
targets.
Landsec // Annual Report 2021 » Strategic Report
WITH PURPOSE
To be able to pursue a successful strategy, businesses need
a clear purpose that articulates the value they create for
all their stakeholders. Our purpose describes why we exist
and what we are trying to achieve together.
SUSTAINABLE PLACES
To create places that make a
lasting positive contribution to
our communities and our planet.
Sustainability is integral to our work at
Landsec, and we think about the long-term
implications of what we do from both
an environmental and social perspective.
We have committed to becoming a net
zero carbon company by 2030 and have
a clear strategy to get there. Social value
is the positive impact our business has on
the local community – our ambition is to
create opportunities for people from our
communities through our social sustainability
programmes. Sustainability will become the
single biggest factor contributing to whether
a business is successful in the long term.
REALISING POTENTIAL
To provide our customers, partners
and people with a platform to realise
their full potential.
From providing the best spaces to do
business, entertain, shop or live, to
developing careers at Landsec to help us
make the most of our talents, realising
potential is central to our purpose. We also
aim to fully realise Landsec’s potential as
a business, maximising our performance
and ensuring we have a sustainable
long-term future.
CONNECTING COMMUNITIES
To bring people together, forming
connections with each other and
the spaces we create.
We want to be a force for good in our
communities. Each of our assets and spaces
is part of a different community, with
different needs. Our spaces can help to
meet those needs – providing relevant
services for the community and bringing
people together to form connections and
share experiences.
Businesses that embrace their
responsibilities to all stakeholders,
and embed that in their strategy
and business model, will attract
more customers, attract the right
customers, appeal to the best and
brightest talent and strengthen
their workforce.”
MARK ALLAN
CHIEF EXECUTIVE
Page
21
Landsec // Annual Report 2021 » Strategic Report Broadening our
resilient central
London proposition
Page
22
OUR CENTRAL LONDON
PORTFOLIO
Chart 1
Our first strategic priority is to Optimise
our central London assets, which include
offices, retail and Piccadilly Lights.
We have £7.3bn of assets across central
London which are very high-quality, resilient
and liquid, and provide a strong foundation
for new growth opportunities. Our strategy
is to Optimise this portfolio through greater
alignment with growth sectors and districts
in the capital, evolving a broader range of
propositions for our customers, continued
deployment of our development expertise
and judicious sales of assets to fund
long-term growth. In practice, this means
we need to rebalance the portfolio – selling
those assets with limited asset management
opportunities, and investing in developments
and assets where we can apply our skills to
creating superior space for our customers
and enhanced returns for the business.
London will remain a gateway city, and
our high-quality, best-in-class portfolio
should provide resilience in a down-cycle.
But more than resilience, the London
market and strength of our portfolio
provide a platform for growth.
We will increase our buying and selling
of assets and development options,
underpinned by our customer-led proposition
of promoting healthy and sustainable spaces
which offer choice and flexibility.
We aim to create value through developing
assets and by establishing a greater range
of propositions to meet the changing needs
of our customers. We will also be disciplined
in the way we deploy our capital, at times
crystalising value to fund long-term growth.
Our £7.3bn central London portfolio has
strong defensive characteristics: established
customers; stable and secure income; and
low capex requirements. We’ll maintain this
resilience while recycling for growth. We
have a £1.2bn development programme
with 1 million sq ft on site and a further
780,000 sq ft ready to commence when
conditions are right. We have retained
flexibility over the progress of the majority
of our speculative schemes. We have
optionality, flexibility and meaningful scale,
all supported by a balance sheet strong
enough to complete the schemes.
OUR STRATEGY IS BASED ON FOUR
ACTIVITIES
› Creating value through
development
› Creating value through resilience
› Creating value through
customer centricity
› Realising value through
disciplined capital recycling
£7.3bn
portfolio
Office
Retail
Other
85%
9%
6%
OPTI
We offer healthy office spaces
that meet our customers’ needs,
designed with the wellbeing of
our occupiers, communities and
planet in mind.”
FERNANDA AMEMIYA
SUSTAINABILITY DIRECTOR –
ENVIRONMENT AND REPORTING
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Second, by offering great experiences, we help
our customers retain and attract talented people.
We support and enhance their employee experience
with services such as Landsec Lounge, first-class
cycle facilities and a relevant ground-floor offer in
our offices.
PURPOSE
OPTIMISE WITH
Finally, we create healthy and sustainable spaces.
As many as 86% of our customers say that supporting
employee wellbeing is an important feature of their
office space. And this will only increase as the
Covid-19 experience highlights the importance of
healthy offices. But more than just the space, the
fabric of the building is important as well. We are
minimising the embedded carbon in our developments
through careful use of materials, efficient design and
modern methods of construction. We are creating
sustainable places where our customers can truly
realise their potential.
PARTNERING WITH CUSTOMERS
› Creative Covid-secure workspaces.
› Qualitative and quantitative research
from existing and prospective customers.
› Ensuring the ground floor remains
relevant to customer needs.
82%
maintaining or
increasing space
81%
believe office-based
work boosts productivity
Our Optimise strategic priority is built on our purpose
so it succeeds for all our stakeholders. Our office
customer proposition aims to meet our existing and
prospective customers’ needs.
First, through great working partnerships, we
understand each customer’s business and perspective.
Through our range of products, we can offer choices –
from Blank Canvas to Myo, our flexible space offer,
we can provide the right product for the lifetime of
a lease, which means our customers are more likely
to remain with us. This is more important than ever,
as businesses adjust their needs for space in a
post-Covid-19 environment.
Page
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23
Re-evaluating
retail models
Page
24
Our second strategic priority,
Reimagine our retail business,
focuses on our regional retail business
– outlets and shopping centres.
REIMAGINE MEANS:
› Taking a fundamentally different
approach to the business model.
› Basing our investment and operating
decisions on a realistic view of
sustainable rents.
› Rethinking the experiences our centres
provide for visitors, building on the
successes of the past, not simply trying
to repeat them.
› Forging stronger, more collaborative
and strategic relationships with our
brand partners. This is essential given
the structural challenges facing some
segments of retail and the ongoing
impact of Covid-19.
› Reshaping the size and mix of our
retail footprint.
Structural shifts are putting retail rents
under pressure, but not all parts of the
sector are affected in the same way.
Our outlets offer good growth potential,
but there is an opportunity to significantly
reshape the model of our six regional
shopping centres.
Understanding where we can maintain
sustainable rent levels is fundamental to
our approach. We believe rents are now
approaching sustainable levels and this
will support sensible store-level profitability
for our brand partners. We are developing
new affordable leasing models based on
an approach that works for both Landsec
and our customers.
More detail on pages 41-43
Finally, we are re-evaluating the type
and volume of space at our centres,
curating the mix of uses as part of
enhancing the consumer experience.
We are also considering how much retail
space we have in our centres and whether
we can augment that space with
alternative uses such as residential and
offices. All will tie in with our purpose of
putting our stakeholders at the heart
of everything we do.
OUR REGIONAL RETAIL PORTFOLIO (£1.8bn)
Shopping centres
Outlets
59%
41%
REIM
OUR STRATEGY IS BASED ON
THREE ACTIVITIES
› Creating value through tailored
guest experiences
› Creating value through deep
brand partner relationships
› Creating value through asset
management expertise
Landsec // Annual Report 2021 » Strategic Report
REIM
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guests. Having interviewed senior managers at
over 30 of our major retail brand partners, we’ve
made great progress in better understanding how
leases now need to evolve. This approach is critical,
particularly with Covid-19 accelerating the trends
affecting the retail sector.
PURPOSE
REIMAGINE WITH
Our regional retail assets are more than just great
places to shop. They are integrated within their local
communities and provide places where people can
meet, connect and socialise. Our Reimagine strategic
priority is clearly aligned with our purpose.
Our centres also connect communities and we are
looking at ways to further enhance the roles they
play locally, and to bring more local operators into
our centres.
For everyone involved with our assets to realise their
potential, we need to change our business model,
moving away from a traditional landlord-tenant
relationship. The businesses in our centres are our
brand partners and consumers visiting our centres
are our guests. With this mindset, we can better tailor
the range of services we offer our brand partners,
and create relevant and enticing experiences for our
Environmental sustainability in our centres is also
important. As we refine our masterplans, we need
to consider all aspects of sustainability. We have
already installed photovoltaic panels at White Rose
and Trinity Leeds, energy and water monitoring
systems at Bluewater, and a waste and recycling
programme at Westgate Oxford. Our Reimagine
strategy will provide opportunities to do much more.
Page
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25
25
Retail is changing, and
we’re changing with it.
Our guests’ experiences
are key and we’re working
closely with our brand
partners so we can all
successfully bounce back.”
GEMMA CASEY
SENIOR PORTFOLIO
DIRECTOR
Opportunities for
growth in evolving
urban environments
Page
26
Our third strategic priority is to
Grow through urban opportunities.
We will seek enhanced returns through
significant investment in mixed-use urban
opportunities, from within our portfolio and
through new investments in London and
potentially other major UK cities.
This strategic priority is supported by the
work we undertook within our strategy review
to identify the six global forces of change.
Urban environments are changing and the
way we live our lives is evolving, whether due
to technology, changing demographics or
adapting to a post-Covid-19 world.
To grow through urban opportunities does
not necessarily involve specific assets or
sectors, but is about bringing people together
– communities, businesses, government,
providers of capital – to envisage, and
ultimately deliver, the urban environments of
the future. And we need to do this in harmony
with the UK’s sustainability agenda, not least
its 2050 net zero carbon commitment.
We have a proven skillset. We have completed
large mixed-use schemes in London. And our
recent retail developments have included
non-retail elements such as residential. We
also have a number of assets within our
portfolio that can offer a blank sheet for
designing new mixed-use communities, and
we will look to augment these further. There
is a very clear need in London. But the need
also exists in the UK’s other major regional
centres. We are not specifically planning a
move into the regions, but we are certainly
open to exploring the opportunities.
OUR STRATEGY WILL FOCUS ON:
› Progressing planning and delivery
strategies for our existing portfolio
of projects
› Evaluating and securing new
complementary opportunities
URBAN OPPORTUNITIES
IN OUR EXISTING
PORTFOLIO
➊ Includes up to c.7,000 new homes
➋ Over 50 acres of land with 1.6m sq ft
of existing use space
➌ Vibrant local communities
➍ Potential to densify up to 8m sq ft,
a five-times multiple
➎ Well connected to existing transport
and infrastructure
GR
NEW INVESTMENT
Short-term capital
investment recycled from
elsewhere in the portfolio
Up to 25% of the Landsec
portfolio in the next
5 years
Targeting
Near-term returns;
mixed-use potential;
London and regional cities.
Variety of potential
investment approaches
Acquisition; JVs; large scale;
partnerships; forward funding.
Landsec // Annual Report 2021 » Strategic Report GROW WITH
PURPOSE
Our Grow strategic priority is fully
aligned to our purpose, as our activity
will focus on connecting communities.
Mixed-use urban regeneration aims to
bring people together, providing the
space and services they need to live,
work, shop and spend leisure time. The
market is still at a relatively early stage
in the UK. We have the opportunity to
shape how it develops, to ensure we are
connecting communities with the best
spaces and environments.
Urban mixed-use schemes are often
larger-scale, longer-term developments –
ensuring we build them in the most
sustainable way will be important to
the communities they serve and beyond.
This is just one of the areas of expertise
we can apply to this strategic priority.
But it is an essential one if we are to
achieve our 2030 net zero carbon target
and contribute towards the wider UK
sustainability targets. Connecting
communities with sustainable places, to
enable everyone to realise their potential.
Our urban
opportunities give
us the chance to
create mixed-use
developments
based on exactly
what each local
community needs,
not just improving
amenities and
connections, but
creating jobs and
social value.”
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Redeploying capital
to invest in growth
Page
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We may sell some retail parks sooner,
as an investment market is beginning
to re-emerge, but we will want to be
sure of obtaining appropriate value first.
In the meantime, where there are asset-
management programmes needed or
in progress across these assets, we will
ensure we continue to implement them.
More detail at www.landsec.com
Regardless of our aim to sell
assets in the medium term, we
continue to manage them so
they’re the best they can possibly
be, while recognising their
intrinsic value to the communities
and customers they serve.”
IAN BR AMLEY
INVESTMENT DIRECTOR
Our fourth strategic priority is to
Realise capital from Subscale sectors.
These are sectors where we don’t have scale
and where we have little or no competitive
advantage. Our leisure, hotels and retail
parks are in this category. Of course, all
have potential, but for Landsec, our capital
is better deployed elsewhere. We will
therefore dispose of these assets in a
managed way over time.
These three sectors have been significantly
affected by Covid-19, but we are confident
in their long-term prospects, and believe
our assets will recover strongly once we
emerge from the pandemic. We are under
no time pressure to realise capital from
these assets, expecting to do so over the
medium term.
REA
OUR SUBSCALE SECTORS
HOTELS
LEISURE
RETAIL PARKS
21 A
S 18 A
S 10 A
S
T
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S
S
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E
S
S
T
E
S
S
OUR REALISE PORTFOLIO
Chart 2
£1.3bn
portfolio
Leisure
Hotels
£506m
£406m
Retail parks
£397m
Landsec // Annual Report 2021 » Strategic Report
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REALISE WITH
PURPOSE
We believe the hotels, leisure and retail
parks sectors all have good long-term
prospects. Although we do not have
scale or competitive advantage as
owner or operator, that does not mean
their link to our purpose is any less clear.
We do not simply own and manage
assets. We are custodians on behalf of
the local communities they serve, and
the businesses and people who operate
within them or visit them. Where
appropriate, we will continue to invest
in these assets while they remain within
our ownership, helping to connect
communities and maintain or increase
the value of the assets. We always
strive to ensure assets leave our
business in better condition than when
they entered our portfolio.
We believe we can apply the capital
tied up in these assets to better effect
elsewhere in our business, helping us
realise our potential and generate value
for our stakeholders.
LISE
Page
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29
Our strategy:
summary
Our strategy is designed to position
Landsec for growth. It builds on existing
areas of competitive advantage. It positions
the business to take advantage of long-term
macro trends. And it is built on a clear,
authentic purpose, so it creates value not
just for shareholders, but for all stakeholders.
It also recognises that culture is as important
as strategy. That’s why we developed our
strategy in conjunction with our purpose
while establishing the culture to support
our activity.
More details on pages 34-35
Successful strategies are based on sources
of sustainable competitive advantage. We
have identified six sources of competitive
advantage that underpin our strategy
(see right). The quality of our portfolio
represents a strong foundation from which
to build a growth-focused strategy. Our
track record, reputation and the strong
relationships we have established, are
important as we pursue our strategy and
increase our activity in urban mixed-use
development. Our scale enables us to
access and deploy capital quickly and cost
effectively. Our development expertise
in creating mixed-use office-led schemes
in London and large shopping centre
developments across the UK, are relevant
and transferable skills we can apply to other
sectors. ESG leadership remains an essential
strength, as occupiers and consumers
increasingly expect our spaces to satisfy
both sustainability and wellbeing credentials.
Finally, it is our people who bring all of
this together – unlocking potential in our
portfolio, spotting new opportunities,
building strategic relationships and
achieving our strategy.
We developed our strategy at the same
time as Covid-19 was affecting our business
in a very significant way. There have been
many short-term challenges and there will
continue to be for some time yet. And the
longer-term implications are still unclear.
Importantly, we entered the pandemic from
a position of strength. We are managing
the near-term challenges proactively.
Page
30
LANDSEC’S SIX KEY
AREAS OF COMPETITIVE
ADVANTAGE
OUR PEOPLE
OUR ESG LEADERSHIP
THE QUALITY OF
OUR PORTFOLIO
OUR DEVELOPMENT
EXPERTISE
OUR TRACK RECORD,
REPUTATION AND
RELATIONSHIPS
OUR SCALE
Through our customer focus, we have
supported our customers through these
extraordinary circumstances, and have
worked with them as we emerge from
the pandemic.
But out of every crisis emerges opportunity,
and this one will be no different. We intend
to make sure we position Landsec to make
the most of these opportunities, by building
on our competitive advantages.
The previous pages described our four
strategic priorities and the link to our purpose.
The diagram right, shows how our purpose,
our competitive advantage and the global
forces of change (shown in our market on
page 13) feed into our strategic priorities.
We have also identified five key performance
drivers that will be essential to achieving our
strategy. Finally, we show what our strategy
means for our stakeholders, and for our
culture and organisation.
HOW DO WE THINK ABOUT RISK AND RETURN?
Positioning the business for growth with an appropriate level of risk
TOTAL RETURN
GENERATING
‘ALPHA’
LEVERAGE
THE CYCLE
› A greater
focus on value
creation.
› Taking on
more risk but
doing so in
a managed,
proactive way.
› Our tolerance
for financial
leverage is
guided by
the level of
operating risk
in the business
and our view
of the cycle.
› We operate
in a cyclical
market.
› Understanding
and responding
to the cycle
is a key part
of generating
and protecting
alpha.
› We focus on
total return
through the
cycle and
position the
business to
deliver above-
market returns.
› Income is a
key part of
the property
return, but
is not the
key driver.
Landsec // Annual Report 2021 » Strategic Report
OUR STRATEGY
REPOSITIONING LANDSEC FOR GROWTH
OUR COMPETITIVE ADVANTAGE
OUR PURPOSE
GLOBAL FORCES OF CHANGE
OPTIMISE
Our central London business
REIMAGINE
Our retail business
(shopping centres and outlets)
GROW
Through Urban opportunities
REALISE
Capital from Subscale sectors
STRATEGIC PRIORITIES
Development expertise
Capital discipline
Customer centricity
Data-driven decisions
ESG leadership
KEY PERFORMANCE DRIVERS
...Shareholders
› Total returns, delivered through the cycle.
› A focus on creating ‘alpha’.
› Higher operational leverage, offset by lower
financial leverage.
WHAT IT MEANS FOR...
...Other stakeholders
› A continued commitment to becoming net zero
carbon by 2030.
› A partnership-based approach.
› The creation of vibrant communities with a lasting
sense of place.
...Our culture and organisation
› Outward-facing and customer-led.
› Lean, agile, nimble, empowered and supportive.
› Customer-centric and data-led.
THE FIVE KEY ATTRIBUTES THAT
SUPPORT OUR STRATEGY
DEVELOPMENT EXPERTISE
Building sector-leading knowledge
and capabilities
We have a record of successful developments
in London and across the UK. Our expertise
lends itself to large, complex, long-term
projects that can meet the needs of
multiple customer segments. We also
take an innovative approach to design,
manufacture and assembly.
CAPITAL DISCIPLINE
Positioning our portfolio for growth
We are investing in sectors and assets that
can thrive throughout the cycle to achieve
a premium net asset valuation. We also
consider managing property for fee income,
or using attractively priced partner capital.
CUSTOMER CENTRICITY
Creating positive experiences based
on understanding our customers
Customer centricity has always been
important, but as our customers manage
and respond to the challenges of Covid-19
and other changes in their needs, customer
focus will be essential to ensure we find
mutually beneficial solutions.
DATA-DRIVEN DECISION-MAKING
Making data a strategic asset for
our business
It’s not about how much data we have,
but how we use it to enhance all aspects
of our business. We will build data as a
strategic asset for the long term, blending
proprietary and public data to enable
focused, strategic decision-making.
ESG LEADERSHIP
Leading the industry in pursuit of our
science-based environmental targets
We take a proactive approach to our
social and environmental impact,
making investments which lead to positive
employee and stakeholder experiences.
This helps ensure our business remains
attractive and relevant, and creates value
in the long term.
More details at www.landsec.com
Our new strategy brings a new approach
to risk and return. Our business has the
potential to add significant value through
its portfolio and activities. We therefore
intend to prioritise achieving above-market
total returns through the cycle or, in market
parlance, ‘alpha’.
Income is, of course, a key component
of our property return and will still be
meaningful. But we do not believe it should
be the key driver. As a result, we place a
greater emphasis on true value creation.
This means taking more operational risk,
but risk we understand, and doing so in a
managed, proactive way. This higher level
of operating risk will generally require a
lower level of financial leverage.
Notwithstanding our focus on total
return through the cycle, we do operate
in a cyclical market and recognise that
understanding and responding to the
cycle is a key part of generating and
protecting value.
With the quality of our existing portfolio
as an effective source of liquidity to fund
growth, a team with an unrivalled record
in creating value in its core markets, and
a clear strategy to make the most of
that strength through our culture and our
approach to operational risk, we aim to
achieve market-beating returns through
the cycle.
Page
31
Landsec // Annual Report 2021 » Strategic Report
Key performance
indicators
We set KPIs in line with our strategy.
They provide direction for our people,
and offer clear links to remuneration.
Page
32
In addition to our financial performance
metrics (charts 3 to 6 below), we set
ourselves a range of KPIs for the year
which focused on ensuring we emerge from
Covid-19 in as strong as position as possible,
and ready to progress our strategic priorities.
Of these, we identified 14 as Group KPIs
with a link to remuneration, and we
describe these on the following page.
THREE YEAR TOTAL SHAREHOLDER RETURN (TSR) % THREE YEAR TOTAL PROPERTY RETURN (TPR) %
HOW WE MEASURE IT
Three year TSR performance
compared to the TSR performance
of a comparator group (weighted
by market capitalisation) of
property companies within the
FTSE 350 Real Estate Index
LINK TO REMUNERATION
50% of the award of long-term
share investment plans is
determined by the three year
TSR performance compared with
to the comparator group
OUR PROGRESS IN 2021
TSR of -15.6% for the three-year
period from April 2018 did not
exceed our comparator group
at +4.1%
Chart 3
4.1
HOW WE MEASURE IT
Three year TPR performance
compared to all March-valued
properties within MSCI
(excluding Landsec)
LINK TO REMUNERATION
50% of the award of long-term
share investment plans is
determined by the three year
TPR performance compared
to our benchmark
OUR PROGRESS IN 2021
TPR of -4.7% per annum for the
three-year period from April 2018
was below the estimated MSCI
benchmark at +1.3% per annum
3.9
0.4
Chart 4
0.8
1.3
-0.9
-4.5
-4.7
-9.6
2019
2020
2021
3 years
Landsec
MSCI all March-valued properties
excluding Landsec
MSCI all March-valued properties
excluding Landsec (estimate)
-15.6
3 years
Landsec
Comparator group
ONE YEAR TOTAL PROPERTY RETURN (TPR) %
REVENUE PROFIT £m
HOW WE MEASURE IT
One year TPR compared to all
March-valued properties within
MSCI (excluding Landsec)
LINK TO REMUNERATION
The one year TPR performance
compared to our benchmark
determines part of the annual
bonus
OUR PROGRESS IN 2021
One-year TPR of -9.6% was below
the estimated MSCI benchmark
of +0.8%
-2.3 -2.6
Chart 5
0.8
-9.6
-23.6
-28.4
Central
London
Regional
retail
Total
portfolio
Landsec
MSCI relevant sector1
MSCI all March-valued properties
excluding Landsec (estimate)
1. MSCI quarterly universe
HOW WE MEASURE IT
Revenue profit compared to an
internal minimum threshold which
is reset every three years
LINK TO REMUNERATION
Forms part of the specific business
targets which determine a
proportion of annual bonus
OUR PROGRESS IN 2021
Revenue profit was above the
internal threshold for 2020/21
442
400
414 408
Chart 6
251
250
2019
2020
2021
Reported
Threshold
Landsec // Annual Report 2021 » Strategic Report
SUMMARY OF GROUP KPIs
Office
Retail
Development
DESCRIPTION
We set ourselves a target for office
net rental income. This includes the
notional rental value of deals and
concessions agreed with customers.
OUR PROGRESS IN 2021
We achieved our target for office net
rental income.
LINK TO REMUNERATION
Forms part of the specific business
targets that determine a proportion
of annual bonus.
DESCRIPTION
We have three KPIs relating to rent
paid or deals agreed in the year,
the level of rent or service charge
concessions given, and our retail
vacancy rate.
OUR PROGRESS IN 2021
We achieved our targets for rent
concessions and vacancy, but did not
reach the threshold for rent paid or
deals agreed.
LINK TO REMUNERATION
Forms part of the specific business
targets that determine a proportion
of annual bonus.
DESCRIPTION
There are five KPIs relating to our
development activity. Two are in
response to Covid-19 and focus on
minimising delays to the programmes
and on controlling costs. Two relate
to repurposing space within our retail
portfolio. We also set a KPI for pre-let
activity in our office developments.
OUR PROGRESS IN 2021
We achieved our Covid-19 KPIs and
partially achieved the remaining three
development KPIs.
LINK TO REMUNERATION
Forms part of the specific business
targets that determine a proportion
of annual bonus.
Finance
ESG
People
DESCRIPTION
To ensure we remained financially
healthy, we set a target for the
amount of cash and available banking
facilities. We also set a target to
reduce our net debt.
OUR PROGRESS IN 2021
We achieved both of our finance KPIs.
LINK TO REMUNERATION
Forms part of the specific business
targets that determine a proportion
of annual bonus.
DESCRIPTION
In line with our ESG strategy, we set
three KPIs relating to reducing energy,
reducing embodied carbon, and the
value of our social contribution.
OUR PROGRESS IN 2021
We achieved all three ESG KPIs.
LINK TO REMUNERATION
Forms part of the specific business
targets that determine a proportion
of annual bonus.
DESCRIPTION
An aligned, motivated and healthy
workforce is critical to our business
performance. We established a number
of activities to support our people
during Covid-19 and we set one Group
KPI to measure our success through our
engagement survey.
OUR PROGRESS IN 2021
Our engagement survey KPI achieved
the threshold level.
LINK TO REMUNERATION
Forms part of the specific business
targets that determine a proportion
of annual bonus.
Page
33
Landsec // Annual Report 2021 » Strategic Report
Our culture
Page
34
At Landsec, we know we can only
truly fulfil our purpose if it is fully
aligned with our culture and strategy.
As the diagram below shows, purpose,
strategy and culture do not exist in
isolation, but influence and support each
other, and are equally important.
We wanted to create an authentic purpose,
a strategy owned by the whole business
and a culture that unifies our people.
We did this by engaging our people to
conduct a strategic review in parallel with
an exercise to get clarity on our purpose,
culture and organisational structure.
Importantly, we ran all activities concurrently,
with significant input from across our
business. The result is a purpose that is
authentic, a strategy owned by the whole
business, and a culture our people
recognise, support and unite within.
The strategy makes the most of Landsec’s
strengths and positions the business for
growth. It is built around a clear, authentic
and meaningful purpose, so it can create
value not just for shareholders, but for
all stakeholders. Our culture is key to
successfully achieving our strategic
ambitions, and we regard it as a source
of competitive advantage.
Our culture shapes how we achieve our
strategy, it ensures we have the right
organisational capability. It defines how
we do things, how we behave, and how
our leaders can inspire and motivate.
Supported by our values, our culture provides
a common language to enable our people
to thrive and harness their potential. So our
culture is as important as our strategy.
In addition to culture, it is important to
have the right organisational structure.
We have already established our Executive
Leadership Team and are moving to a
leaner, more nimble organisation with
greater levels of both decision-making
and accountability within our clear
strategic framework.
See more about our Executive
Leadership Team on pages 88-89
HOW WE ACHIEVE OUR PURPOSE
e
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g
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Purpose
OUR VALUES
Our values guide us in everything we do,
making us a team and helping to shape our
culture. They guide our actions, inform our
strategic decisions and define our behaviours
– driving us to support each other and to
come together to create great experiences
for people.
Determined: We have the courage
to do the right thing for the long term.
Inclusive: We are caring, open
and progressive.
Driven: We strive to be the best.
United: We achieve more together.
OUR CULTURAL BLUEPRINT
Simply saying culture is important is not
enough. That is why we have set out on a
continual process of defining, measuring
and evolving what it is like to work with and
for Landsec. We started this during summer
2020 by engaging 273 people from right
across our business in conversations about
our purpose and culture. This led to the
creation of our Cultural Blueprint (see right).
As a purpose-driven organisation, our
focus is on the impact and value we bring.
Our blueprint sets out our desired future
culture, showing how we are trusted and
empowered to make the right decisions for
our customers, communities and our planet.
And we haven’t stopped there. In spring
2021, we went a step further with the first
annual review of how we are living up to
our Cultural Blueprint. Once again, our
people came together to tell us where we
are performing well and where we have
room for improvement. These findings have
informed the development of an ongoing
plan to continually evolve our culture and
positively support our purpose and strategy.
Landsec // Annual Report 2021 » Strategic Report
THE FOUR POINT FOCUS PLAN
SHIFT
FOCUS
ROLE
MODEL
We use understandable
language
We understand our levels
of responsibility and we
work at pace
We are clear about the
impact our work has on our
customers, our communities
and our environment
Trust and empowerment
is role modelled across
Landsec
We will all become
ambassadors for
Landsec’s culture
Our approach to work
always reflects our values
INCREASE
CAPABILITY
We understand the scope
of our roles and can have
challenging conversations
We use our clear tone
of voice
ALIGN
PROCESSES
Our bonus, performance
and recognition processes
reflect our culture
Our cultural development
is aligned with our annual
strategy review process
YEAR 1
YEAR 2
YEAR 3
Our cultural blueprint
HOW WE ARE SHAPING OUR CULTURE AS AN ORGANISATION
HOW WE WILL KNOW WE ARE GETTING IT RIGHT
OUR CULTURAL DRIVERS
Our structure
allows us to
adapt quickly,
deploying the
right capabilities
in the right
places.
We always have
the customer
in mind and
continuously
seek to evolve
and improve.
OUR PURPOSE
Sustainable places
Connecting communities
Realising potential
We have high
levels of trust.
Our people are
empowered
decision makers.
We are building
our capabilities.
Streamlining
our hierarchy.
Simplifying
delegated
authorities.
Being consistent
across all sites.
Transparent
decision-making.
Flexing our
working practices.
Being clear about
what we expect
of each other.
We care for
our people.
We work together
to solve problems.
Our leaders
support our
decisions.
We create
outstanding
customer
experiences.
Innovation is in
everything we do.
We understand
and live our values.
Those closest
make customer
decisions.
We know what is
expected of us.
We try new things
and learn from
mistakes.
Our leaders
remove barriers.
Our teams are
productive.
We act with pace.
We work together.
We embrace and
adapt to change.
More effective use
of meeting time.
Clearer
communication.
More visibility
on performance
management
and bonus.
Stretching
our people
with broader
responsibility.
Mirroring our
strategy in our
structure.
Making change
management and
delivery the norm.
Page
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Landsec // Annual Report 2021 » Strategic Report Operating and
portfolio review
We have a £10.8bn Combined
Portfolio which is comprised of office
space in London, and retail, leisure
and hotel assets across the UK.
-9.6%
Ungeared total
property return
£24m
of investment
lettings, with a
further £12m in
solicitors’ hands
AT A GLANCE
-13.7%¹
Valuation deficit
4.4%
Like-for-like voids
(31 March 2020:
2.5%) and units in
administration: 2.2%
(31 March 2020: 0.8%)
1.0m sq ft
of developments
now on site
CENTRAL
LONDON
£9m
of investment lettings with a
further £1m in solicitors’ hands
REGIONAL
RETAIL
Page
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-6.5%1
Valuation deficit
-2.3%
Ungeared total property return
3.3%
Like-for-like voids (31 March 2020:
1.3%) and units in administration:
0.3% (31 March 2020: nil)
-31.4%1
Valuation deficit
-28.4%
Ungeared total property return
7.5%
£9m
Like-for-like voids (31 March 2020:
4.7%) and units in administration:
5.8% (31 March 2020: 2.1%)
of investment lettings, with a
further £7m in solicitors’ hands
59.4%
Same centre sales (excluding
automotive), taking into account
new lettings and occupier
changes, down (BRC national
benchmark down 29.2%)
65.3%
Footfall down (ShopperTrak
national benchmark down 58.2%)
URBAN
OPPORTUNITIES
£1m
of investment lettings, with a
further £1m in solicitors’ hands
SUBSCALE
SECTORS
£5m
of investment lettings, with a
further £3m in solicitors’ hands
1. On a proportionate basis.
-23.3%1
Valuation deficit
-21.4%
Ungeared total property return
5.0%
Like-for-like voids (31 March 2020:
4.8%) and units in administration:
1.1% (31 March 2020: 0.4%)
-16.4%1
Valuation deficit
-12.8%
Ungeared total property return
2.5%
Like-for-like voids (31 March 2020:
2.0%) and units in administration:
2.9% (31 March 2020: 0.9%)
Landsec // Annual Report 2021 » Strategic Report We focus on maximising financial, physical
and social value through providing the
spaces and environments to allow businesses
and people to thrive. This approach has
been particularly important during the
challenging environment we have operated
in during the pandemic. Our focus during
the year has been on supporting our
customers and positioning our business
to emerge from the pandemic in as strong
a position as possible.
THE IMPACT OF COVID-19
AND OUR RESPONSE
Our entire financial year was impacted by
the pandemic. Operationally, all areas of
the business were affected but the impact
varied across the portfolio. Our office
portfolio remained open throughout the
year; occupation was significantly below
pre-Covid-19 levels but we saw progressively
higher levels of occupancy during each
successive lockdown. In retail, leisure and
hotels, the impact was more severe – during
periods of lockdown, only essential retail
and services could trade, with other
operators limited to servicing online
customers or providing takeout services.
The financial impact of Covid-19 was much
more acute in the retail and hospitality
segments of our business, where rent
collection rates were significantly below
pre-Covid-19 levels. Almost all of the rent
due from our office occupiers was collected.
Our priorities throughout the year have
been: (i) colleague and visitor safety;
(ii) proactively supporting our customers;
and (iii) preserving financial strength and
flexibility. We tailored our support to the
specific needs of each area of the business.
In offices, we provided some financial
support to a very small number of
occupiers whose businesses were particularly
impacted by the pandemic, but the
majority of our support related to ensuring
the safety of our spaces and helping our
customers to adapt their spaces to meet
their specific needs.
In retail and hospitality, our focus was on
providing financial support from our £80m
customer support fund, ensuring our assets
allowed safe and easy navigation for
guests, and providing marketing and
operational support for our customers.
For our people, we provided regular updates
from our business resilience team, increased
the mental health and wellbeing support
available for those who needed it and we
made sure there was regular contact
between teams while working from home.
None of our people have been furloughed.
We took advantage of resilient investment
markets in London to maintain financial
capacity and flexibility through targeted
disposals, and minimised the disruption
to our committed developments
while preserving optionality on our
longer-term pipeline.
Page
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As the year progressed, and the path out of
the pandemic became clearer, we focused
on ensuring our portfolio and strategy were
positioned appropriately for a post-Covid-19
world. Covid-19 has accelerated many
existing trends which would otherwise have
taken a number of years to play out. The
range of office products we offer will enable
us to provide the space our customers need
as they adapt to potentially different and
more flexible ways of operating, combining
office and home-based working. Our
Regional retail portfolio is well placed to
provide the right mix of exciting retail
brands, leisure and entertainment which
will be essential for successful centres.
And our hotels and leisure assets are well
placed to benefit from the consumer-led
recovery we expect to see as we emerge
from lockdown restrictions.
Landsec // Annual Report 2021 » Strategic Report Operating and
portfolio review
continued
Page
38
VALUATION OF INVESTMENT PROPERTIES
Our Combined Portfolio declined in value by
13.7% or £1,646m over the year compared
with a decrease in the prior year of £1,179m.
A breakdown of valuation movements by
category is shown in table 7 below.
Valuation analysis
Offices
London retail
Other central London
Regional shopping centres and shops
Outlets
Urban opportunities
Leisure
Hotels
Retail parks
Total like-for-like portfolio
Proposed developments
Development programme
Acquisitions
Total Combined Portfolio
Market value
31 March 2021
£m
Valuation
movement
%
Rental value
change1
%
Net initial
yield
%
Equivalent
yield
%
Movement in
equivalent yield
bps
Table 7
5,194
623
420
1,041
722
360
483
406
397
9,646
286
713
146
10,791
-4.3
-26.7
-1.2
-38.2
-18.5
-23.4
-22.9
-13.4
-10.1
-14.8
-12.4
-0.2
-5.4
-13.7
-1.9
-25.2
n/a
-21.5
-3.8
-11.0
-7.1
-17.2
-8.1
-9.1
n/a
n/a
n/a
-9.1
4.4
4.4
2.6
7.9
5.3
5.6
6.9
3.3
7.4
5.0
–
–
3.3
4.5
4.6
4.5
4.4
7.6
6.8
5.9
7.6
5.5
7.6
5.5
n/a
4.3
5.4
5.4
3
26
6
140
91
73
118
34
15
29
n/a
n/a
n/a
29
1. Rental value change excludes units materially altered during the year.
The 13.7% decline in the value of our
Combined Portfolio is mostly due to a fall
in the value of our retail and leisure assets,
driven by reductions in rental values and
expanding equivalent yields. Within the
like-for-like portfolio, regional shopping
centres and shops saw the largest reduction
in values, down 38.2% overall as rental
values reduced by 21.5% and yields moved
out 140bps. London retail reduced in value
by 26.7% as rental values declined by 25.2%
and yields moved out by 26bps. Our leisure
assets declined in value by 22.9% with rental
values 7.1% lower and yields expanding by
118bps, while hotels were down by 13.4%
due to the impact of Covid-19 on our
turnover rents and a 34bps expansion in
yields. Our office assets saw a more modest
decrease in value of 4.3% as rental values
declined by 1.9% and yields moved out
slightly. The values of our other central
London assets, principally Piccadilly Lights,
W1, were down marginally.
1
Outside the like-for-like portfolio, values in
the development programme were broadly
flat, with the value of 21 Moorfields, EC2
increasing as we approach completion
of the development, offset by declines at
Lucent, W1 and n2, SW1 where expected
rents have been slightly reduced and
development costs increased. The 12.4%
decline in the value of our proposed
developments is due to Portland House, SW1
and Timber Square, SE1 where expected
rents have reduced and costs on Portland
House have increased.
Our acquisitions fell in value by 5.4%,
driven by a decline in value of the X-Leisure
portfolio, where we acquired the remaining
5% in December 2019.
OPTIMISE OUR CENTRAL LONDON
PORTFOLIO
Our £7.3bn Central London portfolio
comprises offices (85%), associated
ground level retail (9%) and other assets (6%),
the most significant of which is Piccadilly
Lights, W1. The portfolio is characterised by
its quality, resilience and liquidity and despite
challenging market conditions, valuations
were resilient with our office valuations
declining by 4.1%. Our offices remain almost
fully let and rent collection remained strong,
with almost all of the rent due now collected,
reflecting the strength of our occupier base.
The central London market has been
significantly impacted by the pandemic but
Landsec remains in a strong position with
high levels of rent collection and a clear
strategy to create value.
Landsec // Annual Report 2021 » Strategic Report Covid-19 impacted the London office market
in two ways: low levels of occupation and
a significant reduction in demand for new
space. This, in turn, affected the London
retail and hospitality sectors which are
dependent upon office workers and tourism
for the majority of their custom. Retail
footfall in central London was down 82%
year on year, reflecting the challenging
nature of this market.
Physical occupancy in our offices portfolio
was, on average, 6.2% reflecting a
combination of working from home and
social distancing guidelines as employers
imposed occupancy limits as part of
maintaining a Covid-19 secure workplace.
Central London office take-up in the
12 months to March 2021 was just
4.4 million sq ft – the lowest annual take-up
rate for over 30 years. Availability across
the market increased to 25.3 million sq ft,
compared with the 10-year average of
14.8 million sq ft, driven by second-hand
space as leases expired and some occupiers
looked to sub-let excess office capacity.
As a result, vacancy rates rose to 8.9%, the
majority of which is second-hand space.
Despite this, there continues to be demand
for high-quality office space, with 39% of
total take-up being of new space. One of
the trends accelerated by Covid-19 is
demand for sustainable, healthy work
environments. This is offered by the best
space and is likely to continue the
bifurcation of the occupier market.
Investment market volumes in the 12 months
to March 2021 were below the long-term
average with transactions totalling £7.2bn,
reflecting the logistical challenges of
viewing assets particularly by overseas
investors, but there was continued demand
for long income, high-quality assets.
London remains a global financial centre
and, with average prime yields of 3.75%,
continues to offer relative value compared
with other major cities.
Maintaining
office health
during Covid-19
Following the first national
lockdown, we developed an office
remobilisation plan, and by the end
of May 2020, had implemented new
Covid-secure measures across our
office portfolio, including one-way
systems, signage, hand-sanitiser
stations, PPE bins and a ventilation
strategy. We reviewed all properties
based on a ‘customer journey’, to
ensure users and visitors could meet
social-distancing guidelines.
Clear communications at
all times
We quickly designed and developed
an easily accessible Covid-19
document centre, to provide
building-specific guidance, which
we also distributed to all customers.
This included interactive walk-
through videos and FAQs, all
updated, sometimes daily, through
the subsequent phases of lockdown.
Office customers have accessed
these live documents over 25,000
times so far. In addition, we
maintained a continuous
programme of customer
engagement, including webinars,
weekly video meetings, and
electronic messaging around
buildings.
Page
39
Dealing with confirmed cases
In all, we had to deal with six on-site
cases of Covid-19, five of them over
a short period. We had a step-by-
step guide for people to respond,
available company-wide and
updated after each case. We also
created a specially equipped fast-
response team to undertake a full
deep-clean in line with Public Health
England guidelines, ensuring all sites
were safe again for 6am the
following morning.
Working with our customers
During this period, we were able to
reduce service charges, adapting
to lower occupancy levels, and
reducing energy use. We liaised with
all customers on matters such as
security patrols, water flushing on
unoccupied floors and resilience of
critical communications systems.
We were also able to improve
shower facilities, increase cycle-
storage capacity, and test air
quality, UV monitoring of mail and
other measures. We continue to
track daily office occupancy levels
across the portfolio, so we can
react quickly to any changes as
the country opens up gradually
from lockdown.
More information on
www.landsec.com
Landsec // Annual Report 2021 » Strategic Report
Operating and
portfolio review
continued
Page
40
SUPPORTING OUR CENTRAL
LONDON CUSTOMERS
Supporting our customers and maintaining
their safety has been a top priority this year.
The vast majority of our office customers’
businesses were resilient throughout the
year, but we used our customer support
fund to help three who were particularly
challenged. As customers start to plan for
their return to the office, we are liaising
closely with them to understand their
intentions and help them return smoothly
and safely.
While some customers will review and
potentially consolidate their requirements,
there is ongoing demand for high quality
office space, and we are seeing the benefit
of working alongside our customers to
understand their needs. For example,
in Victoria, we are currently in active
discussions with seven occupiers across
300,000 sq ft in five buildings. This ranges
from a 40% upsize to a 20% downsize.
The outcome will be stronger customer
relationships, re-geared leases, a more
diverse product mix and reduced vacancy
across the estate. This is not simply a
function of upcoming lease events, it is
being driven by strategic partnerships with
our occupiers and a proactive approach
to delivering the right solutions for them.
While our office customers have remained
resilient, the trading environment for central
London retail and hospitality has been
particularly challenged, and we expect this
part of the market to take longer to recover.
Through our customer support fund we have
provided £6m of concessions, together with
longer-term support through turnover related
leases for some customers. In addition to
financial support, we are helping customers
with their reopening plans. Alongside
targeted marketing, we have worked
closely with local authorities to enable
hospitality customers to extend their outside
trading capacity, creating space for 680
additional covers.
We are seeing interest from occupiers in
taking new space, but the market remains
challenging. In Victoria, One Rebel expanded
their footprint at Nova, we have good
interest in the former Goldsmiths unit at
Cardinal Place, and we are exploring upsize
options for one of our existing brand
partners. At One New Change, EC4, we
completed the letting of the former
Topshop unit to Zara as well as progressing
renewal terms with a number of existing
brand partners.
DISPOSALS
In line with our strategy to recycle capital
out of assets where there are limited
opportunities for us to add further value,
we completed two disposals during the
year. In September 2020, we sold 7 Soho
Square, W1 for £78m at a 4.0% yield and
4.3% above the March 2020 valuation, and
in December, we sold 1 & 2 New Ludgate,
EC4 for £552m at a 4.2% yield and 1.1%
above the March 2020 valuation. Both
assets attracted significant interest from
bidders and demonstrate the continued
demand for prime London office assets.
DEVELOPMENTS AND ACQUISITIONS
During the year, our focus has been on
progressing our committed development
schemes and preserving optionality on
the others. We maintained flexibility in the
pipeline while we assessed the long-term
prospects of the London office market.
Having completed our review in the
first quarter of 2021, we increased our
speculative developments to 451,000 sq ft
by adding n2, SW1 to our existing schemes
at Lucent, W1 and The Forge, SE1. Alongside
our pre-let to Deutsche Bank at 21 Moorfields,
EC2, this takes our committed activity to
1.1 million sq ft, with a further 1.0 million sq ft
held for development.
At 21 Moorfields, the contractor Sir Robert
McAlpine, doubled the facilities space
for construction workers in order to
accommodate more people on site in a
Covid-secure way. Weekend working was
also introduced to mitigate some of the
delays resulting from lower on-site capacity.
However, as a result of the lower on-site
capacity we now expect practical
completion to be delayed to July 2022.
At Lucent, The Forge and n2, we negotiated
break options ahead of entering into the
main construction contracts. This enabled
us to progress with building to grade and
construction of the cores while maintaining
optionality before committing to further
work and capex. With confidence in the
long-term prospects of the London office
market, we fully committed to Lucent and
The Forge in September and n2 in March.
Completion dates at The Forge, Lucent and
n2 are June 2022, December 2022 and June
2023 respectively.
To date, the additional costs resulting
from the impact of Covid-19 have been
accommodated within the contingency
allowances of the schemes’ total
development costs (TDCs), but further
disruption may put modest upward
pressure on TDCs as projects complete.
We continue to focus on mitigating the
cost impact of Covid-19 wherever possible.
Despite the current low levels of take-up in
the market, we remain confident about the
occupational markets we will deliver space
into. Demand is expected to be strongest
for prime, high-quality, sustainable space
and our three speculative office schemes
will meet this need in different locations
in London, with phased completion dates.
We added to our development potential
with two acquisitions during the year. In
December, we purchased 55 Old Broad
Street, EC2 for £87m. The acquisition offers
significant marriage value as the site is
adjacent to an existing Landsec asset,
Dashwood. We also acquired the remaining
undeveloped land on the Nova, SW1
island site from our joint venture for a
consideration of £13m. We now own 100%
of the final two phases at Nova (n2 and
Nova Place) and we have recently satisfied
all of the Nova P1 planning obligations,
meaning Nova Place is now an
unencumbered site.
Landsec // Annual Report 2021 » Strategic Report POSITIONING OUR LONDON BUSINESS
FOR A POST-PANDEMIC WORLD
The long-term impact of the pandemic
on central London is not yet clear but it
won’t be uniform. We are likely to see some
bifurcation of demand as quality of space
and sustainability credentials become
significant factors for customers. Some
sectors, such as banking and professional
services, may reduce their floorspace.
Others, such as tech, are not necessarily
changing footprint size but are focused
on quality of space and employee choice.
We will work closely with our occupiers
to understand and deliver their needs and
the scale that is required.
It is clear that customers who are looking to
consolidate want to occupy the best space.
This plays to our strengths. Our portfolio
and product range gives us the opportunity
to tailor our customer conversations to
meet upsize, downsize and servicing needs,
which is leading to several positive re-
gearing discussions. We are also working
with some customers to consolidate into
a smaller number of buildings, freeing up
development opportunities in assets which
otherwise would not have become vacant.
BUILDING ON THE PROGRESS MADE
TO DATE, OUR OPTIMISE STRATEGY
IS BASED ON FOUR OBJECTIVES:
➊ Creating value through development
Our focus for the coming year will be on
progressing our committed schemes
while minimising the impact of Covid-19
on completion dates and costs. We are
already seeing occupier interest in our
three speculative schemes and we will
continue to work towards securing
pre-lets as activity in the occupational
market increases.
At Portland House, SW1, strip out and
design works continued through to the
end of April. We are currently assessing
the potential timing of the scheme
and are likely to pause to manage
development exposure.
At Timber Square, SE1, demolition of the
existing building is due to commence by
the end of May 2021 with a decision on
development to be taken by the autumn.
The earliest PC date is February 2024 and
we will assess the expected demand levels
and rental tone before committing to
the scheme.
At 55 Old Broad Street, EC2, we will
continue to work towards vacant possession
in December 2024. In the meantime, we will
be working up development plans while
protecting short-term income.
Page
41
➋ Creating value through resilience
Our high rent collection throughout the
year demonstrates the resilience of income
from our office portfolio and, despite the
challenges of the pandemic, we renewed
£8m of leases during the year and secured
£1m of new lettings. As we look to position
our portfolio for future growth, we are using
data and insight to focus our activities and
capital on sectors, locations and products
that we believe will be successful for the
long term.
We have three office products which enable
us to meet the space requirements of
existing and potential customers, large
or small, established companies or new
businesses. At 123 Victoria Street, SW1,
Myo occupancy averaged 85% over the year,
and we extended five leases with existing
customers. At 31 March 2021, occupancy
dropped to 71% through lease expiries, but
we are having positive discussions with new
customers, as well as upsizing discussions
with two existing customers. We are also
trialling Covid-secure daily and weekly
bookings at 123 Victoria Street.
The reduction in central London footfall
significantly impacted the out-of-home
advertising market in the year, with short-
term bookings at Piccadilly Lights, W1, 68%
below 2019/20. However, we are starting to
see evidence of the market recovering, with
significant interest for summer bookings.
We have demonstrated the long-term
appeal of Piccadilly Lights, signing a new
ten-year agreement with Samsung and
we are in discussions with two other brands
about longer-term agreements.
We will look to strengthen our resilience
further through acquisitions. We have
identified a number of potential acquisitions
within London providing a range of
opportunities for us to add value.
➌ Creating value through relentless
customer focus
We are progressing the roll-out of our
office products and continue to invest in
delivering great customer experiences
across our office portfolio. We have invested
significantly into Dashwood, EC2 where
a range of Myo, Customised and Blank
Canvas spaces have been delivered in a
single building. Myo Liverpool Street at
Dashwood, provides flexible office, meeting
and amenity spaces on floors 6 to 8,
with delivery of floor 9 to follow later
this year. The Customised show floor
is complete on level 2, with further
Customised floors available to be delivered
on demand. A visualisation tool has been
created for customers to configure their
space virtually to ensure it meets their
specific needs before physical work starts.
Customised is also being delivered at 55
Old Broad Street, EC2 and 30 Eastbourne
Terrace, W2, with further expansion of this
product planned to meet customer demand
across our portfolio. Landsec lounge spaces
have been completed at One New Change,
EC4 and 6 New Street Square, EC4 to
enhance the arrival experience and provide
informal drop-in work and meeting spaces.
With a focus on delivering healthy and
sustainable spaces, we are progressing
our WELL Building portfolio accreditation,
aiming to achieve accreditation across
the entire office portfolio.
➍ Realising value through disciplined
capital recycling
Disposals in the financial year totalled
£0.6bn at an average yield of 4.1%.
We have indicated our intention to sell
approximately £2.5bn of central London
assets with more limited asset management
opportunities. We have made £0.6bn of
disposals since March 2020 and therefore
expect to sell a further £1.9bn over the next
two to three years.
2
REIMAGINE OUR REGIONAL
RETAIL PORTFOLIO
Our £1.8bn Regional retail portfolio comprises
six regional shopping centres and five outlets.
Covid-19 has had a profound effect on the
retail sector. In addition to the short-term
impact resulting from three lockdowns and
social distancing restrictions, the pandemic
has significantly accelerated the structural
trends which were already changing how
people shop. Online is now the primary
growth channel across most areas of retail.
For retail property to be relevant and thrive
in an omnichannel world, it needs to be
compelling in its own right, complementary
to online or offer something which cannot
easily be replicated online.
Retailers recognise the importance of
physical retail to their omnichannel
strategy, but there is too much of it
in the UK and a lot of it is poor quality.
17% of retail space across the UK is
currently vacant and this is expected to rise
to 25% in 2025, equivalent to 158 million sq ft
of excess or obsolete retail space.
Outlets are one of the strongest retail
formats as they offer a service and
experience which cannot be replicated
online. The higher quality regional shopping
centres are generally well placed to support
and complement online – brand mix needs
to evolve, but rents are approaching
sustainable levels which will support store
level profitability.
Landsec // Annual Report 2021 » Strategic Report Operating and
portfolio review
continued
A year of
Covid-19 in retail
When what is now known as lockdown 1
hit on 23 March 2020, with barely any
notice, our Property Operations team
already had their plans in place. With
65% of the retail sector deemed non-
essential, we still had to ensure our
‘essential’ retailers could continue to
trade. Naturally our highest priority
was the health and safety of all staff
and guests.
So as well as adhering to Government
guidelines, we worked closely with
our brand partners and colleagues
on all necessary planning, ensuring
a consistent approach across
our shopping centres and outlets.
At Bluewater, White Rose and
all four of our suburban London
properties, we continued to operate,
providing a critical service to each
local community.
LITTLE DID WE KNOW, BUT THE
EVER-EVOLVING CHALLENGE OF
THIS FIRST LOCKDOWN PHASE,
AND GEARING UP FOR THE INITIAL
15 JUNE AND 4 JULY REOPENINGS,
WAS HELPING PREPARE US FOR
SUBSEQUENT LOCKDOWNS AND
REOPENINGS. THIS INCLUDED
ORGANISING:
HAND-SANITISER POINTS
ENHANCED CLEANING REGIMES
ONE-WAY SYSTEMS AND
CALCULATIONS FOR
MAXIMUM CAPACITY
SIGNS, FLOOR STICKERS
AND TEAMS OF ‘SOCIAL
DISTANCING CHAMPIONS’
QUEUING SYSTEMS FOR
POPULAR PERIODS
WEB AND SOCIAL MEDIA
COMMUNICATIONS FOR
OPENING TIMES AND FAQS
The Government’s autumn tiering
system brought differing regional
challenges, and by the third lockdown on
5 January 2021, we had the experience
needed to again expedite matters
quickly, efficiently and, above all, safely.
Minds again turned to planning the
reopenings of 12 April 2021 and beyond,
which included a 71% increase in external
seating to support the hospitality sector.
Throughout the year we ran individual
meetings with our brand partners,
and our Commercial Office and Retail
teams combined their experiences to
produce printed and online guidelines,
or host explanatory webinars. This
ensured all brand partners were able,
at all times, to offer an appropriate
balance between doing business and
maintaining safety when welcoming
their guests back.
Page
42
Rent collection was significantly impacted
by Covid-19 throughout the year. We have
now collected 58% of the net rent due on
25 March 2021. For the four quarters to
25 March 2021, 71% of the net rent due
has been collected. The rent moratorium,
which remains in place, restricted our ability
to enforce rent collections. With lockdown
measures easing and operators re-opening,
we hope to see a return to timely rent
payments and settlement of arrears.
The scale and pace of retail and leisure
CVAs and administrations has increased
significantly during the year, and some
high-profile names have disappeared
from the retail landscape. During the year,
£41m of annualised rental income was
subject to CVA or administration, of which
we lost £29m. This compares with £9m
of annualised rental income in 2019/20.
360 units across 58 brand partners were
impacted, with 48 units falling void as a
result. Like-for-like voids across the portfolio
were 7.5% (31 March 2020: 4.7%) and units
in administration were 5.8% (31 March
2020: 2.1%).
We have engaged with a number of brand
partners during the year on opportunities
to reduce their overall store portfolio, with
some customers also seeking consensual
rent reductions to reduce their occupancy
costs. We remain committed to working
alongside our customers to ensure rents
are affordable, and we welcome open and
constructive dialogue. However, during the
year we have also taken legal action where
we believe insolvency processes have been
used unfairly, or due legal process has not
been followed.
SUPPORTING OUR RETAIL CUSTOMERS
The pandemic brought significant
operational challenges for the portfolio
and safety has always been our first priority.
The first lockdown, starting on 23 March
2020, saw footfall at our regional shopping
centres reduce significantly. Throughout
each lockdown and reopening we have had
a clear plan for each asset, and provided
frequent communications to our brand
partners and guests.
Landsec // Annual Report 2021 » Strategic Report We adapted our response as conditions
allowed, with brand partners evolving
the way they used their space to support
online fulfilment through click & collect
and food deliveries. Post lockdown, 24-hour
trading at some Bluewater stores helped
to spread capacity and drive sales.
In early April 2020, soon after the start
of the first national lockdown, we
established a customer support fund
of £80m for occupiers who most needed
our support. We have now granted £42m
of agreed concessions from the fund to
brand partners.
We continued to work closely with our
brand partners, particularly in the lead
up to the reopening of non-essential
retail in England and Wales on 12 April
and in Scotland on 26 April. Early evidence
suggests there is pent-up demand from
customers to return to physical retail and
leisure. Shopping centre sales, excluding
F&B, in England are up 5% versus the
same period in 2019 and outlets up 14%,
with footwear and outdoor particularly
popular sectors.
POSITIONING OUR RETAIL BUSINESS FOR A POST-PANDEMIC WORLD
There are increasingly clear trends which could offer an opportunity
for us to reset the portfolio and provide a more sustainable future:
TREND
TREND
TREND
TREND
Retail winners
are looking for
fewer, larger
stores
Flight to prime
as retailers
demand the right
space in the best
locations
Greater focus on
experiences
Greater
operational
alignment with
brand partners
LANDSEC ACTION/
EVIDENCE
LANDSEC ACTION/
EVIDENCE
LANDSEC ACTION/
EVIDENCE
LANDSEC ACTION/
EVIDENCE
› Our exposure to outlets
and the quality of our
shopping centres mean
our portfolio is well
placed to benefit from
the flight to prime:
– Trinity Leeds accounts
for 19% of retail space
in Leeds city centre
but has a 35% share
of spend
› The outlets experience is
not replicable online and
provides a resilient model
› Leisure will be another
important element of
experience – we have let
the 80,000 sq ft former
Debenhams space to
Gravity at Southside,
Wandsworth, providing a
significant footfall driver
and improvement in mix
› Increased operational
risk is a reality but it is
something that can be
embraced and treated
as an opportunity,
particularly with rents
approaching sustainable
levels. We have increased
the number of turnover
only leases by 76%
this year
› Zara business
development during
the pandemic period:
– White Rose, Leeds –
21,000 sq ft renewal
– One New Change, EC4 –
new letting of
26,000 sq ft
– St David’s, Cardiff –
opened a new
38,000 sq ft store
– Bluewater, Kent –
upsize opened Dec
2020, from 19,000 sq ft
to 37,000 sq ft
› Decathlon have opened
their 35,000 sq ft unit at
Trinity Leeds
Page
43
Landsec // Annual Report 2021 » Strategic Report Page
44
CREATING VALUE THROUGH DEEP
BRAND PARTNER RELATIONSHIPS
We are developing deeper relationships
with our brand partners to enable them to
maximise the role of the physical retail
environment. By understanding our brand
partners and their aspirations for the physical
environment, we can develop a range of
leasing models to suit different situations.
There will not be a one-size-fits-all solution
on how we contract with our brand partners,
but rather different models that enable all
parties to share in the value of the physical
store. We are currently developing a suite of
four products to address evolving space
needs. These will operate in a similar way to
the three products we have developed within
our office portfolio, enabling us to better
serve our brand partners and attract and
retain new ones across existing and emerging
market segments.
Operating and
portfolio review
continued
LOOKING
FORWARD,
OUR
REIMAGINE
STRATEGY
IS BASED
ON THREE
PRIORITIES:
CREATING VALUE THROUGH TAILORED
GUEST EXPERIENCES
We are putting guest experiences at the
heart of everything we do, so that our
destinations continue to be relevant for
the communities they serve and deliver
shopping and leisure experiences that
cannot be matched online. This will help
ensure our destinations remain the location
of choice for our brand partners to deliver
their physical and digital propositions to
meet specific needs of our guests. During
the pandemic, we added activities services
such as virtual shopping and click & collect,
expanded our ‘al fresco’ dining options and
introduced drive through collection points
to help our brand partners to connect with
their customers.
Landsec // Annual Report 2021 » Strategic Report CREATING VALUE THROUGH ASSET
MANAGEMENT EXPERTISE
The last few years have demonstrated that
some of our retail destinations are over-
sized, and we do not have the best
occupier mix and usage of space at all
our assets. We are underway designing a
new approach to assessing and planning
the right use and mix of space at our
destinations. The approach is underpinned
by data; catchment insight, economic
forecasts and predictions of social trends
all contribute to determining how our
assets can be best placed to maximise
future growth and de-risk returns.
Page
45
3
GROW THROUGH URBAN
OPPORTUNITIES
Urban opportunities are essentially mixed-
use, multi-phase regeneration projects
rooted in a need to redevelop parts of the
built environment that are no longer fit
for purpose. Retail is the most prominent
example, and our Urban opportunities
portfolio comprises five suburban London
projects with redevelopment potential over
1.6 million sq ft with the potential to
extend to around 8.0 million sq ft of
mixed-use space.
These urban development projects can offer
a compelling blend of income, development
upside and rental growth throughout their
lives. And development can be phased,
enabling risk and capital investment to
be spread over the life of the projects.
At our most advanced scheme, Finchley
Road, NW3, consultations have taken place
with a further phase of consultation due
in early summer as we progress our master
planning and design. We remain on track
to submit our planning application this
coming financial year. Our other projects
are all progressing through concept and
design during the pre-development phase.
Our large mixed-use schemes will embrace
local communities and placemaking to
deliver the most suitable and sustainable
developments in line with our purpose to
provide sustainable places and connect
communities. We have engaged external
agencies to help develop our overall vision
for our Urban opportunities. And we have
progressed discussions with a number of
leisure operators to trade rent reductions
for lease break points and flexibility as we
progress towards vacant possession.
The redevelopment potential and more
convenience-led nature of these assets
has meant that valuations have been more
resilient than shopping centres but were
still down 23.3% to £0.4bn. Across our five
schemes, 45% of retailers remained open
throughout the third lockdown, significantly
ahead of the rest of the retail assets in our
portfolio. This reflects the local convenience
nature of our five schemes and demonstrates
that these assets already play an important
role within their local communities.
The timeline for these projects is long but
the right opportunities can start delivering
balanced returns in the near future. We are
also evaluating opportunities to add to our
portfolio, ideally with projects that offer an
accelerated returns horizon.
So, looking forward, our strategy will be to
progress planning and delivery strategies
for our existing portfolio of projects and
to evaluate and ideally secure new
complementary opportunities.
4
REALISE CAPITAL FROM SUBSCALE
SECTORS
Our £1.3bn Subscale sectors portfolio
comprises hotels, leisure parks and retail
parks, which we intend to divest over the
medium term.
The £0.4bn hotel portfolio has been
impacted by the periods of lockdown during
the pandemic with the majority of our
hotels closed for 20 weeks on average over
the year. The portfolio is let on turnover
based leases and income has been
significantly lower during the year, down
90%. As lockdown restrictions ease, we
expect to see a recovery in the hotel sector
and our portfolio of two and three-star
hotels is well placed to benefit.
Our leisure portfolio comprises assets typically
anchored by cinemas and leisure and F&B
operators. Social distancing measures have
impacted the performance at these assets.
Cinemas were closed for 41 weeks of the year
and the F&B industry has been particularly
challenged. This was reflected in valuations
which were down 23.0% to £0.5bn. These
assets, like the hotels, are well placed to
benefit from the expected consumer-led
recovery. We continue to work on asset
management initiatives across the portfolio
to ensure it is well positioned for sale.
Our ten retail parks performed more
strongly, benefiting from their open-air
design and increased spending on home
and leisure products. However, the portfolio
was not immune from the challenges faced
by the wider market and values declined by
10.1% to £0.4bn. The valuation declines in
retail parks are less pronounced than other
retail assets, and there has been increased
investor demand for stronger retail parks in
recent months.
The F&B segment of both portfolios has been
challenged but we have responded quickly to
replace operators. In response to Pizza Hut
entering CVA, we replaced three units with
Canadian fast food operator Tim Hortons
on 15 year leases. In addition, Tim Hortons
will convert these units into drive-thrus.
We have also completed two deals with
both KFC and Burger King. At six sites, we
have replaced units previously occupied by
Chiquito, Frankie and Benny’s and Bella Italia
with foodhall operator Gourmet4 – their
concept reverses the classic restaurant
model with a delivery business supported
by a strong eat-in operation.
Landsec // Annual Report 2021 » Strategic Report Financial review
Martin Greenslade reports
on our financial performance
and explains the movement
in our key financial measures.
MARTIN GREENSL ADE
CHIEF FINANCIAL OFFICER
Page
46
OVERVIEW
We began and ended the financial year
with the country in lockdown, many retail
and leisure destinations closed and our
offices, while open, largely deserted as
most people followed Government
guidance to work from home. While
conditions are now improving and we look
forward to a full re-opening of the UK
economy, the effect of Covid-19 on our
business and financial performance has
been significant.
In early April, we were quick to acknowledge
the effect of lockdown on our occupiers
by setting up our £80m customer support
fund for those most in need. At about the
same time, the Government introduced
a temporary rent collection moratorium
which has severely impacted our ability
to enforce rent collection. With the
moratorium still in place, there has been
little incentive for our retail and leisure
occupiers to make payments or even agree
and document rent concessions from our
customer support fund when they are
able to withhold rent payments without
consequences. While much rent due
from leisure and retail occupiers has been
withheld, it would be a mistake not to
acknowledge those occupiers who have
paid their rent and service charge in full,
despite being negatively impacted by the
pandemic. Hopefully, as retailers and leisure
operators can now see a way out of the
pandemic towards full re-opening, we will
see a return to timely rent payments and
agreement on how outstanding amounts
will be settled.
The impact on our results from unpaid rent
and service charges has been significant.
During the year we have made bad debt
provisions of £127m on top of the £23m
we provided in last year’s results against
quarterly rent due on 25 March 2020.
This is an unprecedented level of provisions
and is based on a cautious assessment
of the impact of concessions, CVAs and
business failures on how much rent we will
collect. Time will tell whether we have been
too cautious or optimistic in our assessment
of these factors but it is our best estimate
today based on our knowledge of each
individual occupier. In total, we have provided
for approximately 38% of the retail and
leisure rent for the year. Covid-19 and
lockdown has also led to a sharp decline
in turnover related income from our
hotels, car parks and outlets. The impact
of reduced income and higher bad debt
provisions is behind the decline in revenue
profit to £251m (2020: £414m).
Landsec // Annual Report 2021 » Strategic Report The decline in asset values we saw in
our retail and leisure assets last year has
continued while our London offices have
been more resilient with a relatively small
reduction in values. While our external
valuer, CBRE, has removed the material
uncertainty clause that they included
at 31 March 2020 (except for our hotel
portfolio), the valuation declines in
regional shopping centres and outlets
remain more driven by sentiment than
transactional activity. This is not true
of the London office investment market
which continues to demonstrate liquidity,
with good investment appetite and
transactions completing.
HIGHLIGHTS
£251m
Revenue profit1
(2020: £414m)
£(1,393)m
Loss before tax
(2020: £(837)m)
33.9p
Adjusted diluted
earnings per share1
(2020: 55.9p)
27.0p
Dividend per share
(2020: 23.2p)
£10.8bn
Combined Portfolio1
(2020: £12.8bn)
975p
Net assets per share
(2020: 1,182p)
1. Including our proportionate share of subsidiaries
and joint ventures, as explained in the Presentation
of financial information below.
Revenue profit for the year to 31 March 2021
was £251m, down 39.4% from £414m as a
result of the impact of Covid-19 across the
portfolio. Adjusted diluted earnings per
share were also down 39.4% at 33.9p due
to the reduction in revenue profit. Over the
year, our assets declined in value by 13.7%
or £1,646m (including our proportionate
share of subsidiaries and joint ventures)
compared with a £1,179m decline last year.
This decline in the value of our assets is
behind our loss before tax of £1,393m
(2020: £837m loss) and the reduction in
our EPRA net tangible assets per share
in the year, down 17.4% to 985p.
Page
47
Presentation of financial information
Our property portfolio is a combination
of properties that are wholly owned by
the Group, part owned through joint
arrangements and those owned by the
Group but where a third party holds a
non-controlling interest. Internally,
management reviews 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 £10.8bn,
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 additional
information to stakeholders on the
activities and performance of the
Group, as it aggregates the results of
all the Group’s property interests which
under IFRS are required to be presented
across a number of line items in the
statutory financial statements.
The same approach 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 but 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.
Measures presented on a proportionate
basis are alternative performance
measures as they are not defined under
IFRS. Where appropriate, the measures
we use are based on best practice
reporting recommendations published
by EPRA. For further details see table 113
in the Business analysis section.
During the year, following the strategy
review, we changed how we report
financial information to better reflect
the way we manage our assets. Assets
have been reallocated by strategic
priority into one of four new segments:
Central London, Regional retail, Urban
opportunities and Subscale sectors.
The sector breakdown within our
Combined Portfolio analysis disclosure
has been re-ordered to reflect the
new segments and the level of detail
reported in the CPA for the office assets
has been reduced to reflect the fact
that all the London office assets are
managed in a consistent manner
irrespective of their location. The prior
year has been restated in the new
format and a reconciliation to the
previous presentation has been provided
on our website.
INCOME STATEMENT
Our income statement has two key
components: the income we generate
from leasing our investment properties
net of associated costs (including finance
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 and finance charges
related to bond repurchases, which we call
Capital and other items.
We present two measures of earnings per
share: the IFRS measure of basic earnings per
share, which is derived from the total profit or
loss for the year attributable to shareholders,
and adjusted diluted earnings per share,
which is based on tax-adjusted revenue profit,
referred to as adjusted earnings.
Income statement
Table 8
Year ended
31 March
2021
£m
Year ended
31 March
2020
£m
251
414
(1,644)
(1,251)
Table
9
15
Revenue profit
Capital and other
items
Loss before tax
(1,393)
(837)
Taxation
Loss attributable
to shareholders
Basic loss per
share
Adjusted diluted
earnings per share
–
5
(1,393)
(832)
(188.2)p (112.4)p
33.9p
55.9p
Landsec // Annual Report 2021 » Strategic Report Financial review
continued
Page
48
Our loss before tax was £1,393m, compared
with a loss of £837m in the prior year, due
to a greater fall in the value of our assets
this year (down £1,646m, compared with
£1,179m last year) as well as a £163m
reduction in revenue profit. The loss per
share this year was 188.2p, compared with
a loss per share of 112.4p in the prior year.
Adjusted diluted earnings per share
decreased by 39.4%, from 55.9p to 33.9p
Revenue profit
this year, as a result of the decrease
in revenue profit from £414m to £251m.
There is no difference between our
adjusted diluted earnings per share
and the EPRA measure.
The reasons behind the movements
in revenue profit and Capital and other
items are discussed in more detail below.
REVENUE PROFIT
Revenue profit is our measure of underlying
pre-tax profit, presented on a proportionate
basis. A full definition of revenue profit is
given in the Glossary. Revenue profit
decreased by £163m to £251m for the year
ended 31 March 2021 (2020: £414m) as set
out in the table below.
Year ended 31 March 2021
Year ended 31 March 2020
Table 9
Central
London
£m
Regional
retail
£m
Urban
opps
£m
Subscale
sectors
£m
Chart
Gross rental income1
Net service charge expense
Net direct property expenditure
Bad and doubtful debts expense
Segment net rental income
Net indirect expenses
Revenue profit before interest
Net finance expense
Revenue profit
1. Includes finance lease interest, after rents payable.
306
157
–
(9)
(17)
280
(3)
(13)
(69)
72
26
–
(4)
(10)
12
10
11
Total
£m
569
(5)
(32)
80
(2)
(6)
(31)
(127)
41
405
(80)
325
(74)
251
Central
London
£m
Regional
retail
£m
Urban
opps
£m
Subscale
sectors
£m
327
1
(13)
(5)
310
193
(3)
(19)
(18)
153
29
–
(4)
(3)
22
114
(2)
(7)
(7)
98
Total
£m
663
(4)
(43)
(33)
Change
£m
(94)
(1)
11
(94)
583
(178)
(74)
(6)
509
(184)
(95)
21
414
(163)
The main driver behind the reduction in revenue profit was a £178m decrease in net rental income. This reduction and other changes
compared with last year are explained in more detail below.
Net rental income
Net rental income1 (£m)
600
550
500
450
400
350
583
(71)
e
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Chart 10
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a
e
y
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
Net rental income movement in the year
Landsec // Annual Report 2021 » Strategic Report
Like-for-like net rental income was down
£165m, with increased bad and doubtful
debts accounting for £94m of the decline.
Further information on our rent collections
and bad debt provisions is set out below.
Like-for-like net rental income before bad
debt provisions was down £71m largely due
to a reduction in short-term and turnover
related income of £56m and CVAs and
administrations of £22m, partly offset
by an £11m reduction in direct property
expenditure. Income from our Accor hotel
portfolio, which is all linked to turnover, was
down £24m, while car park income reduced
by £15m. Turnover related top-ups, principally
in our outlet portfolio, declined by £11m and
Piccadilly Lights, W1 saw a £6m reduction
from short-term advertising campaigns.
Outside the like-for-like portfolio, there
was a £9m reduction in net rental income
from proposed developments, driven by
Portland House, SW1, which reached
vacant possession of the office space
in March 2020. There was also a £9m
reduction in net rental income following
the disposal of 1 & 2 New Ludgate, EC4 and
7 Soho Square, W1 in the current year and
Poole retail park in the prior year. The £2m
increase in non-property related income
largely reflects the release of a provision
following an agreement which ended
our obligations under one of our last
remaining Landflex leases.
Rent collections
25 March 2021 quarter 1,2
Offices
Rest of Central London
Regional retail
Urban opportunities
Subscale sectors
Rent collections
For the year ended 24 March 2021 1,2
Offices
Rest of Central London
Regional retail
Urban opportunities
Subscale sectors
Total
Net indirect expenses
Net indirect expenses represent the indirect
costs of the Group including joint ventures.
In total, net indirect expenses were £80m
(2020: £74m). The £6m increase is partly
due to higher uncapitalised development-
related expenditure and professional and
consultancy fees.
Net finance expense
(included in revenue profit)
Net finance expense1 (£m)
Chart 11
100
95
(17)
75
50
0
2
0
2
h
c
r
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M
1
3
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Impact of:
74
1
2
0
2
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c
r
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M
1
3
d
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d
n
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r
a
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p
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e
c
n
a
n
fi
t
e
N
1. Including our proportionate share of subsidiaries and
joint ventures, as explained in the Presentation of
financial information above.
Our net finance expense has decreased by
£21m to £74m due to reductions in interest
payable following debt management
exercises carried out last year, lower base
rates and an increase in interest capitalised
on our developments in the year.
Recent rent collections and related
provisions
In early April, soon after the start of the
first national lockdown, we established
a customer support fund of £80m for
occupiers most in need of our assistance
with a focus on our retail and leisure
portfolios. During the year, we have worked
with our occupiers to agree rent concessions
out of the fund and the payment of any
outstanding balances. We also agreed
with some occupiers for rents to be paid
on a monthly basis, or to be deferred
to later quarters to assist with cash
flow management.
£110m of rent was due on the 25 March 2021
quarter day, including the Group’s share of
joint venture debtors. While this rent almost
entirely relates to the 2021/22 financial year,
we are still required to assess its recoverability
at 31 March 2021. The table below shows
the amount and percentage of this rent
collected to date after adjusting for the
impact of customers having entered CVAs
and administrations, concessions agreed
out of the fund and agreed monthly and
deferred payment terms. A similar analysis
is shown for the rents which were due
between 25 March 2020 and 24 March 2021.
Table 12
Gross
amounts
due
25 March
£m
Impact of
CVAs and
admins
£m
Concessions
£m
Agreed changes in
payment terms
Monthly
payment
terms
£m
Deferred
payments
£m
Net
amounts
due
25 March
£m
Amounts
received
to date
£m
Amounts
received
to date
%
63
9
16
5
17
110
–
–
–
–
(1)
(1)
–
(1)
(3)
–
(1)
(5)
(1)
–
(1)
–
(1)
(3)
–
–
–
–
–
–
62
8
12
5
14
101
61
5
7
2
7
82
98
63
58
40
50
81
Gross
amounts
due for
the year3
£m
Impact of
CVAs and
admins
£m
Agreed changes in
payment terms
Concessions
£m
Deferred
payments
£m
Net
amounts
due for
the year3
£m
Amounts
received
to date
£m
328
58
191
30
101
708
–
(2)
(12)
(1)
(6)
(21)
(1)
(5)
(21)
(2)
(8)
(37)
(1)
(1)
(1)
(1)
(3)
(7)
326
50
157
26
84
643
326
40
112
16
60
554
Table 13
Amounts
received
to date
%
100
80
71
62
71
86
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
2. All amounts are shown gross of VAT. Where an amount billed remains uncollected and is subsequently written off, the VAT component will be recovered by the Group.
3. Due dates from 25 March 2020 to 24 March 2021. Does not include 25 March 2021 quarter day rents.
Page
49
Landsec // Annual Report 2021 » Strategic Report
Financial review
continued
Page
50
Of the £101m of net rent billed for the
25 March 2021 quarter, £19m remains
outstanding with £89m outstanding from
rents due between 25 March 2020 and
24 March 2021. Following legislation
introduced as a result of the pandemic, the
options available to landlords to recover
outstanding amounts have been significantly
reduced. As a result, there is limited incentive
for those who can afford to pay rent to do
so and for those who are in difficulty to agree
and document concessions.
Given this situation, we have assessed the
outstanding debtors for recoverability and
provided £127m for bad debts in the year.
The provision includes £42m for occupiers
where we have agreed concessions out
of our customer support fund and £13m
against tenant lease incentive balances.
More detail on the amounts provided,
including the impact on revenue profit
for the year, is included in the table below.
Provisions for bad and doubtful debts1
Provisions related to customer support fund concessions
Other provisions for rents receivable
Provisions for service charge receivables
Tenant lease incentive provisions
Bad debt expense charged to revenue profit in the year
Group
£m
37
50
12
11
110
Joint
ventures
£m
5
8
2
2
17
Table 14
Total
£m
42
58
14
13
127
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
As we work to agree and document rent
concessions with individual retail and leisure
occupiers, we expect this to result in the
payment of the balance of their outstanding
amounts. Nevertheless, we have taken what
we believe to be a cautious view on provisions
as we recognise the challenge of a gradual
exit from lockdown, ongoing social
distancing and the risk of further CVAs and
administrations. Of the total amount of rent
outstanding at 31 March 2021, around 60%
was covered by a doubtful debt provision.
CAPITAL AND OTHER ITEMS
Capital and other items1
Valuation and profit on disposals
Valuation deficit
Profit/(loss) on disposal of investment properties
(Loss)/profit on disposal of trading properties
Net finance expense
Other items
Profit from long-term development contracts
Gain on settlement of liability
Other
Exceptional items
Capital and other items
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
Year ended
31 March
2021
£m
Table
Table 15
Year ended
31 March
2020
£m
7
(1,646)
(1,179)
16
5
(1)
(3)
–
4
1
(4)
(6)
7
(68)
3
–
(3)
(5)
(1,644)
(1,251)
Landsec // Annual Report 2021 » Strategic Report This year, there was no net tax charge
(2020: credit of £5m).
The Group has met all the REIT
requirements, including the payment by
31 March 2021 of the minimum Property
Income Distribution (PID) for the year
ended 31 March 2020. The forecast
minimum PID for the year ended 31 March
2021 is £143m, which must be paid by
31 March 2022. The Group has already made
PID dividends relating to 31 March 2021 of
£49m, leaving £94m to be paid in the
coming year.
Our latest tax strategy can be found on
our corporate website. In the year, the total
taxes we incurred and collected were £69m
(2020: £171m), of which £25m (2020: £47m)
was directly borne by the Group including
environmental taxes, business rates and
stamp duty land tax. The Group has a low
tax risk rating from HMRC.
Gain on settlement of liability
We recognised a £4m gain this year after
settling the s106 liability at Nova, SW1, at a
lower value than the previously anticipated
cost of fulfilling the obligations.
Exceptional items
We incurred £4m (2020: £5m) of impairment
charges during the year which have been
classified as exceptional. As a result of
a decline in the value of Bluewater, Kent,
an impairment test of the intangible asset
related to the management rights for the
centre was carried out. This resulted in
impairment charges of £4m in the year
(2020: £4m) against the intangible asset
we hold in the balance sheet and £nil
(2020: £1m) against the related goodwill.
At the year end, our intangible asset was
£2m and the related goodwill was £1m.
TAXATION
As a REIT, our income and capital gains
from qualifying activities are exempt
from corporation tax. 90% of this income
must be distributed as a Property Income
Distribution and is taxed at the shareholder
level to give a similar tax position to direct
property ownership. Non-qualifying
activities, such as sales of trading properties,
are subject to corporation tax.
An explanation of the main Capital and
other items is given below.
Valuation of investment properties
Our Combined Portfolio declined in value by
13.7% or £1,646m over the year compared
with a decrease in the prior year of £1,179m.
A description of market conditions and a
breakdown of valuation movements by
category are set out in the Operating
and portfolio review (table 7).
Profit/(loss) on disposals
The net profit on disposals of £4m in the
year (2020: £1m) relates to the sale of
both investment and trading properties.
We recognised a £2m profit on the disposal
of 7 Soho Square, W1, in September 2020
and a £5m profit on the disposal of 1 & 2
New Ludgate, EC4 in December 2020.
Partly offsetting this was our £2m share of
the Nova joint venture’s loss on disposal of
Nova Place, SW1 and n2, SW1, which were
acquired by the Group in the year, and a
£1m loss on trading properties.
Net finance expense (included in Capital
and other items)
In the year ended 31 March 2021, we
incurred £3m of net finance expense that
is excluded from revenue profit principally
due to premiums paid on the redemption
of medium term notes.
Net finance expense1
Year ended
31 March
2021
£m
3
1
(1)
3
Premium on
redemption of
medium term notes
(MTNs)
Fair value
movement on
interest-rate swaps
Other net finance
income
Total
Table 16
Year ended
31 March
2020
£m
59
9
–
68
1. Including our proportionate share of subsidiaries
and joint ventures, as explained in the Presentation
of financial information above.
Page
51
Landsec // Annual Report 2021 » Strategic Report Financial review
continued
BALANCE SHEET
Balance sheet
Combined Portfolio
Adjusted net debt
Other net liabilities
EPRA net tangible assets
Excess of fair value over net investment in finance leases book value
Other intangible asset
Fair value of interest-rate swaps
Net assets
Net assets per share
EPRA net tangible assets per share1
1. EPRA net tangible assets per share is a diluted measure.
Our net assets principally comprise the
Combined Portfolio less net debt. Both IFRS
net assets and EPRA net tangible assets
declined over the year ended 31 March 2021
primarily due to the reduction in the value
of our investment properties.
At 31 March 2021, our net assets per share
were 975p, a decrease of 207p or 17.5%
from 31 March 2020. EPRA net tangible
assets per share were 985p, a decrease
of 207p or 17.4%.
Chart 18 summarises the key components
of the £1,534m decrease in our EPRA net
tangible assets over the year.
Page
52
NET DEBT AND GEARING
Table 17
Net debt and gearing
Table 19
31 March
2021
£m
10,791
31 March
2020
£m
31 March
2021
31 March
2020
12,781
Net debt
£3,509m £3,942m
(3,489)
(3,926)
Adjusted net debt1
£3,489m £3,926m
(2)
7,300
(93)
2
3
(21)
8,834
Group LTV1
(90)
Security Group LTV
7
(1)
Weighted average
cost of debt1
32.2%
32.7%
2.2%
30.7%
32.5%
1.8%
7,212
8,750
975p
985p
1,182p
1,192p
Movement in EPRA net
tangible assets1 (£m)
Chart 18
Diluted per share (pence)
1,192
34
(222)
(18)
(1)
985
8,834
251
(1,646)
(133)
(6)
7,300
10,000
9,000
8,000
7,000
6,000
5,000
1. Including our proportionate share of subsidiaries
and joint ventures, as explained in the Presentation
of financial information above.
Over the year, our net debt decreased
by £433m to £3,509m. The main elements
behind this decrease are set out in our
statement of cash flows and note 21
to the financial statements.
Adjusted net debt was down £437m
to £3,489m, with the main movements
outlined in chart 20 below. For a
reconciliation of net debt to adjusted
net debt, see note 20 to the financial
statements.
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1. Including our proportionate share of subsidiaries
and joint ventures, as explained in the Presentation
of financial information above.
Landsec // Annual Report 2021 » Strategic Report
The weighted average maturity of our
debt has increased to 11.5 years following
a reduction at 31 March 2020 to 9.6 years
after we drew down on our facilities.
The weighted average cost of our debt at
31 March 2021 was 2.2% (31 March 2020:
1.8%). The weighted average cost of our net
debt at 31 March 2021, which recognises the
minimal interest income on cash deposits,
was also 2.2% (31 March 2020: 2.4%).
DIVIDEND
During the year we reinstated quarterly
dividends, having suspended them due
to the pandemic. We did not declare a
first quarterly dividend, but paid a second
quarterly dividend of 12.0p per share which
we viewed as a combined first and second
quarterly dividend at a level of 6.0p per
quarter. A third quarterly dividend of 6.0p
per share was paid on 30 March 2021.
We are now recommending a final dividend
of 9.0p per share to be paid on 23 July 2021
to shareholders registered at the close of
business on 18 June 2021. Together with the
final dividend, our full year dividend is 27.0p
or £200m, up 16.4%. The first quarterly
dividend, payable in October 2021, will be
announced nearer the time.
At 31 March 2021, the Company had
distributable reserves of £2.7bn. We do not
anticipate that the level of distributable
reserves will limit distributions for the
foreseeable future.
MARTIN GREENSLADE
CHIEF FINANCIAL OFFICER
Movement in adjusted net debt1 (£m)
Chart 20
4,000
3,926
(249)
127
220
95
(634)
(10)
3
11
3,489
3,000
2,000
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A
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial
information above.
Net cash inflow from operating activities
was £249m. Capital expenditure on
investment properties was £220m, largely
related to our development programme,
with a further £95m spent on acquiring
investment properties, principally 55 Old
Broad Street, EC2. Net cash flow from
disposals totalled £634m, with £550m
received from the sale of 1 & 2 New Ludgate,
EC4, £78m from the sale of 7 Soho Square,
W1 and £4m from trading properties.
FINANCING
At 31 March 2021, our committed revolving
facilities totalled £2,715m (31 March 2020:
£2,715m). The pricing of our facilities which
fall due in more than one year range from
LIBOR +65 basis points to LIBOR +75 basis
points. Borrowings under our commercial
paper programme typically have a maturity
of less than three months, currently carry a
weighted average interest rate of LIBOR +11
basis points and are unsecured.
The most widely used gearing measure
in our industry is loan-to-value (LTV).
We focus most on Group LTV, presented
on a proportionate basis, which increased
from 30.7% at 31 March 2020 to 32.2% at
31 March 2021, due to the decline in the
value of our assets partly offset by the
reduction in net debt. Our Security Group
LTV also increased, from 32.5% to 32.7%,
but to a lesser extent as we moved
additional assets into the Security Group.
The total amount of drawn bank debt
was £209m (31 March 2020: £1,944m)
with £906m of commercial paper in issue
(31 March 2020: £977m). At 31 March 2021,
we did not have any cash on hand
(31 March 2020: cash balances of £1,345m).
During the year, the sterling bond and
commercial paper markets normalised,
having been effectively closed to new
issuance at March 2020. As a result, during
the early part of the year, we repaid the
cash balances we were holding as a liquidity
buffer at 31 March 2020. At 31 March 2021,
we had £1.6bn of available undrawn facilities,
net of our outstanding commercial paper.
Page
53
Landsec // Annual Report 2021 » Strategic Report
Our approach
to sustainability
As one of the leading real estate
companies in the UK and Europe, we
recognise we have a responsibility, and
significant role to play, in addressing
long-term challenges such as
combatting climate change, protecting
scarce resources, improving diversity
and reducing inequality.
S
E
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P
E
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B
A
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S
U
S
I
1
These challenges are likely to affect all
businesses. For that reason, in developing
our business strategy, we have identified
ESG leadership as key to performance,
and an important source of competitive
advantage. It will help us ensure our
business remains relevant and creates
value over the long term.
Sustainability has always been central
to how we do business. It may be in the
way we design and operate our buildings
to minimise our carbon footprint and
environmental impact, and enhance
the health and wellbeing of our people,
partners, occupiers and visitors who use
them. Or in the importance we place
on making sure our assets and activities
enhance local communities and support
those most in need of help, especially
as we recover from the pandemic.
Sustainability is integral to our purpose
to create places that make a lasting
positive contribution to our communities
and our planet.
Page
54
S
E
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I
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U
M
M
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2
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3
OUR
PURPOSE
We want to provide lasting value
to the environment and society
through the work we do. It’s at
the heart of how we engage our
employees, customers, partners
and communities. Our goal is
to lead our industry in bringing
different people together and
providing opportunities for all.
1
Sustainable places
When we design, build and
manage our buildings, we
make sure we consider efficiency
of resources, the wellbeing
of occupants, using ethical
material sourcing, the
biodiversity of the area and
the value we deliver for our
local communities through
our education, charity and
employment programmes.
2 Connecting communities
We connect with our
communities by creating jobs
and opportunities for a diverse,
inclusive workforce. We also
engage our customers and
partners on our social
programmes, recognising the
value in helping them connect
with the local community.
3 Realising potential
Our Affinity Networks and
development programmes
are helping our employees
thrive within an environment
that values and supports their
wellbeing. Our volunteering
programme also plays an
important role in developing
our people’s confidence,
relationships and leadership
skills.
Read about Growth
with Purpose on pages 20-29
Landsec // Annual Report 2021 » Strategic Report
Our sustainability
programme
We have been leading our sector in
sustainability for a number of years,
running an ambitious sustainability
programme split into three areas to
address our most material social
and environmental issues:
CREATING JOBS
AND OPPORTUNITIES
Social value; Fairness; Diversity
& Inclusion; Health & Safety
EFFICIENT USE OF
NATURAL RESOURCES
Climate change & carbon;
Renewables; Energy; Waste
SUSTAINABLE DESIGN
AND INNOVATION
Resilience; Materials;
Biodiversity; Wellbeing
We have identified the above issues as
the most important ones to us and our
stakeholders. This followed a detailed
sustainability materiality review we carried
out in 2016, in line with the methods
supported by the Global Reporting Initiative
and AccountAbility, consulting internal and
external stakeholders.
Read more at www.landsec.com/
sustainabilityour-sustainability-strategy/
materiality-review
We continue to review the relevance of
this materiality review, and use it to develop
our sustainability strategy and programme.
We will consider updating our materiality
assessment in the coming year.
We set, and have already achieved,
ambitious targets. For instance, in 2016
we became the first commercial property
company in the world to have its carbon
emissions target approved by the Science
Based Targets initiative. In 2019, having
achieved our original science-based target
(SBT) 11 years early, we increased our
ambition and aligned it with a 1.5ºC
scenario. Reducing operational carbon
emissions in line with our SBT is the first
step towards achieving our commitment
to becoming a net zero company by 2030.
Through our social sustainability programme,
we’re creating opportunities for people in
our local communities, supporting those
furthest from the job market in their search
for employment, inspiring young people from
diverse backgrounds about careers in our
industry, and working with our communities
to address important societal issues. Since
2019 we have created over £11m of social
value through these programmes.
You can find further information
on pages 56-67
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). Achieving them
requires productive partnerships between
business, government and society. We are
a signatory to the UN Global Compact
(UNGC), a voluntary initiative that brings
together leading businesses committed
to UN goals and universal sustainability
principles. Every year, we report our annual
Communication on Progress (COP) in
our 2021 Sustainability Performance and
Data Report, demonstrating how we’re
implementing the Ten Principles in the areas
of human rights, labour, environment and
anti-corruption, and contributing to the
advancement of the SDGs.
More information on our
contribution to the SDGs is available in our
Sustainability Performance and Data Report
www.landsec.com/sustainability/reports-
benchmarking
SUSTAINABILITY GOVERNANCE
To ensure sustainability is part of everything
we do at Landsec, we have rigorous
governance in place. Sustainability is
overseen by our Sustainability Committee,
chaired by our Chief Executive and
attended by our Head of ESG and
Sustainability and senior representatives
from across the business. The Committee
meets quarterly to develop and implement
our sustainability strategy and review
progress towards targets.
Furthermore, to incentivise and encourage
working towards our sustainability
commitments, we link a number of
sustainability key performance indicators
(KPIs) to executive and senior management
remuneration. This year, our KPIs were
based on our social value creation, energy
efficiency projects and embodied carbon
from new developments.
Read more about our Sustainability
Governance at www.landsec.com/sustainability/
governance-policies
KEY MILESTONES
2016
› Sustainability
materiality review.
› First commercial
property company to
set a science-based
carbon target.
2017
Page
55
2018
› Launched UK’s first
scaffolding training
centre at Brixton
Prison.
› Committed to
disclosing climate
risks in line with
TCFD.
› Achieved target to
divert 100% of
operational waste
from landfill.
› Installed the then
largest solar PV
system in UK retail
at White Rose,
Leeds.
2019
2020 › Published strategy
to achieve net zero
carbon by 2030.
› Met SBT 11 years
early and committed
to net zero carbon
by 2030.
› Committed to
creating £25m of
social value by 2025.
Landsec // Annual Report 2021 » Strategic Report
Social review
The pandemic has accentuated the inequalities in
society and highlighted the importance of our social
initiatives. In the short term, it accelerated the need
to adapt our ways of working, training, volunteering
and ensuring the safety of our people, partners,
occupiers, visitors and local communities.
In the long term, many of the new ways
we do things will prove to be better than
the old, or offer more flexible options.
Externally, events, protests and initiatives
in wider society brought matters of equality
and inclusion further into the spotlight,
catalysing strategies and initiatives for
education and change.
COMMUNITY RESPONSE
TO COVID-19
Within communities around the UK, the
pandemic has disproportionately affected
particular groups in society, with issues like
poverty, unemployment, mental health
and social inequality increasing. Our long-
standing charity partners have experienced
a huge increase in demand for their support.
Given the impacts of Covid-19, businesses
like ours have a heightened responsibility
to make a meaningful commitment to
long-term social sustainability in their
communities. For us, this has meant
increasing our focus on supporting those
facing barriers including young people,
prison leavers, and people experiencing
homelessness and long-term unemployment
– all areas we know will need continued
support after the pandemic.
We set up a Covid-19 community support
fund to provide both immediate and
long-term assistance to our charity
partners. To date, this fund has given
over £500,000 of financial support to
the charities we work closely with, who
do incredible work supporting vulnerable
people. This included a £100,000 donation
to LandAid, the property industry’s youth
homelessness charity; we were proud to be
a founding supporter of their emergency
fund at the start of the pandemic.
Beyond financial support, we’ve used our
resources, skills, people and spaces to help
our local communities during Covid-19.
We’ve been able to continue many of our
employment and education programmes
virtually, closely supported by our
volunteers and partners. Our volunteers
have helped with everything from
employability mentoring, to inspiring
students about careers in property, to
giving pro-bono advice to our charity
partners. We have had to work innovatively,
launching projects to ensure our impact
continues to be socially sustainable and
benefits the people who most need
support. This included our virtual mentoring
programme with the Cardinal Hume
Centre, our charity partner in Victoria.
Landsec mentors have worked over several
months with individuals facing barriers
to work, to build their skills, confidence
and motivation.
In London, our world-famous Piccadilly
Lights became an important way for
charities and public health bodies to run
campaigns during lockdown. We were able
to partner with a wide range of community
organisations to raise awareness of
important issues, including mental health,
youth engagement and domestic abuse.
We gave over £2m worth of free advertising
space to registered charities on Piccadilly
Lights this financial year.
Page
56
SOCIAL VALUE
Social value is a way to describe the positive
outcomes generated by businesses to benefit
people, communities and society as a whole.
At the start of 2019, we set a corporate
commitment to create £25m worth of
social value by 2025 through our four
social sustainability programmes:
community employment, education,
charity partnerships and volunteering.
At the end of the second year of our
target, we’ve created over £11m worth
of social value through our programmes,
with over £6.5m of this in 2020/21 alone.
For more information about how
we measure social value, please see our 2021
Sustainability Performance and Data Report
MEASURING SOCIAL VALUE
EXAMPLES OF OUR REPORTING METRICS:
Jobs created
Volunteer time and expertise given
Students supported
Charity donations
Space given
Skills created
This year, despite the challenges of
Covid-19, our charity partners around the
UK have continued to provide exceptional
support for our communities. We’ve
continued to focus our investments on
where we can have the greatest impact.
Whether supporting people in finding work,
offering career coaching to young people
under-represented in the property sector,
or opening up our spaces for charities to
use, we want our impact to be targeted
and sustainable.
SOCIAL VALUE IN OUR DEVELOPMENTS
We’ve also integrated the principles of
social value measurement into our
development process, so we can assess
and understand the potential social value
our upcoming projects create for local
communities in addition to Section 106
obligations set by local authorities. This
year, we began this for several development
projects, including a local needs analysis for
O2 Finchley Road to inform our planning
consultation, a feasibility study in Lewisham
to incorporate into our masterplan, and
a social value statement to communicate
to local stakeholders at Red Lion Court.
Landsec // Annual Report 2021 » Strategic Report
SOCIAL SUSTAINABILITY PROGRAMMES
COMMUNITY EMPLOYMENT
Our community employment programme
has continued to work well this year, even
with the significant impact of several
Covid-19 lockdowns. Our programmes have
helped 121 individuals who are further from
the job market into work, and supported
an additional 852 people with employability
skills, creating £1.7m worth of social value.
We have continued to support people
who face barriers such as homelessness,
long-term unemployment and leaving
prison, and young people with no previous
work experience.
We’ve also expanded our wider support
for our charity partners, to maximise their
ability to engage local people. One example
is Circle Collective based in Lewisham
Shopping Centre, who help young people
gain work experience and start their careers.
This year we’ve helped the charity move to
a larger unit within our shopping centre to
create a community hub and reach even
more young people in need of support.
We’re also supporting the Government’s
Kickstart employment initiative, working
with Circle Collective and our service
partners in London. We’re taking on a
cohort of young people at risk of long-term
unemployment as a result of Covid-19,
helping them build work experience and
skills for their future.
EDUCATION
This year, we’ve continued our commitment
to helping young people from diverse
backgrounds enter careers in property,
in particular those who face barriers and
risk becoming disengaged, running our
education programmes virtually. Our aim
is to provide role models for students,
alongside transferable skills, industry
insights and career opportunities. In turn,
this helps us to bring more diverse young
talent into our business and helps bring
equal access to opportunities in real estate
for young people from all backgrounds.
In London, we ran two Circl reverse
coaching programmes, where over 30
Landsec employees coached – and were
coached by – young people from diverse
and under-represented backgrounds.
Evidence shows this can increase a young
person’s chance of reaching their potential
through employment, education or training.
Circl not only supports young people in
becoming future leaders through regular
coaching by industry professionals, it also
helps our workforce develop their own
managerial and leadership skills.
We also ran our annual Future Property
School with The Construction Youth Trust
Page
57
CIRCL REVERSE COACHING OUTCOMES
75%
1,248
of participants
interested in a career
at Landsec
hours of coaching
training
88%
87%
of Landsec employees
involved say they now
feel confident using
coaching skills
of young participants
felt Circl helped
them develop useful
leadership skills
Circl has really helped me
to make a start on a range
of personal goals – it feels
like I have much more
energy and focus in life now.”
LANDSEC EMPLOYEE
remotely for the first time. This project
works with 10 students from Victoria over
three months, to learn about the different
areas of our industry through weekly
workshops with our volunteers and
partners. At the end of the programme,
students present their own ideas for
sustainable developments at our 21
Moorfields site in London. We’ve also joined
Construction Youth Trust’s Schools
Partnerships programme to encourage
students in Lewisham and across London
to consider careers in property by meeting
professionals from a range of exciting roles.
Outside of London, our ‘Made In’
sustainability enterprise challenges at
Bluewater, White Rose and Gunwharf Quays
have continued. We’ve also started a new
virtual employability project at our three
Yorkshire retail sites – Trinity Leeds, Junction
32 and White Rose – with education social
enterprise Ahead Partnership, to offer local
students careers awareness over lockdown.
t
r
o
p
e
R
c
i
g
e
t
a
r
t
S
»
1
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
/
/
c
e
s
d
n
a
L
Collaborating
with the Cardinal
Hume Centre
The Cardinal Hume Centre, one of
our Victoria based charity partners,
supports local young people, families
and refugees at risk of poverty and
homelessness. The pandemic has
caused significant demand for this
support. We work with the charity to
help local people who face barriers,
into sustained work, and this year,
directly supporting 12 people into
jobs. We also provided additional
financial support from our Covid-19
community support fund, helping
them through this difficult period.
Our volunteers have supported the
centre this year, providing virtual
work experience, pro-bono advice
and a new employment mentoring
initiative that has helped address
the increase in people seeking
employability support.
Without my mentor,
I wouldn’t be on the right
track – starting a new job,
pursuing my education and
dream. She helped me so
much to gain confidence
and take the next steps.
She really listened to me
and made me feel less
anxious about Covid-19.”
MENTEE
Page
58
Social review
continued
CHARITY PARTNERSHIPS
Around the UK, we’ve continued to work
with our charity partners to support
vulnerable and excluded groups in our
communities. We provided additional
financial and pro-bono support where
needed, as charities have been hit by loss
of funding and increased demand due to
the pandemic. This year, we’ve given over
£4.7m worth of support to charities, including
nearly £4m of space in our assets and free
advertising space on Piccadilly Lights.
Despite Covid restrictions our teams have
found innovative ways to engage visitors
to our destinations in supporting causes
important to our communities. At several
shopping centres we’ve run Poppy Appeals
and Giving Trees, which gave over £250,000
worth of support to local charities and
people in need. Our local teams have also
donated food, gifts and resources to help
tackle the increased need.
We’ve launched new partnerships with
several charities, including Providence Row,
a leading East London homelessness
charity, and with several Westminster
charities through our work with the
London Community Foundation, including
St Andrew’s Youth Club and Pursuing
Independent Paths (PiP). We’ll be supporting
St Andrew’s youth employability project,
and at PiP we’ll be helping young adults
with learning difficulties gain life skills to
help them find work. Beyond this, we’re
expanding partnerships at our development
sites to help local people access employment
and training opportunities.
VOLUNTEERING
Our volunteering programme helps our
people and partners have a positive impact
in our communities. We encourage all
employees to take up to four workdays a year
to use their professional skills and experience
to support people and charities. This year,
our workforce were just as enthusiastic,
with working from home having a positive
impact on participation. All our volunteering
has taken place virtually this year, with
technology helping us reach a wider audience
in our communities and our workforce. We’ve
run careers Q&As with employment charity
partners including Key4Life, Bounce Back and
Circle Collective, mentoring programmes
with the Cardinal Hume Centre, mock
interviews with Resurgo, industry insights
sessions with students via Construction
Youth Trust, work experience with Young
Westminster Foundation and a significant
amount of pro-bono volunteering through
LandAid. In particular, pro-bono has enabled
our staff to use their business knowledge
to help charities build their own resilience
through the pandemic. We also know
volunteering has a positive impact on our
employees’ own development and wellbeing,
also important during the pandemic.
FAIRNESS
REAL LIVING WAGE
We are committed to a fair wage at all
levels of the business and fully support the
UK Living Wage Foundation’s approach of
a hard day’s work deserving a fair day’s pay.
While we continue to pay the Real Living
Wage to all of our direct employees and
partners across our London office portfolio,
we have not been able to meet our 2020
Living Wage commitment fully across our
retail portfolio. Recognising the impact
the pandemic has had on businesses,
particularly the retail sector, The Living Wage
Foundation is allowing businesses to pause
their accreditation during the pandemic.
We will review our accreditation by November
this year when there will be more certainty
on the reopening of the UK economy.
ENGAGING OUR SUPPLY CHAIN
This year, we launched a new questionnaire
to gain better insight into our suppliers’
sustainability-related governance,
performance and targets. The questionnaire
has five sections: policies and governance;
labour and human rights; targets and
performance; energy and carbon reporting;
and collaboration, and asks for both current
and forward-looking performance metrics.
We sent the questionnaire to all existing
suppliers, and it now forms part of the
onboarding process for new suppliers.
Over 900 suppliers, representing over half
of our total spend, have responded to the
questionnaire. This primary supplier data
has given us a much better understanding
of our suppliers’ sustainability performance,
our collaborative impact, and key areas for
improvement. Indeed, in March, Landsec
was awarded the Supply Chain Data Award
at the WDI’s Inaugural Awards Ceremony.
Building on the results of the questionnaire,
in 2021 we will be increasing our work with
high-risk suppliers and ensuring it continues
to have an impact. Our aim is to work
with our suppliers to reduce our collective
environmental impact, improve the working
conditions of those in our supply chain,
and ultimately cascade this positive action
throughout our supply chain.
Landsec // Annual Report 2021 » Strategic Report DIVERSITY AND INCLUSION (D&I)
We strongly value diversity and aim to be
an inclusive employer. We strive to attract,
retain and promote employees from all
backgrounds, regardless of their gender,
race, religion, age or sexuality.
We recognise our sector still has work to
do in fully embracing diversity and inclusion,
and is not representative of the diverse
communities we serve.
We also know the senior levels of our
business do not reflect the community,
and we’re working hard to address this.
In 2020, we focused on developing our
internal structures and governance to help
align our approach across our business.
One of our first steps involved developing
our D&I strategy.
CHANGING AND CHALLENGING MINDSETS
We’re galvanising our colleagues to challenge
bias in themselves and others, and to take a
zero-tolerance approach to discrimination in
all our office and retail spaces.
During the year our inclusive-leadership
training was offered to line managers
and encompassed recognising bias, using
inclusive-leadership principles to model
inclusive behaviour, and planning an
inclusive organisational culture.
A number of senior leaders sponsor our
affinity networks, helping encourage
inclusion from the top and interaction
with a diverse range of colleagues. This
includes our CEO sponsoring the disability
and wellbeing network, Hand in Hand.
We’re also planning to offer colleagues
the opportunity to ‘reverse-mentor’ our
senior management team, helping the
team improve their understanding of the
perspectives and experiences of a broad
range of colleagues.
While we are moving in the right direction,
the Black Lives Matter protests of 2020
provided us and many businesses with a
rude awakening. As a business, we reflected
on what we should do in response, and
agreed on two things that would help
contribute to building a fairer society.
Our D&I strategy focuses
on four key areas:
1
2
3
4
BUILD AND
MAINTAIN A DIVERSE
WORKFORCE AND
TALENT PIPELINE
INTEGRATE INCLUSIVE
BEHAVIOUR AND
VALUES IN OUR
CULTURE
PROVIDE
INCLUSIVE
SERVICES FOR
OUR CUSTOMERS
BUILD AN
INCLUSIVE
EMPLOYER
BRAND
› Ensure the
recruitment process
is fair, diverse and
inclusive
› Build a diverse talent
pipeline
› Provide inclusive
learning
opportunities for
all employees
› Support line
managers in
establishing inclusive
behaviour
› Promote inclusive
network events
› Promote work-life
balance and
wellbeing
› Inclusive and
accessible design
› Inclusive policies,
procurement and
practices
› Supplier diversity
› Wellbeing
› Host and attend
events that promote
Landsec as an
inclusive employer
and customer brand,
so we can play our
part in demonstrating
the industry is a
welcoming place
for all
› Enter appropriate
industry awards and
benchmarks
To oversee and keep us focused on this strategy, we’ve created a steering group, Landsec Includes,
made up of key senior stakeholders from across the business and the leaders of our affinity networks.
TACKLING MODERN SLAVERY
During 2020, we again carried out due
diligence across our business activity
through our worker engagement surveys
which are carried out by an accredited
third party. This covered a range of
issues including debt bondage, labour
exploitation, fair payment, health, safety
and discrimination. We targeted high-risk
areas of our supply chain, focusing on
construction labour in the UK. Due to
the pandemic, we had to postpone some
surveys, but resumed in August 2020.
We interviewed 91 individuals at three sites
and found no instances of modern slavery.
To further improve our approach to
identifying and managing modern slavery
risk in our business and supply chain, this
year we worked with not-for-profit modern-
slavery specialist Stronger Together, who
performed a gap analysis to identify areas
for improvement. This reviewed all key
business functions including procurement,
risk, operations and development, and
provided recommendations for improved
governance, training, and management
systems. We have collaborated with
Stronger Together to develop a strategic
implementation plan to address the
recommendations.
In March 2021, we launched our new Modern
Slavery Working Group, to provide practical
insight and feedback on this, and continue to
develop our policies, processes and resources.
Page
59
Landsec // Annual Report 2021 » Strategic Report Social review
continued
Page
60
FOCUS AREA
KEY HIGHLIGHTS
HAND
IN HAND
Executive
sponsor:
Mark Allan
Disability and
Wellbeing network,
supporting the
wellbeing of our
colleagues and
customers
DIASPORA
NETWORK
Executive
sponsor:
Nick
de Mestre
Creating an
inclusive
organisation
supportive of
multicultural
customers and
colleagues
LGBT+
NETWORK
Executive
sponsor:
Bruce Findlay
Lead the property
industry in being
more inclusive
for the LGBT+
community
The challenges of Covid-19, such as lockdowns, determined the
group should concentrate on aspects of mental health and
wellbeing and the group presented a Company-wide webinar
to support those facing these challenges.
Purple Tuesday in November was a highlight for the group. The aim
of Purple Tuesday is to improve customer experience for disabled
people. Run by the Purple Organisation, worldwide activities, this
year mainly run digitally, were launched by their CEO Mike Adams
and Landsec’s CEO, Mark Allan, at Piccadilly Lights. A great deal
of activity across our retail and office properties highlighted the
importance of creating an inclusive and welcoming space.
This year we hosted ‘Feelings of Injustice’ at Piccadilly Lights in
collaboration with What We See, to support the discussion about
Black Lives Matter and became signatories of the Race at Work
Charter and the Audeliss & Involve open letter to UK business.
The network also carried out the Investing in Ethnicity Audit
which helped identify the key areas we can make progress in,
and supported the internal reporting of ethnicity data to inform
our career progression initiatives.
During the year, the network conducted its first ethnic-minority
pay gap report, ran unconscious bias training and launched a
cross-network inclusion allies programme. We’ve partnered with
Involve, specifically designed to help firms change culture and
create inclusive workplaces where anyone can succeed. Involve will
provide a tailored development programme for ethnic minority
colleagues at all levels of our business. The programme is designed
to build confidence, capability and leadership skills to help people
move into more senior roles.
This year, we have worked with our suppliers to increase the
transparency of their employee LGBT+ representation, and to
promote this, particularly at leadership level. We gathered
preliminary information for taking part in the Stonewall Workplace
Equality Index in 2021, to help inform our strategy and targets. We
have also continued our sponsorship of Freehold, the networking
forum for lesbian, gay, bisexual and transgender professionals
working in real estate. Together, this will start to change the
perception of the property sector and attract more diverse people.
There weren’t the usual Pride parades around the country this year,
but we promoted virtual Work Pride events, hosted by MyGwork,
for our staff to celebrate and learn. We also held a number of allies
events throughout the year, including the LGBT+ History Month,
with great response to educational and social events.
LANDSEC
WOMEN
Executive
sponsor:
Colette
O’Shea
To celebrate
gender
diversity and
intersectionality
within our
organisation,
create positive
change, and
promote gender
related issues with
our employees,
customers and
communities
In celebration of International Women’s Day, Landsec Women
hosted a panel discussion by a mix of women representing other
affinity groups such as BAME, LGBT+ and Disability. We created
this to support the discussions we had throughout the year on
intersectionality and the complications it faces in the workplace.
Landsec has supported the development of its high potential
females by delivering our Thrive programme. This bespoke course
aims to develop self-confidence, build self-esteem and hone
personal brand, while remaining true to themselves to assist them
in achieving their full potential.
We also worked with national charity Refuge during the Covid-19
lockdown, providing free advertising space on Piccadilly Lights to
raise awareness of their vital support for victims of domestic abuse.
Expressing solidarity was our first step.
Our second was to identify what we could
do to promote real change. We then
reviewed our progress and:
➊ Signed the Involve open letter agreeing
to report our progress on black inclusion
as part of our Annual Report.
➋ Carried out the Investing in Ethnicity Audit.
➌ Signed the Race at Work Charter.
➍ Launched our internal cross-network
inclusion allies programme.
We are committed to ending exclusion
within our society, and cementing diversity
and inclusion at the heart of our business.
We know these are small steps, but believe
they will help galvanise our efforts and
build on our aspiration to be caring, open
and progressive.
AFFINITY NETWORKS
We have four employee-led affinity networks
at Landsec. All work together, are fully
inclusive, and celebrate our intersectional
ties. They are open to all colleagues and
have over 200 members.
Landsec // Annual Report 2021 » Strategic Report DIVERSITY CHARTS AND TARGETS
OUR PROGRESS
GENDER BY LEVEL
Chart 21
WHOLE ORGANISATION
BY ETHNICITY
Chart 22
BOARD, EXEC & SENIOR
LEADER – GENDER DIVERSITY
Chart 25
100
80
60
40
20
0
e
v
i
t
u
c
e
x
E
/
d
r
a
o
B
r
e
d
a
e
L
r
o
n
e
S
i
r
e
d
a
e
L
r
e
g
a
n
a
M
l
a
n
o
i
s
s
e
f
o
r
P
t
r
o
p
p
u
S
r
o
t
c
e
r
i
D
e
v
i
t
u
c
e
x
E
-
n
o
N
Female
Male
We continue to maintain good female
representation at all levels of our
organisation. We have increased our
female representation to 31% at leader
level and 38% at senior leader level, up
from 24% and 30% in 2020 respectively.
White
81%
Black, Asian and
minority ethnic
(BAME)
Other
Prefer not
to say
13%
4%
2%
17%
of our employees are from ethnic
minority backgrounds, exceeding our
target of 14%. Our ethnic minority
representation is 8% at leader and 6%
at senior leader level.
. 3 %
5
3
6
4
.
7
ale
m
e
F
ale
M
%
2018
. 3 %
3
3
ale
m
e
F
ale
M
6
6
.
7
%
2021
WHOLE ORGANISATION
BY SEXUAL ORIENTATION
Chart 23
WHOLE ORGANISATION
BY DISABILITY
Chart 24
BOARD, EXEC & SENIOR
LEADER – ETHNICITY DIVERSITY
Chart 26
Heterosexual
75%
Not recorded
14%
Prefer not to say 8%
Lesbian, gay,
bisexual and
transgender
LGBT)
Other
2%
1%
No disability
91%
Have a disability 4%
Prefer not to say 3%
Not recorded
2%
3%
of our employees have told us that they
identify as LGBT+. However, 8% of our
employees prefer not to say, a figure
that has reduced from 11% last year.
4%
of our employees have told us that they
have a disability, up from 3% last year.
However, 5% have not recorded their
details or prefer not to say, down from
10% last year.
B A ME – yes
B A ME – no
2018
1
0
0
%
B A ME – yes
B A ME – no
2021
9
3
.
9
%
%
0
6.1%
KEY TARGETS
FEMALE REPRESENTATION (BY 2025)
BAME REPRESENTATION (BY 2025)
Whole organisation
Board, Executive Leadership
Team and Senior Leaders
Leader level
50% 50%
>14% 14%
40%
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.
Page
61
Landsec // Annual Report 2021 » Strategic Report
Social review
continued
Page
62
PAY GAP
GENDER PAY GAP
Pay gap reporting encourages us to look
even more closely at our pay gap at
Landsec, and we’re committed to shedding
light on what’s driving it. And, to finding
solutions that can help us build a balanced
workforce for the long term.
Our median gender pay gap narrowed
from 34.3% in 2020 to 29.3% in 2021 and
our mean gender pay gap narrowed from
37.7% to 36.6% over the same period.
This reduction in the gender pay gap is due
to the average earnings of female starters
being higher than female leavers, as
well as more women in the upper middle
income quartile, up from 42% in 2020
to 45% in 2021.
If we adjust our gender pay gap data to
account for new starters and leavers that
we already know about up to July 2021
the mean and median gender pay gap
reduces to 32.7% and 28.4% respectively.
The adjusted data includes 18 new starters
up to July 21 (8 females and 10 males).
The higher average hourly pay of male
leavers compared to female joiners
reduces the overall mean gender pay gap.
Our ethnicity pay gap has been calculated
using the same method as the gender pay
gap. Of those included in the gender pay
gap calculation 2% stated ‘prefer not to
say’ for ethnicity and were excluded from
the ethnicity pay gap reporting.
EMPLOYEE ENGAGEMENT
The impact of Covid-19 on ways of working
was a focal point for employee feedback,
which we gathered quarterly. We measured
engagement on a scale of 1-10, with the
average score being 7.6, and an average
response rate of 58%. This relatively
high engagement score was consistent
throughout the year, employees appreciating
Landsec’s response to the pandemic, and
the fact that no employees were furloughed.
Chart 27
Our mean
gender pay gap
36.6% (2020: 37.7%)
Our median
gender pay gap
29.3% (2020: 34.3%)
Quartile proportions
Quartile split (hourly rate – mean)
Table 28
Lower Income Quartile
Lower Middle Income Quartile
Upper Middle Income Quartile
Upper Income Quartile
ETHNICITY PAY GAP
No.
136
136
136
136
Male
Female Total Avg
Male
Female
% Gap
32%
41%
55%
73%
68% £16.47 £15.58 £16.88
–8.4%
59% £25.10 £25.58 £24.77
45% £36.40 £36.46 £36.33
3.2%
0.4%
27% £77.77 £82.44 £65.27 20.8%
Chart 29
Our mean
ethnicity pay gap
32.7%
Our median
ethnicity pay gap
27.6%
Quartile proportions
Quartile split (hourly rate – mean)
Lower Income Quartile
Lower Middle Income Quartile
Upper Middle Income Quartile
Upper Income Quartile
No.
134
134
134
134
Ethnic
White
minority Total Avg
White
Ethnic
minority
% Gap
75%
76%
85%
93%
25% £16.47 £16.44 £16.55
–0.6%
24% £25.07 £25.05 £25.15
–0.4%
15% £36.41 £36.63 £35.09
4.2%
7% £78.02 £79.04 £63.93 19.1%
Table 30
Landsec // Annual Report 2021 » Strategic Report Working closely with our Employee Forum,
we have adapted our approach to surveys
this year, and the data has been vital to
continuing to adapt our ways of working
in response to the pandemic. We ran a
full survey in May in response to the first
lockdown, followed by quarterly surveys
in June, September and December.
We’re also measuring readiness, as an
indicator of how colleagues feel about
returning to our offices. The main concerns
have been virus transmission and using
public transport. We’ve addressed these
as part of our Covid-19 response. Where
we’ve communicated survey results, we’ve
also said what we’ve done in response to
previous surveys.
LEARNING AND DEVELOPMENT
We regard learning and development highly
at Landsec, but are changing it from
face-to-face to online. In September 2020,
we introduced our online platform, Workday
learning. Working with LinkedIn Learning
and other providers, we added 20,000+
pieces of digital learning, now available to
all employees round the clock, on demand,
covering a variety of topics that apply to our
business. This means we could carry on with
even more relevant personal development,
despite the pandemic.
Our Thrive and Circl programmes are
examples of our tailored programmes, aimed
respectively at improving gender diversity
and supporting our external community.
RECRUITMENT AND RETENTION
The rate of turnover reduced throughout
2020 to 14% from 27% in the previous year.
Following the impact of Covid-19, leaver
numbers reduced significantly throughout
2020, with voluntary turnover reduced
from 12% in March 2020 to 6% in March
2021. In 2019/20, there were 77 voluntary
leavers, whereas in 2020/21 there were
33 voluntary leavers.
We continue to improve retention by
recruiting internally. Since last year, we
have increased from 33% internal hires
to 50%, with 27 people promoted in the
last year (2019: 21).
INCLUSIVE RECRUITMENT
This year, our Sustainability team worked
closely with our Diversity & Inclusion team
and employee networks to increase diversity
within our business and industry, and to
increase inclusive behaviour throughout
our community projects. We’ve set up a
new inclusive recruitment project linking
Page
63
our community employment programme
with our hiring managers, to better connect
people facing barriers to career opportunities
at Landsec. We’ve also collaborated with
our Diaspora and Women’s networks to
establish a new mentoring programme
with social enterprise Diverse Leaders
Network, starting in 2021. This will target
female and ethnic minority students
from lower socio-economic backgrounds,
to build their aspirations and careers
awareness through regular sessions with
Landsec mentors.
HEALTH AND SAFETY
Our goal is to provide healthy and safe
places and communities that support
our people and partners in realising their
potential. We recognise we can only achieve
this by working closely with our partners,
including our supply chain, investors and
enforcing authorities.
Health and safety considerations were
central to our corporate response to the
Covid-19 pandemic. In March 2020, we
quickly established a taskforce to assess
the impact of the virus on our operations,
to interpret government guidance, and to
develop and co-ordinate the rollout of new
ways of working, so we could establish and
maintain Covid-secure destinations and
workplaces. The taskforce met regularly
throughout the year to review and update
our national and regional approach as the
pandemic and the Government’s
requirements evolved.
The launch of our new corporate strategy
prompted a review of our health and safety
strategy and priorities. We consulted
stakeholders from across the business
to ensure we were addressing their needs
and expectations for health and safety.
Last year we changed our safety
management system from the British
Standard 18001 to the International
Standard 45001. This year, our independent
auditors conducted two rounds of remote
auditing to maintain this accreditation.
They found no non-conformances nor
made any recommendations.
TRAINING
We run a comprehensive mandatory
programme of health and safety training
for all our employees and contingent
workers, and this year we reviewed it to
ensure it remains of high-quality, relevant,
and up to date. The training is designed to
ensure our people are aware of risk, and
competent in identifying and managing
our organisational risks. This year, we also
launched a learning management system
that has enabled us to provide most of
this training online, which improves where
and when it can be completed. The system
also simplifies booking and improves
record-keeping and reporting.
FIRE SAFETY
We continue to enhance fire safety across
the business and ensure we meet new
government initiatives and legislation.
We have seven high-rise residential
buildings above 18 metres in our portfolio,
and independent fire engineers are
examining them all to ensure they remain
safe for occupation and meet stringent
new building regulations. If remediation
is needed on the external walls, we will
immediately implement interim safety
measures such as changing the evacuation
strategy, introducing waking watches, or
installing temporary fire-alarm systems.
We will complete any remedial works
as quickly as possible, with minimum
disruption to tenants and local community.
Checking we are achieving our high internal
standards for health and safety is one of
our key priorities. We have completed our
full annual programme of ‘Property health
check’ audits and client audits at all our
development sites.
KEY PERFORMANCE INDICATORS
We introduced health and safety key
performance indicators for our service
partners and managing agents, that we
review quarterly. We also undertook an
internal audit during the year, to assess
our fire-safety systems and processes,
and sought evidence of compliance to
these arrangements in a sample of our
operational buildings. We identified and
completed several improvements.
ANTI-BRIBERY AND CORRUPTION
We are committed to the highest legal
and ethical standards of conduct
throughout every aspect of our business.
Our relationships with all our stakeholders
must be conducted in a fair, honest and
open way. We have a zero tolerance for
bribery and corruption of any sort and this
is reinforced through our Code of Conduct.
We also require our suppliers to have similar
policies and practices in place. Over the
summer of 2021, we will launch our new
Anti-Bribery and Corruption Policy and
we have developed a compulsory training
module which all our employees will be
required to complete and will be part of
the employee induction programme
going forward.
Landsec // Annual Report 2021 » Strategic Report Environmental
review
2020 was a pivotal year. As the world came to a
standstill following imposed lockdown restrictions
across the globe, greenhouse gas (GHG) emission
rates dropped. According to Science Magazine,
there was approximately a 7% decline in the rate
of GHG emissions.
CLIMATE CHANGE AND CARBON
This rate is actually what we would need
year on year until 2050 to keep to the
Paris Agreement. The reality, however, is
that this was achieved while significant
temporary disruption altered patterns of
energy demand.
Despite a drop in the rate of emissions,
global temperatures kept rising due to the
continuous emission of GHG globally, leading
to unprecedented weather events, such as a
record 38ºC recorded in June in the Russian
tundra, north of the Arctic Circle.
Amidst a pandemic, responding to climate
change is still the top priority for governments
and forward-looking businesses. Investor
requirements for disclosure of climate
change risks and opportunities kept increasing
and our customers set ambitious climate
commitments of their own, from science-
based carbon reduction targets to net zero
carbon commitments.
The Committee on Climate Change warned
in its 2020 Progress Report to Parliament
that emissions from the built environment
have barely dropped in the UK, so a lot
more progress is needed.
During 2020, through thought leadership
and advocacy, Landsec has been driving our
industry forward in its response to the climate
emergency. We’ve published our net zero
carbon pathway, in line with the BBP Climate
Change Commitment, participated in the
UK Green Building Council net zero carbon
framework development on renewable energy
procurement and offsets, and responded to
the GLA New London Plan consultation and
the Planning White Paper on sustainability.
CLIMATE RESILIENCE
Landsec considers climate change a
principal risk and material issue. In line with
the Task Force on Climate-related Financial
Disclosures’ (TCFD) recommendations, since
2017 we’ve committed to assessing and
reporting on material climate change risks
across our portfolio, ensuring we have the
appropriate strategy and mitigation plan
in place. We provide our TCFD disclosure
in the risk section on pages 76-77, with
further details in the 2021 Sustainability
Performance and Data Report.
This year, we have worked again with Willis
Towers Watson in assessing and quantifying
climate-related risks. This study has
provided us with an updated view of these
at portfolio and asset level, and allowed
us to understand the potential financial
impact of transition risks, such as policy
and legislation changes and shifts in
market preferences. This is informing our
approach to managing climate risks across
our portfolio, including new developments.
Through our net zero carbon strategy, we’re
managing the transition risks, supporting
our transition to a low carbon world. This
strategy is helping ensure we remain resilient
and relevant in the long term. Here we
provide an update on how we are managing
our net zero strategy, and progress to date.
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64
OUR NET
ZERO
CARBON
STRATEGY
As part of our Climate Change Commitment
with the Better Buildings Partnership, in
2020, we published our Net Zero Carbon
Pathway Framework, outlining our plans for
net zero carbon for both our new and
existing buildings. Our progress is as follows:
1
REDUCE OPERATIONAL ENERGY
USE AND CARBON EMISSIONS
a) Progress towards our science-based
target (SBT)
The first step to achieving net zero is to
reduce our operational carbon emissions.
For that reason, as part of our net zero
carbon strategy, in 2019 we increased the
ambition of our SBT, aligning our carbon
reductions with a 1.5ºC scenario. Our current
target is to reduce our absolute carbon
emissions by 70% by 2030 from a 2013/14
baseline. Our target includes scope 1, 2
and a portion of scope 3 emissions from
downstream leased assets. This year we
reduced our carbon emissions by 55%.
b) Energy efficiency across our
operational portfolio
It has been a turbulent year for energy
management, and the lockdowns have
naturally had an impact on how we operate
buildings. With the fall in occupancy rates,
we made an even bigger push towards
lowering our energy use by maximising
building efficiency while ensuring the health
and safety of our occupants. To do this,
Landsec // Annual Report 2021 » Strategic Report We’ve chosen Portland House and Timber
Square as our two official Design for
Performance Pioneer projects. Following
the NABERS UK Design for Performance
approach, the energy performance of
our development projects has been
independently verified to targeted ratings.
We’re targeting operational energy
performance for our new developments
in line with those published by the UKGBC
in its Net Zero Carbon Framework.
We’re using our internal shadow price
to quantify financially the long-term
environmental risks associated with
business decisions. For instance, deciding
to redevelop an asset comes with a much
larger environmental cost than keeping
most of the building’s structure. We will
take a large number of implications into
account, such as financial returns, benefits
to the local area and community, flexibility
offered by the asset and overall quality of
the experience; but it’s crucial we quantify
the environmental impact of our decisions
and translate it into a well-understood
metric – such as a financial metric.
2
INVEST IN RENEWABLE
ENERGY
Since 2016, all the electricity we procure
is REGO-backed renewable through
our corporate contract with Smartest
Energy, and we are looking to move our
procurement towards direct purchasing
from renewable projects, through Power
Purchase Agreements (PPA).
We also aim to increase the amount of
renewable electricity we generate on
our sites. Our current on-site renewable
electricity capacity is 1.4 MW, and we
are running feasibility studies for installing
solar PV at three of our assets.
3
USE AN INTERNAL SHADOW
PRICE OF CARBON
As part of our net zero strategy, we’ve set
an internal shadow price of carbon to help
us consider the cost of carbon emissions
in our investment decisions. We established
our price of carbon at £80 per tCO2e based
on the required investments in carbon and
energy reduction to meet our science-based
target. This price is also consistent with the
United Nations Global Compact guidance
on carbon pricing and the Department for
Business, Energy and Industrial Strategy’s
forecast of carbon prices through to 2030.
4
REDUCE CONSTRUCTION
IMPACTS
Across our development pipeline, we’ve
continued to prioritise reducing the
embodied carbon in our supply chain.
From early design to developed design,
Timber Square demonstrated a 15%
reduction in embodied carbon intensity,
for an intensity just over half that of the
typical benchmark. Timber Square uses
an embodied-carbon Value Engineering
schedule to track all proposed design
decisions to the defined carbon budget
set at developed design stage.
we use smart technology to gather data
from our building management systems
in several of our offices, and having this
detailed data helps us decide how we
control energy-intensive service equipment
in our buildings, and the services that we
provide in our buildings are now running
in line with occupancy. Consequently,
this year we have been able to undertake
various actions to improve the building-
management systems at our London
assets. For example, we have improved
the efficiency and lifecycle of our cooling
systems, as they now react more optimally
to external temperatures. Our energy
intensity has decreased considerably this
year, by a further 29% compared with last
year, and is now 43% below our 2013/14
baseline. Although this figure suggests
that we’ve already achieved our target to
reduce energy intensity by 40% by 2030,
we recognise that energy consumption
has been significantly impacted by lower
occupancy and operational hours due to
Covid-19 restrictions and doesn’t reflect
portfolio energy performance in normal
conditions. For that reason, we’ll continue
tracking our performance against this
2030 target.
In addition, we acknowledge we must
do more to further reduce our energy
use and reach our net zero goal by 2030.
We are therefore working to ‘future-proof’
our portfolio, so we can continue to operate
in line with our ambition and meet the
commitments we have made. To do this,
we have mapped out the level of investment
needed to reach our net zero target and
identified the priority projects needed.
We see increased customer engagement
as having significant potential for energy
savings. We are developing an engagement
programme for increasing collaboration
with our occupiers on initiatives to improve
energy performance.
c) Energy efficiency at new
developments
The formal launch of NABERS UK in
November 2020 was an important
milestone, and Landsec has been
supporting it over a number of years as
Pioneers of the Design for Performance
initiative led by the Better Buildings
Partnership (BBP). NABERS UK is a new
energy-efficiency rating scheme for in-use
performance that will help commercial
office developers and owners deliver and
operate energy-efficient buildings and
disclose their actual performance.
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65
Landsec // Annual Report 2021 » Strategic Report Environmental
review
continued
Portland House will have an embodied-
carbon intensity of around 342 kgCO2/m2
GIA, a third of embodied carbon compared
to a typical new building, as we reposition
the existing asset, retaining the existing
structure. This approach reduces the extent
of construction or demolition required and
uses fewer materials, driving down both
cost and carbon emissions. On our live
development sites at 21 Moorfields, Lucent,
The Forge and n2, we’ve also been tracking
closely the embodied carbon information
arising from materials purchased and
activities undertaken on site to date.
We create this ‘as-built’ embodied carbon
model for each project and match it
against assumptions and specifications
made at the design stage.
We measure supply chain carbon
consistently, at every design stage and
at regular points throughout the year for
our projects on site. This allows us to see
whether the procurement decisions made
by our supply chain align with, or are better
than, our contractual targets. That’s how,
for our four projects currently on site, we’ve
been able to save more carbon through our
procurement decisions than in the design-
stage specifications. Across the materials
purchased to date, we’ve reduced 2,452
tonnes CO2 more than anticipated. This
represents a further 1.5% reduction across
the four projects. While small given the
limited scope to date, this will keep growing
as works progress, and is further helping us
meet our reduction targets.
In addition to monitoring the projects’
carbon intensity, we also set for each
project a reduction target for its design
stage. Across our six live developments we
are achieving a 15.6% reduction in embodied
carbon from our design-stage baseline.
5
OFFSET REMAINING
CARBON
To be truly net zero carbon in construction,
we will need to offset emissions once we
have minimised all those on site. We are
buying our first carbon offsets for the Forge
through a third-party provider. We ensure
our offsets meet the eight principles laid
out by the UKGBC to safeguard the
environmental integrity and guarantee
the quality of the offset.
WASTE MANAGEMENT
We continue to divert all our operational
waste from landfill, and have recycled 65%
across our portfolio, performing below our
target of 75% recycled and reused by 2020.
Due to our diversified portfolio, our
waste management performance varies
significantly across our assets. We have
achieved this target across our office
portfolio, outperforming it for the last two
years, achieving 82% in 2020/21. In 2018/19,
our shopping centres also outperformed
our target, at 76.8%, leaving only the
outsourced managed leisure and retail
parks as the portfolio segments not
achieving 75% recycled and reused.
Since we set our waste target, we’ve seen
a significant improvement in the accuracy
of waste data. Using actual waste data
rather than estimated data, and a better
understanding of offsite Material Recovery
Facility (MRF) outputs, has resulted in a
minor decrease in the reported recycling
rates, especially within the retail portfolio.
Finally, and most significantly, this year the
recycling rate across our retail portfolio has
decreased to 67% from 72% in 2019/20, as a
direct consequence of Covid-19 restrictions.
A reduction in recyclable materials
produced by brand partners and F&B
(such as packaging materials, cardboard
and glass) and a change in operational
procedures to minimise infection risk to
operational staff, has had a direct impact
on the amount of waste collected as well
as that recycled.
Page
66
The 75% recycling target is still achievable,
albeit challenging in the current climate.
We are therefore extending our commitment
for 75% recycling to 2030 to align with our
expanded new construction-waste
commitments announced last year. We will
support this by working with our employees
and customers to reduce, reuse and recycle
waste, running campaigns and incentives
across the business, building upon our
successes of recent similar campaigns.
Additionally, we are running an in-depth
waste auditing exercise at the third-party
managed retail and leisure portfolio on sites
that produce a significant amount of waste
but are not achieving our recycling target.
We will use this information when retendering
for the waste service in this portfolio.
As part of our commitment to our
community partners, we also donate any
Surface Pros we no longer need to some
of the charities we support.
MATERIALS
In early 2020, we published our Prohibited
Materials List. This sets the minimum
requirements for sourcing materials on our
projects. Since then, we have expanded
its scope to provide guidance to design
teams on materials that we would avoid,
prefer and those that would be ideal. We
circulate this guidance at the start of any
project. From avoiding laminated glass to
recommending air purifying paints, the
list states clearly our expectation of high-
quality and thoughtful design.
With construction progressing on four
of our sites, our procurement has been
a lot more varied in 2020. Despite this, we
remain on track to source 100% of our core
construction materials with responsible
sourcing certification, and exclusively from
the UK and Europe.
CIRCULAR ECONOMY INITIATIVES
Closed-loop glass recycling
Glass is infinitely recyclable to its highest
environmental value (that is, as glass) if
it is segregated properly, so at Portland
House we’re working with our demolition
contractors, Erith, to segregate it carefully.
To date, we’ve removed just under 100
tonnes of glass from site, avoiding an
estimated 29 tonnes of CO2. We anticipate
recovering an estimated additional 200
tonnes of glass from the project as it
progresses. The glass then goes on to a
specialist contractor, eventually to be
re-melted as float glass. This improves
on the traditional approach of mixing it
with other waste to be used as aggregate.
Landsec // Annual Report 2021 » Strategic Report Digitising
construction
As part of digitising our construction
methods, we trialled QFlow, a
cloud-based software, at the Forge.
This automates site data collection
and uses artificial intelligence to
provide accurate and immediate
insights into waste and material
movements to and from the
construction site. It has proven
extremely effective at minimising
environmental risk. We have set a
number of responsible procurement
targets at the Forge. Since starting
on site, QFlow has identified 159
risks early by flagging any non-
compliance at the site gate,
removing any human handling
errors and minimising the time
needed to address them.
It has also given us insights into
waste movements off site, allowing
us to think how we can manage our
waste more efficiently. It is making
our supply chain more transparent
and has proven vital to staying on
track to achieve our sustainability
targets at the Forge. The trial was so
successful we have extended it for
the duration of the construction,
and are now working with QFlow to
increase use of their data in our
reporting and planning.
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A second life for used raised-access
floor tiles
Raised-access floor tiles are standard
products in the real estate industry, of
standard size and specification. They’re
also typically wasted, discarded during
strip-outs and demolition, only to be
replaced by new tiles serving exactly the
same function.
This is costly and environmentally wasteful,
especially as the tiles will sit underneath
a floor covering. Tiles can be salvaged,
cleaned, re-tested and re-installed. We
work with one of the UK’s largest recycling
companies for raised floors, developing a
product where refurbished second-hand
tiles can be painted with low-VOC paint,
to ensure visual consistency on show floors.
We created a prototype during the works
at Dashwood this year, which proved
acceptable to many leasing and technical
partners. We estimate the recycled tiles
are at least 50% less carbon intensive than
new ones which can significantly contribute
to further reduce the embodied carbon of
new developments.
This year we also committed to pursuing
the WELL Portfolio Programme across
our existing managed office portfolio, in
addition to our new schemes. This will
enable us to further improve the health and
wellbeing of our customers by applying the
10 principles of the WELL Building Standard
at scale. As part of this work stream we
undertook an extensive review of our assets
as well as our operational procedures which
revealed a consistent level of quality. We
will be testing our assets to establish their
internal conditions and implement remedial
measures where required to ensure the
safety and wellness of our customers.
We’ve also created a comprehensive health
and wellbeing brief for our commercial
development projects and we’re doing the
same for our mixed-use Urban opportunities.
These briefs set out the minimum
requirements we expect our design teams
to meet, ensuring we maintain the same
level of quality and diligence across all our
development activities, from apartment
layouts and daylight, to the design of the
public realm.
WELLBEING
BIODIVERSITY
Health and wellbeing has been a central
theme of our sustainability programme
for a number of years, so we were well
positioned to respond to the changes
brought about by Covid-19.
We’ve formalised our approach by registering
and assessing our live development schemes
against the WELL Building Standard. This was
a natural step as we have embedded health
and wellbeing principles into our projects for
a number of years.
In the past year, at Dashwood, we’ve also
experimented with the WELL standard in our
office products Blank Canvas, Customised
and Myo, creating three wellness offerings
to suit our customers’ needs. For Blank
Canvas, we are aiming to ensure any
customer can achieve a WELL Core
certification if they wish. For Customised,
we’ve created a specific WELL fit-out option
for customers, including a handbook
imparting the knowledge we have acquired
over the years to help them fulfil their own
wellness aspirations. For Myo, we are hoping
to be the first flexible office space in the
City to achieve full WELL certification.
In 2020, we expanded the scope of our
Biodiversity Brief to include our mixed-use
assets, and set an overarching goal to make
our strategy more comprehensive across
our entire portfolio. Our live developments
remain on track to achieve significant
biodiversity improvements in line with
the brief.
This spring we also worked with an ecologist
to conduct site visits to evaluate progress
against our 2016 baseline. The results of
this evaluation will help us identify further
enhancements for the sites to help us reach
our 2030 target.
BUILDING CERTIFICATION
BREEAM IN-USE
This year we undertook a pilot certification
of BREEAM In-Use at four key assets
(Bluewater, Nova, 80-100 Victoria Street
and One New Change). BREEAM In-Use
assesses the operational impact of a
building by key sustainability
criteria including energy
usage, environmental
management, and health
and wellbeing. All assets
received a rating of
‘Very Good’, providing an
effective yet simple way
to communicate the assets’
sustainability credentials
to customers and investors.
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Managing risk
Page
68
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
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 2021/22.
Helping the business to
navigate the challenges
and opportunities it faces
through proactive risk
management.”
risk (the risk that
remains after we
consider the effect of
mitigating actions and
controls). 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.
OUR KEY SUCCESSES IN 2020/21
› Project managed the business response to
Covid-19 with business resilience and risk
management at the core of our approach
› Led the Brexit working group to ensure
we mitigated the risks of leaving the EU
with no deal
› Realigned the principal risks to the new
strategy and market segments
› Promoted a positive risk culture across
the business and raised risk awareness
OUR KEY PRIORITIES IN 2021/22
› Develop an assurance mapping process
to assess the quality of the assurance we
receive across the three lines of defence
for our principal risks
› Refine the risk management processes
to ensure they are fully aligned to the
new strategy
› Roll out the new business resilience plans
to each property
› Use technology to improve risk
aggregation and assessment of risk
dependencies
› Continue to promote risk awareness
and positive risk culture
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.
This forms the basis for the principal
and emerging risks, which are challenged
and validated by the Executive Leadership
Team 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 next
review taking place in December 2021.
MANAGEMENT OF RISKS
Ownership and management of the risks
are assigned to members of the Executive
Leadership Team. 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. Our strategic review
of the business over the course of 2020/21
had risk management as a fundamental
part of the assessment criteria.
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.
Landsec // Annual Report 2021 » Strategic Report employees. The Executive Leadership
Team is responsible for the day-to-day
management of risk. Senior managers
also attend the Executive Leadership
Team 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 Leadership
Team 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 2021/22 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
K
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TOP-DOWN
Oversight,
identification,
assessment
and mitigation
of risk at a
group level
Board
› Set the risk culture
› Approve risk appetite
› Agree the risk programme
› Discuss the Group principal risks
with the Executive Leadership Team
1ST LINE OF DEFENSE
2ND LINE OF DEFENSE
3RD LINE OF DEFENSE
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
Executive
Leadership Team
› 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
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
› Identify and monitor
› Provide direction on
applying
framework
› Provide guidance
and training
› Facilitate risk
escalations
Support
functions
› Provide guidance/
support to the
risk team and
business units
emerging risks
Business units
and risk champions
› Identify and assess
risks
› Respond to risks
› Monitor risks and
risk response
› Ensure operating
effectiveness of
key controls
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BOTTOM-UP
Identification,
assessment and
mitigation of
risk at business
unit and
functional level
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.
Each 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 pages 72-75. Any red rated KRIs will be
discussed by the Executive Leadership Team
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 realign the principal risks to the new
strategy and market segments. This was
critical in ensuring that risk management
was fully aligned to the changes to the
organisational structure and that risk
owners had full visibility and ownership
of their risks. We provide further details
on the changes to the principal risks below.
RISK MANAGEMENT FRAMEWORK
As shown in the diagram, 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
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Landsec // Annual Report 2021 » Strategic Report
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The long-term implications of Covid-19
are unclear and our strategy will continue
to adapt to ensure we are managing
near-term challenges proactively and
focused on positioning the business for
post-pandemic opportunities.
In 2021, we have split our Customer Risk
into two segments to ensure that our
risks are fully aligned to our new strategy;
namely, Customer Risk – Retail & Hospitality
(which includes London Retail) and Customer
Risk – London Office. At the same time
we have absorbed key elements of the
previous ‘Disruption risk’ into these two
new segmental risks and accordingly,
‘Disruption’ will no longer be reported as
a standalone principal risk.
CUSTOMER – Retail & hospitality is
placed in the top right quadrant of the heat
map sitting in the position of the previous
Customer Risk. This positioning reflects
the continued uncertainty around demand
for this space and the outlook for these
sectors. The pandemic impact on the retail
sector has seen a notable increase in the
switch to online shopping from physical
stores as people stay at home to comply
with government guidelines, and we expect
some of this change is unlikely to reverse.
CUSTOMER – London office is placed in
the centre of our risk heat map reflecting
the overall lower risk profile of this segment
of our business which has remained resilient
through the pandemic and is supported
by the successful introduction of our new
flexible office products. However, the
reported success of workforces working
from home provides ongoing uncertainty
for this segment of our business with some
companies reappraising their real estate
options and how they plan to use the office
going forward.
The change to our principal risks helps
to clarify key market and organisational
differences in the way the risks are
managed and addressed going forward.
The risk table sets out further details of
the nature of the risk and the mitigation
actions we have taken as a business.
Looking to
the future
We are positioning our business to
emerge strongly from the pandemic.
Our response
to the pandemic
and Brexit
Our approach to emerging and rapidly
accelerating risks was tested during the
year as the business responded to Brexit
uncertainty and the Covid-19 pandemic.
The speed and scale of the impact
of Covid-19 was unprecedented and
fundamentally affected all aspects
of our business. The Risk Management
team supported the business through
the establishment of a workstream
structure to assess and mitigate the
myriad of risks facing the business as
a result of the pandemic.
The Risk Management team also
supported our Brexit no-deal risk
planning, assessing the risks to the
business and our supply chain that may
have resulted from the UK leaving the
EU with no trade deal by reference to
three distinct workstreams: construction,
operations and portfolio management.
Upon conclusion of the negotiations
and the final trade deal being agreed,
we have been focused on managing the
operating risk of effectively trading with
partners who are based in the EU and
ensuring we have robust processes in
place to mitigate regulations around
the movement of goods across borders.
Our business resilience and risk planning
has been tested over the past year in
response to the pandemic and the business
has responded very well to the challenges
presented by the crisis. All levels of our
organisation were rapidly mobilised to
assess, plan, respond and mitigate the
myriad of risks presented to the business
by Covid-19.
We continue to operate a business
recovery workstream and have detailed
plans in place as we look towards a
gradual easing of lockdown restrictions
and a full reopening of the economy.
The business is fully mobilised and ready
to provide the best possible support to
our customers, communities, employees
and service partners during this transition
back to normality.
The risk heatmap on the following page
shows the principal risk positions for March
2021 before and after mitigating actions.
It is important to note that our principal
risks at 31 March 2020 reflected the
impact of Covid-19 with the UK under
full national lockdown restrictions at this
point and the majority of the economy
already feeling the impact of the pandemic.
As we look forward, our strategic priorities,
market segments and key performance
drivers have been carefully articulated in
the strategy set out by the Board last
year and we have realigned our principal
risks and the risk owners to reflect this
strategic vision.
Landsec // Annual Report 2021 » Strategic Report Our principal risks
and uncertainties
Our risk
assessment
The risk heat map illustrates
the relative positioning of our
principal risks before and
after mitigating actions as
at 31 March 2021. We set out
further details on our principal
risks below, explaining our risk
mitigation strategies and the
rationale for the risk movement
in the year.
MAP KEY
Before mitigating actions
After mitigating actions
PRINCIPAL RISKS OVERVIEW
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Low (<25%)
Medium (26-50%)
High (51-75%)
Very high (76-100%)
PROBABILITY
Customer – Retail & hospitality (includes London retail)
Market cyclicality
People and skills
Customer – London office
Major health, safety and security incident
Information security and cyber threat
Climate change
Investment and development strategy
NB: Disruption is no longer reported as a separate risk having been absorbed into risk 1 and 4.
Page
71
CHANGE IN THE YEAR
No change
Decrease
No change
No change
No change
No change
No change
No change
Landsec // Annual Report 2021 » Strategic Report
Our principal risks
and uncertainties
continued
Page
72
Customer – Retail & hospitality
EXECUTIVE RESPONSIBLE | COLETTE O’SHEA
Structural changes in customer
and consumer expectations
leading to a change in demand
for space and the consequent
impact on income.
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
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
› The monthly management
accounts review lease expiries,
breaks, re-gears and compare
new lettings against estimated
rental value
› We measure footfall and retail sales
at our shopping centres to provide
insight into consumer trends
› We regularly measure customer
satisfaction across our retail
customer base
› We are reviewing each element of
our customer journeys to identify
opportunities to improve
CHANGE IN YEAR | NO CHANGE
This remains our most significant risk.
We elevated the risk in March 2020
and the risk remains very high today.
We were already operating in a
tough retail environment before
the Covid-19 outbreak and the
pandemic has accelerated some of
the changes that we were closely
monitoring with a shift to greater
online shopping from physical stores.
In addition, London retail has in the
past year seen lower footfall and
trading levels than regional retail as
it is more reliant on the presence of
office staff and tourism. In the future,
if fewer workers use offices this
change could persist.
Hospitality has been highly impacted
by social distancing measures due
to Covid-19. This includes our leisure,
food & beverage and hotels. 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 rent collections at risk across
the whole portfolio, which have
reduced significantly over the year.
This indicates a likely increase in
business failures and we are closely
monitoring customers in financial
distress.
OPPORTUNITY
Structural shifts continue to put retail
rents under pressure and Covid-19
has accelerated some of the trends
driving this. Shopping centres have
been impacted more severely by this
trend than outlets. Our outlets have
been relatively shielded from online
competition and have performed
well when permitted to open.
‘Reimagine Retail’ is one of our
four strategic pillars and one of the
key objectives within this pillar is
to reimagine the retail space and
determine long-term sustainable rent
levels for our customers. Another
objective of the Reimagine Retail
pillar is to repurpose space to reduce
the retail footprint and enhance the
quality of the mix. The activities
under this strategic pillar will be key
to managing this risk, particularly
for shopping centres.
We are also assessing plans for
significant mixed use developments
on our suburban London retail sites
where we see opportunities to
create value.
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.
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 research team prepare a
quarterly report for the Executive
and Property Committees, which
tracks both macroeconomic and
internal risk metrics, against
tolerance ranges, e.g. 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
› Scenarios are modelled based on
plausible economic trajectories.
EXECUTIVE RESPONSIBLE | MARK ALLAN
Modelling completed during
the year included the impact of
different Brexit outcomes and
the containment of the pandemic.
Our economic scenario analysis then
feeds into our annual budgeting
and five-year forecasting process
› 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
CHANGE IN YEAR | DECREASE
The market cyclicality risk remains
high at year end due to the ongoing
impact of the pandemic but has
decreased since last year on the
back of achieving a trade deal with
the EU on the conclusion of Brexit
negotiations and the ongoing
Covid-19 vaccine rollout.
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.
Landsec // Annual Report 2021 » Strategic Report 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.
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
EXECUTIVE RESPONSIBLE | BARRY HOFFMAN
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 organisation
› We have robust succession plans
in place for senior and critical roles
to mitigate key people risks
› Clear employee objectives and
development plans to ensure
alignment to business goals
› 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 helps
retain employees while promoting
work-life balance and helping to
improve productivity
› We regularly complete employee
engagement surveys to understand
areas of strength and opportunities
for improvement
CHANGE IN YEAR | NO CHANGE
In response to Covid-19, the majority
of our employees have worked
from home for much of the past year.
Overall, this transition has been
smooth from a technology and
communications perspective. We have
not seen any significant impacts on
employee productivity, although we
are carefully monitoring employees’
mental and physical wellbeing. We
have used regular ‘Pulse’ employee
surveys to understand employee
engagement and concerns
throughout the pandemic.
OPPORTUNITY
As part of our strategic review process
we have taken the opportunity to
refresh our culture and values as a
business and we have rolled out a
company-wide programme focused
on the importance of culture and
values to deliver our vision. We
continue to build further expertise,
knowledge and capability in the
business to allow us to effectively
deliver on our strategy.
Customer – London office
EXECUTIVE RESPONSIBLE | COLETTE O’SHEA
Structural changes in customer
expectations leading to a
change in demand for space
and the consequent impact
on income.
EXAMPLE KRIs
› 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
› Serviced office take-up
(external metric)
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
› The monthly management
accounts review lease expiries,
breaks, re-gears and compare
new lettings against estimated
rental value
› We regularly measure customer
satisfaction across our office
customer base
› Our Insight team holds a Future of
Work forum examining disruption
themes, megatrends and changes
in the way people work and live
› We have defined an innovation
process to capture ideas and
workshop with our customers on
their needs in a test office
environment
CHANGE IN YEAR | NO CHANGE
Leasing activity in the London office
market has been severely depressed
by the pandemic and vacancy rates
have risen. Our assets have seen a
small rise in vacancy but are supported
by the continued differentiation of
our product offerings to align to our
customer needs and expectations,
including the successful introduction
of our flexible office products.
However, the reported success of
workforces working from home
provides ongoing uncertainty for this
segment of our business with some
companies reappraising their real
estate options and how they plan
to use the office going forward.
OPPORTUNITY
Our Optimise strategic priority is
focused on our central London assets.
Optimise will mean greater alignment
with sectors and geographies in the
capital, evolving a broader range of
propositions for our customers,
continued deployment of our
development expertise and targeted
recycling of capital to fund long-term
growth. We firmly believe London will
remain a gateway city and we have a
high-quality, best in class portfolio.
Page
73
Landsec // Annual Report 2021 » Strategic Report Our principal risks
and uncertainties
continued
Page
74
Major health, safety and security incident
EXECUTIVE RESPONSIBLE | COLETTE O’SHEA
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.
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
MITIGATION
› The Health, Safety & Security
(HSS) Committee is chaired by
the COO and governs the Health
& Safety management systems
and processes. H&S performance
is reported to the Board every
six months
› Our ‘One Best Way’ standards
› 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
define mandatory H&S compliance
policies for the business and our
supply chain
› We hold 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 providers 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 programme of
proactive fire safety improvements
during the year
› 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
CHANGE IN YEAR | NO CHANGE
We evaluated our fire management
strategies across our entire property
portfolio last year and identified
some fire safety improvements.
We have now implemented these
improvements.
The fire safety regulatory
environment continues to evolve
and tighten requirements which is
monitored closely at our Health,
Safety and Security Committee.
We have established a working group
to respond to any new requirements
around external cladding systems.
As lockdown restrictions are eased,
our efforts are focused on ensuring
we are well prepared for a gradual
and safe return to our properties.
OPPORTUNITY
We are testing a prototype of a new
construction approach at The Forge.
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.
Landsec // Annual Report 2021 » Strategic Report Information security and cyber threat
EXECUTIVE RESPONSIBLE | BARRY HOFFMAN
Data loss or disruption to the
corporate systems and building
management systems resulting
in a negative reputational,
operational, regulatory (including
GDPR) or financial impact.
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
› We have an IT Operations team and
Privacy & Compliance Officer who
monitor information security and
privacy risk and cyber threat
› All of our colleague’s complete
mandatory cyber security and
GDPR training
› Our IT security management policy
sets out our standards for security
and penetration testing, vulnerability
and patch management, data
disposal and access control
› 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 standards
› Our development brief clearly
defines the required technical IT
standards for all building systems
› Our move to put all corporate
systems in the cloud has improved
the resilience of our disaster recovery
and business continuity plans
› 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
› We are rolling out a programme
of improvements to our site
building cyber defences based
on the NIST framework
CHANGE IN YEAR | NO CHANGE
The level of this risk has 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.
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.
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.
EXAMPLE KRIs
› Energy intensity and carbon
emissions
› Recycling waste
› Renewable electricity
› Embodied carbon for new
developments
› Portfolio natural disaster risk
EXECUTIVE RESPONSIBLE | NICHOLAS DE MESTRE
MITIGATION
› We are committed to becoming
net zero carbon by 2030 and have
published our carbon reduction
pathway for achieving this
› We have a science-based target
to reduce our operational emissions
in line with a 1.5°C scenario
› We operate all our properties in
line with our ISO 50001 Energy
Management System ensuring we
measure, manage and monitor our
energy performance
› We continue to procure 100%
renewable electricity across
our portfolio
› Through our Responsible Property
Investment Policy and sustainability
due diligence process, we assess
climate risks and opportunities in
potential acquisitions
› Our Sustainability Brief for
Developments ensures that we
develop our properties with
consideration to the risks of climate
change and take advantage of the
latest low-carbon opportunities
› We undergo assurance for data and
disclosures across our sustainability
programme, enhancing the
integrity, quality and usefulness
of the information we provide
CHANGE IN YEAR | NO CHANGE
The residual risk is the same as last
year and we have intensified our
mitigations, progressing plans to
achieve our ambition to be a net zero
carbon business by 2030.
OPPORTUNITY
Lead our business and the property
sector towards a low-carbon
economy, creating long-term value
for our shareholders and wider
stakeholder groups.
More details on climate-related risk
are provided in the TCFD disclosure
on pages 76-77.
Investment and development strategy
EXECUTIVE RESPONSIBLE | COLETTE O’SHEA
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.
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
› We have robust and established
governance and approval
processes, including the Investment
Committee
CHANGE IN YEAR | NO CHANGE
This risk was elevated in March 2020
and remains unchanged this year
given the increased uncertainty
around the future economic
environment into which we will
deliver our developments.
We have reprofiled 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
As mentioned above, the strength of
our balance sheet, combined with
our strong rating, enables us to
continue to invest in our growing
development pipeline and other
opportunities as they arise.
Page
75
Landsec // Annual Report 2021 » Strategic Report Our principal risks
and uncertainties
continued
Page
76
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 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
2021 Sustainability Performance and Data
Report at www.landsec.com/sustainability.
For further climate-related disclosures,
please 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 change as
one of our principal risks.
Ongoing oversight of climate-related
issues is carried out by our Sustainability
Committee, chaired by the Chief Executive
and attended by our Head of ESG &
Sustainability, members of the Executive
Leadership Team 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.
For the third successive year, we have worked
with Willis Towers Watson to identify and
assess the impact of climate-related risks
through quantitative and qualitative scenario
analysis, considering short term until 2030,
and long term beyond 2030 until 2100.
Our analysis focuses on two distinct scenarios
based on the Representative Concentration
Pathways (RCPs), which are used by the
Intergovernmental Panel on Climate Change
(IPCC) to illustrate future concentrations of
greenhouse gases in the atmosphere: a
scenario where global average temperature
increases by less than two degrees (RCP 2.6),
and a scenario where temperatures increase
by up to four degrees (RCP 8.5).
In line with the TCFD recommendations,
our assessment covered both physical risks
(i.e. physical impacts of climate change,
such as flooding events, windstorms,
increase in temperature and sea level rise)
and transition risks (i.e. risks related to
the transition to a lower-carbon economy
to avoid the worst physical impacts of
climate change, such as policy and
regulation changes).
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SHORT TERM (UNTIL 2030)
High transition risks associated with aggressive mitigation
actions to reduce emissions
› Minimum Energy Efficiency Standards (MEES) raise requirements for all
non-domestic rented properties to meet a minimum EPC B, potentially
impacting nearly 80% of floor area
› Increased pricing of carbon emissions expected to reach £87/tCO2
($100/tCO2), impacting operational costs
› Change in customer expectations regarding offices, as more companies
committed to becoming net zero and set science-based targets
LONG TERM (2030-2100)
Slight increase in physical risks
› 3% to 20% increase in river peak flows with no additional assets exposed
compared with current risks
› No significant change to exposure of portfolio to windstorm and impact
is likely to remain within current natural weather variability
› 12% expected increase in terms of flooding losses
› Warmer summers with +1.7°C maximum temperatures but no significant
risk of heat stress
› 55% of portfolio could be exposed to subsidence risk
Business as usual with no significant change in transition and
physical risks
Failure to transition leading to significant increase in physical
risks and adaptation risks
› No significant changes to current physical risks
› 2% of portfolio located in areas highly exposed to river flooding with a
return period of 50-100 years
› Significantly hotter summers with +4°C to +7.6°C maximum temperatures
› 88% of the portfolio could be exposed to 10-20 days in heatwaves
› Sea level rise between 21cm-80cm on average which would put additional
› 5% of portfolio located in areas highly exposed to storm surge (coastal
strain on the Thames Barrier
flooding) with a return period of 50-100 years
› 21% to 56% increase in river peak flows and potential flood defence
failures across the UK, leading to higher portfolio exposure
› 40% expected increase in flooding losses
› 7% expected increase in storm losses
› >64% of portfolio exposed to subsidence risk
As consequence of the changes in climate and associated physical risks,
there will be a significant increase in risks linked with adaptation measures.
Landsec // Annual Report 2021 » Strategic Report
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
Leadership Team, who are responsible
for ensuring the operating effectiveness
of the internal control systems and for
implementing key risk mitigation plans.
The Board undertakes an annual assessment
of the principal risks. The Executive
Leadership Team is supported by risk
champions across the business, who are
tasked with maintaining awareness of key
risks and control measures.
The senior leader responsible for climate-
related risk is the Head of ESG and
Sustainability. 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 senior leader and risk champion
responsible for climate-related risk ensure
appropriate mitigation actions are taken and
integrated 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
our principal risks and uncertainties,
including climate change is discussed
further on pages 68-69.
As part of our strategy to manage
transition risks, we’re committed to
becoming a net zero carbon business by
2030 and we have a science-based carbon
target to reduce our operational carbon
emissions by 70% by 2030, aligned with
a 1.5ºC scenario. In addition to reducing
our operational emissions, by improving
the energy efficiency in our assets, and
committing to the procurement of
renewable electricity, we’ve implemented
an internal shadow carbon price to drive
investment towards cleaner projects.
We’re also reducing carbon emissions across
our construction activities by carefully
designing and selecting every raw material
we use. Further details on our net zero
strategy is discussed on pages 64-66.
Our analysis gives us confidence in
the resilience of our strategy, as we’re
supporting the transition to a low-carbon
world while managing the impact of
climate-related risks to our portfolio.
Our analysis showed us that our current
portfolio is not highly exposed to physical
risks given the location of our assets and the
impact of physical risks to our portfolio will
only become more relevant in the long term,
under a four-degree scenario. Conversely,
transition risks are relevant in the short term
as increasing mitigating actions to drive
emissions reduction are expected, such as
policy and regulation changes, as well as
change in customer preference.
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 delivering 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.
KEY METRICS AND TARGETS
Climate-related Financial Metrics
2020/21
2019/20
Change
Percentage of revenues derived
from BREEAM certified space
62% 56% 11%
Percentage of portfolio which
is BREEAM certified (by value)
57% 59% -3%
Percentage of portfolio which is
BREEAM certified (by floor area)
44% 40% 11%
Percentage of portfolio with EPCs
rated F or G (by rental income)1
2%
–
–
Investment in energy efficiency
measures implemented in the year
£1.6m £1.2m 33%
Estimated annual savings from
energy efficiency measures
implemented in the year
£0.8m £0.5m 66%
Percentage value of portfolio located
in areas exposed to a 10% risk of
inland, coastal and flash flooding
in a ten-year period2
7.2% 7.4% -3%
1. New metric added to the TCFD disclosure in 2020/21.
2. Indicator has been updated to include all assets located in areas with 1 in 100 year return period for flooding.
Exposure doesn’t consider any local flooding protection or existing mitigation actions in place.
Additional TCFD metrics and targets, including energy consumption and
carbon emissions, are disclosed in our 2021 Sustainability Performance and Data Report
at www.landsec.com/sustainability
Page
77
Landsec // Annual Report 2021 » Strategic Report
Page
78
Going concern
and viability
The Directors outline their assessment
of the Group’s ability to operate as
a going concern and its long-term
viability, taking into account the
impact of the Group’s principal risks.
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 period
ending 31 May 2022 from 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
deterioration in cash collections over the
year ended 31 March 2021 as a result of
Covid-19. This stress testing modelled a
scenario with materially reduced levels
of cash receipts over the next 12 months.
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 2021.
VIABILITY STATEMENT
THE VIABILITY ASSESSMENT PERIOD
The Directors have assessed the viability of
the Group over a five-year period to March
2026, 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 plan 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
plan 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 plan 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 has been operating, additional
stress-testing has been carried out on the
Group’s ability to continue in operation
under extremely unfavourable operating
conditions. While the assumptions we
have applied in these scenarios are possible,
they do not represent our view of the likely
outturn. The Directors have also considered
reverse stress-test scenarios including one
in which we are unable to collect any rent
for an extended period of time. The results
of these tests help to inform the Director’s
assessment of the viability of the Group.
Landsec // Annual Report 2021 » Strategic Report KEY RISKS
The table below sets out those of the
Group’s principal risks (see pages 71-77 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.
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.
PRINCIPAL RISK
VIABILITY SCENARIO ASSUMPTION
Key metrics
Customer – Retail and hospitality
Continuation of structural changes in
shift to online providers and failure to
respond to cost pressures on retailers.
Market cyclicality
Impact of non-containment of Covid-19
leading to further lockdowns and a
negative impact on the market in the
near term.
Customer – London office
Structural changes in customer and
consumer expectations leading to an
adverse change in demand for space
and the consequent impact on income.
› Increased customer failures lead to
increased void periods, negative
valuation movements and downward
pressure on rental values to sustainable
levels during the five-year forecast period
› Any uncommitted forecast acquisitions,
disposals and developments do not take
place due to reduced liquidity of assets
› Decline in capital values and outward
yield movements through to March
2023 before partial recovery through to
March 2026 driven by our office assets
› Declines in capital values through to
March 2026 for retail and leisure assets
› Reduced demand leads to increased
void periods, negative valuation
movements and downward pressure
on rental values through to March 2022
before partial recovery through to
March 2026
Investment and development strategy
› No uncommitted debt refinancing
Inability to deliver our development
pipeline and re-stock the portfolio.
takes place, and no new debt or bank
facilities are raised or extended
› Any uncommitted forecast acquisitions,
disposals and developments do not
take place
Page
79
Table 31
Viability
scenario
31 March
2026
31 March
2021
32.7%
32.3%
£3,489m £3,424m
955p
985p
£1,600m £(1,562)m
Security Group LTV ratio
Adjusted net debt
EPRA net tangible
assets per share
Available financial
headroom
The viability scenario represents a slight
contraction in the size of the business over the
five-year period considered, with the Security
Group LTV at 36.9% at its highest point in the
assessment period at which point we have
£1.6bn of available financial headroom.
The Group would be required to secure
new funding, or exercise extension options
for a minimum of £0.6bn of its debt facilities
during the March 2025 financial year and
a further £1.0bn during the March 2026
financial year upon their expiry. 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 2026.
Landsec // Annual Report 2021 » Strategic Report Non-financial
information statement
Page
80
This section of our Strategic Report constitutes Landsec’s Non-Financial Information Statement. This is intended to help stakeholders
understand our position on these key non-financial matters. The table below highlights our policies and standards and where you can
find more information in this report.
You can find our policies on our website: www.landsec.com/sustainability/governance-policies, www.landsec.com/about/corporate-governance
and www.landsec.com/sustainabilityour-stakeholders/our-employees.
TOPIC
Environmental
matters
WHERE INFORMATION CAN BE
FOUND IN THIS REPORT
Environmental review
on pages 64-67
OUR POLICIES AND STANDARDS THAT GOVERN
OUR APPROACH
› Sustainability policy: our sustainability commitment and strategy
› Environment and energy policy: how we manage our business
activities with minimal impact on the natural environment
› Biodiversity brief: used to guide our partners and expand on our
biodiversity requirements across our portfolio
› Materials brief: sets out the materials we prohibit use of in our
construction activities based on health impacts, responsible
sourcing, embodied impact and resource efficiency considerations
› Responsible property investment policy: our commitment and
approach to managing aspects of sustainability throughout the
acquisition and disposal of assets
› Sustainability brief for developments: our sustainability ambitions
and commitments for our developments
› Employee Code of Conduct: sets out how we behave internally
Social review on pages 56-63
Employees
Respect for
human rights
Social matters
and externally, in line with our values
› Equal opportunities policy: how we treat our employees, our
most valuable assets, based on merit and ability, in a fair and
transparent way
› Health and safety policy: how we manage health and safety
throughout our operations and assets
› Health and wellbeing policy: investing in improving the health
and productivity of our employees, particularly throughout the
pandemic
› Mental health first aider policy: sets out the support we provide
our employees with on maintaining mental health
› Human rights policy: our commitment and core principles to
respect the human rights of all those who work on behalf of
Landsec
› Modern Slavery Statement: we are committed to ensuring that
all work in our supply chain associated with our projects and
contracts are voluntary and fair and that the health, safety and
security of all workers is a priority
› Equal opportunities policy: how we treat our employees, our
most valuable assets, based on merit and ability, in a fair and
transparent way
Directors’ Report on page 142
Social review on pages 56-63
› Right to work policy: provides best practice guidance to those
Social review on pages 56-63
assigned responsibility in performing right to work checks across
our supply chain
› Supplier Code of Conduct: our non-negotiable expectations
of our suppliers including providing safe and healthy working
conditions and fair pay for their own employees
› Diversity and inclusion: having a diverse workforce will ensure
we make better decisions for our business and our stakeholders
Landsec // Annual Report 2021 » Strategic Report TOPIC
Anti-bribery and
corruption
Description of principal
risks and impact of
business activity
Description of
business model
OUR POLICIES AND STANDARDS THAT GOVERN
OUR APPROACH
› Anti-bribery gifts and hospitality policy: we have a zero
tolerance for any form of bribery or corruption
› Conflicts of interest and anti-competitive behaviours policy:
our employees must act in the best interests of the Company
and not make decisions for personal gain
› Whistleblowing policy: a process to allow people to anonymously
report any impropriety or wrongdoing
› Group Procurement Policy: ensures we source goods and services
in accordance with the law and in compliance with relevant
legislation in relation to matters such as anti-competitive
behaviour, anti-bribery, health and safety regulations and
data protection
› Tax strategy: we act with integrity and excellence when
dealing with taxes and engage with Government for a fair
taxation system
› We consider both external and internal risks, evaluate
them, assess the impact and put in place mitigating actions
and controls
WHERE INFORMATION CAN BE
FOUND IN THIS REPORT
Social review on pages 56-63
Audit Committee Report
on page 108
Managing Risk on pages 68-69
Our principal risks and
uncertainties on pages 71-77
Audit Committee Report
on pages 106-114
› To create value, we buy, develop, manage and sell property,
drawing on a range of financial, physical and social resources
Our Business model
on pages 18-19
Non-financial key
performance indicators
› In addition to our financial performance metrics, we set
ourselves a range of KPIs for the year which focused on ensuring
we emerge from Covid-19 in as strong a position as possible
Key performance indicators
on pages 32-33
This Strategic Report was approved by the Board of Directors on 17 May 2021 and signed on its behalf by:
MARK ALLAN
CHIEF EXECUTIVE
Page
81
Landsec // Annual Report 2021 » Strategic Report Introduction from
the Chairman
CRESSIDA HOGG
CHAIRMAN
ENGAGEMENT WITH OUR STAKEHOLDERS
Our stakeholders’ interests have changed
as a result of the pandemic and therefore
effective communication with them has
been more important than ever this year.
The Board Strategy Day in January this year
was centred around the long-term impact
of Covid. We heard from medical and
health policy experts, economists and
customers. The Board enjoyed engaging
directly with stakeholders, particularly
our customers representing office, retail
and leisure, to hear first hand about the
challenges that Covid has posed for them
and what their priorities now are. You can
read more about this on page 96.
The Board has been very conscious of the
health and wellbeing of our employees
given the impact of the pandemic and the
challenges of adapting to remote working.
The Board has received regular updates
from the Executive Directors on the
sentiment within the business and the
initiatives being taken to promote health
and wellbeing amongst the workforce. We
look forward to more direct engagement
with employees as we return to the office.
Due to Covid restrictions, our 2020 Annual
General Meeting had to be held as a closed
meeting. This year, we are holding our first
hybrid AGM to ensure that we are able to
effectively engage with our shareholders
whatever Covid restrictions may be in place
at the time. Shareholders will be able to
watch a live webcast with presentations
from both Mark and me. We will cover our
new strategy and business performance,
and shareholders will then be able to ask
questions and also vote remotely. Further
information is set out in the Notice of AGM
which is available at www.landsec.com/agm.
At our 2020 AGM, Edward Bonham Carter’s
re-election to the Board received 79.63%
votes in favour, and as a result this
resolution was added to the Investment
Association’s significant dissent list.
Edward brings significant experience to the
Board as our Senior Independent Director
and a member of our Nomination and
Remuneration Committees. It is clear that
DEAR SHAREHOLDER
Welcome to the governance
section of this year’s
Annual Report.
As I outlined in my Chairman’s statement
on page 6, this has been a year of
unprecedented challenges resulting from
the pandemic. Good governance has been
a critical foundation for Landsec’s response
to Covid, providing a framework for effective
decision-making, addressing the changing
needs of our stakeholders and making sure
that we emerge from the pandemic in as
strong a position as possible.
PURPOSE, CULTURE AND GOVERNANCE
When Mark joined as our CEO he emphasised
that the culture of a business is as important
as its strategy. Our culture will enable our
people to execute on our strategy and we
can only achieve our purpose when our
culture and strategy are aligned. Our culture
defines how we do things and how we
behave and our governance framework
plays a crucial role in this.
In a year of so much change, it has been
particularly interesting for the Board to
monitor the culture at Landsec, how
the culture is being redefined under new
leadership and how the existing culture
has been tested through the challenges
of remote working.
Page
82
his commitment to Landsec is not
compromised by his other external
appointments. However, we understand
that some institutions apply their own
guidelines in determining if a Director is
overboarded. Ahead of Edward’s re-election
at the AGM in July, it is important to note
that on 6 May 2021 Edward stepped down
as Vice Chairman of the board of Jupiter
Fund Management plc. He has taken up
a new part time role at Jupiter focusing
on stewardship and corporate responsibility,
which is not a board position and will
reduce Edward’s time commitment.
BOARD ACTIVITIES
In addition to the scheduled eight meetings,
the Board held three additional Board
meetings during the year, one to discuss
Landsec’s immediate response to the
pandemic at the beginning of the financial
year and two meetings to discuss our new
strategy. Helping the executive management
formulate the new strategy and responding
to the challenges created by Covid were the
main focus for the Board through the year.
It was encouraging to see active capital
recycling as outlined in the new strategy
with the sale of 1 and 2 New Ludgate and
the acquisition of 55 Old Broad Street.
These transactions demonstrate the value
that Landsec has created in its Central
London portfolio and our commitment to
optimising the Central London portfolio
through the reinvestment of capital.
More information on the Board’s
activities during the year can be found on
page 92
I would like to conclude by thanking all
members of the Board for their continued
support and commitment over the past
year. The majority of Board meetings have
been held remotely with all Directors joining
by video call. The Board has adapted well
to this dynamic and its decision-making
has not been affected. However, the Board
looks forward to the benefits of more
informal engagement amongst the Board,
the Executive Leadership Team and
our employees that a return to the office
will provide.
CRESSIDA HOGG
CHAIRMAN
Landsec // Annual Report 2021 » Governance
Board of Directors
CHAIRMAN OF THE BOARD
SENIOR INDEPENDENT DIRECTOR
N R
N R
CRESSIDA HOGG
CHAIRMAN
EDWARD BONHAM CARTER
NON-EXECUTIVE DIRECTOR*
YEARS ON THE BOARD: 7
Chairman since 12 July 2018. Independent upon
appointment.
ROLE
Leads the Board, responsible for governance,
major shareholder and other stakeholder
engagement.
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.
Cressida chairs the Nomination Committee.
OTHER CURRENT APPOINTMENTS
Non-executive Director, London Stock Exchange
Group plc. Non-executive Director, Troy Asset
Management.
YEARS ON THE BOARD: 7
Senior Independent Director since July 2016.
ROLE
A sounding board for the Chairman and a
trusted intermediary for other Directors and
shareholders.
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 global
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. In May
2021 Edward stepped down from the Jupiter
board and has now taken on a non-board,
part time role at Jupiter focusing on stewardship
and corporate responsibility.
Edward stepped down as Chairman of the
Remuneration Committee in May 2020 but
continues to be a member of the Remuneration
Committee.
OTHER CURRENT APPOINTMENTS
Senior Independent Director, ITV plc. Director,
The Investor Forum CIC. Trustee, Esmée Fairbairn
Foundation. Non-Executive Chairman, Netwealth
Investments Ltd. Member, Strategic Advisory Board
Livingbridge LLP.
*Independent as per the UK Corporate Governance Code.
GENDER DIVERSITY OF BOARD Chart 32
(All Directors as at 31 March 2021)
Female
Male
50%
50%
BOARD TENURE
Chart 33
(Non-executive Directors including Chairman)
0-3 years
4-6 years
7-9 years
43%
14%
43%
BOARD ATTENDANCE
Eight scheduled meetings
Chart 34
Attendance
100%
Page
83
Landsec // Annual Report 2021 » Governance Board of Directors
continued
NON-EXECUTIVE DIRECTORS
Page
84
CONTINUED →
A N
A
A R
NICHOLAS CADBURY
NON-EXECUTIVE DIRECTOR*
MADELEINE COSGRAVE
NON-EXECUTIVE DIRECTOR*
CHRISTOPHE EVAIN
NON-EXECUTIVE DIRECTOR*
STACEY RAUCH
NON-EXECUTIVE DIRECTOR*
MANJIRY TAMHANE
NON-EXECUTIVE DIRECTOR*
YEARS ON THE BOARD: 4
YEARS ON THE BOARD: 2
YEARS ON THE BOARD: 2
YEARS ON THE BOARD: 9
YEARS ON THE BOARD: <1
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 to 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 is Chairman of the Audit Committee
and became a member of the Nomination
Committee on 1 June 2021.
OTHER CURRENT APPOINTMENTS
Group Finance Director, Whitbread PLC.
SKILLS AND EXPERIENCE
Madeleine has deep knowledge and perspective
in relation to investment decisions, asset
management and market dynamics from her
extensive experience in the property industry.
She is a member of the Royal Institution of
Chartered Surveyors and has sat on a number
of GIC Real Estate boards across Europe.
Madeleine is Managing Director and Regional
Head of Europe at GIC Real Estate, a position
she has held since 2016, and will retire from at
the end of June 2021. She is responsible for
the real estate investment strategy and portfolio,
leads the real estate business in Europe and is
a voting 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, real estate asset
management and market dynamics, is an
asset to Board discussions especially on all
property matters.
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
Corporate representative, Euro Lily Private
Limited (a corporate director of CeGeREAL SA)
until 1 July 2021.
Christophe became Chairman of the
Remuneration Committee in May 2020 and
became a member of the Audit Committee
on 1 June 2021.
OTHER CURRENT APPOINTMENTS
Chairman, Bridges Fund Management.
*Independent as per the UK Corporate Governance Code.
KEY » A Audit Committee N Nomination Committee R Remuneration Committee
SKILLS AND EXPERIENCE
SKILLS AND EXPERIENCE
Stacey brings deep analytical thought to the
Manjiry is currently Global Chief Executive
Board, with considerable expertise of retail trends
Officer of Gain Theory, a marketing effectiveness
and insights gained at a leading international
consultancy, a subsidiary of WPP plc. Manjiry
management consultancy. She has significant
was part of a team which founded Gain Theory
board level experience gained through non-
in 2015, having previously been Managing Director
executive positions held in retail and other
of another of WPP’s consultancies also focused
industries which is of particular relevance and
on data and analytics, Ohal Ltd. Prior to that,
benefit to the Company at a time of challenge
Manjiry spent the first part of her career in
in the UK retail sector. Stacey is a Director
the retail sector, latterly as Head of Customer
(Senior Partner) Emeritus of McKinsey &
Insight and Strategy at Debenhams. Manjiry’s
Company where she served clients in the US
experience of data and analytics is a key
and internationally for 24 years. Whilst there,
addition to the overall skillset of the Board.
she co-founded the New Jersey office and was
the first woman to be appointed as an industry
Manjiry became a member of the Remuneration
practice leader. Stacey retired from McKinsey &
Committee on 1 June 2021.
OTHER CURRENT APPOINTMENTS
Chief Executive Officer, Gain Theory, a subsidiary
of WPP plc. Advisory Board member, Saracens
Women’s Rugby.
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.
Stacey will step down from the Board on 24 June
2021 having served over nine years.
OTHER CURRENT APPOINTMENTS
Chairman, Board Fiesta Restaurant Group Inc.
Non-executive Director, Heidrick & Struggles
International, Inc.
Landsec // Annual Report 2021 » Governance NON-EXECUTIVE DIRECTORS
NICHOLAS CADBURY
NON-EXECUTIVE DIRECTOR*
MADELEINE COSGRAVE
NON-EXECUTIVE DIRECTOR*
CHRISTOPHE EVAIN
NON-EXECUTIVE DIRECTOR*
STACEY RAUCH
NON-EXECUTIVE DIRECTOR*
MANJIRY TAMHANE
NON-EXECUTIVE DIRECTOR*
YEARS ON THE BOARD: 4
YEARS ON THE BOARD: 2
YEARS ON THE BOARD: 2
YEARS ON THE BOARD: 9
YEARS ON THE BOARD: <1
A N R
R
SKILLS AND EXPERIENCE
SKILLS AND EXPERIENCE
SKILLS AND EXPERIENCE
Nicholas brings wide-ranging and international
Madeleine has deep knowledge and perspective
Christophe has extensive investment experience
financial and general management experience
in relation to investment decisions, asset
in private equity, debt and other alternative
to the Group gained from working in consumer-
management and market dynamics from her
asset classes. As the former CEO of a UK listed
facing businesses, particularly in the retail,
extensive experience in the property industry.
company, he also has management and
leisure and hospitality sectors. He also has
She is a member of the Royal Institution of
leadership strengths, having successfully led the
extensive commercial and operational
Chartered Surveyors and has sat on a number
transformation of Intermediate Capital Group
knowledge and skills in relation to strategy
of GIC Real Estate boards across Europe.
PLC (ICG) from a principal investment business
and IT development. This broader commercial
Madeleine is Managing Director and Regional
into a diversified alternative asset management
perspective adds breadth to Board discussions
Head of Europe at GIC Real Estate, a position
group with €34bn assets under management.
and enables Nicholas to provide effective
she has held since 2016, and will retire from at
Christophe’s broad experience, both as a
challenge as Chairman of the Audit Committee.
the end of June 2021. She is responsible for
business leader and an investor, is a valuable
Nicholas is Group Finance Director of Whitbread
the real estate investment strategy and portfolio,
asset to the Board. Having started his career in
PLC, a position he has held since November 2012.
leads the real estate business in Europe and is
banking, holding various positions at NatWest
Before that, he was Chief Financial Officer of
a voting member of the GIC Real Estate global
and Banque de Gestion Privée, he joined ICG in
Premier Farnell PLC. Nicholas originally qualified
investment committee. Prior to GIC Madeleine
1994 as an investment professional, became CEO
as an accountant with Price Waterhouse.
held various positions with JLL in London and
in 2010 and stepped down from that position in
Sydney. Madeleine’s global real estate experience,
2017. During this time he held various investment
Nicholas is Chairman of the Audit Committee
combined with her knowledge and perspective
and management roles, founded the Group’s
and became a member of the Nomination
of investment decisions, real estate asset
businesses in Paris, the Asia-Pacific region and
Committee on 1 June 2021.
management and market dynamics, is an
North America, and was instrumental in adding
OTHER CURRENT APPOINTMENTS
Group Finance Director, Whitbread PLC.
asset to Board discussions especially on all
various additional businesses, including a UK
property matters.
property lending business.
OTHER CURRENT APPOINTMENTS
Corporate representative, Euro Lily Private
Limited (a corporate director of CeGeREAL SA)
Christophe became Chairman of the
Remuneration Committee in May 2020 and
became a member of the Audit Committee
until 1 July 2021.
on 1 June 2021.
OTHER CURRENT APPOINTMENTS
Chairman, Bridges Fund Management.
SKILLS AND EXPERIENCE
Manjiry is currently Global Chief Executive
Officer of Gain Theory, a marketing effectiveness
consultancy, a subsidiary of WPP plc. Manjiry
was part of a team which founded Gain Theory
in 2015, having previously been Managing Director
of another of WPP’s consultancies also focused
on data and analytics, Ohal Ltd. Prior to that,
Manjiry spent the first part of her career in
the retail sector, latterly as Head of Customer
Insight and Strategy at Debenhams. Manjiry’s
experience of data and analytics is a key
addition to the overall skillset of the Board.
Manjiry became a member of the Remuneration
Committee on 1 June 2021.
OTHER CURRENT APPOINTMENTS
Chief Executive Officer, Gain Theory, a subsidiary
of WPP plc. Advisory Board member, Saracens
Women’s Rugby.
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.
Stacey will step down from the Board on 24 June
2021 having served over nine years.
OTHER CURRENT APPOINTMENTS
Chairman, Board Fiesta Restaurant Group Inc.
Non-executive Director, Heidrick & Struggles
International, Inc.
Page
85
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.
Our Non-executive Directors have
a diverse skill set and background
including property, investment, asset
management, retail and hospitality
and data and analytics. This expertise
enables the Board to constructively
challenge management and encourages
diversity of thought in the decision-
making process.
Landsec // Annual Report 2021 » Governance Board of Directors
continued
Page
86
EXECUTIVE DIRECTORS
OUR CFO DURING THE YEAR
COMPANY SECRETARY
MARK ALLAN
CHIEF EXECUTIVE
YEARS ON THE BOARD: 1
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 for three years. Prior to that he
was Chief Executive of The Unite Group PLC
from 2006 until 2016. 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.
ROLE
Responsible for the leadership of the Group,
development and implementation of strategy,
managing overall business performance and
leading the Executive Leadership Team.
OTHER CURRENT APPOINTMENTS
None.
MANAGEMENT COMMITTEES
Chairman of the Group’s Executive Leadership
Team, and Investment and Sustainability
Committees. Mark attends the Audit,
Remuneration and Nomination Committees
at the invitation of the chairs of the relevant
Committees.
VANESSA SIMMS
CHIEF FINANCIAL OFFICER
YEARS ON THE BOARD: <1
Appointed to the Board 4 May 2021.
COLETTE O’SHEA
CHIEF OPERATING OFFICER
YEARS ON THE BOARD: 3
SKILLS AND EXPERIENCE
Vanessa brings extensive financial experience to
Landsec from the property sector in the UK, most
recently as Chief Financial Officer at Grainger plc.
Vanessa has particular expertise in leading and
implementing strategic change in businesses and
substantial experience in senior finance leadership
roles in a listed environment. Vanessa has worked
in finance since 1998 and immediately prior to
joining Grainger held a number of senior positions
within The Unite Group PLC, including Deputy
Chief Financial Officer. Prior to that Vanessa
was UK finance director at SEGRO plc. Vanessa
is a Chartered Certified Accountant (FCCA)
and has an executive MBA (EMBA) from Ashridge
Business School.
ROLE
Supports the Chief Executive in developing
and implementing strategy, determining
funding arrangements and reporting Group
financial performance.
OTHER CURRENT APPOINTMENTS
Audit Chair and a Non-executive Director at
Drax Group Plc.
MANAGEMENT COMMITTEES
A member of the Group’s Executive Leadership
Team and Investment Committee. Vanessa
attends Audit Committee meetings at the
invitation of the Committee Chairman.
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 the London Portfolio, and
in December 2020 became Chief Operating Officer.
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.
ROLE
Responsible for our Office, Retail and
Specialist assets.
OTHER CURRENT APPOINTMENTS
Joint Chair of the Royal Docks Enterprise Zone
Programme Board Management committees.
MANAGEMENT COMMITTEES
A member of the Group’s Executive Leadership
Team and Investment Committee. Chairman
of the Property Committee.
MARTIN GREENSLADE
LIZ MILES
CHIEF FINANCIAL OFFICER – UNTIL 31 MAY 2021
COMPANY SECRETARY
Martin stepped down as Chief Financial Officer
Appointed Company Secretary January 2021.
on 31 May having served on the Board for 15 years.
Martin brought extensive and wide-ranging
financial experience to Landsec, from the
property, engineering and financial sectors
in the UK and overseas.
Martin has wide-ranging corporate finance and
investment experience which was of immense
benefit to the Board.
Prior to joining Landsec, Martin was Group
Finance Director of Alvis plc and before that
he worked in corporate finance serving as a
member of Nordea’s investment banking division
and Managing Director of its UK business.
Martin is a qualified Chartered Accountant.
Martin is a Non-executive Director of Tullow
Oil plc and Trustee of International Justice
Mission UK.
SKILLS AND EXPERIENCE
Liz is a solicitor and company secretary
with significant experience of listed company
governance and compliance. Liz joined Landsec
as Deputy Company Secretary in 2017, having
previously worked at Vodafone Group Plc in a
variety of legal and company secretariat roles.
Liz is a Fellow of the Chartered Governance
Institute.
ROLE
Provides advice and support to the Board, its
Committees and the Chairman, and is responsible
for corporate governance across the Group.
The appointment and removal of the Company
Secretary is a matter for the Board.
Landsec // Annual Report 2021 » Governance EXECUTIVE DIRECTORS
OUR CFO DURING THE YEAR
COMPANY SECRETARY
MARK ALLAN
CHIEF EXECUTIVE
YEARS ON THE BOARD: 1
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 for three years. Prior to that he
was Chief Executive of The Unite Group PLC
from 2006 until 2016. 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.
ROLE
Responsible for the leadership of the Group,
development and implementation of strategy,
managing overall business performance and
leading the Executive Leadership Team.
Business School.
ROLE
OTHER CURRENT APPOINTMENTS
None.
MANAGEMENT COMMITTEES
Chairman of the Group’s Executive Leadership
Team, and Investment and Sustainability
Committees. Mark attends the Audit,
Remuneration and Nomination Committees
at the invitation of the chairs of the relevant
Committees.
VANESSA SIMMS
CHIEF FINANCIAL OFFICER
YEARS ON THE BOARD: <1
Appointed to the Board 4 May 2021.
COLETTE O’SHEA
CHIEF OPERATING OFFICER
YEARS ON THE BOARD: 3
SKILLS AND EXPERIENCE
Vanessa brings extensive financial experience to
Landsec from the property sector in the UK, most
recently as Chief Financial Officer at Grainger plc.
Vanessa has particular expertise in leading and
implementing strategic change in businesses and
substantial experience in senior finance leadership
roles in a listed environment. Vanessa has worked
in finance since 1998 and immediately prior to
joining Grainger held a number of senior positions
within The Unite Group PLC, including Deputy
Chief Financial Officer. Prior to that Vanessa
was UK finance director at SEGRO plc. Vanessa
is a Chartered Certified Accountant (FCCA)
and has an executive MBA (EMBA) from Ashridge
Supports the Chief Executive in developing
and implementing strategy, determining
funding arrangements and reporting Group
financial performance.
OTHER CURRENT APPOINTMENTS
Audit Chair and a Non-executive Director at
Drax Group Plc.
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 the London Portfolio, and
in December 2020 became Chief Operating Officer.
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.
ROLE
Responsible for our Office, Retail and
Specialist assets.
OTHER CURRENT APPOINTMENTS
Joint Chair of the Royal Docks Enterprise Zone
Programme Board Management committees.
MANAGEMENT COMMITTEES
A member of the Group’s Executive Leadership
Team and Investment Committee. Chairman
MANAGEMENT COMMITTEES
A member of the Group’s Executive Leadership
of the Property Committee.
Team and Investment Committee. Vanessa
attends Audit Committee meetings at the
invitation of the Committee Chairman.
MARTIN GREENSLADE
CHIEF FINANCIAL OFFICER – UNTIL 31 MAY 2021
LIZ MILES
COMPANY SECRETARY
Martin stepped down as Chief Financial Officer
on 31 May having served on the Board for 15 years.
Martin brought extensive and wide-ranging
financial experience to Landsec, from the
property, engineering and financial sectors
in the UK and overseas.
Martin has wide-ranging corporate finance and
investment experience which was of immense
benefit to the Board.
Prior to joining Landsec, Martin was Group
Finance Director of Alvis plc and before that
he worked in corporate finance serving as a
member of Nordea’s investment banking division
and Managing Director of its UK business.
Martin is a qualified Chartered Accountant.
Martin is a Non-executive Director of Tullow
Oil plc and Trustee of International Justice
Mission UK.
Appointed Company Secretary January 2021.
SKILLS AND EXPERIENCE
Liz is a solicitor and company secretary
with significant experience of listed company
governance and compliance. Liz joined Landsec
as Deputy Company Secretary in 2017, having
previously worked at Vodafone Group Plc in a
variety of legal and company secretariat roles.
Liz is a Fellow of the Chartered Governance
Institute.
ROLE
Provides advice and support to the Board, its
Committees and the Chairman, and is responsible
for corporate governance across the Group.
The appointment and removal of the Company
Secretary is a matter for the Board.
Page
87
Landsec // Annual Report 2021 » Governance Executive
Leadership Team
Mark Allan chairs our Executive
Leadership Team supported by
Vanessa Simms and Colette O’Shea
and the Managing Directors set out
on this page.
Biographies for Mark, Vanessa and Colette
can be found on page 86
The Executive
Leadership Team
is responsible for
Oversight of development
and execution of strategy
People and organisation
Strategic performance
Major change initiatives
Page
88
BARRY HOFFMAN
MANAGING DIRECTOR | PEOPLE AND CORPORATE SERVICES
Joined Landsec and Executive Leadership Team in April 2019.
BRUCE FINDLAY
MANAGING DIRECTOR | RETAIL
DAVID HEAFORD
MANAGING DIRECTOR | DEVELOPMENT
Joined Landsec and Executive Leadership Team in December 2020.
Joined Landsec in April 2016 and Executive Leadership Team in December 2020.
SKILLS AND EXPERIENCE
Barry has extensive prior experience in HR. He was previously Group HR
Director at Computacenter PLC. In addition, he has held various senior HR
roles, both in the UK and internationally. Barry is a Chartered Secretary
and has an MBA from Ashridge Business School.
ROLE
Barry is responsible for HR including Landsec’s people strategy. His role also
incorporates the Company Secretariat and Governance function as well as
delivering IT for the Group.
SKILLS AND EXPERIENCE
SKILLS AND EXPERIENCE
Bruce has over 25 years of consumer brand experience where he developed
David started his career at KPMG in London, qualifying as a Chartered
his operational leadership and strategic management skills. He brings a
Accountant in 2006, working across audit, advisory and corporate finance.
global perspective from his most recent roles: Chief Commercial Officer
Prior to Landsec, the majority of David’s career was spent in the Technology
of Furla and prior to that as the VP Global Retail for Diesel, where he led
sector, working in strategy and finance roles at Hewlett Packard and Cisco
the brand’s Direct to Consumer business through its transformation from
Systems. He brings cross sector knowledge, together with financial and
a traditional wholesale manufacturer to a modern omnichannel retailer.
strategic execution experience.
ROLE
ROLE
Bruce plays a key part in defining the overall direction of the retail assets,
David leads our development, leasing and marketing functions
ensuring our retail destinations remain relevant for both retailers and
having originally joined Landsec in 2016 as Finance Director for the
OTHER CURRENT APPOINTMENTS
Barry is a Non-executive Director for international charity Sightsavers.
consumers in order to provide a sustainable retail model that fairly values
London Portfolio.
physical retail space in an omnichannel world.
MARCUS GEDDES
MANAGING DIRECTOR | CENTRAL LONDON
Joined Landsec in May 2011 and Executive Leadership Team in December 2020.
NICK DE MESTRE
CHRIS HOGWOOD
MANAGING DIRECTOR | STRATEGY, RESEARCH AND INNOVATION
MANAGING DIRECTOR | CORPORATE AFFAIRS
Joined Landsec in May 2017 and Executive Leadership Team in December 2020.
Joined Landsec and Executive Leadership Team in February 2021.
SKILLS AND EXPERIENCE
Marcus Geddes is a qualified chartered surveyor with over 20 years’ experience
in the central London market. A Cambridge Land Economy graduate,
he qualified and spent 13 years at Savills before joining Landsec in 2011.
ROLE
Marcus is responsible for the performance of our Central London Portfolio
and executing Group investment acquisitions and disposals.
OTHER CURRENT APPOINTMENTS
Marcus is Vice-Chairman of the Westminster Property Association.
SKILLS AND EXPERIENCE
SKILLS AND EXPERIENCE
Nick has extensive investment, strategy and business development
Chris joined Landsec from Portland Communications where he was a Senior
experience across a wide range of infrastructure sectors alongside real
Partner, leading its local engagement and real estate specialism as well
estate, including waste, water and energy. Nick began his career as a
as jointly leading the agency’s flagship corporate practice. He has worked
lawyer before moving over to work in finance, initially as an investment
in leading communications agencies for the last ten years and before that
banker at Merrill Lynch and then as a fund manager, investing in
worked in London local government.
innovative businesses in the waste and water sectors.
ROLE
Chris leads the Corporate Affairs function at Landsec. He is responsible for
Nick is responsible for strategy, capital allocation, research and insight
building our reputation with politicians, media and the communities in
as well as several of the business’s key strategic levers: data and digital
which we operate, as well as helping us to communicate more effectively
modernisation focused on improving Landsec’s use of data and technology.
internally as we shape our new culture.
ROLE
OTHER CURRENT APPOINTMENTS
Nick sits as a non-executive director on the board of The Passage Trading
Services, the commercial arm of Victoria homeless charity, Passage 2000.
Landsec // Annual Report 2021 » Governance
BARRY HOFFMAN
MANAGING DIRECTOR | PEOPLE AND CORPORATE SERVICES
Joined Landsec and Executive Leadership Team in April 2019.
BRUCE FINDLAY
MANAGING DIRECTOR | RETAIL
Joined Landsec and Executive Leadership Team in December 2020.
DAVID HEAFORD
MANAGING DIRECTOR | DEVELOPMENT
Joined Landsec in April 2016 and Executive Leadership Team in December 2020.
SKILLS AND EXPERIENCE
Barry has extensive prior experience in HR. He was previously Group HR
Director at Computacenter PLC. In addition, he has held various senior HR
roles, both in the UK and internationally. Barry is a Chartered Secretary
and has an MBA from Ashridge Business School.
ROLE
Barry is responsible for HR including Landsec’s people strategy. His role also
incorporates the Company Secretariat and Governance function as well as
delivering IT for the Group.
OTHER CURRENT APPOINTMENTS
Barry is a Non-executive Director for international charity Sightsavers.
SKILLS AND EXPERIENCE
Bruce has over 25 years of consumer brand experience where he developed
his operational leadership and strategic management skills. He brings a
global perspective from his most recent roles: Chief Commercial Officer
of Furla and prior to that as the VP Global Retail for Diesel, where he led
the brand’s Direct to Consumer business through its transformation from
a traditional wholesale manufacturer to a modern omnichannel retailer.
SKILLS AND EXPERIENCE
David started his career at KPMG in London, qualifying as a Chartered
Accountant in 2006, working across audit, advisory and corporate finance.
Prior to Landsec, the majority of David’s career was spent in the Technology
sector, working in strategy and finance roles at Hewlett Packard and Cisco
Systems. He brings cross sector knowledge, together with financial and
strategic execution experience.
ROLE
Bruce plays a key part in defining the overall direction of the retail assets,
ensuring our retail destinations remain relevant for both retailers and
consumers in order to provide a sustainable retail model that fairly values
physical retail space in an omnichannel world.
ROLE
David leads our development, leasing and marketing functions
having originally joined Landsec in 2016 as Finance Director for the
London Portfolio.
MARCUS GEDDES
MANAGING DIRECTOR | CENTRAL LONDON
Joined Landsec in May 2011 and Executive Leadership Team in December 2020.
NICK DE MESTRE
MANAGING DIRECTOR | STRATEGY, RESEARCH AND INNOVATION
Joined Landsec in May 2017 and Executive Leadership Team in December 2020.
CHRIS HOGWOOD
MANAGING DIRECTOR | CORPORATE AFFAIRS
Joined Landsec and Executive Leadership Team in February 2021.
SKILLS AND EXPERIENCE
Marcus Geddes is a qualified chartered surveyor with over 20 years’ experience
in the central London market. A Cambridge Land Economy graduate,
he qualified and spent 13 years at Savills before joining Landsec in 2011.
ROLE
Marcus is responsible for the performance of our Central London Portfolio
and executing Group investment acquisitions and disposals.
OTHER CURRENT APPOINTMENTS
Marcus is Vice-Chairman of the Westminster Property Association.
SKILLS AND EXPERIENCE
Nick has extensive investment, strategy and business development
experience across a wide range of infrastructure sectors alongside real
estate, including waste, water and energy. Nick began his career as a
lawyer before moving over to work in finance, initially as an investment
banker at Merrill Lynch and then as a fund manager, investing in
innovative businesses in the waste and water sectors.
SKILLS AND EXPERIENCE
Chris joined Landsec from Portland Communications where he was a Senior
Partner, leading its local engagement and real estate specialism as well
as jointly leading the agency’s flagship corporate practice. He has worked
in leading communications agencies for the last ten years and before that
worked in London local government.
ROLE
Nick is responsible for strategy, capital allocation, research and insight
as well as several of the business’s key strategic levers: data and digital
modernisation focused on improving Landsec’s use of data and technology.
ROLE
Chris leads the Corporate Affairs function at Landsec. He is responsible for
building our reputation with politicians, media and the communities in
which we operate, as well as helping us to communicate more effectively
internally as we shape our new culture.
OTHER CURRENT APPOINTMENTS
Nick sits as a non-executive director on the board of The Passage Trading
Services, the commercial arm of Victoria homeless charity, Passage 2000.
Page
89
Landsec // Annual Report 2021 » Governance Our governance structure
Page
90
ROLES AND RESPONSIBILITIES
BOARD 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
AUDIT COMMITTEE
› Responsible for oversight of the Group’s
financial and narrative reporting
processes
› Responsible for the integrity of financial
statements and internal control
REMUNERATION COMMITTEE
› Recommends to the Board the executive
Remuneration Policy
› Determines remuneration packages
of the Executive Directors and the
Executive Leadership Team
› Supports the Board in risk identification
› Oversight of remuneration practices
and management
for all employees
NOMINATION COMMITTEE
› Reviews structure, size and composition
of the Board and its Committees
› Oversees succession planning of Directors
and the Executive Leadership Team
› Leads Board appointment processes
› 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
MANAGEMENT COMMITTEES
PROPERTY COMMITTEE
› Responsible for property and investment
decisions up to £15m
› Execution and delivery of strategy
› Operational performance
› Discusses significant market matters
impacting the portfolio, for example
Covid-19 rent concessions and deferrals
› Challenges and debates ahead of
Investment Committee approval
INVESTMENT COMMITTEE
› Responsible for property and investment
decisions between £15m and £150m
› Ensures capital investment is consistent
with strategy and our expectations in
terms of earning, return on capital and
cash flow
› Provides challenge and debate ahead of
Board approval
EXECUTIVE LEADERSHIP TEAM
For information on our Executive Leadership Team please see pages 88-89.
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 www.landsec.com/
aboutcorporate-governance/board-
committees
Decision-making on investments,
commercial agreements, including the
acquisition, disposal and development
of assets, is delegated according to
financial values.
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.
This year, as part of shifting the
culture at Landsec, we have revised
our Delegated Authorities to empower
the people with the right information
to make decisions. We took on feedback
from the business that our Delegated
Authorities made decision-making
slow and were preventing people
from managing their assets effectively.
In many cases we have doubled,
or more than doubled, individuals’
authorities in our decision-making
structure. This promotes the culture
of empowerment and accountability
that we are striving for.
TM E N
S
E
V
N
I
T C O MMITTEE
£15m-
£150m
D
R
BO A
ERT Y C O M MITTEE
P
O
R
P
up to
£15m
Over
£150m
Landsec // Annual Report 2021 » Governance 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. No new conflicts were declared
during the year.
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. The Board was
not asked to approve any additional
external appointments for any of our
Directors during the year.
EDWARD BONHAM CARTER’S
COMMITMENTS
At our 2020 AGM, Edward Bonham Carter’s
re-election to the Board received a 79.63%
vote in favour and, as a result, this
resolution was added to the Investment
Association’s significant dissent list.
The Board believes that Edward Bonham
Carter brings significant experience to the
Board and its Committees and continues to
be in a position to dedicate sufficient time
to discharge his duties and responsibilities
as a member of the Board and Senior
Independent Director.
Landsec identified BlackRock as having
cast the majority of votes against Edward’s
re-election and has engaged with BlackRock
since to understand the rationale for its
votes. BlackRock confirmed that its voting
decision was based on the concern that
Edward was overboarded as a result of his
position at Jupiter Fund Management plc
(Jupiter) in addition to his appointments
at Landsec and ITV.
In October 2020, it was announced that
Edward would step down from Jupiter’s board
and relinquish his role as Vice Chairman in
May 2021 in order to take up a new role
within Jupiter focusing on its stewardship
and corporate responsibility activities.
This will be a non-board, part time role
and therefore Edward’s time commitment
at Jupiter will significantly reduce.
Edward attended all of the Company’s
Board meetings throughout the 2020/21
financial year, and carried out his duties as
Senior Independent Director which included
additional time to run the internal Board
evaluation process. Also this year, as a
member of the Nomination Committee,
Edward spent additional time on the
appointment of the Company’s new Chief
Financial Officer and new Non-executive
Director. Edward stepped down as Chair of
the Remuneration Committee in May 2020
but is still the Senior Independent Director
and a member of both the Remuneration
and Nomination Committees.
INDUCTION
Our induction plan is delivered over the first
year of appointment. The aim is to enable a
new Director to integrate into the Board as
quickly as possible and feel able to contribute
to business and strategy discussions, with
sufficient knowledge to provide effective
challenge.
Manjiry Tamhane started her induction in
March 2021, prioritising on developing an
understanding of Landsec’s business and
financial position, strategy, culture, risks and
opportunities and Board governance and
dynamics. Key to this is spending time with
the Chairman, the Executive Directors, other
Non-executive Directors and the Executive
Leadership Team. The induction will also
cover the legal and regulatory obligations
of a director of a listed company and the
legal and regulatory environment in which
the Group operates. More information on
Manjiry’s induction can be found on page 101.
TRAINING
Directors received regular updates in their
Board papers, facilitating greater awareness
and understanding of the Group’s business
and in particular the emerging strategy and
the impact that the global pandemic has
had on the business. In January the Board
held a deep dive session into the long-term
impact of Covid-19, hearing from medical
experts, economists and our occupiers.
More information can be found on page 96.
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)
Until 6 May 2021, Edward was Vice Chairman
of Jupiter Fund Management plc (Jupiter), a
fund manager which invests in listed company
shares including, at times, the Company.
Jupiter is also a customer of the Group.
Madeleine Cosgrave
(Non-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.
Edward was not involved in the selection of investments and
he agreed not to participate in any investment decisions
which may involve the Group’s securities. The Committee
concluded that there was no conflict of interest.
This is no longer a potential conflict as Edward has
stepped down from the Jupiter board and this potential
conflict is not applicable to his new Jupiter role.
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.
Madeleine steps down from GIC on 1 July 2021 and,
therefore, this potential conflict will no longer be relevant.
Page
91
Landsec // Annual Report 2021 » Governance Board activities
All Board decisions this year have been
viewed through a changing Covid-19 lens.
Flexibility and adaptability are key so that
Landsec can emerge from Covid-19 in as
strong a position as possible.
Executing the new
strategy
In December 2020, the Board approved
the sale of 1 & 2 New Ludgate for £552m.
This was followed by the acquisition of
55 Old Broad Street for £87m.
The transactions demonstrate the value that
Landsec has created in its central London
Portfolio and Landsec’s commitment to
optimising the Central London portfolio
through the reinvestment of capital, as set
out in our strategy. Our new strategy better
aligns our capital and capability leading to
greater value creation opportunities in the
medium to longer term.
More detail on www.landsec.com
Page
92
A YEAR OF CHANGE
This year, much of the focus of the Board
has been listening to the views and
perspectives of our new CEO Mark Allan,
contributing to the refresh of the strategy
and responding to the challenges posed
by the pandemic. All Board decisions and
matters have had to be viewed through
a Covid-19 lens. Risks have had to be
reassessed, the interests of our stakeholders
have changed and had to be rebalanced
and strategy has had to be re-contextualised.
Flexibility and adaptability to long-term
decision-making have never been more
important. The Board continues to make
decisions in a period of uncertainty which
poses challenges but also opportunities.
BOARD MEETINGS
The Board attends eight scheduled Board
meetings per year and will meet as required
for additional discussions. This year, the
Board held three additional Board meetings:
one to discuss Landsec’s immediate
response to the pandemic at the beginning
of April 2020; and two meetings to
specifically discuss the new strategy.
If the Board needs to make decisions in
between meetings, it can do so by
unanimous approval by email but will only
do so in such situations where the matter
has been discussed at previous meetings
so that Directors are fully appraised of the
matter, have had the opportunity to ask
questions and are therefore in a position
to make a fully informed decision.
This year, the majority of Board meetings
have been held virtually with all Directors
dialling in by video call. The Board has
adapted well to this change in dynamic
and its operation and decision-making
has not been affected. However, the Board
looks forward to the benefits of more
informal engagement amongst the
Board and employees that face-to-face
meetings provide.
THE BOARD’S INPUT INTO THE
STRATEGIC REVIEW
The Board held two additional meetings
over the summer of 2020 to discuss the
strategic review and resulting strategic
plan. As part of this review, the Board
considered the key concepts around which
the strategy would be built: our heritage,
our purpose, and global forces of change
being the broad trends that will determine
our focus and highlight the opportunities
and challenges for Landsec. The resulting
strategic priorities were discussed and
approved by the Board after it had
thoroughly considered what the strategy
would mean for our investors, our other
stakeholders, our culture and organisation
and creating long-term sustainable value.
Landsec // Annual Report 2021 » Governance
THE BOARD’S REVIEW OF THE IMPACT OF
COVID-19 ON THE DEVELOPMENT PIPELINE
The Board has been monitoring our
development pipeline to determine how
to progress our developments in light of
the impact of the pandemic. The decision
was taken to scale back our developments
significantly in the face of elevated
uncertainty and projects were prioritised
in terms of which offered the best risk-
adjusted returns.
Preserving optionality across our
development pipeline wherever possible
by limiting development spend and
delaying commitment dates was key.
In March 2021, the Board approved
proceeding with the development of n2,
Nova East. The Board made this decision
after analysis of the supply and demand
forecasts for prime London office space
and consideration of timing, value, costs
and return.
PRINCIPAL ACTIVITIES DURING THE YEAR
ACTIVITIES
OUTCOMES
Strategy
› Listening to the views and perspectives
of the new CEO
› Strategy review
› New strategic plan:
– Reimagine Retail
– Grow through Urban opportunities
– Optimise Central London
– Realise capital from Subscale sectors
› Capital Markets Day
› Approval of sale of 1 & 2 New Ludgate
› Approval to proceed with the n2 development
Financial
› Budget and five-year plan
› Key business targets
› Dividend consideration
› Going concern and viability statement
› Group weighted average cost of capital
› Investor relations
› Portfolio valuation
› Debt funding and gearing levels
› Preliminary Results
› Annual Report and Accounts
› Half-year Report
› Cancellation of the April 2020 dividend, no final
dividend for FY20 proposed, no first interim dividend
for FY21 declared
› Publication of quarterly rent collection data
› Annual Tax Report
Operational
› The impact of Covid-19 on the business
and its customers (occupancy, sales and
footfall)
People &
Organisation
› Development pipeline
› Market and sector trends
› Investment and sales
› Business recovery
› Succession planning
› Talent
› Diversity
› Culture
› Gender pay
› Sustainability
› Health, safety and security
› Customer Support Fund
› Rent concessions and deferrals
› Development optionality
› Appointment of new CFO
› Appointment of new NED
› New Executive Leadership Team
› Importance of diversity reinforced at Board level
and throughout the business
› New organisational design
› Gender Pay Gap Report
› Landsec Contribution Report
Governance
› Risk identification, management and
internal control
› Meeting reports from Chairs of Audit,
Remuneration and Nomination
Committees
› Risk appetite and tolerance ranges for each principal risk
› Realigning principal risks to the new strategy and
market segments
› Board evaluation
› Modern Slavery Report
› Annual General Meeting
Page
93
Landsec // Annual Report 2021 » Governance Page
94
The Board is pleased to provide a statement
that supports Section 172(1) of the
Companies Act 2006. This requires that
Directors promote the success of the
Company for the benefit of the members
as a whole, having regard to the interest of
stakeholders in their decision-making. Over
the next few pages, we provide examples of
how the Board engages with stakeholders
and takes into account their interests when
making decisions.
An introduction to our stakeholders can be
found in our Strategic Report on pages 16-17.
STAKEHOLDERS AND BOARD
DECISION-MAKING
Our stakeholders’ interests have changed
as a result of the pandemic and therefore
effective communication with our
stakeholders so that we keep pace with
their changing needs has been more
important than ever. 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 and our
overall governance.
The pandemic has created a number of
situations where the opposing interests of
stakeholders have had to be balanced and
assessed in the Board’s decision-making.
For example, investors want to receive
income by way of dividend but this had to
be balanced with longer term interests of
preserving cash during times of uncertainty
and prioritising cash to be used to support
our customers and communities most in
need during the crisis. Short-term decisions
such as suspending dividend payments and
reducing Directors’ pay had to be taken for
the long-term benefit of Landsec and its
stakeholders.
We have continued to embed stakeholder
interests into the culture and operating
model of our business. Papers presented to
management committees always include
an analysis of the impact of the decision
on our various stakeholders.
The Board and
our stakeholders
Our purpose – sustainable places, connecting
communities, realising potential – places
all our stakeholders at the forefront of the
Board’s decision-making.
This is our Section 172 Statement.
OUR FIVE KEY
STAKEHOLDERS
S
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NITIE
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Landsec // Annual Report 2021 » Governance
HOW HAS THE BOARD CONSIDERED OUR STAKEHOLDERS DURING THE YEAR?
UNDERSTANDING STAKEHOLDERS
INTERESTS
BOARD ENGAGEMENT WITH
STAKEHOLDERS
OUTPUT
› Restrictions on operating due to Covid-19
› Inability to generate income/financial
constraints
› Planning for the future and adapting
to change
› Direct engagement with representatives from our
office, retail and leisure customers at the January
Board meeting where the Board heard directly about
the challenges posed by Covid-19
› Information presented in COO Reports to the Board
› Customer Support Fund – £80m allocated to
help our customers most in need
› Reimagine Retail, one of our strategic pillars,
taking a different approach to our business
model, a realistic view of sustainable rents,
rethinking guest experience and reshaping
the size and mix of our retail footprint
› Responding to customers’ changing office
requirements with our range of products
› Adapting to remote working
› Operating in an environment of change and
uncertainty
› Health and wellbeing
› Understanding purpose and new strategy
› Reports from Executive Directors at every Board
meeting on sentiment amongst employees, the
challenges and the impact on motivation and morale
› Reports from latest employee pulse surveys
› Enhanced communications with employees
from Executive Directors
› Five employee surveys held throughout the
year and results reported back to the Board
› NED attendance at Employee Forum and reporting
› Encouragement of flexibility in working
back to Board
› Regular reports on culture from MD People &
Corporate Services
› Board sought the views of the Executive Directors on
employees’ health, wellbeing and resilience
throughout the pandemic at every Board meeting
› Challenges of continuing community
› Annual Sustainability Review at the Board
support through lockdowns
› Charities maintaining income
› Adapting the use of our assets to provide
community space
› Information presented in COO Reports to the Board
arrangements to facilitate home schooling
and other commitments
› Spotlight on strategy sessions from Executive
Leadership Team, including Q&A
› Regular Town Hall meetings to engage with
employees
› Number of initiatives focused on health and
wellbeing during the pandemic
› Community employment and education
programmes have continued remotely
› £500,000 provided to our charity partners
(which included 100% of the proceeds received
by Landsec from the sale of dormant
shareholdings)
› Directors waived 20% of their base salaries
or fees for three months and this money was
used to supplement the £500,000 provided
to our charity partners
› Site teams providing practical assistance, for
example: linking our food retailers in London
to local homeless charities we work with for
food donations
› Site car parks offered for NHS Covid-19 testing
› Public Health England free space on Piccadilly
Lights – ‘Our local heroes: London thanks you’
and ‘Show your support for key workers’
› Offering shopping centres as vaccination hubs
› Understanding the impact of Covid-19
on Landsec’s long-term performance
› Understanding the impact of Covid-19
on the execution of Landsec’s new strategy
› Impact of Covid-19 on share price and
dividend payments
› Capital Markets Day
› Cancellation of the April 2020 dividend
› Full year and half year results presentation
› No final dividend for FY20 proposed, no first
› Investor meetings
› Investor Roadshow
› AGM
interim dividend for FY21 declared
› Resumed paying dividends in January 2021
› Quarterly rent collection data published to
update the market
› Ensuring our developments could progress
› Health and safety discussions at the Board
› £0.9m provided to top up furlough funds to
whilst maintaining safety
› Impact of the pandemic on decisions of local
planning authorities
› Impact on service partners’ employees
resulting from asset closures
› Increased communication and alignment
with joint venture partners
› Joint venture partners need to understand
Landsec’s new strategy and direction of
the business
› Information presented in COO Reports to the Board
allow our service partners to pay a 100% wage
to their employees
› Regular communications with on-site
contractors to ensure Covid-19 secure
practices on development sites
› Close communications with service providers
as restrictions were imposed on our assets and
lifted to ensure smooth and safe transition at
each stage
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Page
95
Landsec // Annual Report 2021 » Governance The Board and
our stakeholders
continued
The long-term
impact of
Covid-19 from
our stakeholders’
perspectives
The Board experienced a
fascinating day in January
hearing about the long-term
impact of Covid-19 from medical
and health policy experts,
economists and customer
perspectives. This was a great
opportunity for the Board to
engage directly with our
stakeholders, particularly
customers representing our office,
retail and leisure portfolio, to hear
first hand the challenges that
the pandemic has posed and
their priorities as we emerge from
the pandemic.
After hearing from experts
and our customers, the Board
concluded the following:
➊ We are going to be living with
Covid-19 and the after-effects
for quite some time, particularly
in a global context, and we
need to plan accordingly.
➋ There is huge value to be
derived from staying close to
our stakeholders and building
and maintaining strong
relationships.
➌ Experience is everything.
Whether it is employees in
offices, visitors to shopping
centres or people in their
homes, we need to understand
what experience people want
and deliver brilliantly.
➍ With so much uncertainty
ahead, financial, strategic
and operational flexibility,
agility and resilience are
going to be key.
These points are going to remain
fundamental considerations in
the Board’s decision-making
going forward.
Page
96
WORKFORCE ENGAGEMENT
Face-to-face interaction between the Board
and the workforce was not possible this year
but the Board was extremely conscious that
the health and wellbeing of employees and
the impact of the pandemic on Landsec’s
cultural journey was of increased importance
during this challenging year. At every Board
meeting, the Board has asked the Executive
Directors for a report on the sentiment and
mood within the business and was keen to
find out how employees were adjusting to
the challenges of remote working and what
actions were being taken to keep morale
boosted and performance consistent.
Five Employee Forum meetings were held
during the year. Madeleine Cosgrave, one of
our Non-executive Directors, attended the
Employee Forum in December and discussed
a number of topics including the impact of
the pandemic on the workforce, our new
strategy, the future of retail, culture and
diversity. Madeleine reported back to the
Board the outputs of her discussion with the
Employee Forum and this was particularly
useful to the Board to supplement its
discussions on culture as it provided the
Board with direct feedback as to how
employees perceive culture and diversity
at Landsec and what needs to change.
Christophe Evain, as Chairman of our
Remuneration Committee, met with the
Employee Forum in March 2021 to discuss
the proposed new Remuneration Policy
and answered questions from the Employee
Forum to ensure that the Policy was
understood.
Mark Allan, our CEO, also meets regularly
with the Employee Forum to answer any
questions and get an indication of topical
issues of importance to employees.
The Employee Forum reports back to the
wider workforce on the outputs of their
discussions with Board members, therefore
effecting a two-way dialogue.
Cressida Hogg, our Chairman, held a live
Q&A session open to all employees to mark
and raise awareness of International
Women’s Day. Cressida led a discussion on
experiences and challenges of lockdown.
We are planning a series of employee and
Non-executive Director engagement events
to take place throughout the 2021/22
financial year and will report on these in
next year’s Annual Report.
Landsec // Annual Report 2021 » Governance Our investors
We want to create sustainable value for our three
types of investors: institutional; private; and debt.
INSTITUTIONAL INVESTORS
PRIVATE INVESTORS
DEBT INVESTORS
Our Executive Directors once again held
meetings with investors representing more
than half the register by value during the
year. The investor relations programme was
conducted primarily using online meetings
and conference calls due to the pandemic.
Institutional investors were invited to attend
our full year and half-yearly results virtual
presentations. Over the summer, Mark Allan
met with a number of institutions – a
selection of holders and non-holders of our
shares – to ensure their views were taken into
consideration as part of the development of
our new strategy. We held a Capital Markets
Day in October which set out our new
strategic priorities and information around
our culture, capability and organisation.
We extended our sustainability roadshow to
two days and met with shareholders from
the Netherlands and the UK. We engage
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 conferences in New York and
London, the Citi conference in Florida,
Barclays’ real estate conference in London
and Morgan Stanley’s real estate conference
in London. All conferences were virtual.
Our private investors are encouraged to
give feedback and communicate with the
Directors via the Company Secretary
throughout the year.
2020 ANNUAL GENERAL MEETING
Covid-19 meant we had to hold a closed
AGM. We invited shareholders to ask
questions via email in advance of the
meeting.
All resolutions put to the meeting received
overwhelming support of investors with
the exception of the re-election of Edward
Bonham Carter which received just under
80% of votes in favour. See page 91 for
further details. The results of the voting
at all general meetings are published on
our website: www.landsec.com/investors/
regulatory-news.
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, 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
paying dividends by direct mandate only,
(no longer by cheque), and a deemed
consent mailing to reduce the number of
hard copy communications.
CREDIT SIDE INSTITUTIONAL INVESTORS
AND ANALYSTS
Our treasury and property team held
non-deal specific meetings with credit
side institutional investors and analysts
after the half-yearly and full year results
as well as answering any ad hoc queries
from investors. Due to the pandemic
these meetings were held online.
BANKS
Regular dialogue is maintained with our
key relationship banks, including at times
weekly meetings or conference calls with
our treasury team. 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, senior managers to Standard &
Poor’s, Fitch Ratings and Moody’s as
well as responding to ad hoc queries in
relation to any significant press releases.
Further information for our debt
investors can be found on our website:
www.landsec.com/investors.
99%
of shares
Institutional investors
2,236
1%
of shares
Private investors
8,277
No. of equity investors
No. of listed bonds
10,513
11
Figures are as at 31 March 2021.
Page
97
Landsec // Annual Report 2021 » Governance Governance
and culture
“Culture is as important as strategy”. Mark Allan
emphasised this upon his appointment as CEO at
Landsec and this has triggered a focus on culture,
in parallel with the establishment and execution
of our new strategy.
Page
98
HOW DOES CULTURE RELATE TO
GOVERNANCE AND WHAT IS THE
ROLE OF THE BOARD?
At Landsec we would like an authentic and
supportive culture based on greater levels
of empowerment and accountability. This
will mean that we are better placed to
assess and manage risk, make decisions
and take action quicker and achieve better
returns as a result.
When driving cultural change, governance
is a good place to start. An appropriate
governance framework for decision-making,
together with promoting an environment
of trust, respect and accountability, are all
fundamental to our culture. The Board
plays an important role in monitoring and
assessing our culture, particularly as we
make a cultural shift.
This year, we started a journey to shape a
culture we all want to be part of, which has
involved input from employees throughout
the business. Our employees told us that
we need to be more agile in our decision-
making, empower the right people to make
decisions and become even more customer
focused. Our culture will be underpinned
by our values: inclusive, united, driven
and determined.
Culture is a specific Board agenda item
twice a year but discussed regularly as a
key consideration in other Board discussions.
This year’s Board evaluation concluded
that the Board is embedding culture into
its mindset, not just when it is prompted
to consider culture as an agenda item.
Set out on the next page are four cultural
themes that we feel are critical to operating
our business model and executing our
strategy. Each theme has a set of metrics
that we reported on for the first time last
year and our assessment of our progress.
These metrics are provided to the Board as
context for its discussions on culture.
Our culture is what
makes Landsec a
great place to work.
Read more on
www.landsec.com
Landsec // Annual Report 2021 » Governance
Key for status:
On track
Flagged for improvement
Financial Year 2021
PURPOSE AND
MEANING
We give our employees a sense of
purpose as to why Landsec exists with
a focus on our role in wider society
£6.5m
Value of social
contribution
100%
Staff with social
value/ESG targets
ETHICS AND
FAIRNESS
TRANSPARENCY
AND OPENNESS
As a result of the pandemic, this year our role
in wider society and consideration of all our
stakeholders has been more important than ever
and has been at the forefront of Board discussions.
More on www.landsec.com
We behave ethically and treat all our
stakeholders fairly. We have clear
accountabilities and an effective and
transparent decision-making structure
In addition to ethics and fairness, decision-making
is central to creating the right culture. If we don’t
empower the right people to make decisions,
it demotivates people, impacts morale and slows
the pace of our decision-making. We continue
to assess our gender pay gap to build a balanced,
diverse workforce for the long term.
More on www.landsec.com
zero
one
Equal pay claims
Grievance raised
73%
% of roles advertised
internally
We share information openly and
discuss our challenges and mistakes
seven
one
Town hall meetings
Whistleblowing incident
During a year of remote working, the importance
of effective communication and transparency has
been crucial. We have increased the number of
town halls held and have posted regular videos
from people sharing business developments,
our response to the pandemic and our plans for
emerging from Covid-19 in as strong a position
as possible. We have encouraged our workforce
to reassess priorities and to feel empowered to
challenge expectations placed upon them in
terms of what and how we deliver.
More on www.landsec.com
29
76%
Exit interviews
completed
Employee
engagement index
five
Employee Forum
meetings
four
Diversity champions
COLLABORATION
AND GROWTH
We collaborate, innovate
and collectively contribute
to Landsec’s growth
86%
31%
Leadership roles with
succession plans in place
Roles filled by internal
candidates
Our culture promotes personal development
and growth and we encourage internal moves
and promotion from within our business.
We monitor talent and potential and have
succession plans in place for all key leadership
roles. We resource projects with people from
different teams throughout the business which
enhances learning and development bringing
together cross functional skills and experience.
More on www.landsec.com
47
People promoted in
the last year
28
People on new
female development
programme
102
Employee training
(Number of employees
taking part in online
learning)
Page
99
Landsec // Annual Report 2021 » Governance
Introduction from
the Chairman of the
Nomination Committee
CRESSIDA HOGG
CHAIRMAN OF NOMINATION COMMITTEE
COMMITTEE MEMBERS
› Board appointment
› Cressida Hogg
(Chairman)
› Edward Bonham Carter
› Stacey Rauch
HIGHLIGHTS
› Appointment of new
CFO and Non-executive
Director
› Internal Board evaluation
KEY RESPONSIBILITIES
› Composition of the
Board and Committees
› Succession planning
process
› Corporate governance
NUMBER OF MEETINGS AND
ATTENDANCE
› Four scheduled meetings
› Additional meetings in
relation to CFO and
Non-executive Director
appointments
› 100% attendance from
all members at all
meetings
Page
100
DEAR SHAREHOLDER
I am pleased to introduce the
report from the Nomination
Committee for the year.
The Committee has focused during the
year on the appointment of the new Chief
Financial Officer and a new Non-executive
Director. It has also continued to assess the
composition, succession plan and skills of
the Board and its Committees, promote
diversity through the business and have
oversight of corporate governance.
BOARD AND COMMITTEE CHANGES
Mark Allan joined Landsec as CEO on
14 April 2020 and in October we announced
the appointment of Vanessa Simms as our
new Chief Financial Officer, following the
announcement of Martin Greenslade’s
intention to retire from the Board.
We also appointed Manjiry Tamhane as a
new Non-executive Director and Manjiry
joined the Board at the beginning of March.
You can read about the Committee’s
appointment process for both Vanessa
and Manjiry on pages 103 and 102.
Stacey Rauch will step down on 24 June
2021, having served over nine years on the
Board. Stacey remained on the Board post
reaching her nine-year anniversary of
appointment (January 2021) in order to help
transition Manjiry Tamhane onto the Board.
As a result of Stacey’s departure, we are
making some changes to our committee
composition. As of 1 June, Nicholas Cadbury
joined the Nomination Committee,
Christophe Evain joined the Audit Committee
and Manjiry Tamhane joined the
Remuneration Committee.
I would like to take this opportunity to
thank Stacey for her contribution to the
Board over the past nine years. We have
valued the depth of analytical thought that
Stacey has brought to the Board together
with considerable expertise of retail trends.
Stacey has also been a great champion of
diversity throughout the business. We will
miss Stacey as a colleague and wish her all
the best for the future.
The Committee is currently searching for
one more Non-executive Director to join the
Board to complement the Board’s existing
composition.
Landsec // Annual Report 2021 » Governance DIVERSITY
The Board believes that diversity and
inclusivity at Board level and throughout
the business is key to Landsec’s long-term
success. We promote diversity in the
broadest sense, not just gender or ethnicity
but also experience, skills, professional
background and tenure.
We supported 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
at 31 March 2021 was 50%. We have also
met the Parker Review target of one
director of ethnicity on the Board by 2021.
INTERNAL BOARD EVALUATION
This year our Board evaluation was carried
out internally. The evaluation concluded
that the Board and its Committees
continue to operate to a high standard
and work effectively. The Board believes
it has added most value throughout the
year in the strategic review and leadership
transition. Areas of focus for the year ahead
will be risk and opportunities coming out of
the pandemic, people and talent pipeline
and workforce engagement and culture.
Next year’s evaluation will be conducted
externally.
CORPORATE GOVERNANCE
The Committee oversees the corporate
governance agenda on behalf of the Board.
I am pleased to confirm that Landsec
has complied with and applied all of
the principles of the 2018 UK Corporate
Governance Code for the financial year
ended 31 March 2021. The Code is published
by the Financial Reporting Council and is
available from www.frc.org.uk.
CRESSIDA HOGG
CHAIRMAN, NOMINATION COMMITTEE
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Manjiry Tamhane
induction – first month
Manjiry met with the Executive Leadership
Team to discuss the following topics:
Introduction to Landsec’s purpose, strategic
priorities, key performance drivers and
values and market overview (CEO)
Operational performance and priorities
and Covid-19: impact and response (COO)
Financial position (CFO)
People and culture and Tech overview
(MD People & Corporate Services)
Data & Digital Modernisation, Customer
Proposition & Innovation and Insight
(MD Strategy, Insight and Innovation)
Manjiry also met with other Non-executive
Directors who she had not met during the
selection process.
The next phase of Manjiry’s induction
will focus on gaining more insight into
our portfolio and will include visits to some
of our assets and developments. We will
report further on Manjiry’s induction in
next year’s Annual Report.
Landsec // Annual Report 2021 » Governance
Report of the
Nomination Committee
Page
102
EXECUTIVE DIRECTOR CHANGES
During the year, Mark Allan was appointed
as the new CEO following the appointment
process in the previous year. Mark joined
the Board and took over as Chief Executive
with effect from 14 April 2020.
In September 2020, Martin Greenslade,
CFO, announced his intention to retire in
2021. In October 2020, Vanessa Simms was
announced as Martin’s successor. Vanessa
joined the Board as CFO Designate on
4 May 2021 and became CFO on 1 June 2021
after Martin Greenslade stepped down
from the Board on 31 May. More details
on the recruitment process for Vanessa
can be found on page 103.
NON-EXECUTIVE DIRECTOR CHANGES
The Nomination Committee appointed
Russell Reynolds, an independent executive
search company with no connection to
Landsec, to conduct a search for a Non-
executive Director who had experience in
data and analytics, which was a skills gap
on the Board that had been identified by
the Committee. A short list of candidates
was put forward by Russell Reynolds,
and these candidates each met with all
members of the Committee and also the
CEO. The Committee concluded that
Manjiry Tamhane would be an excellent
addition to the Board, with a history of
data analytics and also retail and therefore,
recommended Manjiry’s appointment to
the Board. Manjiry was appointed to the
Board on 1 March 2021.
DIVERSITY
The Board’s policy on diversity establishes
the importance of diversity in the broadest
sense, not just gender or ethnicity but also
experience, skills, professional background,
tenure and also other differentials between
directors such as cognitive and personal
strengths. The Board believes that diversity
is crucial to create a high-performing,
effective Board, to provide a breadth of
perspective and debate that aids decision-
making and which supports and directs the
business more effectively.
The Nomination Committee works with
executive search consultants to ensure
they support our approach to diversity in
providing a diverse selection of candidates
for Board appointments and the selection
can then be based upon merit and
objective criteria.
Diversity at Board level, sets the tone for
diversity throughout the business. The
Nomination Committee monitors our
talent pipeline to ensure we have a diverse
succession pool of talent being developed
and maintained at all levels of the business.
Maintaining a diverse workforce is as
important as diverse recruitment and we
continue to assess this.
Further information on diversity
at Landsec can be found in the Social Review
on page 59
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 is satisfied
with the contributions and time
commitment of all the Non-executive
Directors during the year. The Committee
will always discuss the additional
commitments of all Directors (including
the Chairman) before recommending their
approval to the Board. It considers 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 was
ratified by shareholders at the Annual
General Meeting (AGM) in July 2020.
The appointment of Vanessa Simms
and Manjiry Tamhane will be ratified by
shareholders at the AGM in July 2021.
Stacey Rauch will not be standing for
re-election as she will be stepping down
from the Board at the end of June. Martin
Greenslade will not stand for re-election as
he retired from the Board at the end of
May. All the other Directors will stand for
re-election with the support of the Board.
Landsec // Annual Report 2021 » Governance
Appointment
of new CFO
Following the announcement on
30 September 2020 that Martin
Greenslade was to step down as
CFO, the Nomination Committee
led the search on behalf of the
Board to identify and recruit a
new CFO.
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 key criteria for the search
was technical competence
(listed company CFO
experience), customer focus,
and preferably a real estate or
consumer facing multi-site
business experience. A shortlist
was presented to the CEO and
Managing Director People
and Corporate Services before
being recommended to the
Nomination Committee and
then in turn to the Board for
appointment. Diversity was
very important throughout the
search and the candidates on
the shortlist were all diverse.
Before making the final decision,
the Committee reviewed the
process that it had 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 Vanessa
Simms be appointed. Vanessa
was previously CFO of Grainger
plc, a role she held since
February 2016, and Non-
Executive Director and Audit
Committee Chair at Drax
Group plc. Prior to that,
Vanessa held a number
of senior positions at other UK
property companies, including
Deputy CFO at The Unite Group
PLC and UK finance director
at SEGRO plc. She has over
20 years of experience in
finance and extensive
knowledge of UK real estate.
The Committee recommended
the appointment of Vanessa
Simms as the new Group
CFO and Executive Director,
a decision that was endorsed by
the Board on 27 October 2020.
Vanessa’s appointment as CFO
was announced on 28 October
2020. Vanessa joined the Board
as CFO Designate on 4 May 2021
to enable a month of transition
with Martin Greenslade before
he stepped down from the Board
on 31 May 2021 and Vanessa
became CFO on 1 June 2021.
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.
For example, this year Landsec responded
to the FRC’s consultation on the future of
corporate reporting.
The Committee also has a role to play in
ensuring that the decisions taken by the
Board and its Committees are made in the
best interests of the Company and that
they address any wider implications that
may affect stakeholders.
Landsec complied and applied all of the
principles of the 2018 UK Corporate
Governance Code for the financial year
ended 31 March 2021.
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Landsec // Annual Report 2021 » Governance
Report of the
Nomination Committee
continued
Page
104
BOARD EVALUATION PROCESS
In line with year three of our three-year
cycle, we carried out this year’s review of
the Board’s effectiveness internally. 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. 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 it 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. Many
questions were the same as last year to
provide comparative results. This year
we also added questions specifically to
address the Board’s contribution to the
strategy review, the impact of Covid-19
on the business and the impact of Board
meetings being held remotely. 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.
PROGRESS AGAINST OBJECTIVES SET FOR 2020/21
The results of the questionnaire were
collated by the Company Secretary on
behalf of Edward Bonham Carter who 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.
STRATEGY AND RISK
PEOPLE AND SUCCESSION PLANNING
STAKEHOLDER ENGAGEMENT
strategy as the Board listens to
the views and perspectives of the
new CEO.
1 More time will be allocated to
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More time to be spent on
considering and modelling different
risk scenarios and their outcomes.
time was dedicated to the strategic
review undertaken by the new CEO
and that the Board was given the
opportunity to listen to Mark’s views
and perspectives.
1 The Board agreed that sufficient
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The Board was appreciative of the
flexibility of Board agenda to ensure
that sufficient time was spent
considering and modelling different
Covid-19 risk scenarios and their
outcomes.
More opportunity to 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.
Ongoing work on engagement with
relevant stakeholder groups.
Opportunity to engage with employees
was challenged due to remote working
throughout the year but the Board was able
to experience the output of talent pipeline
and succession planning as a result of the
CEO’s new Executive Leadership Team being
established which included a number of
internal promotions.
The pandemic brought stakeholders
even more to the forefront of the Board’s
decision-making throughout the year
as it made decisions on provision of the
customer support fund, community
support and the suspension of dividends,
balancing the needs and expectations of
all stakeholder groups.
The Board also benefited from direct
engagement with customers at the
Board day in January. See page 96 for
further details.
Culture and diversity are regular agenda
items for the Board with the MD People
and Corporate Services presenting regular
updates. The Board took particular interest
in the culture workstream that has been
underway which is reviewing the culture at
Landsec and identifying necessary culture
shifts and also the challenges to culture that
were experienced throughout remote working
during the pandemic.
Landsec // Annual Report 2021 » Governance
As a Board we are embedding
culture into our mindset and this
is the best way for us to assess
Landsec’s culture as it evolves.”
NON-EXECUTIVE DIRECTOR
It feels like the mood around the
Board table is positive, despite being
difficult times, and the collaboration
between the Executive and Non-
executive Directors has become
even closer during the year.”
NON-EXECUTIVE DIRECTOR
The Board continues to be high-
performing and adapted well to
remote meetings. However, the
informal discussions and interactions
are missing and the Board will
benefit in due time with the return
to in-person meetings.”
NON-EXECUTIVE DIRECTOR
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. Despite
the challenging circumstances caused by
the pandemic, the Board believes there has
been a positive shift in its performance with
the arrival of our new CEO, with greater
emphasis on purpose and culture and a
constructive contribution by the Board
to the development of the new strategy.
There were no material issues to report.
The Directors believe that leadership
transition and strategy were the areas
where the Board added most value during
the year. 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 culture
and conversations in the Boardroom are
positive and performance-enhancing.
The Board would like more visibility of
our sustainability agenda and this will be
addressed in the year ahead.
The Board agreed that its dynamic had
been adversely impacted by remote
working and meetings held via video call
and there was consensus that some of the
informal face-to-face meeting time and
the quality of interaction that this brings
has been missed. This will be resolved once
the Board is able to meet again in person
and the Board looks forward to increasing
its direct engagement between Board
members and also with senior management.
The Non-executive Directors hold a private
session at the end of each meeting to
review the meeting, its performance, and
discuss the agenda and set expectations
for the next Board meeting.
OUTPUT OF 2020/21 BOARD EVALUATION: AREAS OF FOCUS FOR THE YEAR AHEAD
RISKS AND OPPORTUNITIES COMING
OUT OF GLOBAL PANDEMIC
PEOPLE AND TALENT PIPELINE
WORKFORCE ENGAGEMENT
AND CULTURE
2 The Board will increase its focus on
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talk about trends impacting the
property sector.
The Board would like more visibility of
potential and talent coming up through
senior management with greater exposure
to the Executive Leadership Team and its
direct reports both formally in meetings
and through informal drinks, dinners and
meetings on the floor.
The Board would like more employee/NED
events. These events will pick up on
themes raised at the Employee Forum
and will allow the NEDs to hear directly
about matters that concern employees.
Continued emphasis on workforce
engagement will also enable the Board
to gain a greater insight into culture at
Landsec and the shift in culture that the
business is striving to achieve.
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Landsec // Annual Report 2021 » Governance
Introduction from
the Chairman of the
Audit Committee
NICHOL AS C ADBURY
CHAIRMAN OF THE AUDIT COMMITTEE
COMMITTEE MEMBERS
› Nicholas Cadbury
(Chairman)
› Madeleine Cosgrave
› Stacey Rauch
HIGHLIGHTS
› Continued focus on
integrity of reporting
process
› Rigorous assessment
of risk management
and internal controls
› Review of impact of
Covid-19 on the business
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
› 100% attendance from
all members
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DEAR SHAREHOLDER
Throughout the financial year, the Audit
Committee continued its focus on the
financial statements and the integrity of
the reporting process, oversight of risk
management and internal controls and
addressing the ongoing impact of the
pandemic on the Group’s risk profile,
performance and recovery.
RISK
The Committee used the risks contained
in the Group’s risk register (set out on
pages 71-75 of this Annual Report) as
a basis for its activity during the year.
On behalf of the Board, the Committee
manages the process by which risks are
identified, prioritised and managed.
There are two areas of key risk that the
Committee has monitored over the year that
I would like to note due to their importance:
cyber security and fire management. A risk
management strategy has been established
to identify and prioritise cyber security risks to
improve cyber standards and practices across
all our assets. Fire safety management is also
being closely monitored by the Committee to
ensure the correct measures are in place and
risk management processes are being
updated regularly.
A global pandemic was not something most
companies had identified as a principal
risk prior to 2020. The disruption caused by
Covid-19 has illustrated how going forward
we need to ensure that disruption risk is
embedded into all our principal risks as
appropriate. I am, however, reassured
by Landsec’s response to the pandemic
which highlights how well embedded risk
management is, the effectiveness of the
business resilience plan and how capable
the business is in responding to a crisis.
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 judgements
and estimates made by management to
ensure that it is satisfied with the outcome.
The Financial Reporting Council (FRC)
reviewed our 2020 Annual Report and
Accounts and we were pleased that, based
on its review, there were no questions or
queries that it wished to raise nor any
significant findings. It was very useful,
however, to receive some suggestions from
the FRC as to how we could improve our
Landsec // Annual Report 2021 » Governance COMMITTEE EFFECTIVENESS
The Committee’s performance was
considered as part of the internal Board
evaluation conducted this year. The
conclusion is that we operate to a high
standard, with clear priorities, well defined
responsibilities and clarity around our
work plan.
The composition of the Committee will
change in June this year when Stacey
Rauch steps down from the Board. I would
like to express my thanks to Stacey for
her contribution to the Audit Committee
over the past nine years. On 1 June 2021,
Christophe Evain became an Audit
Committee member and I look forward to
the perspective that Christophe will bring
to the Committee.
I would like to thank the other members of
the Committee, together with management,
CBRE and EY, for their support during a
challenging year. 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
existing disclosures and we have addressed
all the points raised in the preparation of
this year’s Annual Report. The FRC provides
no assurance that our report and accounts
are correct and its review was limited to
considering compliance with the reporting
requirements. The FRC accepts no liability
for reliance on its letter by any third party,
including but not limited to investors.
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 this to
provide us with a valuation prepared in
accordance with the relevant industry
standards. The valuation process is an
extensive exercise that requires CBRE
to evaluate the likely future financial
performance of each individual asset
and apply recent, relevant transactional
evidence in the market to determine an
appropriate value at the period end. The
Committee analyses, challenges and
debates the valuations 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. At 31 March 2021, the valuation
contains a material uncertainty clause to
reflect the Covid-19 impact but only in
respect of our hotel portfolio.
ACQUISITIONS AND DISPOSALS
During the year, in execution of its new
strategy, Landsec sold 7 Soho Square, W1,
1 & 2 New Ludgate, EC4 and acquired
55 Old Broad Street, EC2. The Committee
ensured that the accounting treatment
of these material transactions was
appropriate.
PROVISIONS FOR BAD DEBT
Over the year, the Committee has closely
monitored the cash collections of rents
across the whole portfolio and we have
seen a material reduction in cash collected
this year. This indicates a likely increase in
business failures and we are monitoring any
customers in financial distress, particularly
with the end of the moratorium on
enforcement action in June. This has
resulted in increasing levels of outstanding
debtor balances which we have assessed
and made a judgement as to whether the
balance is expected to be recovered, taking
into account any concession agreements
concluded and anticipating insolvency
events. This analysis involves a significant
amount of judgement and we therefore
include provisions for bad debts as a
significant financial matter.
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INTERNAL AUDIT
Landsec has a combined 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
it to report to the Board that the systems of
internal processes and controls are robust.
This year, the internal audit plan has
reviewed matters including fire safety
management, outsourced service
providers, purchase to pay, fraud risk and
a ‘Sarbanes-Oxley’ readiness assessment.
In the year ahead, the internal audit plan
includes reviews for Piccadilly Lights, site
cyber security, a major development,
cultural framework and controls over Myo
(our flexible office product).
FAIR, BALANCED AND UNDERSTANDABLE
The Committee assessed and recommended
to the Board that, taken as a whole, the
Company’s 2021 Annual Report is fair,
balanced and understandable.
GOING CONCERN AND VIABILITY
STATEMENT
Given the significant impact of Covid-19 on
the macro-economic conditions in which the
Group is operating, we continue to have a
particular focus on the appropriateness of
adopting the going concern assumption in
preparing the financial statements for the
year ended 31 March 2021. The going concern
statement is set out on page 78 and detail
of the assessment can also be found under
significant financial matters on page 114.
The viability statement, together with the
rationale behind the chosen five-year time
horizon, is set out on page 78.
UK CORPORATE GOVERNANCE CODE/
FRC GUIDANCE ON AUDIT COMMITTEES
The Committee considered its compliance
with the 2018 UK Corporate Governance
Code and the FRC Guidance on Audit
Committees. We believe that we have
addressed both the spirit and the
requirements of each.
Landsec // Annual Report 2021 » Governance Report of the
Audit Committee
The Audit Committee continued to
focus this year on risk assessment and
management, internal controls and
financial reporting processes, together
with the impact of Covid-19 on all
these aspects.
STRUCTURE AND OPERATIONS
AUDIT COMMITTEE MEETINGS
CBRE PROPERTY
VALUATION
PRESENTATIONS
COMMITTEE
PRIVATE SESSIONS
› All Directors are
invited to attend
meetings when CBRE
property valuation
presentations are
made
› Internal audit team
› CBRE valuation team
› Ernst & Young
REGULAR
ATTENDANCE AT
MEETINGS TO SUPPORT
THE COMMITTEE
› Chairman of the
Board
› Chief Executive
› Chief Financial Officer
› Company Secretary
› Director of Risk
Management and
Internal Audit
› Members of senior
finance team
› Representatives of the
external auditor
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STRUCTURE AND OPERATIONS
The Audit Committee’s structure and
operations, are governed by terms of
reference which are reviewed annually
and approved by the Board. The terms
of reference are available on our website:
www.landsec.com/aboutcorporate-
governance/board-committees.
To maintain effective communication
between all relevant parties, and in support
of its activities, the Chairman of the Board,
Chief Executive, Chief Financial Officer,
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.
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 audit team. 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 are all
independent Non-executive Directors and
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 84 and 85.
Landsec // Annual Report 2021 » Governance The Committee works to a structured
programme of activities and meetings
to coincide with key events around our
financial calendar 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 2021/22 are described on page 68.
This includes the risk management process,
by which the Executive Leadership Team
completes a detailed review of the business
risks, controls and mitigation strategies
which form the basis for the principal and
emerging risks, before being assessed by
the Audit Committee.
The risk dashboard uses indicators to track
whether our risk level is within our risk
appetite and this triggers discussion by the
Committee as to how the principal risks
are moving and whether the risk tolerance
ranges remain appropriate.
In its year end assessment, the Audit
Committee has determined that the
market cyclicality risk remains high due
to forecasts of a stronger UK recession
resulting from the pandemic but has
decreased since last year and our half-
yearly results on the back of achieving a
trade deal with the EU on the conclusion
of Brexit negotiations.
The customer risk has been split into two
segments, one for retail and hospitality and
one for London office. Customer risk – retail
and hospitality is placed at the top right
quadrant of the heat map, in the position
of the previous customer risk, reflecting
the continued uncertainty around demand
for space and outlook for these sectors.
Customer risk – London office, is placed in
the centre of our heat risk map reflecting
the overall lower risk profile of this sector
which has remained resilient through the
pandemic but is subject to some
uncertainty given the reported success of
home working and companies reappraising
how they use office space going forward.
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 market practice.
INTERNAL CONTROL
Internal audits carried out by the Group
and reviewed by the Committee included
fire safety management, Sarbanes-Oxley
readiness, fraud risk and the quality of our
development 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 service charge management.
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, forecasting and
financial reporting process
› various policies, procedures and guidelines
underpinning the development, asset
management and financing operations
of the business, together with professional
services support including legal, human
resources, information technology, 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
Page
109
Landsec // Annual Report 2021 » Governance Report of the
Audit Committee
continued
Page
110
› 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 Audit Committee has proactively
reviewed and challenged our Brexit risk
assessments over the year to ensure we
are able to minimise downside business
consequences. Further, we are receiving
support from specialist agencies to ensure
any direct purchases of goods from the
European Union for our development
pipeline clear customs effectively.
DATA GOVERNANCE
To strengthen data governance and pursue
its strategic objective of being data led,
Landsec has invested in technology tools to
enhance data loss detection, classification
and access control.
A new role has been created in the
business, a Head of Data & Digital
Modernisation, with a remit for reviewing
and strengthening data governance
practices within the organisation.
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 assesses the Company’s own
evaluation of compliance against the
Information Commissioner’s Office (ICO)
accountability principles and its maturity
assessment as part of its oversight process.
GENERAL DATA PROTECTION
REGULATION (GDPR)
Following Brexit, the UK has adopted both
the EU General Data Protection Regulation
(GDPR) into UK law and the ‘adequacy’
decisions of the EU for its international data
transfers, including recognising the EU as
adequate. The EU has also commenced
steps to recognise the UK as adequate and
data transfers remain unhindered under
the Brexit deal.
As with all organisations, Landsec is eager
to understand the international data
sharing strategy for the UK government
post-Brexit and has participated in
consultations with the Department for
Culture, Media and Sport and the ICO.
Landsec also chairs a forum for data
protection representatives from the
property industry to discuss, learn, share
and promote privacy practices in the
industry.
FIRE SAFETY
New fire safety legislation is expected to
come into effect during FY2021/22 as a
result of the Fire Safety Bill and Building
Safety Bill. 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 and management of new
and existing buildings.
EXTERNAL AUDITOR
EY are Landsec’s external auditor and are
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 its 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 its work remained aligned to the Group’s
structure and new strategy.
The Committee is keen to ensure that its
auditor feels able to challenge
Landsec // Annual Report 2021 » Governance
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 it maintains
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 June 2018
› the internal performance and effectiveness
review of EY referred to above.
The EY partner in charge of the valuation
specialist team rotated during the year.
No Committee member has any
connection with the current auditor.
Taking the above review into account, the
Committee concluded that EY remained
objective and independent in its 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 has again performed its 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 EY for inclusion in its audit and service
delivery plans going forward.
AUDIT TENDERING
EY was 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 June 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 audit and
assurance for 2020/21 (including the audit
of the Group’s joint ventures) are £1.2m
(2019/20: £1.0m).
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.
AUDIT VS. NON-AUDIT FEES
2020/21
Chart 35
Audit
Non-audit
13.8%
86.2%
(17.9% non-audit fees as a ratio to Group
audit fees excluding the audit of the
Group’s joint ventures)
Page
111
Landsec // Annual Report 2021 » Governance Report of the
Audit Committee
continued
Page
112
The Committee monitors compliance with
the policy, including the prior approvals
required for non-audit services, which are
as follows:
Per assignment
(£)
Table 36
Aggregate
during the year
(£)
0–25,000
<100,000
Chief
Financial
Officer
Audit
Committee
Chairman
25,000–
100,000
100,000–
400,000
Committee >100,000
>400,000
EY was engaged during the year to provide
non-audit services to the Group relating
to the Company’s half-yearly review, the
assurance statement on sustainability
and a non-statutory audit of the Security
Group. 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 £190,000.
Details of the fees charged by EY during
the year can be found in note 8 to the
financial statements.
The total of £190,000 paid for non-audit
services represented 17.9% of the Group
audit fee payable to EY during the year
(excluding the audit of the Group’s 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.
The London Portfolio was inspected by
CBRE as normal during the year and as a
result of Covid-19, approximately 75% of
our shopping centres and outlets were
visited by CBRE and just under 50% of our
leisure assets.
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 39 properties
(comprising 74% of the portfolio) for
substantive review by its valuation experts
primarily on the basis of their value, type,
risk profile and location. A new valuation
expert was brought onto the EY team to
lead this year’s valuation review. This year,
EY was restricted in its ability to visit sites
due to Covid-19 but did virtually visit two
properties and completed analytical reviews
over the input data for the valuations,
comparing this to market data. The
Committee reviewed the auditor’s 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
Landsec // Annual Report 2021 » Governance We report on alternative performance
measures on page 227. The Committee
debated and discussed these measures and
agreed that they were appropriate for the
business.
was received through a different channel,
was fully investigated and no further action
was deemed necessary. The report of the
investigation was provided to the Board
and the Committee.
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.
ANTI-BRIBERY AND CORRUPTION
We have updated our Bribery Risk Register
during the year and anti-bribery controls
have been assessed in a recent internal
audit. In addition, we have reviewed and
made improvements to how we record and
approve activity related to our Gifts and
Hospitality Policy. We have also developed
a training module on Anti-Bribery and
Corruption and this will launch Company
wide during the coming year alongside a
new Anti-Bribery and Corruption Policy.
The Board has a zero tolerance for bribery
and corruption of any sort and this is
reinforced through our Code of Conduct.
Our principal suppliers are required to have
similar policies and practices in place within
their own businesses.
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 Leadership
Team to ensure consistent reporting and
the existence of appropriate links between
key messages and relevant sections of the
Annual Report.
Taking the above into account, together
with the views expressed by EY, the
Committee recommended, and in turn
the Board confirmed, that the 2021 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 and has overall
responsibility for whistleblowing but the
Audit Committee supports the Board in this
respect. 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 Company Secretary,
MD People and Corporate Affairs and the
Director of Risk Management and Internal
Audit and escalated to the Committee,
as appropriate. During the year, no
whistleblowing incidents were reported
through the hotline, although one report
importance of their work, we have disclosed
the fees paid to them in note 9 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 four significant
financial matters in connection with the
financial statements, namely the valuation
of the Group’s property portfolio, revenue
recognition, going concern in the context of
the impact of Covid-19 and recovery of
receivables and bad debt provisions. Further
details are set out in the table on page 114.
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.
In addition, the Committee considered,
took action and made onward
recommendations to the Board, as
appropriate, in respect of other key matters
including accounting for property
acquisitions and disposals, maintenance of
the Group’s REIT status and other specific
areas of individual property and audit focus.
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.
Page
113
Landsec // Annual Report 2021 » Governance Report of the
Audit Committee
continued
Page
114
SIGNIFICANT 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 significant judgements to be made
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.
As a result of Covid-19, and the resulting lack of transactional evidence
in the market, CBRE’s valuations of our hotel assets are subject to a
‘material valuation uncertainty’ clause.
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 recovery from 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.
Recovery of receivables and provision for bad debts
Ongoing Covid-19 restrictions during the year have resulted in increasing
levels of outstanding debtor balances. Debtor balances are assessed on
an individual basis for both rent and service charge and a judgement
is made as to whether the balance is expected to be recovered, taking
into account any concession agreements concluded and anticipated
insolvency events. This analysis involves a significant amount of
judgement and there is a risk that balances which are expected to be
recovered are not, or that the amounts provided for are not sufficient.
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 its 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. CBRE was asked to attend and present its report to the Board and
to highlight any significant judgements made or disagreements which existed between
CBRE 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 premiums and other property-
related revenue.
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.
The Group’s going concern assessment considers the Group’s principal risks (see page 78)
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 going concern assessment is based
on the 12-month period to 31 May 2022 within the Group’s viability model, which
reflects unfavourable macro-economic conditions and potential adverse structural
changes to the business.
The Committee has reviewed the going concern disclosures 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 78 and note 1 of the financial statements.
The Committee has discussed the provision for bad debts at all of its meetings
throughout the year. Ahead of the May meeting, the Committee Chairman met with
management to agree how the Committee would evaluate the judgements applied in
determining the appropriate level of provisions. The Committee and EY have reviewed
the process applied and judgements taken and concluded that they are appropriate.
The above description of the significant financial matters should be read in conjunction with the Independent Auditor’s Report on
pages 146-153 and the significant accounting policies disclosed in the notes to the financial statements.
Landsec // Annual Report 2021 » Governance Directors’ Remuneration
Report – Chairman’s
Annual Statement
CHRISTOPHE EVAIN
CHAIRMAN, REMUNER ATION COMMITTEE
COMMITTEE MEMBERS
› Christophe Evain
(Chairman)
› Edward Bonham Carter
› Cressida Hogg
› Stacey Rauch
HIGHLIGHTS
› Remuneration Policy
Review
› ESG targets introduced
› New Chief Financial
Officer appointed
Page
115
KEY RESPONSIBILITIES
› Reviewing the link
between reward and
the Group’s purpose
and strategy
› Oversight of reward
matters across the
Group
› Maintaining a strong
connection between
returns to shareholders
and reward for
Executives
NUMBER OF MEETINGS AND
ATTENDANCE
› Four scheduled meetings
› Two additional meetings
› 100% attendance
DEAR SHAREHOLDER,
I am pleased to present,
on behalf of the Board, the
Directors’ Remuneration
Report for the year ended
31 March 2021.
This year has been extraordinary for many
reasons and I cannot introduce this year’s
report without acknowledging the
disruption that Covid-19 has had on our
lives. Other sections of the Annual Report
deal with the effects of the pandemic on
our business in more detail, but I would like
to pay tribute here to all those at Landsec
who have worked so hard to minimise the
potentially devastating impact of the virus
on our people, our partners and our
customers.
DIRECTORS’ REMUNERATION POLICY
This year we continued to apply the
Remuneration Policy that was approved
by shareholders at our 2018 AGM. However,
as the policy is due to expire during 2021,
we have undertaken a comprehensive
review of executive pay arrangements.
We consulted with our major shareholders,
the main shareholder representatives and
with our people. In doing so, we took
account of developments in best practice
and investor expectations, as well as the
specific nature of our business and the
sector in which we operate.
The Committee believes that the existing
approach to Directors’ remuneration
remains appropriate for Landsec. We are,
however, proposing several changes to the
Remuneration Policy and its implementation
to align it to the conclusions of our recent
strategic review, to address feedback
received at the 2020 AGM, and to reflect
recent developments in governance and
good practice more generally.
The details of the proposed changes we are
making to the Policy, which do not involve
any increases to quantum, can be found on
page 134, while the Committee’s proposed
implementation of the Policy for the year
ending 31 March 2022 is presented below.
PERFORMANCE FOR THE 2020/21
FINANCIAL YEAR
We began the new financial year with the
country in lockdown, many retail and leisure
destinations closed and our offices, while
open, largely empty given Government
guidance to work from home. Conditions
have improved from the early days of the
pandemic, but the effect of Covid-19 on
our income continues to be significant.
Landsec // Annual Report 2021 » Governance Directors’ Remuneration
Report – Chairman’s
Annual Statement
continued
The decline in asset values in our retail and
leisure assets has continued, although our
London offices have been resilient with only
a small reduction in values.
One of the first steps we took to manage
the effects of Covid-19 was to suspend
dividend payments in April 2020 in order
to conserve cash in the face of significant
uncertainty. Over the subsequent months,
we have seen trading conditions begin to
improve and consequently reinstated our
dividend in November 2020.
Our results clearly show the impact of the
pandemic on our business, but Landsec
remains in a fundamentally strong position.
The high-quality of our portfolio and low
leverage of our balance sheet provide
a solid foundation for executing our
growth strategy and creating value for all
stakeholders. The business is well placed to
capitalise on opportunities as they emerge.
For the year ended 31 March 2021 revenue
profit is down 39.4%. Adjusted diluted
earnings per share are also down 39.4%
to 33.9p. Asset values declined by 13.7%
in aggregate reflecting the weaker retail
market, particularly shopping centres and
retail parks and the vacating of proposed
developments during the year. This resulted
in a 17.4% reduction in EPRA net tangible
assets per share to 985p.
These results are clearly reflected in the
variable pay awarded to the Executive
Directors in respect of the performance
period ended 31 March 2021.
ANNUAL BONUS PERFORMANCE
While revenue profit and total property
return have been impacted by the Covid-19
pandemic, the performance of the
Executive Directors and employees has
been strong. This included the successful
delivery of a number of initiatives designed
to ensure that Landsec emerges from the
pandemic in the best position possible,
including maintaining financial strength
and flexibility by successfully executing
asset disposals, preserving optionality over
the Group’s development programme and
strengthening relationships with our
customers.
Given the above, the Committee believes
that it is appropriate for the Executive
Directors to receive annual bonuses for
2020/21. However, the Committee has also
considered the experience of shareholders
and stakeholders more widely during the
pandemic in addition to recognising the
Executive Directors’ efforts and performance
against the targets which were set.
As a result, the Committee agreed to
exercise downward discretion to: (i) reduce
the calculated outcome by 50%; and (ii)
defer the entire bonus into shares for a
period of three years.
This resulted in a bonus outcome of 16.2%
of maximum (equating to 24.3% of salary),
which is considered to be appropriate in
the context of the performance of the
Executive Directors and the impact of
Covid-19 on our shareholders and wider
stakeholders. See page 122 for further details.
Page
116
LONG-TERM INCENTIVE PLAN
PERFORMANCE
Vesting of the LTIP is determined by
performance against two equally-weighted
measures of total property return (TPR) and
Total Shareholder Return (TSR) relative to
FTSE 350 real estate companies. Performance
under both measures over the three years
to 31 March 2021 was below the threshold
level and as such there will be no vesting
in respect of the 2018 LTIP award.
MANAGEMENT CHANGES
On 30 September 2020 Martin Greenslade
announced his intention to retire from the
Board during 2021. He will step down as
CFO on 31 May 2021 and full details of the
remuneration arrangements are explained
on page 124.
Following the announcement, the Board
instigated a comprehensive search for a
replacement CFO and after thorough
consideration, Vanessa Simms was
appointed. She joined the business on
4 May 2021 as CFO Designate assuming the
role of CFO on 1 June 2021. Full details of her
remuneration arrangements are set out on
page 125.
The retirement of Martin Greenslade was
comprehensively reviewed by the Committee.
Noting that he took the role of Acting CEO
prior to Mark Allan’s appointment and after
taking into account Martin’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 bonus plan
and LTIP. Furthermore Martin will continue
in his role as CFO until 31 May 2021, providing
his full support until a handover is completed
on 30 June 2021; his 12-month employment
and notice period will end on 29 September
2021 after which time he will comply with
the Company’s post-cessation shareholding
requirements.
Landsec // Annual Report 2021 » Governance CONCLUSION
I would like to thank my predecessor,
Edward Bonham Carter, for chairing the
Remuneration Committee until 6 May 2020.
This has been a challenging year and,
like many, I look forward to a time when
Covid-19 is a distant memory.
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.
CHRISTOPHE EVAIN
CHAIRMAN, REMUNERATION COMMITTEE
DISCRETION
Details of the negative discretion applied by
the Committee to the annual bonus awards
are set out in the annual bonus performance
section above and in more detail on page 122.
EXECUTIVE REMUNERATION FOR 2021/22
1. BASE SALARY
Due to the ongoing impact of Covid-19, the
annual salary review due for June 2021 will
not take place. The next salary review will
be carried out in June 2022.
2. PENSION
Consistent with the UK Corporate
Governance Code and recent investor
guidance, our new CFO will receive a
pension allowance of 10.5% of salary in line
with the wider workforce. All Executive
Directors’ pension contributions will now
be aligned to the wider workforce.
3. ANNUAL BONUS
For the performance period ending
31 March 2022, Executive Directors will be
eligible for an annual bonus of up to 150%
of salary. Reflecting Landsec’s new strategy
and a desire to simplify the current
arrangements, revenue profit will be
upweighted slightly, absolute total return
targets will replace relative total property
return targets and a small number of key
ESG objectives will replace business KPIs.
Personal objectives will continue to be
operated for a minority of the award albeit
upweighted compared to prior years.
Further detail is provided on page 128.
4. LONG-TERM INCENTIVE PLAN
We intend to grant awards under the LTIP
in June 2021, which will be subject to
performance conditions over a three-year
performance period. Performance targets
will be based on total business return,
relative TSR, and carbon reduction. Any
awards which vest will continue to be
subject to a two-year post-vesting holding
period. The Committee will consider the
prevailing share price at the time of grant
and it will also retain full discretion to apply
a downward adjustment to the level of
LTIP vesting in 2024 if it considers that the
vesting value represents an unjustified
‘windfall gain’ taking account of the level
of performance achieved over the relevant
period. Further detail is provided on page 129.
REMUNERATION ACROSS THE COMPANY
The Committee oversees all remuneration
policies and practices across the
organisation, and is regularly briefed by the
MD, People and Corporate Services on their
implementation. When making any
decisions on remuneration matters, the
Committee takes account of the interests
of all internal and external stakeholders.
During the current year, we reviewed the
bonus scheme for our staff and agreed
measures to simplify the scheme, more
closely aligning it to the Executive Director
bonus scheme.
GENDER PAY GAP
During the course of the year, the
Committee was pleased to see that the
Company’s gender pay gap had improved.
However, we remain concerned about the
gap and continue to review management’s
response to this important topic. The
Committee is pleased to note that
management is also well advanced in its
preparations to report the ethnicity pay
gap, ahead of any formal regulations.
More information on the measures being
taken to deal with this can be found on
page 62 and on the Company’s website.
EMPLOYEE VOICE
I took the opportunity to meet with our
Employee Forum in early 2021, specifically to
understand the views of the wider workforce
in respect of Executive remuneration and our
proposed Remuneration Policy. Employees
were able to ensure their voice was heard
directly by this Committee and I was pleased
to answer a number of questions posed
by the forum. In particular, I noted that
the alignment of Executive pensions with
employee pensions was well received.
SHAREHOLDER CONSULTATION
As part of the Remuneration Policy review,
the Remuneration Committee consulted
with 20 of our main shareholders and the
main shareholder representative bodies.
In addition to setting out the proposals
in a detailed letter and responding to a
number of questions and clarifications,
the Committee held a number of calls with
major shareholders to discuss the proposals.
Finally, consistent with best practice and in
the interests of transparency, shareholder
feedback was summarised and shared
with those consulted. The level of support
received for the proposals has been very
strong and, as such, no changes have been
made to the proposals originally presented.
Page
117
Landsec // Annual Report 2021 » Governance Remuneration
at a glance
Our at a glance summary sets out clearly
and transparently the total remuneration
paid to our Executive Directors in 2020/21.
Page
118
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 – SUPPORTING LONG-TERM SUCCESS AND SUSTAINABLE VALUE
We will materially
differentiate reward
according to
performance.
Performance targets will
be relevant, stretching,
and aligned to our business
strategy.
Rewards will be
compatible with the
Group’s risk policies and
systems, with malus and
clawback applied to all
forms of variable pay.
We will provide a balance
between attracting,
retaining and motivating
talented people as well
as supporting equal
opportunity and diversity
of talent.
Our framework will ensure
that levels of performance-
related pay are appropriate
to each level of the
organisation.
Remuneration outcomes
will be clear and
explainable, avoiding
paying more than the
Committee considers
necessary.
FIXED PAY
➊ Base salary
➋ Benefits
➌ Pension
More on page 135
ANNUAL
BONUS
More on page 135
LONG-TERM
INCENTIVE
More on page 136
2020/21 in numbers
PERFORMANCE
£251m
Revenue profit
(2020: £414m)
27.2%
Annual TSR
(2020: -35.4%)
REMUNERATION ACROSS THE GROUP
£49m
Total pay bill
(2020: £51m)
14.7%
Employees received
an annual increase
(2020: 0%)
CHIEF EXECUTIVE REMUNERATION
£2,919,6291
Single figure
(2020: £1,569,474)
16.2%
Annual bonus percentage
(2020: 43.8%)
-9.6%
Ungeared TPR
(2020: -4.5%)
33.9p
Adjusted diluted EPS
(2020: 55.9p)
1.5%
Average pay
increase
(2020: 0%)
89.6%
Employees to be
paid a bonus
(2020: 99.6%)
0%
LTIP vesting
(2020: 0%)
86.0%²
Change in total
remuneration
(2020: -3.4%)
GENDER PAY GAP REPORTING
36.6% Mean hourly pay gap
(2020: 37.7%)
29.3% Median hourly pay gap
(2020: 34.3%)
68.4% Mean bonus pay gap
(2020: 61.0%)
1. Includes £1,692,042 in relation to buyout awards made on appointment. Excluding relocation and buyout awards the single figure is £1,027,587.
2. Includes buyout awards made in relation to appointment. The change in total remuneration, excluding buyout awards, is -34.5%.
Landsec // Annual Report 2021 » Governance Summary of Executive Directors’ total remuneration
Table 37
Mark Allan
Chief Executive
(£000)
Martin Greenslade
Chief Financial Officer
(£000)
Colette O’Shea
Chief Operating Officer
(£000)
3,000
2,000
1,000
0
1,692
188
1,040
129
635
358
680
117
524
331
514
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
Base salary
Benefits
Pension allowance
Annual bonus paid in cash
Annual bonus deferred into shares
Long-term incentives vested
Other1
Total remuneration
733
230
77
–
188
–
1,692
2,920
–
–
–
–
–
–
–
–
1. Recruitment awards in respect of compensation from previous employment.
Summary of Executive Directors’ total remuneration
504
21
110
–
129
–
–
528
20
132
–
358
–
–
456
18
50
–
117
–
–
444
17
53
–
331
–
–
764
1,038
641
845
Weighting
Outturn
% of weighting achieved
One-year TPR
Revenue profit
26.0%
0.0%
26.0%
0.5%1
Retail & Specialist performance
7.0%
3.5%
Office performance
5.3%
5.3%
Net debt reduction and headroom
7.0%
5.2%
Development performance
8.7%
3.5%
ESG performance
3.5%
3.5%
People and diversity
3.5%
0.9%
Total Company bonus opportunity
87%
22.4%
Individual targets
13%
10.0%
Total bonus
100%
32.4%
After 50% negative discretion applied
16.2%
Three-year TSR
50%
0.0%
Three-year ungeared TPR
50%
0.0%
Total LTIP opportunity
100%
0.0%
S
U
N
O
B
L
A
U
N
N
A
M
R
E
T
-
G
N
O
L
E
V
I
T
N
E
C
N
I
1. Actual outturn 0.65% has been reduced to 0.5% to reflect the impact of Covid-19.
To read more on our strategy, go to page 30
Page
119
Landsec // Annual Report 2021 » Governance
Annual Report
on Remuneration
The Annual Report on Remuneration
describes how the Directors’ Remuneration
Policy has been applied in the financial
year ended 31 March 2021 and how the
new policy will operate in the financial year
ending 31 March 2022.
IN THIS SECTION
➊ Remuneration outcomes
➋ Management changes
➌ Directors’ interests
➍ Application of Policy
for 2021/22
➎ Total Shareholder Return
and CEO pay
➏ The context of pay
in Landsec
➐ Dilution
➑ Remuneration
Committee meetings
➒ Shareholder voting
COLOUR KEY
FIXED
PAY
ANNUAL
BONUS
LONG-TERM
INCENTIVE
Page
120
During the course of 2020/21, the
Remuneration Committee was engaged
in a number of key matters, including:
› Reviewing compensation levels for
employees and Executive Directors in light
of the impact of the Covid-19 pandemic
› Setting and subsequently reviewing the
outcomes for corporate, business unit
and personal targets under the annual
bonus scheme for Executive Directors and
Executive Leadership Team (ELT) 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 2018
› Reviewing the variable pay arrangements
below Executive Director level
› Determining the annual level of LTIP grants
to Executive Directors and ELT members
› Monitoring Directors’ compliance with
the Company’s share ownership policy
› Monitoring developments in stakeholder
sentiment on executive pay and corporate
governance
› Overseeing the calculation and publishing
of the Group’s gender pay gap report
› Determining the remuneration terms for
Martin Greenslade following his retirement
› Determining the remuneration terms for
Vanessa Simms, our newly appointed CFO
Unless otherwise stated, narrative and
tables are unaudited.
Landsec // Annual Report 2021 » Governance 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 2021. Tables 38 and 39 show the
payments we have made or expect to make and tables 40-44 give more detail on how we have measured the performance outcomes with
respect to the annual bonus and LTIP.
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 June 2021 in connection with performance achieved in the financial year ended 31 March 2021.
The values shown for the 2020/21 annual bonus and the 2018 LTIP awards (for the three-year performance period ended 31 March 2021)
are based on estimated achievement against total property return (TPR) performance measures. Based on the estimated TPR and actual
TSR performance, the vesting level for the 2018 LTIP is projected to be zero.
Single figure of remuneration for each Executive Director (£000)
Table 38
Executive Directors
Mark Allan
Martin Greenslade
Colette O’Shea
Base salary1 Benefits2
Pension
allowance3
Annual
bonus paid
in cash4
2020/21
2019/20
2020/21
2019/20
2020/21
2019/20
733
230
–
504
528
456
444
–
21
20
18
17
77
–
110
132
50
53
–
–
–
–
–
–
Annual
bonus
deferred
into
shares4
188
–
129
358
117
331
Long-term
incentives5
Other6
Total
fixed pay
variable pay
Total
Total
–
–
–
–
–
–
1,692
2,920
1,040
1,880
–
–
–
–
–
–
764
1,038
641
845
–
635
680
524
514
–
129
358
117
331
1. Base salary earned during the year after the voluntary reduction of 20% of base salary between May and July 2020 due to the impact of Covid-19. See table 52 for details
of annual salary.
2. The benefits consist of a car allowance, private medical insurance, income protection and life assurance premiums and a one-time relocation payment for Mark Allan of
£200,000 upon joining, repayable on a pro-rata basis should he leave within two years.
3. The pension amount for Martin Greenslade was a cash allowance of 20% of base salary. The pension amount for Mark Allan and Colette O’Shea was a cash allowance of
10.5% of base salary.
4. In response to the Covid-19 pandemic, Executive Directors’ 2019/20 and 2020/21 annual bonus awards were deferred into shares vesting in 2021 and 2024 respectively.
5. The LTIP awards for Martin Greenslade and Colette O’Shea did not vest in respect of 2019/20 or 2020/21, and therefore the 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.
6. In respect of compensation from his previous employer, Mark Allan received a cash bonus payment of £674,630 and share based recruitment awards valued at £1,017,412
(see table 48 for further details) which vested on 7 July 2020 and 22 March 2021.
Single figure of remuneration for each Non-executive Director (£000)
Fees1
Benefits2
Pension
allowance
Annual
bonus paid
in cash
Annual
bonus
deferred into
shares
Long-term
incentives
vested
Non-executive Directors
Cressida Hogg
Stacey Rauch2
2020/21
2019/20
2020/21
2019/20
Edward Bonham Carter 2020/21
Nicholas Cadbury
2019/20
2020/21
2019/20
Madeleine Cosgrave
2020/21
Christophe Evain
Manjiry Tamhane3
2019/20
2020/21
2019/20
2020/21
2019/20
356
375
66
70
82
95
86
90
66
70
83
70
6
–
–
–
5
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Table 39
Total
fixed pay
Total
variable pay
356
375
71
75
82
95
86
90
66
70
83
70
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
356
375
71
75
82
95
86
90
66
70
83
70
6
–
1. Represents fees paid to Directors during the year after the voluntary reduction of 20% of fees between May and July 2020 due to the impact of Covid-19. See table 53 for
annual fees as at 31 March 2021.
2. Stacey Rauch, who is based in the US, received UK tax return support which is treated as a benefit in kind.
3. Appointed 1 March 2021.
Page
121
Landsec // Annual Report 2021 » Governance Annual Report
on Remuneration
continued
Page
122
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%
of salary was dependent on meeting Group targets and 20% of salary was 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.
Annual bonus performance 2020/21: Summary
Measure
Weighting
Description
Performance outcome
Table 40
Outturn
Total property return
26% The Group’s ungeared TPR relative
to relevant MSCI benchmarks
comprising all March-valued
properties (excl. Landsec)
Threshold
Benchmark
(6.5%)
Target
Maximum
Actual
Benchmark +0.7%
(13%)
Benchmark +2.0%
(26%)
Below benchmark
0.0%
Revenue profit
26% Revenue profit
£250m (0%)
£270m (13%)
£310m (26%)
£251m
Group KPIs
35% See table 41 listed below
Personal targets
13% See table 42 listed below
8.75%
0%
17.5%
50%
35%
100%
See table 41
See table 42
Total annual bonus
100%
After 50% negative discretion applied
0.5%1
21.9%
10.0%
32.4%
16.2%
1. Actual outturn 0.65% adjusted to 0.5% to reflect the Executive Directors’ decision taken at the start of the year to waive the financial element of any bonus for the first
quarter of 2020/21.
As detailed in the table above, the revenue profit target of the bonus scheme delivered a low outcome and the total property return target
is expected to be missed due to the pandemic impacting our business for longer than expected. However, performance against a number
of the Group KPIs and personal objectives was strong.
This included the successful delivery of a number of initiatives designed to ensure Landsec emerges from the pandemic in the best position
possible, in particular:
› maintaining financial strength and flexibility including through successfully executed asset disposals;
› preserving optionality over the Group’s development programme for as long as possible to allow time for the impact of the pandemic
to become clearer before committing significant capital expenditure; and
› strengthening relationships with customers at a very challenging time.
As such, and noting: (i) that no government support has been taken; (ii) that there have been no Covid-related redundancies; (iii) the
significant £80m support fund provided to our customers; and (iv) that no adjustments to the targets have been made; the Committee
believes that, in line with the approach adopted for our employees below Board, it was appropriate for the Executive Directors to receive
annual bonuses for 2020/21.
However, the Committee has also considered the experience of shareholders and stakeholders more widely during the pandemic in addition
to recognising the Executive Directors’ efforts and performance against the targets, which were set at the beginning of the year. As a result,
the Committee agreed to exercise downward discretion to: (i) reduce the calculated outcome by 50%; and (ii) defer the entire bonus into
shares for a period of three years.
This resulted in a bonus outcome of 16.2% of maximum (equating to 24.3% of salary), which is considered to be appropriate in the context
of the performance of the Executive Directors and the impact of Covid-19 on our shareholders and wider stakeholders.
Landsec // Annual Report 2021 » Governance Table 41
Outturn
0.00%
1.75%
1.75%
5.25%
3.50%
1.75%
1.75%
0.88%
0.00%
0.88%
0.00%
0.88%
0.88%
1.75%
0.88%
21.9%
Table 42
Award
3.5%
Annual bonus performance 2020/21: Group KPIs
Measure
Weighting
Description
Performance outcome
Group KPIs
Threshold (25%)
Target (50%)
Maximum (100%) Actual
Retail Performance
2.63% Deals agreed
83% agreed
90% agreed
94% agreed
78% agreed
Retail Performance
2.63% Rent/Service charge concessions
£100m
Retail Performance
1.75% Retail vacancy
Office Performance
5.25% Office net rental income
Finance
Finance
Development
Development
Development
Development
Development
ESG
ESG
ESG
People
Total
3.50% Cash and facility headroom
3.50% Net debt reduction
1.75% Phase 1 – Covid-19 response
1.75% Phase 2 – Covid-19 response
1.75% Repurposing – live projects
1.75% Repurposing – concepts
1.75% Office pre-lets
0.88% Energy reduction vs baseline
0.88% Embodied carbon reduction
vs baseline
1.75% Social contribution
3.50% Engagement Survey
35.0%
10%
£221m
£1.0bn
£0m
-1.0%
-10.0%
£3.0m
75%
£80m
8%
£226m
£1.25bn
£250m
£50m
6%
£228m
£1.5bn
£500m
£73m
3.8%
£232m
£1.58bn
£440m
A range of specific targets relating to major
milestones within each development have been
set based on relevant individual project metrics.
-2.0%
-12.5%
£3.5m
80%
-3.0%
-15.0%
£4.0m
85%
-3.8%
-15.6%
£6.6m
76%
Annual bonus performance 2020/21: Personal objectives
The Executive Directors shared a number of common targets which included:
Target
Committee Performance Assessment
Review of strategy and portfolio
Undertake a full strategy and portfolio review
during the first half of 2020/21, obtain Board
approval and communicate the conclusions
externally.
Review organisational design and culture
Determine the appropriate organisational design
and culture necessary to support execution of the
strategy and begin implementation.
Respond to Covid-19
Lead the business’ Covid response, balancing the
needs of all stakeholders, with particular focus on
proactive customer engagement and support;
effective Health, Wellbeing and Safety support;
preserving financial capacity and flexibility.
The Executive Directors completed a detailed review of the
strategy and portfolio. The conclusions and the new strategy
(based on the four priorities of: Optimise Central London;
Reimagine retail; Realise capital from Subscale sectors; and
Grow through Urban opportunities) were presented to and
approved by the Board on time and were delivered externally
via the October 2020 Capital Markets Day.
A detailed review of the organisational design and culture
was completed following the strategic review, resulting in the
formation of a new Executive Leadership Team structure and
a significant number of changes in roles and responsibilities.
Details of the new structure were announced via RNS in
December 2020.
The management team successfully delivered a number of
initiatives to: (i) preserve and strengthen relationships with
customers (including providing a material level of rent/
service charge concessions); (ii) maintain financial strength
and flexibility (including delivering a number of material
asset disposals); (iii) preserve optionality over the Group’s
development programme to allow time for the impact of the
pandemic to become clearer before committing significant
capital expenditure; and (iv) ensure the safety of our
employees and customers throughout the year under review.
Maximum
4.0%
4.0%
3.0%
5.0%
3.5%
Total
13.0%
10.0%
Annual bonus achievement as a percentage of salary
Table 43
As noted above, the Committee exercised its discretion to reduce the bonus outcome by 50% and defer bonus awards into shares for three
years, vesting in 2024. Mark Allan’s bonus will be pro-rated based on the date of his appointment as CEO on 14 April 2020.
Company bonus (87%)
Individual bonus (13%)
Total bonus (100%)
Maximum
achievable
% Salary
awarded
Maximum
achievable
% Salary
awarded
Maximum
achievable
% Salary
awarded
After 50%
discretion
130%
130%
130%
33.6%
33.6%
33.6%
20%
20%
20%
15%
15%
15%
150%
150%
150%
48.6%
48.6%
48.6%
24.3%
24.3%
24.3%
Mark Allan
Martin Greenslade
Colette O’Shea
Page
123
Landsec // Annual Report 2021 » Governance Annual Report
on Remuneration
continued
Page
124
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 2021.
LTIP performance 2018-2021
Measure
Total Shareholder
Return (TSR)1
Ungeared total
property return
(TPR)2
Weighting
Description
50% TSR relative to the FTSE 350 Real
Estate Index, weighted by market
capitalisation, measured over the
three-year performance period.
50% The Group’s ungeared TPR relative
to an MSCI benchmark comprising
all March-valued properties
(excluding Landsec), measured
over a three-year period.
Performance outcome
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 44
Outturn
(% of
maximum)
0%
0%
0%
2. MANAGEMENT CHANGES DURING THE YEAR
2.1 RETIREMENT OF MARTIN GREENSLADE
As announced on 30 September 2020, Martin will retire from his role
as CFO and as a Director of the Board on 31 May 2021, continuing
the handover process until 30 June 2021. His employment ends on
29 September 2021 in accordance with his 12-month notice period.
Share awards
Outstanding LTIP awards have been pro-rated for the portion of
the performance period served (see table below). The awards will
remain 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.
Salary and benefits
Martin 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 June to 29 September 2021 is £217,330 (subject
to all necessary deductions).
Annual bonus
As explained on page 116, as a retiree Martin is a ‘good leaver’
under the terms of the Policy and relevant incentive plan rules.
In line with Company policy on ‘good leaver’ status, in June 2021
Martin will be awarded an annual bonus of £128,790 in respect
of the year ended 31 March 2021 which he served in full. The total
bonus amount will be deferred into shares in line with other
Executive Directors and will vest after three years. Martin will be
eligible for a bonus award for the period 1 April 2021 – 30 June 2021,
with any bonus paid in 2022 at the same time and on the same
basis as other Executive Directors. No bonus will be awarded for
the period 1 July 2021 to 29 September 2021.
Outstanding LTIP awards – Martin Greenslade
Award
2018 LTIP granted on 25 June 2018
2019 LTIP granted on 25 June 2019
2020 LTIP granted on 24 July 2020
1. Subject to performance conditions.
2. Percentage vesting projected to be zero.
Outstanding unvested deferred bonus awards over 65,400 shares
will vest in full and become exercisable for a six-month period from
the normal vesting date, 24 July 2021, subject to the rules of the
Deferred Share Bonus Plan (DSBP).
Post-cessation shareholding
In line with the minimum shareholding policy, Martin will hold at
least 200% of salary in Landsec shares for a period of two years
from 29 September 2021 based on the Company’s share price on
28 September 2020 of 528.9p. This shareholding requirement will be
recalculated on 28 May 2021 and 29 September 2021; in the event
the Company’s share price is higher on those dates, the number of
shares required to be held will be adjusted accordingly.
Compensation for loss of office
Martin will not be eligible for any payments for loss of office.
Malus and clawback
Malus and clawback provisions will continue to apply to annual
bonus, deferred bonus and LTIP awards.
Number of shares
subject to award
163,960
193,997
290,570
Maximum number of
shares which could vest1
163,9602
145,497
112,999
Table 45
Vesting date
25 June 2021
25 June 2022
24 July 2023
Landsec // Annual Report 2021 » Governance 2.2 APPOINTMENT OF VANESSA SIMMS
Vanessa Simms joined Landsec’s Board as CFO designate on 4 May
2021 taking up the post of CFO on 1 June 2021. The Committee
determined Vanessa’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 she brings. Her remuneration has been
set within the parameters of the approved Policy, and consists of:
› a base salary of £490,000
› a standard Company benefits package including car allowance,
health cover and life insurance
› a pension allowance of 10.5% of salary, in line with the majority
workforce rate
› a maximum annual bonus of 150% of salary and
› LTIP awards of 300% of salary.
Vanessa will also be required to comply with the Company’s Minimum
Shareholding Policy, and build and hold a shareholding to the value
of 200% of salary within five years of her appointment, which she
will also be required to retain for a two-year period post-cessation.
In compensation for incentive awards forfeited on her resignation
from her previous employer, four share awards were granted shortly
after Vanessa joined the Company; see table below for detail of the
awards. These awards will vest no earlier than the original vesting
dates of the awards they replace.
As the performance period for Vanessa’s 2018 LTIP award has
been partially completed, the buyout value has been determined
based on an estimate of the extent to which the performance
conditions of her previous employer were satisfied up to
30 September 2020, and the reduced number of shares will
vest subject to continued service.
The performance conditions for the buyout award for Vanessa’s
2019 LTIP award will be based on Landsec’s performance over the
two-year period starting 1 April 2021, with the same performance
targets as the 2021 LTIP grant made to other Landsec employees
albeit measured over a two-year performance period. Both awards
will be subject to a two-year post-vesting holding period, and were
granted on materially equivalent terms to the rules of the Landsec
LTIP including malus and clawback provisions.
In addition to the above, two awards were made to compensate for
Deferred Share Bonus Plan (DSBP) awards forfeited upon resignation.
These awards will vest on the original vesting dates subject to
continued service and malus and clawback provisions will operate.
Finally, as compensation for the annual bonus that would have
been received from her former employer, Vanessa will receive a
replacement award of £288,852, repayable on a pro-rata basis if
she leaves Landsec within two years. In line with the plan rules of
her previous employer, 25% will be deferred into Landsec shares
for three years.
Compensation for forfeited awards – Vanessa Simms
Table 46
2018 LTIP award
2019 LTIP award
2018 DSBP award
2019 DSBP award
Date of
grant
Landsec
awards granted
Vesting
date
Face value (£)
of award1
Performance
conditions
On appointment
On appointment
On appointment
On appointment
69,994
110,160
19,219
5,431
Dec 2021
May 2023
Dec 2021
Dec 2022
368,308
579,662
101,132
28,576
No2
Yes
No3
No3
1. Based on the Landsec share price as at 27 October 2020 (the day prior to the date of announcement) of 526.2p and adjusted for dividend equivalents up to respective grant dates.
2. These are based on previous employer’s performance, for which the performance periods are partially completed. They will vest subject to continued service.
3. Awards replace non-performance, deferred bonus share awards which vest based on continued service only.
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
Mark Allan
Martin Greenslade2
Colette O’Shea
Cressida Hogg
Stacey Rauch
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain
Manjiry Tamhane3
Salary/
base fee at
31 March
2021
(£)
Minimum
shareholding
requirements
(% of salary/
base fee)
Required
holding
value
(£)
Holding
(ordinary
shares)
1 April 2020
800,000
530,000
480,000
375,000
70,000
70,000
70,000
70,000
70,000
70,000
300% 2,400,000
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%
–
444,087
66,309
41,375
8,000
9,375
7,481
4,883
8,000
–
Holding
(ordinary
shares)
31 March
2021
193,552
452,960
74,481
41,375
8,000
9,375
7,481
4,883
8,000
–
Table 47
Deferred
bonus shares
under holding
period
Value of
holding
(£)1
In
compliance
with policy
–
34,662
32,045
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1,335,702
3,365,079
735,136
285,529
55,208
64,697
51,626
33,698
55,208
–
1. Using the closing share price of 690.1p on 31 March 2021 and including any deferred shares at 100%, net of the notional tax and employee NIC.
2. Martin Greenslade will retire from the Board on 31 May 2021 and details of his post-termination shareholding obligations are shown on page 124.
3. Manjiry Tamhane was appointed to the Board on 1 March 2021.
Page
125
Landsec // Annual Report 2021 » Governance Annual Report
on Remuneration
continued
Page
126
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
Mark Allan
LTIP shares
Martin Greenslade
LTIP shares
Deferred shares
Colette O’Shea
LTIP shares
Matching shares
Deferred shares
Award date
12/05/2020
12/05/2020
12/05/2020
25/06/2017
25/06/2018
25/06/2019
25/06/2019
24/07/2020
25/06/2017
25/06/2018
25/06/2019
26/06/2017
25/06/2019
24/07/2020
Market price
at award date
(p)
914
914
914
1,029
953
820
820
547
1,029
953
820
1,029
820
547
Options
awarded
96,890
70,419
113,753
148,795
163,960
193,997
16,323
65,400
49,908
88,881
134,211
29,945
14,812
60,463
Options
vested
96,890
70,419
Market price at
date of vesting
(p)
556
679
Table 48
Vesting date
07/07/2020
22/03/2021
01/06/2022
–
n/a
25/06/2020
16,323
556
25/06/2021
25/06/2022
25/06/2020
24/07/2021
–
n/a
25/06/2020
–
14,812
n/a
556
25/06/2021
25/06/2022
26/06/2020
25/06/2020
24/07/2021
Awards were granted under the LTIP in July 2020, 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.
Mark Allan
Martin Greenslade2
Colette O’Shea
Number of
awards
438,596
290,570
219,298
Share
price (p)1
547
547
547
Face value
Performance period
Performance conditions
£2,399,997
£1,589,999
£1,199,999
1 April 2020 to
31 March 2023
50% TSR relative to the FTSE 350 Real Estate Index,
weighted by market capitalisation. 50% ungeared
TPR relative to an MSCI benchmark.
Table 49
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 will be pro-rated to 112,999 in line with termination arrangements. See page 124 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 50
Martin Greenslade
Total
Colette O’Shea
Total
Number of
options at
1 April 2020
1,047
2,373
3,420
1,047
1,186
–
2,233
Exercise price
per share
(p)
859
759
859
759
519
Number of
options
granted in year
to 31 March
2021
–
–
–
–
–
1,734
1,734
Number
options
exercised/
lapsed1
1,047
–
1,047
1,047
–
–
1,047
Market price
at exercise
(p)
n/a
–
–
n/a
–
–
–
Number of
options at
31 March 2021
–
2,373
2,373
–
1,186
1,734
2,920
Exercisable dates
08/2020-02/2021
08/2021-02/2022
08/2020-02/2021
08/2021-02/2022
08/2023-02/2024
1. The options for Martin Greenslade and Colette O’Shea lapsed at the end of the exercise period in February 2021.
2. SAYE awards may be exercised during the six-month period after the end of the three-year contract.
3. The exercise price for the SAYE awards was determined based on a three-day average mid-market share price prior to the invitation date of the scheme, discounted by 20%.
Landsec // Annual Report 2021 » Governance 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. Martin Greenslade holds the positions of Non-executive Director and Senior Independent Director of Tullow Oil plc and
received fees of £83,716 (£85,000 annually) in respect of the 2020/21 financial year. Mark Allan and Colette O’Shea do not hold any
external directorships.
3.5 DIRECTORS’ SERVICE CONTRACTS AND LETTERS OF APPOINTMENT
Dates of appointment for Directors
Name
Executive Directors
Mark Allan
Martin Greenslade
Colette O’Shea
Non-executive Directors
Cressida Hogg
Stacey Rauch
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain
Manjiry Tamhane
Date of appointment
Date of contract
Table 51
14 April 2020
21 November 2019
1 September 2005
9 May 2013
1 January 2018
1 January 2018
12 July 2018
1 January 2012
1 January 2014
1 January 2017
14 May 2018
13 May 2015
13 May 2015
1 January 2017
1 January 2019
22 November 2018
1 April 2019
1 March 2021
14 March 2019
29 January 2021
4. APPLICATION OF POLICY FOR 2021/22
4.1 EXECUTIVE DIRECTORS’ BASE SALARIES
The Committee has agreed that there will be no salary review for Executive Directors in 2021.
Executive Directors
Name
Mark Allan
Martin Greenslade1
Colette O’Shea
Vanessa Simms2
1. Up to retirement on 31 May 2021.
2. From 4 May 2021.
Current salary
(£000)
New salary
(£000)
800
530
480
–
800
–
480
490
Table 52
Percentage
increase
0%
n/a
0%
n/a
4.2 NON-EXECUTIVE DIRECTORS’ FEES
The fees for Non-executive Directors and Chairman were last amended in December 2019. Fees are reviewed annually, although no
changes are proposed for 2021/22. In line with the Committee’s Terms of Reference, no individual was involved in the decisions relating
to their own remuneration.
1 April 2021
(£000)
375
70
20
20
15
Table 53
1 April 2020
(£000)
375
70
20
20
15
Non-executive Directors’ fees
Base fees
Chairman
Non-executive Director
Additional fees
Audit Committee Chairman
Remuneration Committee Chairman
Senior Independent Director
Page
127
Landsec // Annual Report 2021 » Governance Annual Report
on Remuneration
continued
Page
128
4.3 PERFORMANCE TARGETS FOR THE COMING YEAR
Following the review of the Remuneration Policy and reflecting a repositioning of the Group for future growth, a number of changes have
been made in respect of the approach to performance metrics and targets for the coming year. The linkage between Landsec’s purpose,
strategy and desired outcomes, which demonstrates how our executive team will be incentivised in respect of the delivery of our new
strategic plan, is set out below:
Linking remuneration outcomes
to Purpose and Strategy
Purpose
Strategy
Outcomes
Pay for performance
Sustainable places
Optimise
Reimagine
Growth in asset values
Connecting communities
Growth in income
Realising potential
Grow
Realise
Leadership in
sustainability
Total
business
return
Remuneration
outcomes
Performance metrics and weightings in respect of the annual bonus, which will continue to be capped at 150% of salary, are set out below.
Performance targets are considered to be commercially sensitive although will be disclosed in full, together with the performance and the
resulting bonus awards, in next year’s Directors’ Remuneration Report.
Annual bonus 2021/22: Performance criteria
Measure
Weighting
Description
Performance range
Table 54
Revenue profit (£m)
Total business return
(pence per share)
ESG
30%
30%
20%
Revenue profit targets in line with overall five-year strategic plan.
Full details will be provided in the 2022 report.
Delivery of growth in asset values measured by EPRA NTA growth
(adjusted for dividends) through pro-active asset management.
Energy intensity reduction in all assets and embodied carbon reduction
in assets under development.
Full details will be provided in the 2022 report.
Full details will be provided in the 2022 report.
Personal objectives
20%
A mix of individual goals set at the beginning of the year.
Full details will be provided in the 2022 report.
Total annual bonus
100%
The introduction of total business return into the annual bonus and an increased weighting on revenue profit will ensure that the delivery of
absolute returns through pro-active portfolio management and income generation will be incentivised and rewarded. Total property return will
no longer be used as a bonus metric given that it is not considered to be well-aligned to the new strategy. Furthermore, the relative nature of
the targets and measurement against third party data is no longer considered to be an effective incentive. Performance metrics, weightings and
targets in respect of 2021 LTIP awards, which are expected to be granted over shares up to 300% of salary, are set out below:
Landsec // Annual Report 2021 » Governance LTIP 2021-2024: Performance criteria
Measure
Relative Total
Shareholder
Return (TSR)
Total business return
(TBR)
ESG
Weighting
40%
Description
TSR relative to the constituents of the FTSE 350 Real Estate
Index, measured over a three-year period, from 1 April 2021
Performance range1
Threshold (8%)
Median
40%
20%
Growth in EPRA NTA per share over the performance period as adjusted
for dividends
Threshold (8%)
4% p.a.
Reduction of carbon emissions over the performance period aligned to
achieve our published science based target to achieve net zero by 2030
Threshold (4%)
15%
1. Vesting takes place on a straight line basis between threshold and maximum values.
Table 55
Maximum (40%)
Upper quartile
Maximum (40%)
10% p.a.
Maximum (20%)
20%
The approach for 2021 LTIP awards reflects both Landsec’s focus on delivering returns to shareholders through the cycle combined with our
industry-leading approach to sustainability and our ambition to be a net zero carbon business by 2030. The approach to relative TSR will be
simplified with a more conventional, unweighted, median to upper quartile vesting schedule and total business return targets have replaced
relative total property return for a closer alignment to strategy and a clear line of sight for management. The 2021 LTIP award will be set at
300% of salary for the CEO and CFO and 250% of salary for the COO (the COO award level will be kept under review and may be increased
for future grants).
5. TOTAL SHAREHOLDER RETURN AND CHIEF EXECUTIVE PAY
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 2021, of £100 invested in Landsec on 31 March 2011, compared with the value of £100 invested in the
FTSE 100 and FTSE 350 Real Estate Indices on the same date.
196.0
184.1
132.6
177.1
172.4
125.6
155.2
149.9
124.7
176.4
171.8
154.9
185.3
162.8
155.2
184.8
167.4
167.2
Chart 56
187.0
166.3
135.3
157.9
136.4
106.3
Total Shareholder Return
200
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
150
100
50
0
122.1
117.6
116.9
102.5
101.2
96.6
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Land Securities Group PLC
FTSE 100
FTSE 350 Real Estate
The following table shows remuneration for the Chief Executive over a period of ten years.
Chief Executive remuneration over ten years
Year
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
Chief Executive
Mark Allan
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Francis Salway
1. Includes £1,692,042 in relation to buyout awards made on appointment.
Page
129
Single figure
of total
remuneration
(£000)
2,9201
1,569
1,624
1,693
2,692
2,011
4,776
2,274
2,678
2,769
Annual bonus
payment
(% of maximum)
16.2
43.8
50.5
58.8
58.8
67.5
94.5
71.0
86.0
24.0
Table 57
Long-term
incentive vesting
(% of maximum)
n/a
0.0
0.0
0.0
50.0
13.1
84.7
62.5
76.1
85.9
Landsec // Annual Report 2021 » Governance
Annual Report
on Remuneration
continued
Page
130
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 17 most senior employees (excluding the Executive Directors) is expected to
range from 17% to 27% of salary (2020: 27% to 50%). The average bonus is expected to be 19.7% of salary (2020: 37%). The LTIP awards
made to senior management in June 2018 will vest on the same basis as the awards made to Executive Directors.
b. All other employees
Standard pay increases for employees were not awarded due to the continued impact of the pandemic. However, moderate pay increases were
awarded to lower earners and to a small number of employees whose salaries had variances against the market. As at 31 March 2021, the ratio
of the base salary of the Chief Executive to the average base salary across the Group (excluding Executive Directors) was 12:1 (£800,000: £67,839).
c. Percentage change in remuneration between Directors and employees
The table below shows the year on year percentage change in salary, benefits and annual bonus earned between 31 March 2020 and
31 March 2021 for all Directors compared to all employees.
Executive Directors
Mark Allan
Martin Greenslade
Colette O’Shea
Non-executive Directors
Cressida Hogg
Stacy Rauch
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain
Manjiry Tamhane
Average employee
Salary change
(%)
Benefits change
(%)
Table 58
Bonus change
(%)
n/a
-5%
3%
-5%
-5%
-15%
-5%
-5%
16%
n/a
7%
n/a
-16%
-3%
n/a
0%
n/a
n/a
n/a
n/a
n/a
6%
n/a
-64%
-65%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-49%
d. CEO pay ratio
The tables below show 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 121.
Mark Allan was appointed CEO on 14 April 2020. Prior to this the CEO was Robert Noel.
Year
2021
2020
2019
Method
Option A1
Option A
Option A
e. Total pay and benefits
Year
2021
2020
2019
CEO
£1,027,5871
£1,569,474
£1,624,153
25th percentile pay ratio
22:1
36:1
38:1
Table 59
Median pay ratio
14:1
23:1
25:1
75th percentile pay ratio
10:1
15:1
16:1
25th percentile pay
£45,752
£44,140
£42,859
Median pay
£73,212
£69,393
£64,694
Table 60
75th percentile pay
£105,848
£104,438
£98,886
1. The pay ratio and total pay and benefits figures exclude all one-off recruitment related awards which are detailed on page 121.
Landsec // Annual Report 2021 » Governance f. Salary component of total pay
Year
2021
2020
2019
CEO
£733,3331
£811,620
£797,108
25th percentile pay
£39,000
£29,785
£33,667
Median pay
£55,776
£58,565
£51,167
Table 61
75th percentile pay
£77,000
£79,203
£73,750
1. Actual salary earned during the year after a 20% voluntary reduction between May and July 2020 due to the impact of Covid-19. See table 52 for details of annual salary.
Figures are calculated by reference to 31 March 2021 using actual pay data from April 2020 to March 2021. 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.
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 2021
(£m)
49
200
March 2020
(£m)
51
172
Table 62
%
change
-3.9
16.3
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 1,224,468 shares at 31 March 2021.
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 2021, the total number
of shares which could be allotted under this Scheme was 666,526 shares, which represents less than 0.09% 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 two additional meetings as a result of the CFO
appointment process. All members attended all the scheduled meetings. Christophe Evain replaced Edward Bonham Carter as the
Chairman from 6 May 2020. The other members during the year were Cressida Hogg, Stacey Rauch and Edward Bonham Carter. The
Committee meetings were also attended by the Chief Executive, the Managing Director, People and Corporate Services and the Group
General Counsel and Company Secretary who acted as the Committee’s Secretary.
From July 2020 the Committee received advice on remuneration and ancillary legal matters from FIT Remuneration Consultants LLP
(previous advice was provided by Aon plc). 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 Managing Director,
People and Corporate Services. FIT and Aon are members of the Remuneration Consultants Group and are signatories to its Code of
Conduct, which requires their advice to be impartial. The Committee is satisfied that the advice it receives is independent and objective.
Aside from some support in benchmarking remuneration for roles below the Board, the remuneration advisers have no other connection
with the Group. For the financial year under review Aon and FIT received fees of £32,386 and £78,184 respectively in connection with advice
provided to the Committee.
9. SHAREHOLDER VOTING
Annual Report on Remuneration (2020 AGM)
Directors’ Remuneration Policy (2018 AGM)
1. A vote withheld is not a vote at law.
% of votes
For
89.7
99.4
% of votes
Against
10.3
0.6
Table 63
Number of
votes
withheld1
580,726
651,391
The Directors’ Remuneration Report was approved by the Board on 17 May 2021 and signed on its behalf by:
CHRISTOPHE EVAIN
CHAIRMAN, REMUNERATION COMMITTEE
Page
131
Landsec // Annual Report 2021 » Governance Directors’
Remuneration Policy
Page
132
OUR NEW POLICY
In approaching the renewal of the Directors’
Remuneration Policy (the Policy), the
Remuneration Committee (the Committee)
thought carefully about the behaviours
and outcomes it wishes to see and how the
remuneration structure will support them.
When setting the pay policy for Executive
Directors, the Committee also considered
pay practices and policies of the wider
workforce in order to ensure the revised
policy is proportionate and aligned with
Landsec’s culture. The review was
approached with the following main aims:
› Remuneration should be clearly linked
to the Group’s purpose of creating
Sustainable places, Connecting
communities, Realising potential
› Remuneration should reward and drive
the right behaviours and outcomes and
reflect strategic, personal and financial
achievements
› Remuneration should be designed in a
manner that is clear for all stakeholders
and reflects their expectations
› Remuneration should be easy to explain
and be viewed as fair
› Remuneration should be based on a
pay-for-performance model
REMUNERATION PRINCIPLES
Our remuneration principles, which we also
aim to cascade throughout the business,
underpin our Policy. These principles are
that our remuneration should:
› Support the long-term success of the
business and sustainable long-term
shareholder value
› Materially differentiate reward according
to performance
› Be relevant, stretching and aligned to
the business strategy and achievement
of planned business goals
› Be compatible with Landsec’s risk
policies and systems, with malus and
clawback provisions in place for all
forms of variable pay
› Provide a balance between attracting,
retaining and motivating talented people
as well as supporting equal opportunity
and diversity of talent
› Ensure that performance-related pay
constitutes a proportion of the overall
package appropriate to each level of
the organisation
› Be clear and explainable to appropriate
stakeholders, avoiding paying more than
the Committee considers necessary
CONSIDERATION OF SHAREHOLDER VIEWS
The Committee values the views of
Landsec’s shareholders and guidance from
the main shareholder representative bodies.
As such, the Committee proactively consults
with our major shareholders to ensure that
their views are represented in discussions
on remuneration matters. As part of the
process for renewing the Policy, the
Committee consulted with Landsec’s top 20
shareholders as well as the major shareholder
representative bodies on a set of draft
proposals. The proposed Policy reflects
guidance received from major investors
and representative bodies during the course
of the engagement process.
Landsec // Annual Report 2021 » Governance As part of its review of the Policy, the Committee has considered the factors set out in provision 40 of the UK Corporate Governance Code.
In the Committee’s view, the proposed Policy addresses those factors as set out below:
Factor
Clarity
Description
Approach
Remuneration arrangements should be
transparent and promote effective
engagement with shareholders and the
workforce and link to strategy
› The Policy and arrangements are clearly disclosed in the Annual Report
› The Committee proactively seeks engagement with shareholders on remuneration matters
› The Committee is regularly updated on Landsec’s workforce pay and benefits
› The Committee regularly receives updates on the key performance indicators of
the business
› The Committee Chairman proactively seeks engagement with Landsec’s Employee
Forum on remuneration matters
Simplicity
Remuneration structures should avoid
complexity and their rationale and
operation should be easy to understand
› Our remuneration structure comprises fixed and variable remuneration, with the
performance conditions for variable elements clearly communicated to, and
understood by, participants
Risk
Predictability
Proportionality
Remuneration arrangements should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can
arise from target-based incentive plans,
are identified and mitigated
The range of possible reward values to
individual directors and any other limits or
discretions should be identified and
explained at the time of approving the
policy
The link between individual awards, the
delivery of strategy and the long-term
performance of the company should be
clear. Outcomes should not reward poor
performance
Alignment
to culture
Incentive schemes should drive behaviours
consistent with company purpose, values
and strategy
› Remuneration principles are published and clearly linked to strategy
› The rules of the remuneration plans provide discretion to the Committee to reduce
award levels (see page 141)
› Awards are subject to malus and clawback provisions (see page 138)
› The Committee also has overriding discretion to reduce awards to mitigate against
any reputational or other risk from such awards being considered excessive
› See scenario charts on page 137
› Maximum award levels and discretions are set out in the Policy Table on pages 135-136
› As shown in the scenario charts on page 137, variable performance related elements
represent a significant proportion of the total remuneration opportunity for our
Executive Directors
› The Committee considers the appropriate financial and personal performance
measures each year to ensure that there is a clear link to strategy
› Discretions available to the Committee ensure that awards can be reduced if necessary
to ensure that outcomes do not reward poor performance
› The Committee seeks to ensure that personal performance measures under the annual
bonus plan incentivise behaviours consistent with Landsec’s culture, purpose and values
› Long-term incentives will align Executive Director interests with those of shareholders
by ensuring a focus on delivering against strategy and purpose to generate long-term
value for shareholders
The Committee will operate within the prevailing Remuneration 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 Policy,
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 be explained clearly in the following year’s Annual Report on Remuneration.
Page
133
Landsec // Annual Report 2021 » Governance Directors’
Remuneration Policy
continued
Page
134
SUMMARY OF MAIN POLICY CHANGES SUBJECT TO APPROVAL AT THE 2021 AGM
EXECUTIVE REMUNERATION
Base salary
Benefits
Pension
› No changes proposed
› No changes proposed
› Workforce aligned pension provision (10.5% of salary) for both incumbent and newly appointed Executive
Directors
Annual bonus and LTIP
› Introduction of greater flexibility to select appropriate metrics to align with business strategy
Share ownership
› CEO minimum shareholding requirement increased to 300% of salary
› Formalisation of post cessation shareholding guidelines
NON-EXECUTIVE REMUNERATION
Base fee
› Chairman’s fee set by the Remuneration Committee, rather than the Board (as previously)
Additional fees
› No changes proposed
Benefits & incentives
› No changes proposed
Share ownership
GOVERNANCE
› No changes proposed
Malus and clawback
› Malus and clawback triggers enhanced
Recruitment arrangements
› Introduction of provisions for payment of legal fees in connection with agreeing employment terms
Termination arrangements
› Introduction of provisions for legal fees in connection with agreeing termination arrangements
› Introduction of provisions for outplacement assistance
Page
135
135
135
135-136
139
139
139
139
139
138
141
140
The Policy as set out in the following pages will take effect from the conclusion of the 2021 AGM subject to approval by the shareholders at
that meeting. It is intended that this Policy will remain applicable for the following three financial years albeit the Committee will regularly
review that it remains appropriate in light of Landsec’s strategy and the broader remuneration landscape.
Landsec // Annual Report 2021 » Governance PROPOSED REMUNERATION POLICY
1. Executive Directors
Base salary
Purpose and link
to strategy
Operation
Opportunity
› 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
Normally reviewed annually, with effect from 1 June, and reflects:
› Increases throughout the rest of the business
› Market benchmarking exercises 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
The maximum annual salary increase will not normally exceed the average increase across the rest of the workforce.
Higher increases will be exceptional, and may be made in specific circumstances, including:
› Where there is an 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
Performance measures
› Individual and Company performance is taken into account when determining appropriate salary increases
Benefits
Purpose and link
to strategy
Operation
› To provide protection and market competitive benefits to aid recruitment and retention of high performing
Executive Directors
Typical benefits include, but are not limited to:
› Car allowance
› Private medical insurance
› Life assurance
› Ill health income protection
› Holiday and sick pay
› Eligibility to participate in all-employee share incentive plans
› Professional advice in connection with their directorship
› Travel, subsistence and accommodation as necessary
› Occasional gifts, for example appropriate long service or leaving gifts
Opportunity
› The value of benefits may vary from year to year depending on the cost to the Company
Performance measures
› n/a
Pension
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
› Participation into a defined contribution pension scheme or cash equivalent
Opportunity
› 10.5% of salary1, in line with the maximum employer contribution for all employees in the Company’s Group Personal Pension Plan
Performance measures
› n/a
Annual bonus
Purpose and link
to strategy
› Incentivise Executive Directors and senior management to achieve specific, predetermined goals during a one-year period, or less
› Rewards financial and individual performance linked to the Company’s strategy
› Deferred proportion of bonus, awarded in shares, provides a retention element and additional alignment of interest
with shareholders
Operation
› The annual bonus operates by reference to financial and personal performance measures normally set and assessed over one year
› Any bonus payment is determined by the Committee after the year end, based on performance against challenging targets
which are reviewed annually
› The achievement of on-target performance should normally result in a payment of up to 50% of the maximum opportunity
› Bonuses up to 50% of salary are normally 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
› Dividend equivalents may be awarded on deferred shares between grant and vesting to the extent that awards vest
› Bonus payments are not pensionable
› Malus and clawback provisions apply (see page 138)
› The level of payout at threshold performance for each performance measure is set annually, but will typically be no more than
25% of maximum
› The Committee retains discretion to amend the payout level (up or down) where it considers it to be appropriate, but not so as to
exceed the maximum bonus potential and will fully disclose the exercise of any discretion in the Annual Report on Remuneration
that follows such exercise of discretion
1. Martin Greenslade’s pension contribution will remain at 20% of salary until his retirement on 29 September 2021.
Page
135
Landsec // Annual Report 2021 » Governance Directors’
Remuneration Policy
continued
Page
136
Annual bonus – continued
Opportunity
› 150% of salary
Performance measures
› The performance measures applied may be financial, non-financial, or individual, and in such proportions as the Remuneration
Committee considers appropriate, although individual measures will form a minority of the potential
› Performance measures will be aligned to the Company’s strategy. The Committee reserves the right to change measures
(and their weightings) for each financial year to ensure the metrics chosen are appropriate means of assessing the performance
of the Executive Directors
› Once set, performance measures and targets will generally remain unchanged for the year, exceptionally targets may be
adjusted by the Committee to take account of significant transactions such as acquisitions and/or disposals or in other
exceptional circumstances such as timing of transactions that have a material impact on the business plan
Long-term incentive
Purpose and link
to strategy
› Incentivises value creation over the long-term
› Rewards execution of our strategy
› 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, normally over
a three-year period and continued employment
› The Committee reviews the measures, their relative weightings and targets prior to each award
› For each measure, no awards vest for performance below threshold
› Up to 20% of an award may vest for threshold performance
› Each measure is capped at 100% vesting, which represents a stretching target
› Executive Directors are required to hold vested awards (net of tax/NI where relevant) for a further two years
(including post-cessation) following the three-year vesting period expiry
› Dividend equivalents may be awarded between grant and the expiry of any holding period to the extent that the award vests
› Malus and clawback provisions apply (see page 138)
Opportunity
› 300% of salary
Performance measures
› The performance measures applied may be financial, non-financial, corporate or strategic and in such proportions as the
Remuneration Committee considers appropriate
› The measures may be based on a mixture of relative and absolute financial performance as well as one or more measures to
recognise the Company’s broader strategic ESG commitment
NOTES TO POLICY TABLE:
PERFORMANCE MEASURES AND TARGET SETTING
Full details of the performance conditions and targets applying for each award will be disclosed in the relevant Annual Report on Remuneration.
Where targets are considered to be too sensitive to disclose in advance for commercial reasons, full disclosure of the original targets, and the
extent to which they have been achieved, will be provided on a retrospective basis at the end of the relevant performance period.
PRIOR POLICY ARRANGEMENTS
In approving the Policy, authority is given to the Company to honour any commitments entered into with current or former Directors that
have been disclosed previously to shareholders.
Landsec // Annual Report 2021 » Governance Remuneration scenarios for each Executive Director
Table 64
Mark Allan
Chief Executive
(£000)
Colette O’Shea
Chief Operating Officer
(£000)
Vanessa Simms
Chief Financial Officer
(from 1 June 2021)
(£000)
6,000
5,000
4,000
3,000
2,000
1,000
0
Element of pay
Basic salary
Pension
Benefits
Annual bonus
Long-term incentives
Share price
appreciation
Total
63%
53%
27%
21%
45%
22%
100%
33%
20%
Minimum
Target
Maximum
Minimum
(£000)
Target
(£000)
Maximum
(£000)
800
84
21
0
0
0
800
84
21
600
1,200
0
800
84
21
1,200
2,400
0
16%
Max+
Max+
(£000)
800
84
21
1,200
2,400
1,200
45%
22%
33%
100%
53%
27%
20%
Minimum
Target
Maximum
Minimum
(£000)
Target
(£000)
Maximum
(£000)
480
50
19
720
480
50
19
0
0
0
480
50
19
360
720
0
1,440
1,440
0
720
63%
21%
16%
Max+
Max+
(£000)
480
50
19
720
45%
22%
33%
100%
53%
27%
20%
Minimum
Target
Maximum
Minimum
(£000)
Target
(£000)
Maximum
(£000)
490
51
20
0
0
0
490
51
20
368
735
0
490
51
20
735
1,470
0
63%
21%
16%
Max+
Max+
(£000)
490
51
20
735
1470
735
905
2,705
4,505
5,705
549
1,629
2,709
3,429
561
1,664
2,766
3,501
Assumptions used in determining the level of payout under given scenarios are as follows:
› Minimum remuneration comprises base salary at 1 June 2021, estimated annual benefits and 10.5% of salary pension contribution (fixed pay).
› Target remuneration comprises fixed pay, 50% of the 2021/22 annual bonus and 50% vesting of the 2021 LTIP awards.
› Maximum remuneration comprises fixed pay, 100% of the 2021/22 annual bonus and 100% vesting of the 2021 LTIP award based on a
face value of 300% of salary (although it should be noted that the COO’s 2021 LTIP award will be set at 250% of salary and this award
level will be kept under review).
› Maximum+ comprises maximum pay plus 50% share price appreciation on LTIP awards.
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.
Year Commencing:
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
Following the end
of the base year,
annual bonus
awarded up to
50% of salary is
normally paid in
cash
One year after the
cash bonus is
paid, the first
deferred portion
of annual bonus
(i.e. between 50%
and 100% of
salary) vests
Two years after
the cash bonus is
paid, the second
deferred portion
of annual bonus
(i.e. awards in
excess of 100%
of salary) vests
Long-term
incentive
Performance period
LTIP awards vest
but remain subject
to a two-year
holding period
Holding period on
LTIP awards ends
Share ownership
CEO: 300% of salary. Other Executive Directors: 200% of salary
Executive Directors are expected to maintain a shareholding equivalent to their in-employment shareholding requirement for a
period of two years from the date of cessation
Page
137
Landsec // Annual Report 2021 » Governance Directors’
Remuneration Policy
continued
Page
138
2. STATEMENT OF CONSIDERATION OF
EMPLOYMENT CONDITIONS ELSEWHERE
IN THE COMPANY
The 2021 Policy is designed in line with
the remuneration principles outlined on
page 132 above. In setting the remuneration
of the Executive Directors, the Committee
takes into account the overall approach
to reward for employees in the Group.
Landsec operates in a number of different
environments and has many employees
who carry out diverse roles across a number
of locations. All employees, including
Directors, are paid by reference to the
market rate and base salary levels are
reviewed regularly. When considering salary
increases for Executive Directors, the
Company pays close attention to pay and
employment conditions across the wider
workforce. The Group’s MD, People &
Corporate Services regularly updates the
Committee on pay and conditions applying
to the wider workforce. During 2020, the
Committee received specific updates on
Gender Pay Reporting and pay ratios. The
Committee does not formally consult with
employees on the executive remuneration
policy, although the Committee Chair
meets with the Employee Forum. The
Company also holds regular forums with
employee groups and conducts regular
employee engagement surveys, the results
of which are presented to the Board.
Remuneration arrangements for employees
below Board level reflect the seniority of
the role.
3. MALUS AND CLAWBACK PROVISIONS
All incentive scheme rules contain malus
and/or clawback provisions that allow the
Committee to reduce or retrieve a payment
or an award.
MALUS
Malus is the adjustment of annual bonus
payments or unvested share awards
because of the occurrence of one or more
circumstances listed below. The adjustment
may result in the value being reduced to nil.
CLAWBACK
Clawback is the recovery of payments made
under the annual bonus plan or vested
share awards as a result of the occurrence
of one or more circumstances listed below.
Clawback may apply to all or part of an
Executive Director’s payment/award and
may be effected, among other means, by
requiring the transfer of shares, payment
of cash or reduction of awards or bonuses.
The Remuneration Committee may apply
malus/clawback when there are exceptional
circumstances. Such exceptional
circumstances include (without limitation):
› a material mis-statement in the published
results of the Group or one of its members;
› an error in assessing any applicable
performance condition or the number
of shares subject to an award;
› misconduct on the part of the Executive
Director concerned;
› where, as a result of an appropriate review
of accountability, the Remuneration
Committee determines that the Executive
Director has caused wholly or in part a
material loss for the Group as a result of
(i) reckless, negligent or wilful actions or
omissions; or (ii) inappropriate behaviour;
› where, as a result of an appropriate review
of accountability, the Remuneration
Committee determines that the Executive
Director has caused wholly or in part
a corporate failure of the Group or one
of its members;
› a Group member being censured by a
regulatory body;
› events or behaviour on the part of the
Executive Director leading to significant
reputational damage to the Group; or
› any other events that the Remuneration
Committee considers specifically relevant
to Landsec, e.g. serious health and safety
event or an exceptional negative event.
Landsec // Annual Report 2021 » Governance 4. NON-EXECUTIVE DIRECTORS
Base fee
Purpose and
link to strategy
› To aid the recruitment, retention and motivation of Non-executive Directors of appropriate calibre and experience
› 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
› Non-executive Director fees are reviewed (but not necessarily changed) annually by the Board, having regard to independent advice
and published surveys
› The Chairman’s fee is reviewed (but not necessarily changed) annually by the Remuneration Committee without the Chairman present
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
› 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
Operation
› Reviewed (but not necessarily changed) annually by the Board, having regard to independent advice and published surveys
Opportunity
› 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 time
commitment required
Other incentives and benefits
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
5. SHARE OWNERSHIP GUIDELINES
SHARE OWNERSHIP DURING EMPLOYMENT
The Chief Executive and all other Executive
Directors are expected to accumulate and
maintain a holding in ordinary shares in the
Company equivalent to no less than 300%
of base salary for the CEO and 200% for
other Executive Directors.
SHARE OWNERSHIP POST CESSATION
On leaving the Board, Executive Directors
are expected to maintain a shareholding
equivalent to their in-employment
shareholding requirement for a period
of two years from the date of cessation.
Shares acquired by the Executive are
excluded from this calculation.
Executive Directors are normally 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.
An annual calculation as a percentage of
salary is made against the guidelines for
each Executive Director as at 31 March each
year based on the closing middle market
quotation of a share price on the last
business day in March.
NON-EXECUTIVE DIRECTOR SHARE
OWNERSHIP
Non-executive Directors are expected
to meet a minimum shareholding
requirement of 100% of the relevant annual
fee 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.
6. DIRECTORS’ SERVICE AGREEMENTS
AND LETTERS OF APPOINTMENT
EXECUTIVE DIRECTORS’ LETTERS
OF APPOINTMENT
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.
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.
Full details of the terms of appointment
of each Director can be found on page 127
of the Remuneration Report.
Page
139
Landsec // Annual Report 2021 » Governance Directors’
Remuneration Policy
continued
Page
140
7. TERMINATION PROVISIONS FOR
EXECUTIVE DIRECTORS
The Company’s policy is for Executive
Directors’ Service Agreements to be
terminable on 12 months’ notice by either
party. Service Agreements contain non-
compete and non-solicit clauses with key
suppliers and employees. In the event of
early termination, any payment in lieu of
notice would be limited to 12 months’ basic
salary, normally payable on a phased basis
and subject to mitigation.
In addition to the scenarios below, 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 Committee retains discretion to
determine the exact termination
arrangements of any Executive Director,
having regard to all the relevant facts and
circumstances available to them at the time.
The table below sets out the general position
and range of approaches in respect of
incentive arrangements. In accordance with
the terms of the relevant incentive plan
rules, based on the circumstances of any
departure, the Committee has discretion
to determine how an Executive Director
should be categorised for each element and
determine payout/vesting levels accordingly
based on the range as shown.
Provision
Salary
Benefits
Pension
allowance
Default leaver
Good leaver
› 12 months’ basic salary normally payable in instalments and
› 12 months’ basic salary normally payable in instalments and
subject to mitigation
subject to mitigation
› Cease upon termination of employment contract
› No compensation for loss of benefits
› Cease upon termination of employment contract
› No compensation for loss of benefits
› Ceases upon termination of employment contract
› The Company does not make any arrangements that
guarantee pensions with limited or no abatement on
severance or early retirement
› Ceases upon termination of employment contract
› The Company does not make any arrangements that guarantee
pensions with limited or no abatement on severance or early
retirement
Annual bonus
› No entitlement following date notice served
› Unvested deferred bonus shares lapse on cessation
› Bonus may be payable subject to performance
› Bonus is normally pro-rated based on the period worked during
LTIP
› Awards lapse in full
the financial year
› Payment usually occurs following the financial year end, in line
with the wider workforce
› Deferred share awards normally vest on the scheduled date,
unless the Committee determines that awards should vest earlier
› Unvested awards normally vest at the normal time subject to
performance unless the Committee determines otherwise
› Awards are normally pro-rated by reference to the proportion of
the performance period that has elapsed up to cessation, unless
the Committee determines otherwise
› Awards remain subject to any applicable retention period
All-employee
share schemes
Termination
support
Compensation
for loss of office
› Operate in line with HMRC rules
› Operate in line with HMRC rules
› None
› None
› One-off payments in respect of legal fees and/or outplacement
assistance may be payable
› None
Consistent with market practice, the
Company may pay reasonable legal fees
(and any associated tax costs) on behalf
of the Executive Director for entering into
a statutory settlement agreement and,
additionally, may make a reasonable
contribution towards fees for outplacement
services as part of a negotiated settlement.
In the case of a corporate transaction,
the Company may agree to pay reasonable
legal fees (and any associated tax costs)
on behalf of the Executive Director for
advice on the effect of the corporate
transaction on the Executive Director’s
personal position as a director (including,
where appropriate, as to the terms of their
employment). The Company may agree
to pay reasonable legal fees (and any
associated tax costs) on behalf of the
Executive Director for advice related to
any proposed changes to their terms and
conditions of employment during their
period of employment.
Landsec // Annual Report 2021 » Governance › setting performance targets for the
various criteria, and adjusting these if
necessary
› adjusting the constituents of the
comparator groups in respect of relative
performance measures, if necessary
› determining the extent of payment/
vesting based on the assessment of
performance
› determining ‘good leaver’ status and the
extent of payment/vesting in the case of
the bonus and share-based plans
› determining the treatment of awards
under share-based plans in the event of
a change of control
› 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 not reflect underlying Company
performance.
8. CHANGE OF CONTROL PROVISIONS
On a change of control, unvested LTIP
awards will normally vest subject to
performance and time pro-rating (although
the Committee may allow a greater number
of shares to vest than if pro-rating is applied
where appropriate) and unvested deferred
bonus shares vest in full. The contracts of
the Executive Directors do not provide for
any enhanced payments in the event of a
change of control of the Company or for
liquidated damages.
9. 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 Policy in force at the
time of appointment.
FIXED PAY
› The Committee has the flexibility to set
the base salary of a new hire at the
market level or 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.
› In exceptional circumstances the salary of
a newly appointed Executive Director may
exceed the market median benchmark for
the role.
VARIABLE PAY
› The annual bonus will operate in
accordance with the terms of the
approved Policy, 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 revised performance measures and
targets initially.
› The LTIP will also operate in accordance
with the approved Policy.
The maximum level of variable pay that
may be offered to a new Executive Director
is 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 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
Page
141
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.
RELOCATION ALLOWANCE
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.
LEGAL FEES
On recruitment of an Executive Director,
the Company may make a contribution
towards legal fees in connection with
agreeing employment terms and drawing
up a service contract.
Shareholders will normally be informed
of the remuneration package and all
additional payments to newly-appointed
Executive Directors at the time of their
appointment.
10. 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
Landsec // Annual Report 2021 » Governance Directors’
Report
The Directors present their report for the
year ended 31 March 2021.
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
Table 65
Pages
8-11
62-63
78-79
83-141
168
189
Credit, market and liquidity risks
189-193
Related party transactions
Energy and carbon reporting
Workforce engagement
Stakeholders
Section 172 Statement
203-204
217-223
96
16-17
94-95
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 UK
laws. It has a premium listing on the London
Stock Exchange main market for listed
securities (LSE: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.
Page
142
DIVIDENDS
The results for the year are set out in the financial statements on pages 145-204.
The Company has paid two interim dividends to shareholders for the year under review.
No first interim dividend was paid due to the pandemic but a second interim dividend of
12 pence was paid which reflected a 6 pence dividend for each of the first two quarters of
the year. This was paid to shareholders in January 2021. A third interim dividend of 6 pence
per share was paid to shareholders on 30 March.
1st Interim
2020/21
2nd Interim
2020/21
3rd Interim
2020/21
Final 2020/21
(proposed)
Table 66
Property Income
Distribution (PID)/
Non-PID
None issued
12 pence PID
(representing
6 pence each for the
first two quarters)
6 pence (PID)
9 pence (PID)
Record date
Payment date
–
–
27 November 2020 26 February 2021 18 June 2021
4 January 2021
30 March 2021
23 July 2021
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 83-86.
All the Directors proposed for re-election
held office throughout the year except
Vanessa Simms who joined the Board on
4 May 2021 and Manjiry Tamhane who
joined the Board on 1 March 2021.
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 139.
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
2021 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.
Landsec // Annual Report 2021 » Governance DIRECTORS’ 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 2021, 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 9 July 2020,
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 2021 AGM and a renewal of that
authority will be sought. The Company
received no other DTR notifications by
way of change to the information in the
substantial shareholders table during the
period from 1 April to 17 May 2021, 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
Investor section 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 purchased 500,000 shares in
total in the market during the year. On 17 July 2020, 125,907 ordinary shares were purchased
at a price of £5.48 per share. On 20 July 2020, 124,093 ordinary shares were purchased at a
price of £5.50 per share. On 2 September 2020, 250,000 ordinary shares were purchased at
a price of £5.63 per share. The EBT released 233,224 shares during the year to satisfy vested
share plan awards. At 31 March, the EBT held 1,224,468 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. 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.
SUBSTANTIAL SHAREHOLDERS
As at 31 March 2021, 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 67
Shareholder name
BlackRock, Inc.
Norges Bank Investment Management
The Vanguard Group, Inc.
Legal & General Investment Management Ltd
State Street Global Advisors Ltd
Number of
ordinary shares
Percentage of total voting rights
attaching to issued share capital1
87,509,883
68,192,775
32,321,373
26,576,963
25,642,648
11.82
9.20
4.36
3.58
3.46
1. The total number of voting rights attaching to the issued share capital of the Company on 31 March 2021 was
741,473,884.
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 2021 AGM.
These documents are available on Landsec’s
website at: www.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.
Page
143
Landsec // Annual Report 2021 » Governance Directors’
Report
continued
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 Modern Slavery
Statement was approved by the Board on
22 September 2020 and posted on our website
on 30 September 2020.
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 59-61.
POLITICAL DONATIONS
The Company did not make any political
donations or expenditure in the year that
require disclosure (2020: 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 2021
AGM. The reappointment has been
recommended to the Board by the Audit
Committee and EY has indicated its
willingness to remain in office.
2021 ANNUAL GENERAL MEETING
This year’s AGM is scheduled to be held
at 10.00 am on Thursday, 8 July 2021
at 80 Victoria Street, London SW1E 5JL.
Due to Covid-19 restrictions we strongly
encourage our stakeholders to attend
virtually. Shareholders will be able to
watch presentations from our Chairman
and CEO, ask questions and cast their
votes online. We request that shareholders
who do wish to attend in person pre-
register their intention to attend to help
us manage numbers.
Page
144
We will continue to monitor the impact of
the pandemic, with the health and safety
of our shareholders, Directors and
employees 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 www.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: www.landsec.com/agm.
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 17 May 2021.
By Order of the Board.
LIZ MILES
COMPANY SECRETARY
Land Securities Group PLC
Company number 4369054
Landsec // Annual Report 2021 » Governance 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 the
requirements of the Companies Act 2006.
Under the Financial Conduct Authority’s
Disclosure Guidance and Transparency Rules,
group financial statements are required to
be prepared in accordance with international
financial reporting standards (IFRSs)
adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European
Union. 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;
› in respect of the Group financial
statements, state whether international
accounting standards in conformity with
the requirements of the Companies Act
2006 (and IFRSs adopted pursuant to
Regulation (EC) No 1606/2002 as it applies
in the European Union) have been followed,
subject to any material departures disclosed
and explained in the financial statements;
› in respect of the Company financial
statements, state whether international
accounting standards in conformity with
the requirements of the Companies Act
2006 have been followed, subject to
any material departures disclosed and
explained in the financial statements;
› 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
international accounting standards in
conformity with the requirements of the
Companies Act 2006 (and IFRSs adopted
pursuant to Regulation (EC) No 1606/2002
as it applies in the European Union) give a
true and fair view of the assets, liabilities,
financial position, performance and cash
flows of the Company and Group as a
whole; and
› 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 www.landsec.com. Information
published on the internet is accessible
in many countries with different legal
requirements. Legislation in the United
Kingdom governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
The Directors of Land Securities Group PLC
as at the date of this announcement are
as set out below:
› Cressida Hogg, Chairman*
› Mark Allan, Chief Executive
› Martin Greenslade, Chief Financial Officer
› Vanessa Simms, Chief Financial Officer
Designate
› Colette O’Shea, Chief Operating Officer
› Edward Bonham Carter, Senior
Independent Director*
› Nicholas Cadbury*
› Madeleine Cosgrave*
› Christophe Evain*
› Stacey Rauch*
› Manjiry Tamhane*
*Non-executive Directors
The Statement of Directors’ Responsibilities
was approved by the Board of Directors on
17 May 2021 and is signed on its behalf by:
MARK ALLAN
CHIEF EXECUTIVE
MARTIN GREENSLADE
CHIEF FINANCIAL OFFICER
Page
145
Landsec // Annual Report 2021 » Financial statements Page
146
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 2021 and of the Group’s loss for the
year then ended;
› the Group financial statements have been properly prepared in accordance with International Accounting Standards in conformity with
the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC)
No.1606/2002 as it applies in the European Union;
› the Parent Company financial statements have been properly prepared in accordance with International Accounting Standards in
conformity with the requirements of the Companies Act 2006 as applied in accordance with section 408 of the Companies Act 2006; and
› the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Land Securities Group PLC (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for the
year ended 31 March 2021 which comprise:
Group
Parent Company
Consolidated balance sheet as at 31 March 2021
Balance sheet as at 31 March 2021
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
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 Accounting Standards in
conformity with the requirements of the Companies Act 2006 and, as regards to the Group financial statements, International Financial
Reporting Standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the European Union and as regards the Parent
Company financial statements, as applied in accordance with section 408 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.
We are independent of the Group 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 GOING CONCERN
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue
to adopt the going concern basis of accounting included the following:
› We assessed the risk around going concern at the interim half year review, in planning our audit and again at the year-end phase.
› We confirmed our understanding of the process followed by Management to prepare the Group’s going concern assessment, including
assessing the ongoing impact of the Covid-19 pandemic, the resulting Government restrictions and lockdowns and financial pressures
on tenants leading to increased credit risk and rent concessions.
› We checked the logic and arithmetical accuracy of the models developed by Management for the base case cashflow and liquidity
forecasts and covenant calculations covering the going concern review period to 31 May 2022 and the additional downside scenarios.
› For each of the modelled scenarios, we challenged the key assumptions by checking to corroborative evidence and searching out
independent contradictory evidence. We assessed Management’s consideration of downside sensitivity analysis and applied further
sensitivities where appropriate to stress test the impact on liquidity.
› We checked that the terms and conditions of the debt agreements with lenders had been appropriately incorporated into the going
concern scenarios and modelling, including the maturity profile of the Group’s borrowings, the impact of the Security Group structure
and the tiered operating covenant regime.
› 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 through the going concern period. We performed 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 in assessing the remoteness of movements in rental and valuation assumptions.
› We reviewed the disclosures in the financial statements relating to going concern (including the impact of Covid-19) with a view to confirming
that they appropriately disclose the risk, the impact on the Group’s operations and results and potential mitigating actions. In light of the
current market conditions, this included consultation with independent audit partners to validate our work on the going concern assessment.
Landsec // Annual Report 2021 » Financial statements We have observed that the Covid-19 pandemic has had a number of impacts on the operations and results of the Group. The most
significant have been the collection of rent and service charges, reductions in turnover-based revenues and the decline in property values.
The pandemic has had the most significant impact on the Group’s Regional retail, Urban opportunities and Subscale segments which
account for 31% of Group net rental income. The Central London assets, which account for the remaining 69% of net rental income,
have not been as significantly impacted due to the lower impact on office tenants. There continues to be judgement in assessing the
future impact of the pandemic and the UK Government’s response to it.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group and Parent Company’s ability to continue as a going concern through the going
concern period to 31 May 2022.
In relation to the Group and Parent Company’s reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this
report. However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the Group and
Parent Company’s ability to continue as a going concern.
OVERVIEW OF OUR AUDIT APPROACH
Audit scope › The Group solely operates in the United Kingdom and operates through one portfolio, which is split into four segments:
Central London, Regional retail, Urban opportunities and Subscale sectors, all of which were subject to the same full audit scope.
This included the Group audit team performing direct audit procedures on joint venture balances included within the Group
financial statements.
Key audit
matters
Materiality
› The valuation of property, including investment properties and investment properties held in joint ventures.
› Revenue recognition, including the timing of revenue recognition and the treatment of lease incentives.
› (New in 2021) Impairment of trade receivables, including lease incentive balances.
› Overall group materiality of £99m which represents 0.9% of total assets in the Group balance sheet at 31 March 2021. Overall
materiality is applied to account balances related to investment properties (either wholly owned or held within joint ventures)
and related loans and borrowings.
› Specific materiality of £17m, which represents 5% of average revenue profit before tax over two years to 31 March 2021. Specific
materiality is applied to account balances not related to investment properties (either wholly owned or held within joint ventures)
and loans and borrowing.
› Parent Company materiality of £55m, which represents 0.9% of total assets in the Parent Company balance sheet. Parent Company
materiality is applied to all balances within the Parent Company.
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 four segments, Central London, Regional retail, Urban opportunities
and Subscale sectors, all of which were subject to the same full 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. As a result of all consolidated entities being full scope, we have achieved full coverage over Revenue, Loss before tax
and Total assets.
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: Impairment of trade receivables, including lease incentive balances. In light of the
Covid-19 pandemic and the challenges over cash collection, particularly in the retail sector, the Group has seen a significant increase
in the levels of outstanding debtor balances and bad and doubtful debt expense. The audit partner and other senior members of the
audit team spent a significant amount of time assessing the judgements made and the appropriateness of the balances recorded.
Page
147
Landsec // Annual Report 2021 » Financial statements Page
148
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 2021.
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,
and we did not
identify evidence of
undue Management
influence.
We have reviewed
the disclosures in the
financial statements
including the
significant accounting
estimates and
sensitivities and
consider them to
be appropriate.
Management have
properly disclosed
information relating
to the material
uncertainty
paragraph included
by CBRE on the
valuation of the hotel
property portfolio.
Independent Auditor’s Report
continued
Risk
Our response to the risk
The valuation of property,
including investment properties
and investment properties held
in joint ventures
2021: £9,607m in investment
properties and £735m (the Group’s
share) in investment properties held
in joint ventures (2020: £11,297m
in investment properties and £946m
share in investment properties held
in joint ventures)
Refer to the Report of the Audit
Committee (pages 106 to 114);
Accounting policies (pages 172
to 173); Notes 14 and 16 of the
Financial statements (pages 172
to 177).
The valuation of property, including
investment properties and
investment properties held in joint
ventures, requires significant
judgement and estimation by
Management and their external
valuers. Inaccuracies in inputs 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 hotel property
portfolio, valued at £406m, 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 hotel property portfolio at
31 March 2021 on the basis of a
‘material valuation uncertainty’.
Our audit procedures over the valuation of property included:
We obtained an understanding of the Group’s processes and controls around
the valuation of properties.
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 assessed and challenged these judgements made by CBRE in light of the
Covid-19 pandemic and the impact that this has had on reducing transactional
evidence that can be leveraged in the valuation process. We have obtained
further explanation and sought alternative evidence where this is the case.
In response to CBRE’s inclusion of a valuation uncertainty covering the
hotel portfolio, specific consideration has been given to the judgements
on these assets.
We selected a sample of investment properties 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
74% 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.
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 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 confirmation from CBRE that
they had not been subject to undue influence from Management.
We performed a virtual site visit, accompanied by our Chartered Surveyors,
to both 21 Moorfields and Lucent W1, being the two largest properties in
the development programme by value. This enabled us to assess the stage
of completion 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 disclosures of estimates 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 and investment properties held in joint ventures.
Landsec // Annual Report 2021 » Financial statements Risk
Our response to the risk
Revenue recognition, including the
timing of revenue recognition and
the treatment of lease incentives
2021: £519m rental income
(2020: £611m rental income)
Refer to the Report of the Audit
Committee (pages 106 to 114);
Accounting policies (page 164);
Note 6 of the Financial statements
(page 164).
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.
The increase in the Covid-19 related
rent concessions has had an impact
on revenue recognition and there is
a risk that the accounting treatment
of these is not in line with the
accounting standards.
Impairment of trade receivables,
including lease incentive balances
2021: £110m Bad and doubtful
debts expense (2020: £28m Bad
and doubtful debts expense);
2021: £111m Allowance for
doubtful debts (2020: £30m
Allowance for doubtful debts)
Refer to the Report of the Audit
Committee (pages 106 to 114);
Accounting policies (pages 190
and 194); Note 26 of the Financial
statements (page 194).
With a more challenging environment
in the retail sector and an increased
number of CVAs and administrations,
there is a continued risk that
trade receivables, including lease
incentives, are impaired. This risk
has increased due to the ongoing
implications of Covid-19 on rent
and service charge collection.
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, existing and 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 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 whether the revenue recognition policies adopted complied with
IFRS with focus placed on the accounting treatment of Covid-19 related rent
concessions, including the Covid-19 Customer support fund set up by the Group.
We tested a sample of rent concessions issued from the Customer support fund
and agreed these back to source documentation.
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.
Our audit procedures over impairment of trade receivables included:
We obtained an understanding of the Group’s process and controls over the
tenant billing and cash receipt process, including the process and controls over
the assessment of bad and doubtful debts.
The Group’s accounting policy for assessing expected credit losses takes account
of recent payment behaviours, expectations of likely default events, actual or
expected insolvency filings or company voluntary arrangements, agreed
concessions and trends in the wider macro-economic environment. We assessed
the adequacy of provisions for bad and doubtful debts against this policy and
our expectation of the current market.
For both trade receivables and lease incentives, we performed an analysis of
the Group’s exposure to the risk of retailers who are in CVA or administration
and challenged whether the Group’s bad and doubtful debt assessment
reflected this data.
In challenging Management’s assessment of the recoverability of the lease
incentives receivable balance we considered the financial viability and payment
performance of tenants with significant related lease incentive balances.
For Covid-19 related rent concessions, where the Group waived rents already
due, we tested a sample to confirm whether amounts previously invoiced were
appropriately reflected in the Group’s bad debt charge.
We reviewed the Group’s disclosures over the significant accounting estimate
related to the impairment of trade receivables.
Scope of our procedures
The whole Group was subject to full scope audit procedures over impairment
of trade receivables.
Key observations
communicated to
the Audit Committee
Based upon the
audit procedures
performed, we
concluded that
revenue has been
recognised on an
appropriate basis
in the year.
Covid-19 related
rent concessions are
accounted for in line
with the accounting
standards.
Based upon the
audit procedures
performed, we
concluded that the
impairment of trade
receivables, including
lease incentive
balances, has
been appropriately
accounted for,
and disclosed in the
financial statements.
In the prior year, our Auditor’s Report included a key audit matter in relation to going concern. In the current year, our response and key
observations are outlined in the above section Conclusions relating to going concern. We have not designated Going concern as a key
audit matter in the current year which reflects the lower level of uncertainty regarding the impact of the Covid-19 pandemic following
the experiences of the previous year.
Page
149
Landsec // Annual Report 2021 » Financial statements Page
150
Independent Auditor’s Report
continued
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 borrowing
Parent Company
Basis
Materiality
Performance materiality
Audit differences
0.9% of total assets (2020: 1% of
total assets adjusted for certain
cash items)
£99m
(2020: £131m)
£74m
(2020: £98m)
5% of average revenue profit before
tax over two years (2020: 5% of
revenue profit before tax)
£17m
(2020: £21m)
£13m
(2020: £16m)
£5m
(2020: £7m)
£1m
(2020: £1m)
0.9% of total assets (2020: 1% of
total assets)
£55m
(2020: £62m)
£41m
(2020: £47m)
£3m
(2020: £3m)
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.
Based on this, we determined that it is appropriate to set the overall materiality at 0.9% of total assets (2020: 1% of total assets adjusted
for certain cash items). We adjusted total assets in 2020 to remove the impact of cash drawn down close to year end in response to the
outbreak of the Covid-19 pandemic. This was paid back during the current financial year and so no such adjustment was required in setting
materiality. We have reduced the percentage of the basis taken to reflect the increased risk profile from changes and uncertainty in the
business environment due to Covid-19. We apply overall materiality to the investment property balances, including those in joint ventures,
and other directly related balance sheet items such as the value of loans and borrowings which are secured against the Group’s investment
properties.
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 overall materiality for the financial statements as a whole could influence
the economic decisions of users. We believe that it is most appropriate to use a profit-based measure as profit is also a focus of users
of the financial statements.
We have determined that materiality for these areas should be based upon average revenue profit before tax over two financial years
(2020 and 2021), £333m (2020: revenue profit of £414m). This led to a reduction in the specific materiality in response to the impact
Covid-19 has had on the profitability of the Group. Revenue profit has declined due to the impact of Covid-19 and the resulting bad debt
charges. We conclude that the specific materiality is more appropriately determined using a normalised basis based on past results and
that this better reflects a normal level of earnings. We selected a two-year period as this is more aligned with the impacts of the ongoing
pandemic and other structural changes in the retail property market.
We benchmarked this change in basis to setting specific materiality against other UK listed REITs and determined that using a normalised
basis gives a comparable approach in setting specific materiality.
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% (2020: 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.
Landsec // Annual Report 2021 » Financial statements 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 £5m (2020: £7m),
as well as audit differences in excess of £1m (2020: £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. We 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 section
set out on pages 2 to 145, other than the financial statements and our auditor’s report thereon. The directors are responsible for the other
information contained within the Annual Report.
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.
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 course of 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 themselves. 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.
OPINIONS 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.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that part of the
Corporate Governance Statement relating to the Group and Company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements or our knowledge obtained during the audit:
› Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified; pages 78 to 79;
› Directors’ explanation as to its assessment of the Company’s prospects, the period this assessment covers and why the period is
appropriate set out on page 78 to 79;
› Directors’ statement on fair, balanced and understandable set out on page 107;
› Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 68 to 77;
› The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out
on pages 68 to 77; and
› The section describing the work of the Audit Committee set out on pages 106 to 114.
Page
151
Landsec // Annual Report 2021 » Financial statements Page
152
Independent Auditor’s Report
continued
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ Responsibilities Statement set out on page 145, 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.
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
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect irregularities, including fraud. The risk of not detecting a material misstatement due to fraud
is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the
Company 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
relevant to the presentation of the Annual Report and Accounts are those that relate to the reporting framework (IFRS, the Companies
Act 2006 and UK Corporate Governance Code), the relevant tax regulations in the United Kingdom, including the UK REIT regulations,
the UK General Data Protection Regulation (GDPR), Health & Safety Regulations and the Bribery Act. There are no significant industry
specific laws or regulations that we considered in determining our approach. We understood how Land Securities Group PLC is complying
with those frameworks through enquiry with Management, and by identifying the Group’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 corroborated our enquiries through our review of Board minutes and papers provided to the Board and the Audit Committee, as well
as consideration of the results of our audit procedures across the Group to either corroborate or provide contrary evidence which was
then followed up. Our assessment included the tone from the top and the emphasis on a culture of honest and ethical behaviour.
› We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur by
reviewing the Company’s risk register and enquiry with Management and the Audit Committee during the planning and execution phases
of our audit. We considered the programmes and controls that the Group has established to address risks identified, or that otherwise
prevent, deter and detect fraud; and how Management monitors those programmes and controls.
› Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations.
Our procedures involved:
– Enquiry of 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 electronic confirmations from the Group’s banking providers to vouch the existence of cash balances and completeness
of loans, borrowings and other treasury positions such as derivatives;
– Obtaining and reading correspondence from legal and regulatory bodies, including the FRC and HMRC; and
– Journal entry testing, with a focus on manual journals and journals indicating large or unusual transactions based on our understanding
of the business.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website
at www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Landsec // Annual Report 2021 » Financial statements OTHER MATTERS WE ARE REQUIRED TO ADDRESS
› Following the recommendation from the Audit Committee, 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 seven years, covering the years ending
31 March 2014 to 31 March 2021.
› 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 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 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 company and the 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
18 May 2021
Page
153
Landsec // Annual Report 2021 » Financial statements Income statement
for the year ended 31 March 2021
Revenue
profit
£m
Capital
and other
items
£m
Notes
Revenue
Costs – bad and doubtful debts expense
Costs – other
Share of post–tax profit/(loss) from joint ventures
Profit/(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
631
(110)
(218)
303
8
–
–
311
15
(75)
251
6
7
7
16
14
10
10
12
5
5
2021
Total
£m
635
(110)
(223)
302
(192)
8
(1,448)
(1,330)
16
(79)
4
–
(5)
(1)
(200)
8
(1,448)
(1,641)
1
(4)
(1,644)
(1,393)
–
(1,393)
(188.2)p
(188.2)p
Statement of comprehensive income
for the year ended 31 March 2021
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 (loss)/gain on defined benefit pension scheme
Deferred tax credit/(charge) on re–measurement above
Other comprehensive (loss)/income attributable to shareholders
Page
154
Revenue
profit
£m
Capital
and other
items
£m
740
(28)
(241)
471
22
–
–
493
17
(96)
414
1
–
(5)
(4)
(173)
(6)
(1,000)
(1,183)
1
(69)
(1,251)
2020
Total
£m
741
(28)
(246)
467
(151)
(6)
(1,000)
(690)
18
(165)
(837)
5
(832)
(112.4)p
(112.4)p
Notes
2021
Total
£m
2020
Total
£m
(1,393)
(832)
–
(1)
(3)
(12)
2
(13)
(3)
6
(1)
1
33
12
Total comprehensive loss attributable to shareholders
(1,406)
(831)
Landsec // Annual Report 2021 » Financial statements Balance sheets
at 31 March 2021
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
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
2021
£m
14
19
18
16
28
26
29
15
26
22
23
30
21
27
31
21
27
32
35
Group
2020
£m
11,297
14
156
824
–
178
32
12,501
24
433
9
1,345
48
1,859
2021
£m
–
–
–
–
6,101
–
–
6,101
–
–
3
–
–
3
Company
2020
£m
–
–
–
–
6,213
–
–
6,213
–
–
4
–
–
4
9,607
8
152
625
–
170
22
10,584
36
354
10
–
6
406
10,990
14,360
6,104
6,217
(906)
(252)
(7)
(1,165)
(2,610)
(1)
(2)
(2,613)
(977)
(270)
(2)
(1,249)
(4,355)
(1)
(5)
(4,361)
–
(2,630)
–
(2,630)
–
(2,406)
–
(2,406)
–
–
–
–
–
–
–
–
(3,778)
(5,610)
(2,630)
(2,406)
7,212
8,750
3,474
3,811
80
317
28
–
6,787
7,212
80
317
27
–
8,326
8,750
80
317
28
374
2,675
3,474
80
317
27
374
3,013
3,811
The loss for the year of the Company was £205m (2020: loss of £89m).
The financial statements on pages 154 to 204 were approved by the Board of Directors on 17 May 2021 and were signed on its behalf by:
MARK ALLAN
DIRECTORS
MARTIN GREENSLADE
Page
155
Landsec // Annual Report 2021 » Financial statements Statements of changes in equity
for the year ended 31 March 2021
At 1 April 2019
Total comprehensive loss for the financial year
Transactions with shareholders:
Share-based payments
Dividends paid to shareholders
Total transactions with shareholders
Page
156
Attributable to shareholders
Ordinary
shares
£m
80
Share
premium
£m
317
Other
reserves
£m
26
Retained
earnings
£m
9,497
Group
Total
equity
£m
9,920
–
–
–
–
–
–
–
–
–
1
–
1
(831)
(831)
2
(342)
(340)
3
(342)
(339)
At 31 March 2020
80
317
27
8,326
8,750
Total comprehensive loss for the financial year
Transactions with shareholders:
Share-based payments
Dividends paid to shareholders
Acquisition of own shares
Total transactions with shareholders
–
–
–
–
–
–
–
–
–
–
–
4
–
(3)
1
(1,406)
(1,406)
–
(133)
–
(133)
4
(133)
(3)
(132)
At 31 March 2021
80
317
28
6,787
7,212
At 1 April 2019
Total comprehensive loss 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
80
Share
premium
£m
317
Other
reserves
£m
26
Merger
reserve
£m
374
Retained
earnings1
£m
3,442
Total
equity
£m
4,239
–
–
–
–
–
–
–
–
–
1
–
1
–
–
–
–
(89)
(89)
2
(342)
(340)
3
(342)
(339)
At 31 March 2020
80
317
27
374
3,013
3,811
Total comprehensive loss for the financial year
Transactions with shareholders:
Share-based payments
Dividends paid to shareholders
Acquisition of own shares
Total transactions with shareholders
At 31 March 2021
1. Available for distribution.
–
–
–
–
–
–
–
–
–
–
–
4
–
(3)
1
–
–
–
–
–
(205)
(205)
–
(133)
–
(133)
4
(133)
(3)
(132)
80
317
28
374
2,675
3,474
Landsec // Annual Report 2021 » Financial statements Statement of cash flows
for the year ended 31 March 2021
Cash flows from operating activities
Net cash generated from operations
Interest received
Interest paid
Rents paid
Capital expenditure on 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
Deferred consideration received
Cash contributed to joint ventures
Cash distributions from joint ventures
Other investing cash flows
Net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees)
Repayment of bank debt
Repayment of medium term notes
Redemption of medium term notes
Premium paid on redemption of medium term notes
Net cash outflow from derivative financial instruments
Settlement of redemption liability
Dividends paid to shareholders
(Increase)/decrease in monies held in restricted accounts and deposits
Other financing cash flows
Net cash (outflow)/inflow from financing activities
(Decrease)/increase 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
13
2021
£m
322
4
(83)
(9)
(1)
–
13
233
2020
£m
504
16
(108)
(12)
(2)
3
401
(154)
(47)
(16)
45
–
(13)
69
–
(177)
(41)
(99)
631
10
–
16
(6)
16
16
21
21
21
21
21
334
(116)
–
1,701
(1,755)
–
(12)
(3)
(12)
–
–
(47)
(196)
(59)
(1)
(36)
11
(127)
(342)
(1)
(2)
27
(1)
(1,912)
1,046
(1,345)
1,345
–
1,331
14
1,345
23
The Company did not hold any cash and cash equivalents balances at 31 March 2021 (2020: none) and therefore did not have any cash
flows in the year then ended (2020: none).
Page
157
Landsec // Annual Report 2021 » Financial statements Notes to the financial statements
for the year ended 31 March 2021
Page
158
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 accounting standards
in conformity with the Companies Act 2006. The Group financial statements have been prepared in accordance with IFRSs and IFRICs
adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union. 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
As the impact of Covid-19 on the Group continues to be significant, particularly on our ability to collect rent and service charge from
customers, the Directors have continued to place additional focus on the appropriateness of adopting the going concern assumption
in preparing the financial statements for the year ended 31 March 2021. The Group’s going concern assessment considers changes in the
Group’s principal risks (see pages 71 to 77) and is dependent on a number of factors, including our financial performance and continued
access to borrowing facilities. Access to our borrowing facilities is dependent on our ability to continue to operate the Group’s secured
debt structure within its financial covenants, which are described in note 21.
In order to satisfy themselves that the Group has adequate resources to continue as a going concern for the foreseeable future, the
Directors have reviewed a cash flow model which considers the impact of pessimistic assumptions on the Group’s operating environment
(the ‘Viability scenario’). This model reflects unfavourable macro-economic conditions, a continuation of difficulties experienced collecting
rent and service charge from our customers and removes uncommitted acquisitions, disposals and developments. We also assume that
we are unable to raise any new finance over this period.
Landsec // Annual Report 2021 » Financial statements The Group’s key metrics from the Viability scenario as at the end of the going concern assessment period, which covers the twelve months
to 31 May 2022, are shown below alongside the actual position at 31 March 2021.
Key metrics
Security Group LTV
Adjusted net debt
EPRA net tangible assets
Available financial headroom
31 March 2021
31 May 2022
Viability scenario
32.7%
£3,489m
£7,300m
£1.6bn
36.8%
£3,319m
£5,792m
£1.8bn
In our Viability scenario, the Group has sufficient cash reserves, with our Security Group LTV ratio 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 value of our assets
would need to fall from 31 March 2021 values by a further 50% for LTV to reach 65%. The Directors consider the likelihood of this occurring
over the going concern assessment period to be remote.
The Security Group requires earnings of at least £71m in the year ending 31 March 2022 for interest cover to remain above 1.45x in the
Viability scenario, which would ensure compliance through to the end of the going concern assessment period. Despite the challenging
trading conditions experienced during the year ended 31 March 2021, Security Group earnings are well above the level required to meet
the interest cover covenant. Therefore, the Directors do not anticipate a reduction in Security Group earnings over the period ending
31 May 2022 to a level that would result in a breach of the interest cover covenant, even if the trading conditions experienced in the
year ended 31 March 2021 continue over this period. More detail on the Security Group can be found in note 25.
The Directors have also considered a reverse stress-test scenario which assumes no further rent will be received to determine when our
available cash resources would be exhausted. Even under this extreme 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 these financial statements for the year
ended 31 March 2021.
BASIS OF CONSOLIDATION
The consolidated financial statements for the year ended 31 March 2021 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.
Page
159
Landsec // Annual Report 2021 » Financial statements Page
160
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, none of which have had a significant impact on the Group or Company’s income statement or balance sheet.
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.
SECTION 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 £10.8bn, 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.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 4. SEGMENTAL INFORMATION
The Group’s operations are managed across four operating segments, being Central London, Regional retail, Urban opportunities and
Subscale sectors.
The Central London segment includes all assets geographically located within central London. Regional retail includes all regional shopping
centres and shops outside London and our outlets. The Urban opportunities segment includes those assets where we see the most
potential for capital investment. Subscale sectors mainly includes assets that will not be a focus for capital investment and consists
of leisure and hotel assets and retail parks.
In the year ended 31 March 2020, we merged our London Portfolio and Retail Portfolio and amended our reporting to the Executive
Committee (ExecCom) to reflect the predominant use class of our assets, grouped into Office, Retail and Specialist. Subsequently, during
the year ended 31 March 2021, we merged these three segments into four new reporting segments to support our new strategy and better
reflect the way the business is now being managed. The comparative year has been presented in the new format and a reconciliation to
the previous presentation has been provided on our website.
Management has determined the Group’s operating segments based on the information reviewed by Senior Management to make
strategic decisions. Until 8 December 2020, the chief operating decision maker was ExecCom, which comprised the Executive Directors,
the Group General Counsel and Company Secretary and the Group HR Director. From 9 December 2020, ExecCom was replaced by the
Executive Leadership Team (ELT), comprising the Executive Directors and the Managing Directors. The information presented to ELT
includes reports from all functions of the business as well as strategy, financial planning, succession planning, organisational development
and Group-wide policies.
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 ongoing operations of the Group is analysed between the four segments. The indirect costs, which are
predominantly staff costs, are all treated as indirect expenses and are not allocated to individual segments.
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. Debt facilities and finance expenses, including those of joint ventures, are managed centrally
and are therefore not attributed 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 114.
Page
161
Landsec // Annual Report 2021 » Financial statements 4. SEGMENTAL INFORMATION CONTINUED
Revenue profit
Central
London
£m
300
9
309
Regional
retail
£m
162
–
162
Urban
opps
£m
26
–
26
Subscale
sectors
£m
81
–
81
(3)
306
39
(39)
–
18
(27)
(17)
280
(5)
157
35
(38)
(3)
10
(23)
(69)
72
–
26
5
(5)
–
1
(5)
(10)
12
(1)
80
–
(2)
(2)
3
(9)
(31)
41
Rental income
Finance lease interest
Gross rental income
(before rents payable)
Rents payable1
Gross rental income
(after rents payable)
Service charge income
Service charge expense
Net service charge expense
Other property related income
Direct property expenditure
Bad and doubtful debts expense
Segment net rental income
Other income
Indirect expense
Depreciation
Revenue profit before interest
Finance income
Finance expense
Joint venture net finance expense
Revenue profit
2021
Total
£m
569
9
578
(9)
569
79
(84)
(5)
32
(64)
(127)
405
2
(77)
(5)
325
15
(75)
(14)
251
Central
London
£m
324
9
333
Regional
retail
£m
201
–
201
Urban
opps
£m
29
–
29
Subscale
sectors
£m
115
–
115
(6)
327
50
(49)
1
18
(31)
(5)
310
(8)
193
43
(46)
(3)
11
(30)
(18)
153
–
29
5
(5)
–
2
(6)
(3)
22
(1)
114
–
(2)
(2)
2
(9)
(7)
98
1. Included within rents payable is lease interest payable of £2m (2020: £3m) and £1m (2020: £1m) for the Central London and Subscale sectors segments respectively.
Reconciliation of revenue profit to loss before tax
Revenue profit
Capital and other items
Valuation and profit on disposals
Net deficit on revaluation of investment properties
Profit/(loss) on disposal of investment properties
(Loss)/profit on disposal of trading properties
Net finance expense (excluded from revenue profit)
Fair value movement on interest-rate swaps
Premium on redemption of medium term notes (MTNs)
Other net finance income
Exceptional items
Impairment of intangible asset
Impairment of goodwill
Other
Profit from long-term development contracts
Gain on settlement of liability
Other
2021
Total
£m
251
(1,646)
5
(1)
(1,642)
(1)
(3)
1
(3)
(4)
–
(4)
–
4
1
5
Loss before tax
(1,393)
Page
162
2020
Total
£m
669
9
678
(15)
663
98
(102)
(4)
33
(76)
(33)
583
2
(72)
(4)
509
17
(96)
(16)
414
2020
Total
£m
414
(1,179)
(6)
7
(1,178)
(9)
(59)
–
(68)
(4)
(1)
(5)
3
–
(3)
–
(837)
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 5. 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.
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 2021
Year ended 31 March 2020
Loss attributable to shareholders
Taxation
Valuation and profit on disposals
Net finance expense (excluded from revenue profit)
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
(1,393)
–
–
–
–
–
(1,393)
EPRA
earnings
£m
(1,393)
–
1,642
3
4
(5)
251
Adjusted
earnings
£m
(1,393)
–
1,642
3
4
(5)
251
Loss for
the year
£m
(832)
–
–
–
–
–
(832)
IFRS
(188.2)p
(188.2)p
EPRA
33.9p
33.9p
Adjusted
33.9p
IFRS
(112.4)p
33.9p
(112.4)p
EPRA
earnings
£m
(832)
(5)
1,178
68
5
–
414
EPRA
55.9p
55.9p
Adjusted
earnings
£m
(832)
(5)
1,178
68
5
–
414
Adjusted
55.9p
55.9p
1. In the years ended 31 March 2021 and 31 March 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 leases book value
Deferred tax liability on intangible asset
Goodwill on deferred tax liability (note 19)
Other intangible asset (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
Number of shares
Ordinary shares
Treasury shares
Own shares
Number of shares – basic
Dilutive effect of share options
Number of shares – diluted
Page
163
31 March 2021
31 March 2020
Net assets
£m
7,212
-
-
-
-
-
-
7,212
EPRA NDV
£m
7,212
93
-
(1)
-
-
(244)
7,060
EPRA NTA
£m
7,212
93
1
(1)
(2)
(3)
-
7,300
IFRS
975p
973p
EPRA NDV
n/a
EPRA NTA
n/a
953p
985p
Net assets
£m
8,750
-
-
-
-
-
-
8,750
IFRS
1,182p
1,181p
EPRA NDV
£m
8,750
90
-
(1)
-
-
(274)
8,565
EPRA NDV
n/a
1,156p
Weighted
average
million
2021
31 March
million
Weighted
average
million
751
(10)
(1)
740
1
741
751
(10)
(1)
740
1
741
751
(10)
(1)
740
1
741
EPRA NTA
£m
8,750
90
1
(1)
(7)
1
-
8,834
EPRA NTA
n/a
1,192p
2020
31 March
million
751
(10)
(1)
740
1
741
Landsec // Annual Report 2021 » Financial statements Page
164
5. PERFORMANCE MEASURES CONTINUED
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 based on EPRA NTA
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)
6. REVENUE
ACCOUNTING POLICY
Year ended
31 March
2021
pence
Year ended
31 March
2020
pence
(207)
18
(189)
1,192
-15.9%
(156)
46
(110)
1,348
-8.2%
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.
Where the total consideration due under a lease is modified, for example, where a concession is granted to a tenant prior to the date
the conceded rent falls due, the revised total amount due under the lease is recognised on a straight-line basis over the remaining term
of the lease.
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.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 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.
Rental income (excluding adjustment for lease incentives)
Adjustment for lease incentives
Rental income
Service charge income
Other property related income
Finance lease interest
Gain on settlement of liability
Other income
Revenue per the income statement
Revenue
profit
£m
Capital
and other
items
£m
548
(29)
519
70
31
9
–
2
631
–
–
–
–
–
–
4
–
4
2021
Total
£m
548
(29)
519
70
31
9
4
2
Revenue
profit
£m
630
(20)
610
88
31
9
–
2
635
740
Capital
and other
items
£m
1
–
1
–
–
–
–
–
1
The following table reconciles revenue per the income statement to the individual components of revenue presented in note 4.
Group
£m
519
70
31
–
9
–
4
2
Joint
ventures
£m
50
9
1
4
–
1
–
2
635
67
Adjustment
for
non-wholly
owned
subsidiaries1
£m
–
–
–
–
–
–
–
–
–
2021
Total
£m
569
79
32
4
9
1
4
4
Group
£m
611
88
31
–
9
–
–
2
702
741
Joint
ventures
£m
59
10
2
21
–
3
–
–
95
Rental income
Service charge income
Other property related income
Trading property sales proceeds
Finance lease interest
Long-term development contract income
Gain on settlement of liability
Other income
Revenue in the segmental
information note
Adjustment
for
non-wholly
owned
subsidiaries1
£m
(1)
–
–
–
–
–
–
–
(1)
835
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 purchased this interest thereby
settling the redemption liability.
Page
165
2020
Total
£m
631
(20)
611
88
31
9
–
2
741
2020
Total
£m
669
98
33
21
9
3
–
2
Landsec // Annual Report 2021 » Financial statements Page
166
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
Bad and doubtful debts expense – rent
Bad and doubtful debts expense – service charge
Indirect expense
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
7
75
56
98
12
80
–
–
–
328
–
–
–
–
–
–
1
4
–
5
2021
Total
£m
7
75
56
98
12
80
1
4
–
Revenue
profit
£m
Capital
and other
items
£m
13
90
65
28
–
73
–
–
–
–
–
–
–
–
–
–
4
1
5
333
269
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
Bad and doubtful debts expense – rent
Bad and doubtful debts expense – service charge
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
7
75
56
98
12
80
–
–
1
4
–
2
9
8
15
2
2
5
1
–
–
–
2021
Total
£m
9
84
64
113
14
82
5
1
1
4
–
Group
£m
Joint
ventures
£m
13
90
65
28
–
73
–
–
–
4
1
2
12
11
5
–
3
14
–
–
–
–
2020
Total
£m
13
90
65
28
–
73
–
4
1
274
2020
Total
£m
15
102
76
33
–
76
14
–
–
4
1
Costs in the segmental information note
333
44
377
274
47
321
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements The Group’s costs include employee costs for the year of £58m (2020: £59m), of which £5m (2020: £7m) is within service charge expense
and £53m (2020: £52m) is within indirect expense.
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
2021
£m
46
5
3
4
58
2020
£m
49
5
3
2
59
2021
Number
2020
Number
443
81
6
530
429
130
9
568
With the exception of the Executive Directors 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, none (2020: 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 115 to 141.
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 statements1
Audit of subsidiary undertakings
Audit of joint ventures
Non-audit fees:
Other assurance services
2021
£m
1.0
0.3
0.1
1.4
0.2
1.6
2020
£m
0.5
0.3
0.1
0.9
0.2
1.1
1. The audit fee recognised in the year includes £0.2m of fees paid which relate to the audit for the year ended 31 March 2020 (2020: £0.1m).
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.
Page
167
Landsec // Annual Report 2021 » Financial statements 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
Page
168
2021
£m
0.7
0.1
1.7
2.5
2020
£m
0.7
0.1
0.8
1.6
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.
Revenue
profit
£m
Capital
and other
items
£m
10. NET FINANCE EXPENSE
Finance income
Interest receivable from joint ventures
Fair value movement on other derivatives
Finance expense
Bond and debenture debt
Bank and other short-term borrowings
Fair value movement on interest-rate swaps
Premium on 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
2021
Total
£m
15
1
16
(68)
(17)
(1)
(3)
–
(1)
(90)
11
(79)
(63)
Revenue
profit
£m
Capital
and other
items
£m
–
1
1
–
–
(1)
(3)
–
–
(4)
–
(4)
(3)
15
–
15
(68)
(17)
–
–
–
(1)
(86)
11
(75)
(60)
(14)
(74)
Lease interest payable of £3m (2020: £4m) is included within rents payable as detailed in note 4.
17
–
17
(80)
(22)
–
–
–
(1)
(103)
7
(96)
(79)
(16)
(95)
2020
Total
£m
17
1
18
(80)
(22)
(9)
(59)
(1)
(1)
(172)
7
(165)
–
1
1
–
–
(9)
(59)
(1)
–
(69)
–
(69)
(68)
(147)
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 11. 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
Payment date
PID
Non-PID
Total
Year ended 31 March
2020
2021
£m
£m
For the year ended 31 March 2019:
Third interim
Final
For the year ended 31 March 2020:
First interim
Second interim
Third interim
Final
For the year ended 31 March 2021:
First interim
Second interim
Third 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
12 April 2019
25 July 2019
4 October 2019
3 January 2020
–
–
–
11.30
11.65
11.60
11.60
–
–
–
4 January 2021
30 March 2021
12.00
6.00
–
–
–
–
–
–
–
–
–
11.30
11.65
11.60
11.60
–
–
–
12.00
6.00
84
86
86
86
342
342
–
342
–
–
–
89
44
133
133
(6)
127
In light of extreme market uncertainty due to Covid-19, the Board took the decision not to pay a first interim dividend for the year ended
31 March 2021 (2020: 11.60p or £86m paid in total).
The Board has recommended a final dividend for the year ended 31 March 2021 of 9p per ordinary share (2020: £nil) to be paid as a PID.
This final dividend will result in a further estimated distribution of £67m (2020: £nil). Subject to shareholders’ approval at the Annual
General Meeting, the final dividend will be paid on 23 July 2021 to shareholders registered at the close of business on 18 June 2021.
The total dividend paid and recommended in respect of the year ended 31 March 2021 is 27p per ordinary share (2020: 23.2p) resulting
in a total estimated distribution of £200m (2020: £172m).
The first quarterly dividend for the year ending 31 March 2022 will be paid in October 2021 and will be announced in due course.
A Dividend Reinvestment Plan (DRIP) has been available in respect of all dividends paid during the year. The last day for DRIP elections
for the final dividend is close of business on 2 July 2021.
12. INCOME TAX
ACCOUNTING POLICY
Income tax on the profit or loss 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.
Page
169
Landsec // Annual Report 2021 » Financial statements Page
170
12. INCOME TAX CONTINUED
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.
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.
There is no income tax charge in the income statement. In the year ended 31 March 2020, there was an income tax credit of £5m in the
income statement, comprising tax credits received and a payment for losses surrendered to one of the Group’s joint ventures of £4m
and a deferred tax credit of £1m. There is a deferred tax credit of £2m (2020: £1m charge) included within Other comprehensive income.
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%
Adjustment for exempt property rental (profits)/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
2021
£m
(1,393)
(265)
274
9
(10)
(1)
1
1
–
–
2021
£m
1
1
2
2020
£m
(837)
(159)
158
(1)
–
–
1
(3)
(2)
(5)
2020
£m
1
3
4
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
2021
£m
53
272
381
706
2020
£m
46
272
447
765
The other unrecognised temporary differences relate to the premium paid on the redemption of the Group’s medium term notes.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 13. 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
(Profit)/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
Depreciation
Other
Changes in working capital:
Decrease in receivables
(Decrease)/increase in payables and provisions
Net cash generated from operations
Reconciliation to adjusted net cash inflow from operating activities
Net cash inflow from operating activities
Joint ventures’ net cash inflow from operating activities
Trading property disposals
Trading property capital expenditure
Adjusted net cash inflow from operating activities
2021
£m
(1,330)
Group
2020
£m
(690)
2021
£m
(143)
Company
2020
£m
(21)
1,448
1,000
(8)
192
4
4
–
–
7
5
6
328
8
(14)
322
2021
£m
233
19
(4)
1
249
6
151
2
4
1
–
13
4
2
493
3
8
504
Group
2020
£m
401
70
(20)
1
452
–
–
–
–
–
–
116
–
–
–
–
–
–
–
–
–
2
–
–
–
(27)
(19)
–
27
–
–
19
–
2021
£m
Company
2020
£m
–
–
–
–
–
–
–
–
–
–
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 £10.8bn, 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.
Page
171
Landsec // Annual Report 2021 » Financial statements Page
172
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.
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.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements SIGNIFICANT ACCOUNTING JUDGEMENTS
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.
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.
If 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 indicated that there was substantially more uncertainty than normal and therefore
a higher likelihood that the assumptions upon which the external valuer had based its valuations prove to be inaccurate. As a result of
this increased uncertainty, sensitivities for more extensive changes in assumptions were disclosed in the table on page 176. The material
uncertainty clause was removed from the Valuer’s report for the year ended 31 March 2021, except in relation to the valuation of hotels
which only form a small portion of the Group’s portfolio. Therefore the range of sensitivities disclosed in the table on page 175 have been
reduced back to previous levels.
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
Transfers to trading properties
Net book value at the end of the year
1. See note 21 for details of the amounts payable under head leases and note 4 for details of the rents payable in the income statement.
Page
173
2021
£m
2020
£m
11,297
12,094
115
221
11
1
(579)
16
199
7
30
(49)
(1,448)
(1,000)
(11)
–
9,607
11,297
Landsec // Annual Report 2021 » Financial statements Page
174
14. INVESTMENT PROPERTIES CONTINUED
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, 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
10,025
(249)
61
(230)
9,607
Joint
ventures1
£m
766
–
9
(40)
735
Net deficit on revaluation
of investment properties
(1,448)
(198)
Adjustment
for
proportionate
share2
£m
–
–
–
–
–
–
2021
Combined
Portfolio
£m
Group
(excl. joint
ventures)
£m
10,791
11,802
(249)
70
(270)
(249)
60
(316)
10,342
11,297
Adjustment
for
proportionate
share2
£m
–
–
–
–
–
Joint
ventures1
£m
979
–
9
(42)
946
2020
Combined
Portfolio
£m
12,781
(249)
69
(358)
12,243
(1,646)
(1,000)
(181)
2
(1,179)
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 purchased this additional
interest thereby settling the redemption liability.
The net book value of leasehold properties where head leases have been capitalised is £2,484m (2020: £2,561m).
Investment properties include capitalised interest of £232m (2020: £221m). The average rate of interest capitalisation for the year is 2.6%
(2020: 2.6%). The historical cost of investment properties is £7,554m (2020: £7,463m).
VALUATION PROCESS
The fair value of investment properties at 31 March 2021 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.
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.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements The table below summarises the key unobservable inputs used in the valuation of the Group’s wholly owned investment properties at
31 March 2021:
Estimated rental value
£ per sq ft
Equivalent yield
%
2021
Costs
£ per sq ft
Low
Average
High
Low
Average
High
Low
Average1
High
80
122
n/a
122
3.8%
3.9%
n/a
3.8%
4.7%
4.5%
n/a
4.7%
6.0%
5.6%
n/a
6.0%
2
–
n/a
–
47
8
n/a
43
683
278
n/a
683
Central London
Offices
London retail
Other central London2
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Market
value
£m
5,158
627
420
6,205
813
722
1,535
18
23
n/a
18
15
20
15
63
55
n/a
62
22
47
34
40
56
56
6.5%
6.3%
6.3%
7.6%
9.5%
6.8% 10.8%
7.2% 10.8%
Urban opportunities
305
12
19
35
4.9%
5.7%
8.3%
Subscale sectors
Leisure
Hotels
Retails parks
Total Subscale sectors
Developments: residual method
Development programme
464
406
397
1,267
713
713
6
7
12
6
64
64
12
15
17
12
73
73
16
30
24
30
90
90
6.9%
4.8%
5.1%
4.8%
3.8%
3.8%
7.8%
5.7%
7.6%
5.7%
4.4%
4.4%
9.9%
7.4%
8.7%
9.9%
4.5%
4.5%
–
–
–
–
–
–
–
–
–
–
3
–
2
–
3
–
3
2
–
–
11
–
11
–
30
–
8
30
–
–
Market value at 31 March 2021 – Group 10,025
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 central London’ 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 below illustrate the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s properties:
Sensitivities
Total Central London (excluding developments)
Total Regional retail (excluding developments)
Total Urban opportunities (excluding developments)
Total Subscale sectors (excluding developments)
Developments: residual method
Market
value
£m
6,205
1,535
305
1,267
713
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
Decrease
£m
Increase
£m
Decrease
£m
Increase
£m
247
(242)
401
(356)
25
(23)
2021
64
12
46
38
(66)
(11)
(46)
(41)
56
14
49
67
(58)
(13)
(47)
(67)
–
–
1
14
40
–
–
(1)
(23)
(47)
Market value at 31 March 2021 – Group
10,025
407
(406)
587
(541)
Page
175
Landsec // Annual Report 2021 » Financial statements Page
176
14. INVESTMENT PROPERTIES CONTINUED
The table below summarises the key unobservable inputs used in the valuation of the Group’s wholly owned investment properties at
31 March 2020:
Estimated rental value
£ per sq ft
Equivalent yield
%
20201
Costs
£ per sq ft
Low
Average
High
Low
Average
High
Low
Average2
High
Central London
Offices
London retail
Other central London3
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Market
value
£m
5,879
860
437
7,176
1,301
881
2,182
20
26
n/a
20
18
23
18
64
62
n/a
64
29
48
37
82
123
n/a
123
47
56
56
4.0%
3.4%
n/a
3.4%
5.3%
5.4%
5.3%
4.6%
4.4%
n/a
4.5%
6.2%
5.9%
6.1%
5.9%
5.5%
n/a
5.9%
8.5%
8.6%
8.6%
Urban opportunities
387
13
22
35
4.4%
5.2%
5.9%
Subscale sectors
Leisure
Hotels
Retails parks
Total Subscale sectors
Developments: residual method
Development programme
598
469
444
1,511
546
546
10
8
9
8
–
–
14
18
18
14
75
75
20
34
26
34
124
124
5.6%
4.5%
5.1%
4.5%
4.0%
4.0%
6.4%
5.3%
7.4%
5.3%
4.4%
4.4%
7.8%
6.0%
10.0%
10.0%
4.5%
4.5%
–
–
n/a
–
28
14
n/a
27
456
261
n/a
456
–
–
–
–
–
–
–
–
–
–
5
–
3
–
–
–
2
1
–
–
32
–
32
–
–
–
21
21
–
–
Market value at 31 March 2020 – Group 11,802
1. Restated to reflect the Group’s new segment reporting structure. 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 central London’ 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 Central London (excluding developments)
Total Regional retail (excluding developments)
Total Urban opportunities (excluding developments)
Total Subscale sectors (excluding developments)
Developments: residual method
Market value at 31 March 2020 – Group
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
Decrease
£m
Increase
£m
Decrease
£m
Increase
£m
540
164
33
116
55
908
(518)
(154)
(29)
(106)
(55)
976
204
43
134
133
(771)
(174)
(34)
(112)
(106)
(862)
1,490
(1,197)
43
(35)
1
–
1
40
85
(1)
–
(1)
(40)
(77)
Market
value
£m
7,176
2,182
387
1,511
546
11,802
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 15. TRADING PROPERTIES
At 1 April 2019
Capital expenditure
At 31 March 2020
Transfer from investment properties
Capital expenditure
At 31 March 2021
Development
land and
infrastructure
£m
Residential
£m
Total
£m
23
1
24
–
–
24
–
–
–
11
1
12
23
1
24
11
1
36
There were no cumulative impairment provisions in respect of either Development land and infrastructure or Residential at 31 March 2021
and 31 March 2020.
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.
The Group’s principal joint arrangements are described below:
Joint ventures
Held at 31 March 2021
Nova, Victoria2
Southside Limited Partnership
St. David’s Limited Partnership
Westgate Oxford Alliance Limited Partnership
Harvest 4, 5
The Ebbsfleet Limited Partnership4
West India Quay Unit Trust 4
Joint operation
Held at 31 March 2021
Bluewater, Kent
Percentage owned
& voting rights
Business segment
Year end date1
Joint venture partner
50%
50%
50%
50%
50%
50%
50%
Central London
31 March
Suntec Real Estate Investment Trust
Urban opportunities
31 March
Invesco Real Estate European Fund
Regional retail
31 December
Intu Properties plc3
Regional retail,
Subscale sectors
Subscale sectors
Subscale sectors
Subscale sectors
31 March
The Crown Estate Commissioners
31 March
31 March
31 March
J Sainsbury plc
Ebbsfleet Property Limited
Schroder UK Real Estate Fund
Ownership interest
Business segment
Year end date1
Joint operation partners
30%
Regional 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 Nova Limited Partnership, Nova Residential Limited Partnership, Victoria Circle Developer Limited, Nova GP Limited, Nova Business Manager
Limited, Nova Residential (GP) Limited, Nova Developer Limited, Nova Residential Intermediate Ltd, Nova Estate Management Company Limited, Nova Nominee 1 Limited
and Nova Nominee 2 Limited. On 19 June 2020, the Group acquired Nova’s interests in n2 and Nova Place from the joint venture. On 18 December 2020 the Canada Pension
Plan Investment Fund sold their interest in Nova, Victoria to Suntec REIT.
3. Intu Properties plc went into administration in June 2020 and its subsidiary, our joint venture partner Intu the Hayes Limited, was subsequently placed in receivership by its
secured creditors in November 2020.
4. Included within Other in subsequent tables.
5. Harvest includes Harvest 2 Limited Partnership, Harvest Development Management Limited, Harvest 2 Selly Oak Limited, Harvest 2 GP Limited and Harvest GP Limited.
Page
177
Landsec // Annual Report 2021 » Financial statements Page
178
16. JOINT ARRANGEMENTS CONTINUED
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 holds development land as a trading
property and Harvest which is engaged in long-term development contracts. 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.
Joint ventures
Year ended 31 March 2021
Comprehensive income statement
Revenue1
Gross rental income (after rents payable)
Net rental income
Revenue profit before interest
Finance expense
Net finance expense
Revenue profit/(loss)
Capital and other items
Net deficit on revaluation of investment properties
Loss on disposal of investment properties
Loss on disposal of trading properties
Other income
Loss before tax
Post-tax loss
Total comprehensive loss
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
53
35
32
28
(22)
(22)
6
(23)
(5)
(1)
–
(23)
(23)
(23)
11
10
4
4
(6)
(6)
(2)
30
23
6
5
–
–
5
32
24
6
5
–
–
5
8
4
1
1
–
–
1
–
–
–
(63)
(63)
(63)
–
–
–
(174)
(174)
(174)
–
–
–
(117)
(117)
(117)
–
–
4
(6)
(6)
(6)
(61)
(179)
(122)
(11)
(396)
(198)
Total
100%
£m
134
96
49
43
Total
Group
share
£m
67
48
24
22
(28)
(28)
(14)
(14)
15
8
(3)
(1)
2
(192)
(192)
(192)
(5)
(1)
4
(383)
(383)
(383)
50%
(192)
(192)
(192)
Group share of loss before tax
Group share of post-tax loss
Group share of total comprehensive loss
50%
50%
50%
50%
50%
(12)
(12)
(12)
(32)
(32)
(32)
(87)
(87)
(87)
(58)
(58)
(58)
(3)
(3)
(3)
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.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements Joint ventures
Year ended 31 March 2020
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
55
36
32
28
(27)
(27)
1
12
12
7
7
(6)
(6)
1
42
33
22
21
–
–
21
37
28
19
18
–
–
18
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
Group share of (loss)/profit before tax
Group share of post-tax (loss)/profit
Group share of total comprehensive (loss)/income
1
1
–
(9)
–
(9)
(9)
50%
(5)
(5)
(5)
–
–
–
(71)
–
(71)
(71)
50%
(35)
(35)
(35)
–
–
–
–
–
–
(118)
(117)
–
(117)
(117)
–
(118)
(118)
50%
(59)
(59)
(59)
50%
50%
(59)
(59)
(59)
9
7
7
Other
100%
£m
43
4
3
3
–
–
3
(3)
–
12
5
17
(3)
14
14
Total
100%
£m
189
113
83
77
Total
Group
share
£m
95
57
41
38
(33)
(33)
(16)
(16)
44
22
(361)
(181)
–
7
3
(149)
(2)
(151)
(151)
1
13
5
(298)
(3)
(301)
(301)
50%
(149)
(151)
(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.
Page
179
Landsec // Annual Report 2021 » Financial statements 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
Non-current liabilities
Total liabilities
Net assets
Market value of investment properties1
Net cash/(debt)2
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
Non-current liabilities
Total liabilities
Net assets
Market value of investment properties1
Net cash/(debt)2
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
799
799
34
67
101
900
(21)
(21)
(177)
(177)
(198)
702
859
34
849
849
17
75
92
941
(33)
(33)
(179)
(179)
(212)
729
908
17
132
132
2
6
8
140
(10)
(10)
(144)
(144)
(154)
248
248
13
14
27
275
(11)
(11)
(16)
(16)
(27)
(14)
248
132
2
238
(3)
192
192
2
3
5
197
(4)
(4)
(144)
(144)
(148)
425
425
12
13
25
450
(12)
(12)
(16)
(16)
(28)
49
422
193
2
417
(4)
235
235
8
17
25
260
(10)
(10)
–
–
56
56
5
7
12
68
(4)
(4)
–
–
(10)
(4)
250
245
8
358
358
10
19
29
387
(12)
(12)
–
–
64
57
5
67
67
6
–
6
73
(1)
(1)
–
–
(12)
(1)
375
372
10
72
68
6
Page
180
2021
Total
Group
share
£m
735
735
31
55
86
821
(28)
(28)
(168)
(168)
(196)
625
766
23
2020
946
946
23
55
78
Total
100%
£m
1,470
1,470
62
111
173
1,643
(56)
(56)
(337)
(337)
(393)
1,250
1,531
46
1,891
1,891
47
110
157
2,048
1,024
(62)
(62)
(339)
(339)
(401)
1,647
1,958
31
(31)
(31)
(169)
(169)
(200)
824
979
15
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.
2. Excludes funding provided by the Group and its joint venture partners. See note 20 for further details.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements Joint ventures
Net investment
At 1 April 2019
Total comprehensive (loss)/income
Cash contributed
Cash distributions
At 31 March 2020
Total comprehensive loss
Non-cash contributions
Cash distributions
At 31 March 2021
17. CAPITAL COMMITMENTS
Southside
Limited
Partnership
50%
£m
St. David’s
Limited
Partnership
50%
£m
Westgate
Oxford
Alliance
Partnership
50%
£m
61
(35)
–
(1)
25
(32)
–
–
(7)
277
(59)
–
(7)
211
(87)
–
–
124
258
(59)
–
(12)
187
(58)
–
(4)
125
Nova,
Victoria
50%
£m
359
(5)
13
(2)
365
(12)
9
(11)
351
Contracted capital commitments at the end of the year in respect of:
Investment properties
Joint ventures (our share)
Total capital commitments
Other
50%
£m
76
7
–
(47)
36
(3)
–
(1)
32
2021
£m
222
1
223
Total
Group
share
£m
1,031
(151)
13
(69)
824
(192)
9
(16)
625
2020
£m
323
11
334
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.
Page
181
Landsec // Annual Report 2021 » Financial statements Page
182
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
Unguaranteed residual value
Unearned finance income
Current
Finance leases – gross receivables
Unearned finance income
Net investment in finance leases
Gross receivables from finance leases due:
No later than one year
One to two years
Two to three years
Three to four years
Four to five years
More than five years
Unguaranteed residual value
Unearned finance income
Net investment in finance leases
2021
£m
2020
£m
225
34
(107)
152
13
(9)
4
156
13
13
13
13
13
173
238
34
(116)
156
237
34
(115)
156
12
(9)
3
159
12
13
13
13
13
185
249
34
(124)
159
The Group has leased out several investment properties under finance leases, which range from 30 to 40 years in duration from the
inception of the lease.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 19. 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 2019
Capital expenditure
Amortisation
Impairment
At 31 March 2020
Capital expenditure
Amortisation
Impairment
At 31 March 2021
Goodwill
£m
Software
£m
2
–
–
(1)
1
–
–
–
1
7
2
(3)
–
6
2
(3)
–
5
Other
intangible
asset
£m
11
–
–
(4)
7
–
(1)
(4)
2
Total
£m
20
2
(3)
(5)
14
2
(4)
(4)
8
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 2021, the intangible asset has been impaired by £4m (2020: £4m) as a result of a decline in the management
fees expected to be earned by the Group for managing the asset following further declines in its valuation. The recoverable amount of
the intangible asset has been based on its value in use, using a discount rate of 4.0%.
Page
183
Landsec // Annual Report 2021 » Financial statements Notes to the financial statements
for the year ended 31 March 2021 continued
Page
184
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 while 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
2021
Group
£m
Joint
ventures
£m
Combined
£m
Group
£m
Joint
ventures
£m
10,025
36
10,061
766
–
766
10,791
11,802
36
24
10,827
11,826
979
3
982
2020
Combined
£m
12,781
27
12,808
(1,345)
(23)
(1,368)
3,516
(10)
–
(3)
6
3,509
3
3,512
7,212
(3)
7,209
48.7%
48.7%
34.9%
32.7%
2.2%
8
–
(31)
–
–
(23)
–
(23)
3,524
5,332
(10)
(31)
(3)
6
(9)
1
(37)
3,486
3,942
3
(1)
3,489
3,941
–
–
–
7,212
8,750
(3)
1
7,209
8,751
48.3%
48.4%
32.2%
2.2%
45.1%
45.0%
33.3%
32.5%
1.8%
8
–
5,340
(9)
–
–
(15)
–
(15)
–
–
–
1
(37)
3,927
(1)
3,926
8,750
1
8,751
44.9%
44.9%
30.7%
1.8%
Landsec // Annual Report 2021 » Financial statements 21. 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
2021
Book
value
£m
Nominal/
notional
value
£m
2020
Fair
value
£m
Book value
£m
Current borrowings
Commercial paper
Sterling
Euro
US Dollar
Total current borrowings
Unsecured Floating LIBOR + margin
Unsecured Floating LIBOR + margin
Unsecured Floating LIBOR + margin
Non-current borrowings
Medium term notes (MTN)
A10 4.875% MTN due 2025
Secured
A12 1.974% MTN due 2026
Secured
A4 5.391% MTN due 2026
Secured
A5 5.391% MTN due 2027
Secured
A6 5.376% MTN due 2029
Secured
A16 2.375% MTN due 2029
Secured
A13 2.399% MTN due 2031
Secured
A7 5.396% MTN due 2032
Secured
A11 5.125% MTN due 2036
Secured
A14 2.625% MTN due 2039
Secured
A15 2.750% MTN due 2059
Secured
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
5.0
2.0
5.4
5.4
5.4
2.5
2.4
5.4
5.1
2.6
2.7
84
640
182
906
10
400
17
87
65
350
300
77
50
500
500
84
640
182
906
11
410
19
100
80
367
314
107
68
524
540
84
640
182
906
10
399
17
86
65
348
299
77
50
494
495
4
796
177
977
10
400
17
95
65
350
300
81
50
500
500
4
796
177
977
11
406
20
113
84
366
314
111
71
521
542
4
796
177
977
10
399
17
94
65
347
299
80
50
494
495
2,356
2,540
2,340
2,368
2,559
2,350
Syndicated and bilateral
bank debt
Amounts payable under
head leases
Secured
Floating LIBOR + margin
209
Unsecured Fixed
4.6
61
209
105
209
1,944
1,944
1,944
61
61
126
61
Total non-current borrowings
2,626
2,854
2,610
4,373
4,629
4,355
Total borrowings
3,532
3,760
3,516
5,350
5,606
5,332
Page
185
Landsec // Annual Report 2021 » Financial statements 21. BORROWINGS CONTINUED
Reconciliation of the movement in borrowings
At the beginning of the year
Proceeds from new borrowings
Repayment of bank debt
Repayment of MTNs
Redemption of MTNs
Foreign exchange movement on non-Sterling borrowings
Other
At 31 March
Page
186
2021
£m
5,332
–
(1,755)
–
(12)
(51)
2
2020
£m
3,781
1,701
–
(47)
(196)
60
33
3,516
5,332
Reconciliation of movements in liabilities arising from financing activities
Non-cash changes
2021
Borrowings
Derivative financial instruments
Borrowings
Derivative financial instruments
At the
beginning
of the
year
£m
Cash
flows
£m
Foreign
exchange
movements
£m
Other
changes
in fair
values
£m
Other
changes
£m
At the end
of the
year
£m
5,332
(1,767)
(36)
(12)
5,296
(1,779)
3,781
16
3,797
1,458
1
1,459
(51)
51
–
60
(60)
–
–
–
–
–
7
7
2
–
2
33
–
33
3,516
3
3,519
2020
5,332
(36)
5,296
MEDIUM TERM NOTES
The MTNs are secured on the fixed and floating pool of assets of the Security Group. 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 £10.6bn at 31 March 2021 (2020: £12.1bn). 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 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 £12m (2020: £196m) of MTNs for a total premium of £3m (2020: £59m). 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
Purchases
£m
2021
Premium
£m
Purchases
£m
2020
Premium
£m
–
–
8
–
4
–
12
–
–
2
–
1
–
3
4
8
91
12
75
6
196
1
1
20
3
31
3
59
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements
At 31 March 2021, the Group’s committed revolving facilities totalled £2,715m (2020: £2,715m).
Syndicated and bilateral bank debt
Syndicated debt
Bilateral debt
Maturity as
at 31 March
2021
2025
2024-25
Authorised
2020
£m
2,490
225
2,715
2021
£m
2,490
225
2,715
Drawn
2020
£m
1,797
147
1,944
Undrawn
2020
£m
693
78
771
2021
£m
2,281
225
2,506
2021
£m
209
–
209
All syndicated and bilateral facilities are committed and secured on the assets of the Security Group. During the year ended 31 March 2021,
the amounts drawn under the Group’s facilities decreased by £1,735m.
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 undrawn facilities at 31 March 2021
was £1,600m (2020: £1,139m).
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
2021
£m
3
7
10
Group
2020
£m
4
5
9
Company
2020
£m
4
–
4
2021
£m
3
–
3
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+
A
BBB+
2021
£m
7
2
1
10
Group
2020
£m
Company
2020
£m
2021
£m
5
3
1
9
–
2
1
3
–
3
1
4
Page
187
Landsec // Annual Report 2021 » Financial statements Page
188
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
2021
£m
–
–
Group
2020
£m
1,345
1,345
Company
2020
£m
–
–
2021
£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. These facilities have been repaid during the year ended
31 March 2021.
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+
2021
£m
2020
£m
–
–
1,345
1,345
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.
Assets
Cash and cash equivalents
Gross
amounts of
financial
assets
£m
Gross
amounts of
financial
liabilities
£m
2021
Net
amounts
recognised
in the
balance
sheet
£m
Gross
amounts of
financial
assets
£m
Gross
amounts of
financial
liabilities
£m
2020
Net
amounts
recognised
in the
balance
sheet
£m
49
49
(49)
(49)
–
–
1,363
1,363
(18)
(18)
1,345
1,345
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 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
Notional amount
Interest-rate swaps1
Foreign exchange swaps
2021
£m
1
3
(7)
–
(3)
2021
£m
675
843
2020
£m
39
–
(2)
(1)
36
2020
£m
675
996
1,518
1,671
1. At 31 March 2021, the Group held forward starting pay-fixed interest-rate swaps of £275m (2020: £275m) 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 68 to 77). 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
2021
£m
647
–
5
Group
2020
£m
741
1,345
9
Company
2020
£m
4
–
–
2021
£m
3
–
–
(3,676)
(5,461)
(2,630)
(2,406)
(3)
36
–
–
(3,027)
(3,330)
(2,627)
(2,402)
Page
189
Landsec // Annual Report 2021 » Financial statements Page
190
25. FINANCIAL RISK MANAGEMENT CONTINUED
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, agreed rent
concessions 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 remains high at 31 March 2021 as a result of the ongoing impact of Covid-19, 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 increased at 31 March 2020 following reduced rent collections as a result of Covid-19, and remains elevated
at 31 March 2021 as a result of a continuation in these trends throughout the year.
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.
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 debt1
1. Based on nominal values.
2021
£m
–
(906)
2,506
1,600
46.1%
2020
£m
1,345
(977)
771
1,139
21.5%
The Group’s core financing structure is in the Security Group, although the Non-restricted Group may also secure independent funding.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 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 2021, the reported LTV for the Security Group was 32.7% (2020: 32.5%), 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
974
3
7
12
42
38
67
Between
1 and
2 years
£m
68
3
–
–
–
–
–
Between
2 and
5 years
£m
902
9
–
–
–
–
1
Over
5 years
£m
2,499
334
–
–
–
–
–
2021
Total
£m
4,443
349
7
12
42
38
68
1,143
71
912
2,833
4,959
Less than
1 year
£m
1,058
Between
1 and
2 years
£m
82
Between
2 and
5 years
£m
2,698
3
2
6
23
48
1
50
1,191
3
1
–
–
–
–
1
87
2020
Total
£m
6,394
352
4
6
23
48
1
51
Over
5 years
£m
2,556
337
–
–
–
–
–
–
9
1
–
–
–
–
–
2,708
2,893
6,879
Borrowings (excluding lease liabilities)
Lease liabilities
Derivative financial instruments
Trade payables
Capital accruals
Accruals
Other payables
Borrowings (excluding lease liabilities)
Lease liabilities
Derivative financial instruments
Trade payables
Capital accruals
Accruals
Amounts owed to joint ventures
Other payables
Page
191
Landsec // Annual Report 2021 » Financial statements Page
192
25. FINANCIAL RISK MANAGEMENT CONTINUED
(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 three
years, with at least 50% fixed for a further two 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 2021, the Group (including joint ventures) had pay-fixed interest-rate swaps in place with a nominal value of £400m (2020: £400m)
and forward starting pay-fixed interest-rate swaps of £275m (2020: £275m). The Group’s net debt was 80.8% fixed (2020: 71.3%) and
based on the Group’s debt balances at 31 March 2021, a 1% increase/(decrease) in interest rates would increase/(decrease) the annual
net finance expense in the income statement and reduce/(increase) equity by £7m (2020: £12m). 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 2021, the Group had issued €752m (2020: €901m) and $250m (2020: $220m) of commercial paper, fully hedged through
foreign exchange swaps. A 10% weakening or strengthening of Sterling would therefore have £nil (2020: £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 2021, the Group
had €17m (2020: €29m) and CHFnil (2020: CHF12m) 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 £2m (2020: £7m). A 10% strengthening in Sterling would
increase the loss before tax and reduce equity by £1m (2020: £5m).
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
2,417
–
–
Floating
rate
£m
293
640
182
2021
Total
£m
Fixed
rate
£m
2,710
2,429
640
182
–
–
Floating
rate
£m
1,948
796
177
2020
Total
£m
4,377
796
177
2,417
1,115
3,532
2,429
2,921
5,350
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
–
514
1,903
2,417
400
2,817
Floating
rate
£m
906
209
–
1,115
(400)
715
2021
Total
£m
906
723
1,903
3,532
–
3,532
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
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements The expected maturity profiles of the Group’s derivative instruments are as follows (based on notional values):
One year or less, on demand
More than one year but not more than two years
Two years but not more than five years
Foreign
exchange
swaps
£m
843
–
–
843
2021
Interest-
rate
swaps
£m
–
–
675
675
Foreign
exchange
swaps
£m
981
15
–
996
2020
Interest-
rate
swaps
£m
–
–
675
675
VALUATION HIERARCHY
Derivative financial instruments and financial assets at fair value through other comprehensive income (other investments) 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
–
–
4
(7)
5
–
2021
Total
£m
9
(7)
Level 1
£m
–
–
Level 2
£m
39
(3)
Level 3
£m
9
–
2020
Total
£m
48
(3)
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 2.2% (2020: 1.8%), is £105m (2020: £126m).
The fair value of the Group’s net investment in tenant finance leases, calculated by the Group’s external valuer by applying a weighted
average equivalent yield of 4.6% (2020: discount rate of 1.8%), is £249m (2020: £247m).
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 of the fair value hierarchy, 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 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.
Page
193
Landsec // Annual Report 2021 » Financial statements Page
194
SECTION 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. Where a concession is agreed with a customer after the due date for the rent, this amount is recognised as
an impairment of the related trade receivable.
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 ESTIMATES
IMPAIRMENT OF TRADE RECEIVABLES
The Group’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assessments. 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. 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
2021
£m
74
230
24
3
7
16
354
162
8
524
2020
£m
77
316
24
1
2
13
433
161
17
611
The accounting for lease incentives is set out in note 6. The value of the tenant lease incentive, 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% (2020: 4% to 5%).
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
i
F
»
1
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
/
/
c
e
s
d
n
a
L
Notes to the financial statementsfor the year ended 31 March 2021 continued
Ageing of trade receivables
As at 31 March 2021
Not impaired
Impaired
Gross trade receivables
As at 31 March 2020
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
–
–
–
33
6
39
22
4
26
38
15
53
33
27
60
5
2
7
17
54
71
1
2
3
2
26
28
–
5
5
Total
£m
74
111
185
77
30
107
A change in the Group’s billing process means that there are no longer any trade receivables on the Group’s balance sheet at 31 March 2021
which are not past due. None of the Group’s other receivables are past due and therefore no ageing has been shown (2020: £nil).
2021
£m
30
98
(1)
(16)
111
2021
£m
316
(29)
(4)
–
(11)
(42)
230
2020
£m
8
27
(4)
(1)
30
2020
£m
334
(20)
–
7
(3)
(2)
316
Movement in allowances for doubtful debts
At the beginning of the year
Increase to provision
Decrease to provision
Utilised in the year
At 31 March
Movement in tenant lease incentives
At the beginning of the year
Revenue recognised
Break penalties received
Capital incentives granted
Provision for doubtful receivables
Disposal of properties
At 31 March
Page
195
Landsec // Annual Report 2021 » Financial statements 27. TRADE AND OTHER PAYABLES
Trade payables
Capital accruals
Other payables
Accruals
Deferred income
Amounts owed to joint ventures
Loans from Group undertakings
Total current trade and other payables
Non-current other payables
Total trade and other payables
Page
196
2021
£m
12
42
67
38
93
–
–
252
1
253
Group
2020
£m
6
23
50
48
142
1
–
270
1
271
2021
£m
–
–
17
12
–
–
2,601
2,630
–
Company
2020
£m
–
–
10
3
–
–
2,393
2,406
–
2,630
2,406
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 3.6% per annum (2020: 4.1%).
SECTION 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
2021
£m
6,213
4
(116)
6,101
2020
£m
6,213
2
(2)
6,213
s
t
n
e
m
e
t
a
t
s
l
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A full list of subsidiary undertakings at 31 March 2021 is included on pages 232 to 234.
In the year ended 31 March 2021, the Company’s investment in its subsidiaries has been impaired by £116m (2020: £2m) as a result of a
decline in the value of the investment property assets held in those subsidiary companies. The recoverable amount of the investments
has been based on the fair value of each of the subsidiaries at 31 March 2021 as determined by their individual net asset values at that
date, totalling £6,101m (2020: £6,213m).
29. OTHER NON-CURRENT ASSETS
Other property, plant and equipment
Net pension surplus (note 33)
Derivative financial instruments (note 24)
Total other non-current assets
2021
£m
13
6
3
22
2020
£m
14
18
–
32
Notes to the financial statementsfor the year ended 31 March 2021 continued
30. OTHER CURRENT ASSETS
Derivative financial instruments (note 24)
Other investments
Total other current assets
31. OTHER CURRENT LIABILITIES
Derivative financial instruments (note 24)
Total other current liabilities
32. OTHER NON-CURRENT LIABILITIES
Derivative financial instruments (note 24)
Deferred tax liability (note 12)
Total other non-current liabilities
33. NET PENSION SURPLUS
ACCOUNTING POLICY
2021
£m
1
5
6
2021
£m
7
7
2021
£m
–
2
2
2020
£m
39
9
48
2020
£m
2
2
2020
£m
1
4
5
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 £3m (2020: £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 2021 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 or employee contributions following the closure of the Scheme to future accrual on 31 October 2019. Prior to
this, the employer contribution rate was 43.1% of pensionable salary to cover the costs of accruing benefits and the employee contributions
were at 8% of monthly pensionable salary. It was also agreed that no further deficit contributions were required from the Group. Employee
contributions were paid by salary sacrifice, and therefore appeared as Group contributions. The Group does not expect to make any
employee or employer contributions to the Scheme in the year to 31 March 2022 (2021: £nil).
Page
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Landsec // Annual Report 2021 » Financial statements Page
198
33. NET PENSION SURPLUS CONTINUED
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 gains/(losses) on scheme assets
Net re-measurement (losses)/gains on scheme liabilities
Net re-measurement (loss)/gain
Cumulative net re-measurement loss recognised in other comprehensive income
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
2021
£m
2020
£m
–
–
–
(5)
5
–
2021
£m
17
(29)
(12)
(46)
%
11
31
15
42
1
100
1
–
1
(5)
5
–
2020
£m
(10)
16
6
(34)
2020
£m
24
69
34
96
3
226
(208)
18
%
14
27
14
43
2
100
2021
£m
33
65
33
102
6
239
(233)
6
In the year ended 31 March 2021, £9m (2020: £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 (2020: £nil).
In the most recent triennial valuation, the defined benefit scheme liabilities were split 9% (2020: 9%) in respect of active scheme
participants, 24% (2020: 24%) in respect of deferred scheme participants, and 67% (2020: 67%) in respect of retirees. As the scheme is
now closed to future accrual, there are no longer any active scheme participants. The weighted average duration of the defined benefit
scheme liabilities at 31 March 2021 is 15.8 years (2020: 15.8 years).
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Notes to the financial statementsfor the year ended 31 March 2021 continued
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
2021
%
n/a
3.55
3.40
1.95
3.55
2.85
2021
Years
27.7
29.2
30.0
31.7
2020
%
2.80
2.80
2.75
2.30
2.80
2.00
2020
Years
27.6
29.1
29.8
31.6
The 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
Impact on Scheme liabilities
Decrease by 0.5%
Increase by 1 year
Increase by 0.5%
Increase by £19m
Increase by £10m
Increase by £16m
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 2021,
as opposed to a surplus of £6m.
In order to reduce risk within the Scheme, 43% (2020: 43%) 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 89% (2020: 80%) of the interest rate risk and 88% (2020: 80%) 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 2021
or 31 March 2020.
Page
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Landsec // Annual Report 2021 » Financial statements
Page
200
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 Share Bonus Plan
Executive Share Option Plan
Sharesave Plan
Restricted Share Plan
2021
Charge
£m
Number
(millions)
Charge
£m
2020
Number
(millions)
2
–
–
1
1
4
2
–
1
1
1
5
1
1
–
–
–
2
2
–
2
–
–
4
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 115 to 141.
EXECUTIVE PLANS:
LONG-TERM INCENTIVE PLAN (LTIP)
The LTIP is open to Executive Directors and Executive Leadership Team 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
616p (2020: 988p). The estimated fair value of awards granted during the year under the scheme was £3m (2020: £2m).
DEFERRED SHARE BONUS PLAN (DSBP)
The Executive Directors’ annual bonus is structured in two distinct parts made up of an initial payment and deferred shares. The shares
are usually deferred for between one and three years. In July 2020 the DSBP was awarded following the deferral of 100% of the Executive
Directors’ bonus entitlement for the year ended 31 March 2020. The shares are deferred for one year 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 567p (2020: 745p). The estimated fair value of awards granted during the year
under the scheme was £1m (2020: £nil).
OTHER PLANS:
EXECUTIVE SHARE OPTION PLAN (ESOP)
The 2005 ESOP was previously open to managers not eligible to participate in the LTIP, but was largely replaced by the new Restricted Share
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. There were
no awards exercised during the year (2020: weighted average share price of exercises 927p). The estimated fair value of awards granted
during the year under the scheme was £nil (2020: £nil).
SHARESAVE PLAN
Under the Sharesave 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 middle market price on the three dealing days immediately preceding the date of invitation less 20%
discount. There were no awards exercised during the year (2020: weighted average share price of exercises 944p). The estimated fair value
of awards granted during the year under the scheme was £1m (2020: £nil).
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements
RESTRICTED SHARE 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 (2020: none).
The estimated fair value of awards granted during the year under the scheme was £1m (2020: £1m).
The aggregate number of awards outstanding, and the weighted average exercise price, are shown below:
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.
Executive plans1
Number of awards
Number of awards
2021
Number
(millions)
2020
Number
(millions)
2021
Number
(millions)
2020
Number
(millions)
2
1
–
(1)
2
–
Years
1
2
1
–
(1)
2
–
Years
1
2
1
–
(1)
2
1
2
–
–
–
2
1
Years
4
Years
5
Other plans
Weighted average
exercise price
2021
Pence
873
531
–
817
821
1,343
2020
Pence
976
–
–
884
873
1,039
The 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
Weighted
average
exercise
price
Pence
–
519
728
900
1,022
1,328
Outstanding at 31 March 2021
Outstanding at 31 March 2020
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)
3
1
–
–
1
–
1
3
1
6
5
4
–
584
720
899
1,022
1,328
2
–
–
1
1
–
1
–
2
6
6
5
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
Long-Term Incentive Plan
Deferred Share Bonus Plan
Restricted Share Plan
Sharesave Plan
2021
616p
n/a
30%
2020
820p
n/a
20%
2021
547p
n/a
30%
2020
820p
n/a
20%
2021
547p
n/a
30%
2020
820p
n/a
20%
2021
649p
519p
30%
2020
837p
670p
20%
2.7 years
3 years
1 year
1 year
3 years
3 years
0.66%
-0.13%
0.53%
nil
6.36%
5.55%
5.36%
5.44%
3 to
5 years
3 to
5 years
-0.05%
to -0.07%
0.56%
to 0.62%
Risk-free rate
-0.09%
0.53%
Expected dividend yield
5.87%
5.55%
nil
nil
Page
201
Landsec // Annual Report 2021 » Financial statements Page
202
34. SHARE-BASED PAYMENTS CONTINUED
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
Expected volatility –
Group
2020
20%
Expected volatility – index
of comparator companies
Correlation –
Group vs. index
2021
30%
2020
20%
2021
85%
2020
85%
Year ended 31 March
Long-Term Incentive Plan
2021
581p
2020
820p
2021
n/a
2020
n/a
2021
30%
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
2021
£m
80
2020
£m
80
Number of shares
2021
2020
751,313,063
751,300,993
–
12,070
751,313,063
751,313,063
The number of options over ordinary shares from Executive plans that were outstanding at 31 March 2021 was 2,871,389 (2020: 1,877,442).
If all the options were exercised at that date then 2,871,389 (2020: 1,877,442) 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 2021 was 1,977,120
(2020: 1,999,167). If all the options were exercised at that date then 666,526 new ordinary shares (2020: 440,322) would be issued and
1,310,594 shares would be required to be transferred from the EBT (2020: 1,558,845).
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 2021 and 2020, there were no ordinary shares acquired
to be held as treasury shares. At 31 March 2021, the Group held 9,839,179 ordinary shares (2020: 9,839,179) with a market value of £68m
(2020: £55m) in treasury.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements 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
Acquisition of ordinary shares
Transfer of shares to employees on exercise of share options
At 31 March
Group and Company
2021
£m
10
3
(2)
11
2020
£m
11
–
(1)
10
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 2021 was 1,224,468 (2020: 957,692). The market value of these shares at 31 March 2021
was £8m (2020: £5m).
37. 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
Interest paid
1. All cash payments, including dividend payments, are made by another Group company.
2021
£m
2020
£m
(131)
(87)
(353)
(89)
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
Harvest
The Ebbsfleet Limited Partnership
West India Quay Unit Trust
Year ended and as at 31 March 2021
Year ended and as at 31 March 2020
Net
investments
into joint
ventures
£m
Amounts
owed by
joint
ventures
£m
Amounts
owed to
joint
ventures
£m
(2)
–
–
(4)
–
–
(1)
(7)
92
75
1
–
–
1
–
169
–
–
–
–
–
–
–
–
Income
£m
13
4
1
2
–
–
–
20
Net
investments
into joint
ventures
£m
Amounts
owed by
joint
ventures
£m
Amounts
owed to
joint
ventures
£m
11
(1)
(7)
(12)
(28)
(17)
(2)
(56)
90
72
1
–
–
–
–
163
–
–
–
–
–
–
(1)
(1)
Income
£m
17
4
1
1
–
–
–
23
Page
203
Landsec // Annual Report 2021 » Financial statements Page
204
38. RELATED PARTY TRANSACTIONS CONTINUED
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 115 to 141.
Short-term employee benefits
Share-based payments
39. OPERATING LEASE ARRANGEMENTS
ACCOUNTING POLICY
2021
£m
4
3
7
2020
£m
5
2
7
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
2021
£m
467
431
422
391
346
2020
£m
537
499
451
437
408
3,059
5,116
3,550
5,882
The total of contingent rents, primarily turnover based rents, recognised as income during the year was £5m (2020: £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.
Notes to the financial statementsfor the year ended 31 March 2021 continuedLandsec // Annual Report 2021 » Financial statements Business analysis – EPRA disclosures
EPRA net asset measures
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 asset (note 19)
Fair value of interest-rate swaps
Excess of fair value of debt over book value (note 21)
Purchasers’ costs1
Net assets used in per share calculation
Diluted 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 asset (note 19)
Fair value of interest-rate swaps
Excess of fair value of debt over book value (note 21)
Purchasers’ costs1
Net assets used in per share calculation
Diluted net assets per share
Table 68
31 March 2021
EPRA
NRV
£m
EPRA
NTA
£m
EPRA
NDV
£m
7,212
7,212
7,212
93
1
(1)
–
(3)
–
628
7,930
EPRA
NRV
1,070p
93
1
(1)
(2)
(3)
–
–
93
–
(1)
–
–
(244)
–
7,300
7,060
EPRA
NTA
985p
EPRA
NDV
953p
EPRA
NRV
£m
31 March 2020
EPRA
NTA
£m
EPRA
NDV
£m
8,750
8,750
8,750
90
1
(1)
–
1
–
768
9,609
90
1
(1)
(7)
1
–
–
90
–
(1)
–
–
(274)
–
8,834
8,565
EPRA
NRV
EPRA
NTA
EPRA
NDV
1,297p
1,192p
1,156p
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers’ costs. Purchasers’ costs are added back when calculating EPRA NRV.
Page
205
Landsec // Annual Report 2021 » Additional information Business analysis – EPRA disclosures
continued
EPRA performance measures
Measure
Adjusted earnings
Definition for EPRA measure
Notes
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 ratio3
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
Page
206
Table 69
31 March 2021
Landsec
measure
£251m
33.9p
33.9p
EPRA
measure
£251m
33.9p
33.9p
£7,300m
£7,300m
985p
985p
£7,060m
£7,060m
953p
953p
4.4%
4.3%
5.0%
4.9%
5.2%
19.4%
5.0%
42.3%
n/a
40.0%
5
5
5
5
5
5
5
Table
70
74
74
75
75
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 £14m and £14m 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 of £6m, 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. Provisions for bad and doubtful debts have been excluded from our cost ratio.
EPRA vacancy rate
Table 70
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
Central London
Regional retail
Urban opportunities
Subscale sectors
31 March
2021
£m
27
624
4.3%
Table 71
Change
%
-6.9
-54.4
-47.6
-57.3
-30.4
2021
£m
257
68
11
41
377
2020
£m
276
149
21
96
542
£m
(19)
(81)
(10)
(55)
(165)
Landsec // Annual Report 2021 » Additional information Acquisitions, disposals and capital expenditure
Investment properties
Net book value at the beginning of the year
Acquisitions
Capital expenditure
Capitalised interest
Net movement in capitalised head leases
Disposals
Net deficit on revaluation of investment properties
Transfer to trading properties
Net book value at the end of the year
Profit/(loss) on disposal of investment properties
Trading properties
Net book value at the beginning of the year
Transfer from investment properties
Capital expenditure
Disposals
Net book value at the end of the year
(Loss)/profit on disposal of trading properties
Acquisitions, development and other capital expenditure
Acquisitions2
Development capital expenditure3
Other capital expenditure
Capitalised interest
Acquisitions, development and other capital expenditure
Disposals
Net book value – investment property disposals
Net book value – trading property disposals
Net book value – other net assets
Profit/(loss) on disposal – investment properties
(Loss)/profit on disposal – trading properties
Total disposal proceeds
Table 72
Year ended
31 March
2021
Year ended
31 March
2020
Joint
ventures
Combined
Portfolio
Combined
Portfolio
£m
946
£m
£m
12,243
13,177
–
2
–
–
(15)
(198)
–
735
(3)
£m
3
–
–
(3)
–
(1)
115
223
11
1
(594)
48
207
8
31
(49)
(1,646)
(1,179)
(11)
–
10,342
12,243
5
£m
27
11
1
(3)
36
(1)
(6)
£m
41
–
1
(15)
27
7
Group
(excl. joint
ventures)
£m
11,297
115
221
11
1
(579)
(1,448)
(11)
9,607
8
£m
24
11
1
–
36
–
Investment
properties1
Trading
properties
Combined
Portfolio
Combined
Portfolio
£m
115
182
41
11
349
£m
–
1
–
–
1
£m
115
183
41
11
350
£m
594
3
43
5
(1)
644
£m
48
165
43
8
264
£m
49
15
–
(6)
7
65
1. See EPRA analysis of capital expenditure table 73 for further details.
2. Properties acquired in the year.
3. Development capital expenditure for investment properties comprises expenditure on the development pipeline and completed developments.
Page
207
Landsec // Annual Report 2021 » Additional information Business analysis – EPRA disclosures
continued
Page
208
EPRA analysis of capital expenditure
Other capital expenditure
Table 73
31 March 2021
Acquisitions1
£m
Development
capital
expenditure2
£m
Incremental
lettable
space3
£m
No
incremental
lettable
space
£m
Tenant
improvements
£m
Total
£m
Capitalised
interest
£m
Total
capital
expenditure
– Combined
Portfolio
£m
Total capital
expenditure
– joint
ventures
(Group share)
£m
Total capital
expenditure –
Group
£m
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Regional shopping
centres and shops
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
89
23
–
112
180
2
–
182
3
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
Total capital
expenditure
115
182
1
–
–
1
1
–
1
2
1
–
–
1
5
21
1
–
22
5
4
9
–
–
1
2
3
34
Timing difference between accrual and 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%.
EPRA net initial yield (NIY) and Topped-up NIY
–
–
–
–
–
1
1
–
1
–
–
1
2
22
1
–
23
6
5
11
2
2
1
2
5
11
–
–
11
–
–
–
–
–
–
–
–
302
26
–
328
9
5
14
2
2
1
2
5
41
11
349
1
–
–
1
1
–
1
–
–
–
–
–
2
(34)
315
(4)
(2)
Combined Portfolio
Trading properties
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 (a)
EPRA annualised cash passing rental income1
Net service charge expense2
Void costs and other deductions
EPRA annualised net rent1 (b)
Plus: Rent-free periods and other lease incentives (annualised)
Topped-up annualised net rents (c)
EPRA NIY (b/a)
EPRA Topped-up NIY (c/a)
1. EPRA annualised cash passing rental income and EPRA annualised net rent as calculated by the Group’s external valuer.
2. Including costs recovered through rents but not separately invoiced.
301
26
–
327
8
5
13
2
2
1
2
5
347
(30)
317
Table 74
2021
£m
10,791
37
(769)
10,059
587
10,646
539
(5)
(13)
521
14
535
4.9%
5.0%
Landsec // Annual Report 2021 » Additional information Cost analysis
Gross rental income (before rents payable)
Rents payable
£m
578
(9)
Gross rental income (after rents payable)
569
Net service charge expense
Net direct property expenditure
Bad and doubtful debts expense
Segment net rental income
Net indirect expenses
Segment profit before finance expense
Net finance expense – Group
Net finance expense – joint ventures
Revenue profit
(5)
(32)
(127)
405
(80)
325
(60)
(14)
251
Direct
property
costs
£164m
Net
indirect
expenses2
£80m
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
Void related costs
Other direct property costs
Development expenditure
Asset management,
administration and
compliance
Total costs (incl. direct
vacancy costs)
Costs recovered through rents
Tenant default3
Total cost ratio1
19.4%
Adjusted total costs
Tenant default3
EPRA costs (incl. direct
vacancy costs)
Less: Direct vacancy costs
EPRA costs (excl. direct
vacancy costs)
2021
Cost
ratio
%1
1.2
22.2
2.3
1.9
2.4
12.7
Total
£m
578
(6)
572
(9)
563
7
127
13
11
14
72
Table 75
2020
Cost
ratio
%1
1.5
4.9
1.9
2.8
1.3
10.4
Total
£m
678
(6)
672
(15)
657
10
33
13
19
9
70
244
42.7
154
22.9
(6)
(127)
111
127
238
(13)
225
19.4
42.3
40.0
(6)
(33)
115
33
148
(13)
135
17.1
22.5
20.5
1. Percentages represent costs divided by Adjusted gross rental income, except for EPRA measures which represent costs divided by EPRA gross rental income.
2. Net indirect expenses amounting to £7m (2020: £7m) have been capitalised as development costs and are excluded from table 75. See note 14 of the financial statements
for the Group’s policy on capitalising indirect expenses.
3. Provisions for bad and doubtful debts have been excluded from our cost ratio, including those relating to rent which will be earned in future accounting periods.
Page
209
Landsec // Annual Report 2021 » Additional information
Business analysis – Group
Page
210
Combined Portfolio value by location at 31 March 20211
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
Central
London
%
68.1
–
–
–
–
–
Regional
retail
%
Urban
opportunities
%
–
8.6
–
2.2
4.2
1.4
2.9
5.0
1.0
0.5
2.0
0.7
Subscale
sectors
%
3.4
–
–
–
–
–
Table 76
Total
%
74.4
13.6
1.0
2.7
6.2
2.1
68.1
16.4
12.1
3.4
100.0
1. % figures calculated by reference to the Combined Portfolio value of £10.8bn.
For a full list of the Group’s properties please refer to our website: www.landsec.com.
Combined Portfolio performance relative to MSCI
Total property return – year ended 31 March 2021
Central London
Regional retail
Urban opportunities
Subscale sectors
Combined Portfolio
1. MSCI Central and Inner London Office benchmark/Central London Retail weighted by Landsec exposure.
2. MSCI All Shopping Centres benchmark.
3. MSCI Rest of London Shopping Centres benchmark.
4. No benchmark available.
5. MSCI All Property Quarterly Universe.
Top 12 occupiers at 31 March 2021
Central Government
Deloitte
Cineworld
Boots
Sainsbury’s
Taylor Wessing
Equinix
Lloyds Banking
M&S
Next
H&M
Vue
1. On a proportionate basis.
Table 77
MSCI
%
-2.61
-23.62
-17.53
n/a4
1.25
Landsec
%
-2.3
-28.4
-21.4
-12.8
-9.6
Table 78
% of Group rent1
6.4
6.3
2.1
1.9
1.6
1.5
1.4
1.2
1.2
1.1
1.1
1.1
26.9
Landsec // Annual Report 2021 » Additional information Property Income Distribution (PID) calculation
Loss before tax per income statement
Accounting (profit)/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 and impairment
Estimated tax-exempt income for the year
PID thereon (90%)
Table 79
Year ended
Year ended
31 March 2021
£m
31 March 2020
£m
(1,393)
(837)
(47)
–
5
7
(1,440)
(825)
(45)
(7)
(47)
(5)
1,646
1,179
(6)
9
(3)
5
159
143
7
4
2
5
320
288
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 2021
and 31 March 2020:
Dividends paid in year to 31 March 2020
Dividends paid in year to 31 March 2021
Minimum PID to be paid by 31 March 2022
Total PID required
PID allocation
Ordinary
dividend
Year ended
Year ended
31 March 2021
£m
31 March 2020
£m
Pre-
31 March 2020
£m
–
49
94
143
204
84
–
288
138
–
n/a
£m
–
–
n/a
Table 80
Total
dividend
£m
342
133
n/a
Page
211
Landsec // Annual Report 2021 » Additional information Business analysis – Group
continued
Total Shareholder Returns1
Land Securities Group PLC
FTSE 100
FTSE 350 Real Estate Index
1. Historical TSR performance for a hypothetical investment of £100 – source: Datastream.
Voids and units in administration – like-for-like (%)
Page
212
Table 81
Period to 31 March 2021
5 years
£
77.2
133.1
109.0
3 years
£
83.1
107.1
100.9
1 year
£
134.5
126.8
123.4
Chart 82
Analysis of performance
relative to MSCI (%)
Chart 83
-0.3
-10.3
-10.6
-7.4
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
3.3
1.3
n
o
d
n
o
L
l
a
r
t
n
e
C
7.5
4.7
5.0
4.8
4.4
5.8
2.5
2.0
2.5
2.9
2.1
2.2
l
a
t
o
T
s
r
o
t
c
e
s
l
e
a
c
s
b
u
S
0.3
0.1
n
o
d
n
o
L
l
a
r
t
n
e
C
l
i
a
t
e
r
l
a
n
o
g
e
R
i
1.1
0.4
s
e
i
t
i
n
u
t
r
o
p
p
o
n
a
b
r
U
0.9
0.8
l
a
t
o
T
s
r
o
t
c
e
s
l
e
a
c
s
b
u
S
In administration
l
i
a
t
e
r
l
a
n
o
g
e
R
i
s
e
i
t
i
n
u
t
r
o
p
p
o
n
a
b
r
U
Voids
h
t
w
o
r
g
l
a
t
i
p
a
C
n
r
u
t
e
r
e
m
o
c
n
i
e
v
i
t
a
e
R
l
-0.3
–
0.3
s
e
s
a
h
c
r
u
p
f
o
n
o
i
t
u
b
i
r
t
n
o
C
s
l
a
s
o
p
s
i
d
f
o
n
o
i
t
u
b
i
r
t
n
o
C
l
s
t
n
e
m
p
o
e
v
e
d
f
o
n
o
i
t
u
b
i
r
t
n
o
C
l
a
t
o
T
e
r
u
t
c
u
r
t
s
f
o
t
c
a
p
m
I
Attribution analysis, ungeared total return, 12 months to
31 March 2021, relative to MSCI Quarterly Universe – source: MSCI
31 March 2021
31 March 2020
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:
Year ended 31 March 2021
Year ended 31 March 2020
Table 84
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.
Tax-
exempt
business
194
100%
10,520
95.5%
Residual
business
Adjusted
results
(7)
187
Tax-
exempt
business
390
100%
Residual
business
Adjusted
results
(4)
386
0%
598
14,360
0%
493
4.5%
11,013
13,762
95.9%
4.1%
Landsec // Annual Report 2021 » Additional information
Annual net rent breakdown
by occupier business sector (%)
Chart 85
% portfolio by value and number of
property holdings at 31 March 2021
■ Services
■ Retail trade
■ Financial services
■ Public administration
■ Wholesale trade
■ Manufacturing
■ Transport, communications
■ Other
37%
33%
14%
6%
3%
2%
2%
3%
£m
0 - 10
10 - 25
25 - 50
50 - 100
100 - 150
150 - 200
200+
Total
Table 87
Value
%
Number of
properties
0.8
4.1
7.0
14.5
6.6
6.2
60.8
100.0
17
29
21
21
6
4
15
113
Floorspace (million sq ft)1
■ Central London
■ Regional retail
■ Urban opportunities
■ Subscale sectors
Total
6.2
8.1
1.8
7.4
23.5
1. Joint ventures are reflected at 100% values, not Group share.
Chart 86
Estimated future development spend
on approved developments (£m)
Chart 88
350
300
250
200
150
100
50
0
334
192
2022
2023
30
2024
2
2025+
Estimated future spend excludes interest costs.
Page
213
Landsec // Annual Report 2021 » Additional information
Business analysis – Central London
Page
214
Central London portfolio (%)
Chart 89
Central London floorspace (million sq ft)
Chart 90
■ Offices
■ London retail
■ Other central London
85.3%
9.0%
5.7%
■ Offices
■ London retail
■ Other central London
Total
5.3
0.8
0.1
6.2
£7.3bn
6.2m
sq ft
OFFICES
Our £6.3bn offices portfolio is comprised of office space in London
including our cluster of buildings at New Street Square, EC4, Victoria,
SW1 assets such as Cardinal Place, Nova, 62 Buckingham Gate and
The Zig Zag Building and the development at 21 Moorfields, EC2.
LONDON RETAIL
This sector comprises the retail space in our offices portfolio assets
which include One New Change, EC4, Tottenham Court Road, W1,
Cardinal Place SW1, 32-50 Strand, WC2, 55 Old Broad Street, EC2
and Lucent, W1, as well as Monico Safeguarded.
OTHER CENTRAL LONDON
Comprises Piccadilly Lights, W1 and our residential space.
Top 10 Central London customers
Central Government
Deloitte
Taylor Wessing
Equinix
Lloyds Banking
Bain & Co Inc
Hyundai
Deutsche Bank
Boots
Mace
Central London other
Total
Table 91
% of Group rent
6.4
6.3
1.5
1.4
1.1
1.0
0.9
0.9
0.8
0.8
21.1
33.3
54.4
Landsec // Annual Report 2021 » Additional information
Business analysis – Regional retail
Regional retail portfolio (%)
Chart 92
Regional retail portfolio floorspace (million sq ft)
Chart 93
■ Regional shopping centres
and shops
■ Outlets
59.0%
41.0%
■ Regional shopping centres
and shops
■ Outlets
Total
6.6
1.5
8.1
£1.8bn
8.1m
sq ft
REGIONAL SHOPPING CENTRES AND SHOPS
Comprises our £1.0bn portfolio of shopping centres in major retail
locations across the UK including Bluewater, Kent, Trinity Leeds,
White Rose, Leeds and Westgate Oxford.
OUTLETS
Our five outlets offer a vibrant and engaging experience in
locations such as Gunwharf Quays, Portsmouth, Braintree Village
and Clarks Village, Street.
Top 10 Regional retail customers
Table 94
% of Group rent
H&M
Primark
Boots
Next
Sainsbury’s
M&S
River Island
J C Decaux
John Lewis Partnership
Vans
Regional retail other
Total
0.9
0.9
0.8
0.8
0.6
0.5
0.5
0.4
0.4
0.4
6.2
19.9
26.1
Page
215
Landsec // Annual Report 2021 » Additional information
Business analysis – Urban opportunities
Page
216
Urban opportunities portfolio
Urban opportunities portfolio floorspace (million sq ft)
£0.4bn
1.8m
sq ft
Urban opportunities are essentially mixed-use, multi-phase
regeneration projects rooted in a need to redevelop parts of the
built environment that are no longer fit for purpose. Comprises
retail space at Great North Leisure Park, N12, Finchley Road, NW3,
Southside, SW18, The Lewisham Centre, SE13 and Shepherd’s Bush,
W12 with potential for re-purposing.
Business analysis – Subscale sectors
Subscale sectors portfolio (%)
■ Leisure
■ Hotels
■ Retail parks
38.7%
31.0%
30.3%
£1.3bn
Chart 95
Subscale sectors portfolio floorspace
(million sq ft)
Chart 96
■ Leisure
■ Hotels
■ Retail parks
Total
3.4
2.0
2.0
7.4
7.4m
sq ft
LEISURE
We own five stand-alone leisure assets and an additional 13
schemes of prime leisure and entertainment space, previously
part of the X-Leisure Fund which was restructured within the
Group in this financial year.
HOTELS
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.
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 Lakeside Retail Park, Bexhill
Retail Park and Westwood Cross.
Top 10 Subscale sectors customers
Table 97
% of Group rent
Cineworld
Tesco
DSG International
Accor
Snozone
Morrisons
B & M Retail
Vue
Odeon
Malmaison
Subscale sectors other
Total
1.8
0.9
0.5
0.5
0.4
0.4
0.3
0.3
0.3
0.3
5.7
9.1
14.8
Landsec // Annual Report 2021 » Additional information
Sustainability
performance
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.
To deliver this we’ve set twelve 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.
For more information please visit www.landsec.com/sustainability.
Performance: On track
To establish and maintain Covid-secure destinations and
workplaces we launched a taskforce to assess the impact of the
virus on our operations, to interpret government guidance, and
co-ordinate the rollout of new ways of working. We continue to
enhance fire safety across the business and ensure we meet
new government initiatives and legislation.
EFFICIENT USE OF NATURAL RESOURCES
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.
CREATING JOBS AND OPPORTUNITIES
Landsec carbon reduction target performance
Chart 98
SOCIAL VALUE
Commitment: Create £25m of social value through our community
programmes by 2025.
Performance: On track
This year we’ve created over £6.5m of social value through our
social sustainability programmes, achieving in-year outperformance.
Over £11m of social value created since commitment launched
in 2019/20.
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: Not met
We continue to pay the Real Living Wage to all of our direct
employees and partners across office portfolio. We have not been
able to meet our 2020 Living Wage commitment fully across our
retail portfolio. Recognising the impact that the pandemic had
on businesses, particularly the retail sector, The Living Wage
Foundation is allowing businesses to pause their accreditation
during the pandemic. We will review our accreditation by November
this year when there will be more certainty on the reopening of the
UK economy.
We collaborated with modern slavery specialist Stronger Together
to perform a gap analysis, develop an action plan, and launched
a Modern Slavery Working Group to improve our approach in
identifying and managing modern slavery risk.
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%. We continue to maintain good
female representation at all levels of our organisation, increasing
our female representation to 31% at leader level and 38% at senior
leader level. Our ethnic minority representation is 8% at leader
and 6% at senior leader level.
HEALTH AND SAFETY
Commitment: Maintain an exceptional standard of health,
safety and security in all the working environments we control.
Page
217
79,614
–4%
76,718
–19%
64,703
90,000
80,000
70,000
60,000
e
2
O
C
t
50,000
40,000
30,000
20,000
10,000
0
–32%
54,333
–42%
46,297
–55%
36,010
–70%
23,884
2013/14
Baseline
2016/17
2017/18
2018/19
2019/20
2020/21
2030
Scope 1
Scope 2
Scope 3
Performance: On track
Reduced carbon emissions by 55% since 2013/14 against our
science-based carbon reduction target. Significant reduction in
carbon emissions as a result of lower occupancy and operational
hours due to Covid-19 restrictions.
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 currently exploring opportunities to move our
procurement towards direct purchasing from renewable projects
through Power Purchase Agreements (PPA).
Commitment: Achieve 3MW of renewable electricity capacity
by 2030.
Performance: On track
Our current on-site renewable electricity capacity is 1.4 MW. We have
continued to progress our feasibility studies for on-site renewable
technologies, assessing the value this would deliver to Landsec and
our customers and how these could be incorporated as part of future
redevelopment works.
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.
Landsec // Annual Report 2021 » Additional information Page
218
Sustainability
performance
continued
Performance: On track
We have reduced energy intensity by 43% compared to 2013/14.
Although this figure suggests that we’ve already achieved our
target to reduce energy intensity by 40% by 2030, we recognise
that energy consumption has been significantly impacted by lower
occupancy and operational hours due to Covid-19 restrictions and
doesn’t reflect portfolio energy performance in normal conditions.
For that reason, we’ll continue tracking our performance against
this 2030 target.
UPDATED WASTE COMMITMENTS:
Commitment: Send zero operational and construction waste
to landfill by 2030 and recycle at least 75% of operational and
construction waste by 2030.
Performance: On track
We are diverting 100% of operational waste and 99.9% of
construction waste from landfill. We are recycling 65% of
operational waste and 99% of construction waste.
Landsec energy intensity target performance
Chart 99
SUSTAINABLE DESIGN AND INNOVATION
163
–9%
148
–13%
143
–13%
143
–19%
132
–43%
94
–40%
98
2
m
/
h
W
k
180
160
140
120
100
80
60
40
20
0
2013/14
Baseline
2016/17
2017/18
2018/19
2019/20
2020/21
2030
Previous years performance figures, including baseline, have been restated due
to change in reporting methodology. More information is detailed in our 2021
Sustainability Performance and Data Report.
WASTE
Commitment: Send zero operational waste to landfill.
Performance: Complete
We continue to divert 100% from landfill across our operational
activities.
Commitment: At least 75% waste recycled across all our
operational activities by 2020
Performance: Not met
This year we recycled 65% of operational waste. The decrease
in recycling rate from last year (2020:73%) reflects the reduction
of recyclable materials such as packaging in retail as a result
of Covid-19. Landsec has seen a 63% reduction in total waste
produced due Covid-19.
Landsec waste performance
Chart 100
75%
75%
73%
7,838
23,359
8,477
25,001
9,860
26,203
50,000
40,000
30,000
71%
37
10,645
20,000
24,732
s
e
n
n
o
T
10,000
0
65%
4,612
8,629
80%
70%
60%
50%
40%
30%
20%
10%
0%
2016/17
2017/18
2018/19
2019/20
2020/21
Recycling
Combustion
Landfill
Recycling rate
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,
this year we’ve again worked with Willis Towers Watson in assessing
and quantifying climate-related risks to inform our approach to
managing climate risks across our portfolio, including new
developments.
In our development pipeline we continue undertaking 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.
This year we published our Materials Brief to guide our supply
partners and mitigate human rights risks and 100% of key
construction materials responsibly sourced.
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 continued our partnership with The Wildlife Trusts to enhance
biodiversity net gain at our five operational sites and we’re on track
to deliver significant net gain on our developments and created
a new Biodiversity Brief for developments.
WELLBEING
Commitment: Ensure our buildings are designed and managed
to maximise wellbeing and productivity.
Performance: On track
This year we committed to pursuing the WELL Portfolio Programme
across our existing managed office portfolio, in addition to our new
schemes. All of our live developments are successfully registered
and pre-assessed against WELL Core rating.
Landsec // Annual Report 2021 » Additional information SOCIAL VALUE DATA
To understand the quantifiable difference we are making to people,
communities and society as a whole, we partner with the Social Value
Portal which specialises in measuring and reporting social value.
The Social Value Portal has estimated the social value that Landsec
has unlocked through our various initiatives by developing a
bespoke social value measurement framework which is based on
the widely used National Themes, Outcomes and Measures (TOMs)
Social Value Measurement Framework. The TOMs measurement
framework was launched by the National Social Value Taskforce
in 2017 and was built following extensive consultation by 40 cross
sector organisations including the Landsec Social Sustainability
Team, our delivery partners and our employees.
For more information, please visit www.socialvalueportal.com
Social value data
Total social value created
Community Employment
Social value created
Social value – prison leavers
Social value – young people aged 16-25 at risk of long-term unemployment
Social value – people experiencing homelessness or living in supported accommodation
Total number of people supported into work
Total number of people engaged in training and employability support (who did not move into work)
Education
Total young people engaged on our formal education programmes, including industry projects, mentoring
and reverse coaching
% 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 directly benefited by Landsec volunteers
Total number of volunteer engagements (times a Landsec employee volunteered)
Total Landsec employees who have volunteered (at least once)
Total volunteering hours by Landsec staff
Charity partnerships
Total value of support for charities
Total value directly donated to charities by Landsec
Total value of space donated to charities
1. New indicator for 2021.
2019/20
Table 101
2020/21
£4,822,053
£6,552,911
£2,594,380
£1,686,082
£929,694
£648,697
£226,461
511
n/a1
298
63%
32%
95%
97%
£475,095
£361,627
£387,266
121
852
92
Data not
available
£402,256
£99,061
3,400
539
253
8,527
895
352
120
719
£1,823,184
£4,767,767
£293,255
£463,820
£1,110,262
£3,996,561
Page
219
Landsec // Annual Report 2021 » Additional information
Page
220
Sustainability
performance
continued
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.
Landsec – Scope 1 and 2 emissions
Table 102
Market-based emissions
Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Scope 1 and 2 tCO2e
Intensity
2018/19
2019/20
2020/21
9,879
3,517
9,158
3,719
13,396
12,878
7,554
2,079
9,633
GHG emissions are broken down into three scopes: scope 1, 2 and 3.
Scope 1 and 2 kgCO2e/m2
8.00
6.11
5.27
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 2020’. 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. We haven’t purchased biogas since April 2019, therefore
Scope 1 emissions for 2019/20 and 2020/21 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 8 are directly relevant for Landsec.
Landsec – Scope 1 and 2 emissions
Location-based emissions
Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Scope 1 and 2 tCO2e
Intensity
2018/19
11,490
30,518
42,008
2019/20
9,158
25,382
34,540
Table 102
2020/21
7,554
18,434
25,988
Scope 1 and 2 kgCO2e/m2
22.54
18.56
114.23
Scope 1 and 2 GHG emissions using location-based emission factors
have dropped by 25% compared with previous year. Although these
reductions have been achieved through a combination of factors,
including energy efficiency projects, changes in our portfolio
and changes in the UK’s emission factors, the main driver for
carbon reduction across the portfolio, this year, was the Covid-19
pandemic. The detailed breakdown of main factors driving the
change in our Scope 1 and Scope 2 can be seen in the waterfall
chart 103. In terms of market-based emissions we have also seen
a reduction of 25%.
Landsec Scope 1 and 2 emissions –
year on year driving factors
Chart 103
34,540
(1,479)
(180)
(3,551)
(932)
25,988
(2,410)
e
2
O
C
t
40,000
35,000
30,000
25,000
15,000
10,000
5,000
0
2019/20
Portfolio
changes
External
temperature
Covid-19
restrictions
Energy
efficiencies
Emission
factor
2020/21
The table 104 shows the absolute energy consumption with a
breakdown by landlord and tenant consumption. This year absolute
energy intensity has reduced by 32% compared with previous year,
largely as a result of Covid-19 restrictions.
Our active energy management programme has also contributed
to further reduce energy, maximising building efficiency in line with
lower occupancy levels, while ensuring the health and safety and
comfort of our occupants. To do this, we use smart technology to
gather data from our building management systems in several of
our offices, and having this detailed data helps us decide how we
control energy-intensive service equipment in our buildings, and
the services that we provide in our buildings are now running in
line with occupancy. Consequently, this year we have been able
to undertake various actions to improve the building management
systems across our office assets. For example, we have improved
the efficiency and lifecycle of our cooling systems, as they now
react more optimally to external temperatures.
This year we identified and committed to implement energy
efficiency projects across our portfolio that will lead to over
6,600 MWh of savings per annum. More information on
our energy programme can be found on pages 64-67
(Environmental review).
Landsec // Annual Report 2021 » Additional information Landsec – Energy consumption
Energy consumption
Natural Gas
Unit
kWh
For landlord shared services
(Sub)metered to tenants
Total Natural Gas consumption
Electricity
kWh
For landlord shared services
(Sub)metered to tenants
Total Electricity consumption
2018/19
2019/20
53,714,180
27,595,980
81,310,160
102,604,274
64,985,746
43,015,309
28,576,514
71,591,823
95,890,524
68,977,474
Table 104
2020/21
27,504,757
12,686,608
40,191,365
74,375,665
46,107,177
167,590,020
164,867,998
120,482,841
District Heating and Cooling
kWh
For landlord shared services
(Sub)metered to tenants
9,607,784
7,063,310
5,312,441
7,356,140
Total Heating and Cooling consumption
16,671,094
12,668,581
5,472,813
3,589,825
9,062,638
Total Energy Consumption
kWh
For landlord shared services
165,926,238
144,218,274
107,353,234
Energy intensity
kWh/m2
(Sub)metered to tenants
Total Energy consumption
99,645,036
104,910,128
62,383,610
265,571,274
249,128,402
169,736,845
142
134
93
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 8 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 2021 Sustainability Performance and Data Report.
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)
11,490
30,518
272,937
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
108,996
n/a
n/a
269,571
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
Emissions
(tCO2e)
7,554
18,434
205,235
34,004
84,261
5,052
Grouped
under PG&S
284
33
168
n/a
n/a
n/a
n/a
n/a
81,433
n/a
n/a
231,223
Table 105
2020/21
% of total
value chain
3.3
8.0
88.8
14.7
36.4
2.2
0.0
0.1
0.0
0.1
0.0
0.0
0.0
0.0
0.0
35.2
0.0
0.0
Page
221
Landsec // Annual Report 2021 » Additional information Sustainability
performance
continued
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 emissions by category 2020/21
Chart 106
■ Capital goods
■ Downstream leased assets
■ Purchased good
and services (PG&S)
■ Other
41%
40%
17%
2%
The two largest scope 3 categories are Capital goods and
Downstream leased assets, making up over 71% 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.
The increase in emissions for Capital goods is explained by the
fact that most of our development projects were still in the
design stage in 2019/20, progressing to construction phase during
Embodied carbon – development pipeline
Page
222
the reporting year. In the table below, we provide the amount of
embodied carbon emissions reported for each development in
2020/21. Conversely, lower emissions for Downstream leased assets
are associated with reduction in energy consumption as a result
of Covid-19 restrictions and reduction in the UK’s emission factors.
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
lifecycle assessments on all of 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 over 38,000 tCO2e by targeting an overall reduction
of 15.6% 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.
Development
21 Moorfields, EC2
Lucent, W1
n2, SW1
The Forge, SE1
Portland House, SW1
Timber Square, SE1
Landsec development pipeline
Total embodied carbon
baseline tCO2
120,871
Forecasted total
embodied carbon tCO2
102,224
Forecasted embodied
carbon intensity kgCO2/m2
1,363
27,101
24,788
24,741
19,554
30,548
247,603
22,047
20,878
18,705
19,384
25,813
209,051
1,146
1,013
1,042
342
501
Embodied carbon
reduction %
-15.4
-18.6
-15.8
-24.4
-0.9
-15.5
-15.6
Table 107
Embodied carbon
emissions reported in
2020/21 tCO2
40,295
909
1,836
2,172
73
–
45,285
Landsec // Annual Report 2021 » Additional information 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
Benchmark
CDP
Global Real Estate Sustainability Benchmark
(GRESB)
Dow Jones Sustainability Index (DJSI)
FTSE4Good
EPRA
Table 108
Performance
2020: A-list (top 2.8%) for the fourth consecutive year. Inclusion on the 2020 Supplier
Engagement Leader board (top 7%)
2019: A-list (top 2%). The only A-list UK REIT
2018: A-list (Leadership)
2020: Score 85% for Standing Investments – Regional Listed Sector Leader for Europe within
Diversified Office and Retail / Score 94% for Developments – Global Listed Development
Sector Leader for Office
2019: Score 90%. Sector leader, ranking 1st in Europe and UK diversified office/retail (mixed)
2018: Score 90%
2020: Score 85/percentile ranking 99. European Real Estate leader, ranking 4th globally Silver
Class distinction in the S&P Global Sustainability Awards
2019: Score 82/percentile ranking 98
2018: Score 73/percentile ranking 93
Percentile ranking 94. We continue to retain our established position in the FTSE4Good Index
Received our seventh Gold Award from EPRA for best practice sustainability reporting
Workforce Disclosure Initiative (WDI)
2020: WDI Award for most complete disclosure globally
MSCI
Sustainalytics
EcoAct
ISS ESG
ESG rating: A
10.9 (low risk)/ranking 32 out of 951 companies in the real estate industry
We’ve again been named a climate leader, ranking 3rd for all FTSE 100 companies and 1st for
our sector (ranked 5th in 2019)
Prime status. Rating C+ Decile rank 1/transparency level: very high
Tortoise Responsibility100 Index
Ranking 1st among all FTSE companies in the April 2021 update
ASSURANCE
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 Environmental and Social sections of the Strategic Report on pages 54-67;
the sustainability content in the ‘Additional Information’ section of the Landsec 2021 Annual Report on pages 217-223; and the online
Landsec 2021 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.
Page
223
Landsec // Annual Report 2021 » Additional information Combined Portfolio analysis
Page
224
Like-for-like segmental analysis
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Like-for-like portfolio8
Proposed developments1
Development programme9
Acquisitions10
Sales11
Combined Portfolio
Properties treated as finance leases
Combined Portfolio
Total portfolio analysis
31 March
2021
£m
Market value1
31 March
2020
£m
Valuation movement1
Surplus/
(deficit)
%
Surplus/
(deficit)
£m
31 March
2021
£m
Rental income1
31 March
2020
£m
Annualised
rental
income2
31 March
2021
£m
Annualised net rent3
30 September
2020
£m
31 March
2021
£m
5,194
623
420
6,237
1,041
722
1,763
360
483
406
397
1,286
9,646
286
713
146
–
10,791
5,408
852
427
6,687
1,679
881
2,560
469
615
469
442
1,526
11,242
294
566
55
624
12,781
(214)
(224)
(5)
(443)
(635)
(164)
(799)
(110)
(137)
(64)
(43)
(244)
(1,596)
(41)
(1)
(8)
–
(1,646)
-4.3%
-26.7%
-1.2%
-7.1%
-38.2%
-18.5%
-31.4%
-23.4%
-22.9%
-13.4%
-10.1%
-16.2%
-14.8%
-12.4%
-0.2%
-5.4%
–
-13.7%
10,791
12,781
(1,646)
-13.7%
238
36
17
291
115
47
162
25
41
4
34
79
557
1
–
4
16
578
(9)
569
235
41
22
298
139
62
201
29
45
28
38
111
639
12
–
1
26
678
(9)
669
234
34
13
281
98
39
137
24
39
4
33
76
518
1
–
7
–
526
250
34
13
297
95
40
135
24
38
4
34
76
532
1
–
6
–
539
255
37
13
305
107
48
155
24
38
6
35
79
563
1
–
3
23
590
31 March
2021
£m
Market value1
31 March
2020
£m
Valuation movement1
Surplus/
(deficit)
%
Surplus/
(deficit)
£m
31 March
2021
£m
Rental income1
31 March
2020
£m
Annualised
rental
income2
31 March
2021
£m
Annualised net rent3
30 September
2020
£m
31 March
2021
£m
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Properties treated as finance leases
Combined Portfolio
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Analysis by asset use:
Offices
Retail
Leisure, hotels and other
Combined Portfolio
6,268
659
420
7,347
1,041
722
1,763
372
506
406
397
1,309
10,791
6,810
928
437
8,175
1,679
881
2,560
484
649
469
444
1,562
12,781
(251)
(229)
(4)
(484)
(635)
(164)
(799)
(112)
(144)
(64)
(43)
(251)
(1,646)
-4.1%
-26.0%
-1.0%
-6.5%
-38.2%
-18.5%
-31.4%
-23.3%
-23.0%
-13.4%
-10.1%
-16.4%
-13.7%
10,791
12,781
(1,646)
-13.7%
10,025
766
10,791
11,802
979
12,781
(1,448)
(198)
(1,646)
-13.1%
-21.3%
-13.7%
6,279
3,136
1,376
10,791
6,826
4,348
1,607
12,781
(255)
(1,173)
(218)
(1,646)
-4.2%
-27.4%
-13.9%
-13.7%
254
38
17
309
115
47
162
26
43
4
34
81
578
(9)
569
519
50
569
255
257
66
578
268
43
22
333
139
62
201
29
47
28
40
115
678
(9)
669
610
59
669
270
309
99
678
237
36
13
286
98
39
137
25
41
4
33
78
526
481
45
526
238
227
61
526
252
36
13
301
95
40
135
25
40
4
34
78
539
492
47
539
253
226
60
539
277
39
13
329
107
48
155
25
41
6
34
81
590
543
47
590
279
250
61
590
Like-for-like segmental analysis continued
Net estimated
rental value4
Gross estimated
rental value5
Net initial yield6
Equivalent yield7
Voids (by ERV)1
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
31 March
Combined Portfolio
679
754
693
769
4.5%
Total portfolio analysis continued
Net estimated
rental value4
Gross estimated
rental value5
Net initial yield6
31 March
31 March
31 March
31 March
31 March
31 March
Regional shopping centres and shops
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Like-for-like portfolio8
Proposed developments1
Development programme9
Acquisitions10
Sales11
Regional shopping centres and shops
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Analysis by use type:
Offices
Retail
Leisure, hotels and other
Combined Portfolio
2021
£m
266
30
21
317
95
61
156
26
596
40
25
32
97
–
67
16
–
2021
£m
345
31
21
397
95
61
156
27
42
25
32
99
679
629
50
679
349
241
89
679
2020
£m
272
40
21
333
122
63
185
29
43
30
35
108
655
–
68
3
28
2020
£m
362
45
21
428
122
63
185
30
45
30
36
111
754
688
66
754
364
291
99
754
2021
£m
270
30
21
321
102
61
163
26
608
40
25
33
98
–
69
16
–
2021
£m
351
31
21
403
102
61
163
27
42
25
33
100
693
641
52
693
354
249
90
693
2020
£m
275
41
21
337
130
63
193
29
44
30
35
109
668
–
70
3
28
2020
£m
367
46
21
434
130
63
193
30
46
30
36
112
769
702
67
769
370
300
99
769
2021
%
4.4%
4.4%
2.6%
4.3%
7.9%
5.3%
6.8%
5.6%
6.9%
3.3%
7.4%
5.9%
5.0%
3.3%
–
–
–
2021
%
3.7%
4.3%
2.6%
3.7%
7.9%
5.3%
6.8%
5.6%
6.9%
3.3%
7.4%
5.9%
4.5%
4.5%
5.3%
4.5%
3.7%
6.1%
5.1%
4.5%
2021
%
4.6%
4.5%
4.4%
4.6%
7.6%
6.8%
7.3%
5.9%
7.6%
5.5%
7.6%
6.9%
5.5%
n/a
4.3%
5.4%
n/a
5.4%
2020
%
4.6%
4.3%
4.3%
4.6%
6.2%
5.9%
6.1%
5.2%
6.4%
5.2%
7.4%
6.3%
5.2%
n/a
4.3%
5.8%
n/a
5.1%
2021
%
3.5%
4.0%
–
3.3%
7.9%
6.8%
7.5%
5.0%
5.2%
–
1.2%
2.5%
4.4%
n/a
n/a
n/a
n/a
n/a
Table 109
2020
%
1.2%
2.5%
0.5%
1.3%
4.8%
4.4%
4.7%
4.8%
2.3%
–
3.4%
2.0%
2.5%
n/a
n/a
n/a
n/a
n/a
Notes
1. Refer to Glossary for definition.
2. Annualised rental income is annual ‘rental
income’ (as defined in the Glossary) at the
balance sheet date, except that car park and
commercialisation income are included on
a net basis (after deduction for operational
outgoings). Annualised rental income includes
temporary lettings.
3. Annualised net rent is annual cash rent,
after the deduction of rent payable, as at
the balance sheet date. It is calculated using
the same methodology as annualised rental
income but is stated net of rent payable and
before tenant lease incentive adjustments.
31 March 2020 annualised net rent data is
not available, therefore 30 September 2020
information has been included for
comparative purposes.
4. Net estimated rental value is gross estimated
rental value, as defined in the Glossary, after
deducting expected rent payable.
5. 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.
6. Net initial yield – refer to Glossary for
definition. This calculation includes all
properties including those sites with no
income.
7. Equivalent yield – refer to Glossary for
definition. Proposed developments are
excluded from the calculation of equivalent
yield on the Combined Portfolio.
8. 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.
9. 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.
10. Includes all properties acquired since 1 April
2019.
11. Includes all properties sold since 1 April 2019.
2020
%
4.4%
4.5%
3.4%
4.3%
6.4%
5.6%
6.1%
4.9%
5.8%
2.3%
7.6%
5.2%
4.9%
–
–
5.5%
3.9%
4.5%
2020
%
3.8%
4.3%
3.4%
3.8%
6.4%
5.6%
6.1%
4.9%
5.8%
2.3%
7.6%
5.3%
4.5%
4.6%
4.4%
4.5%
3.8%
5.8%
4.1%
4.5%
Landsec // Annual Report 2021 » Additional information Regional shopping centres and shops
1,041
Combined Portfolio
10,791
12,781
(1,646)
-13.7%
526
539
Properties treated as finance leases
Combined Portfolio
10,791
12,781
(1,646)
-13.7%
Market value1
Valuation movement1
Rental income1
Annualised net rent3
31 March
31 March
31 March
31 March
30 September
31 March
31 March
2021
£m
2020
£m
Surplus/
(deficit)
£m
Surplus/
(deficit)
%
Annualised
rental
income2
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Like-for-like portfolio8
Proposed developments1
Development programme9
Acquisitions10
Sales11
Total portfolio analysis
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Analysis by asset use:
Offices
Retail
Leisure, hotels and other
Combined Portfolio
Market value1
Valuation movement1
Rental income1
Annualised net rent3
31 March
31 March
31 March
31 March
30 September
31 March
31 March
2021
£m
2020
£m
Surplus/
(deficit)
£m
Surplus/
(deficit)
%
Annualised
rental
income2
5,194
623
420
6,237
722
1,763
360
483
406
397
1,286
9,646
286
713
146
–
6,268
659
420
7,347
722
1,763
372
506
406
397
5,408
852
427
6,687
1,679
881
2,560
469
1,526
11,242
615
469
442
294
566
55
624
(214)
(224)
(5)
(443)
(635)
(164)
(799)
(110)
(137)
(64)
(43)
(244)
(1,596)
(41)
(1)
(8)
–
-4.3%
-26.7%
-1.2%
-7.1%
-38.2%
-18.5%
-31.4%
-23.4%
-22.9%
-13.4%
-10.1%
-16.2%
-14.8%
-12.4%
-0.2%
-5.4%
–
6,810
928
437
8,175
1,679
881
2,560
484
649
469
444
(251)
(229)
(4)
(484)
(635)
(164)
(799)
(112)
(144)
(64)
(43)
-4.1%
-26.0%
-1.0%
-6.5%
-38.2%
-18.5%
-31.4%
-23.3%
-23.0%
-13.4%
-10.1%
-16.4%
-13.7%
10,025
11,802
766
979
10,791
12,781
(1,448)
(198)
(1,646)
-13.1%
-21.3%
-13.7%
6,279
3,136
1,376
6,826
4,348
1,607
10,791
12,781
(255)
(1,173)
(218)
(1,646)
-4.2%
-27.4%
-13.9%
-13.7%
2021
£m
238
36
17
291
115
47
162
25
41
4
34
79
557
1
–
4
16
578
(9)
569
2021
£m
254
38
17
309
115
47
162
26
43
4
34
81
578
(9)
569
519
50
569
255
257
66
578
2020
£m
235
41
22
298
139
62
201
29
45
28
38
111
639
12
–
1
26
678
(9)
669
2020
£m
268
43
22
333
139
62
201
29
47
28
40
115
678
(9)
669
610
59
669
270
309
99
678
2021
£m
234
34
13
281
98
39
137
24
39
4
33
76
518
1
–
7
–
2021
£m
237
36
13
286
98
39
137
25
41
4
33
78
526
481
45
526
238
227
61
526
2021
£m
250
34
13
297
95
40
135
24
38
4
34
76
532
1
–
6
–
2021
£m
252
36
13
301
95
40
135
25
40
4
34
78
539
492
47
539
253
226
60
539
2020
£m
255
37
13
305
107
48
155
24
38
6
35
79
563
1
–
3
23
590
2020
£m
277
39
13
329
107
48
155
25
41
6
34
81
590
543
47
590
279
250
61
590
Regional shopping centres and shops
1,041
Properties treated as finance leases
Combined Portfolio
10,791
12,781
(1,646)
-13.7%
1,309
10,791
1,562
12,781
(251)
(1,646)
Like-for-like segmental analysis
Like-for-like segmental analysis continued
Table 109
Net estimated
rental value4
31 March
2020
£m
31 March
2021
£m
Gross estimated
rental value5
31 March
2020
£m
31 March
2021
£m
Net initial yield6
31 March
2020
%
31 March
2021
%
Equivalent yield7
31 March
2020
%
31 March
2021
%
Voids (by ERV)1
31 March
2020
%
31 March
2021
%
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Like-for-like portfolio8
Proposed developments1
Development programme9
Acquisitions10
Sales11
Combined Portfolio
266
30
21
317
95
61
156
26
40
25
32
97
596
–
67
16
–
679
272
40
21
333
122
63
185
29
43
30
35
108
655
–
68
3
28
754
270
30
21
321
102
61
163
26
40
25
33
98
608
–
69
16
–
693
275
41
21
337
130
63
193
29
44
30
35
109
668
–
70
3
28
769
4.4%
4.4%
2.6%
4.3%
7.9%
5.3%
6.8%
5.6%
6.9%
3.3%
7.4%
5.9%
5.0%
–
–
3.3%
–
4.5%
4.4%
4.5%
3.4%
4.3%
6.4%
5.6%
6.1%
4.9%
5.8%
2.3%
7.6%
5.2%
4.9%
–
–
5.5%
3.9%
4.5%
4.6%
4.5%
4.4%
4.6%
7.6%
6.8%
7.3%
5.9%
7.6%
5.5%
7.6%
6.9%
5.5%
n/a
4.3%
5.4%
n/a
5.4%
4.6%
4.3%
4.3%
4.6%
6.2%
5.9%
6.1%
5.2%
6.4%
5.2%
7.4%
6.3%
5.2%
n/a
4.3%
5.8%
n/a
5.1%
3.5%
4.0%
–
3.3%
7.9%
6.8%
7.5%
5.0%
5.2%
–
1.2%
2.5%
4.4%
n/a
n/a
n/a
n/a
n/a
1.2%
2.5%
0.5%
1.3%
4.8%
4.4%
4.7%
4.8%
2.3%
–
3.4%
2.0%
2.5%
n/a
n/a
n/a
n/a
n/a
Total portfolio analysis continued
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Analysis by use type:
Offices
Retail
Leisure, hotels and other
Combined Portfolio
Page
225
Net estimated
rental value4
31 March
2020
£m
31 March
2021
£m
Gross estimated
rental value5
31 March
2020
£m
31 March
2021
£m
Net initial yield6
31 March
2020
%
31 March
2021
%
345
31
21
397
95
61
156
27
42
25
32
99
679
629
50
679
349
241
89
679
362
45
21
428
122
63
185
30
45
30
36
111
754
688
66
754
364
291
99
754
351
31
21
403
102
61
163
27
42
25
33
100
693
641
52
693
354
249
90
693
367
46
21
434
130
63
193
30
46
30
36
112
769
702
67
769
370
300
99
769
3.7%
4.3%
2.6%
3.7%
7.9%
5.3%
6.8%
5.6%
6.9%
3.3%
7.4%
5.9%
4.5%
4.5%
5.3%
4.5%
3.7%
6.1%
5.1%
4.5%
3.8%
4.3%
3.4%
3.8%
6.4%
5.6%
6.1%
4.9%
5.8%
2.3%
7.6%
5.3%
4.5%
4.6%
4.4%
4.5%
3.8%
5.8%
4.1%
4.5%
Notes
1. Refer to Glossary for definition.
2. Annualised rental income is annual ‘rental
income’ (as defined in the Glossary) at the
balance sheet date, except that car park and
commercialisation income are included on
a net basis (after deduction for operational
outgoings). Annualised rental income includes
temporary lettings.
3. Annualised net rent is annual cash rent,
after the deduction of rent payable, as at
the balance sheet date. It is calculated using
the same methodology as annualised rental
income but is stated net of rent payable and
before tenant lease incentive adjustments.
31 March 2020 annualised net rent data is
not available, therefore 30 September 2020
information has been included for
comparative purposes.
4. Net estimated rental value is gross estimated
rental value, as defined in the Glossary, after
deducting expected rent payable.
5. 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.
6. Net initial yield – refer to Glossary for
definition. This calculation includes all
properties including those sites with no
income.
7. Equivalent yield – refer to Glossary for
definition. Proposed developments are
excluded from the calculation of equivalent
yield on the Combined Portfolio.
8. 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.
9. 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.
10. Includes all properties acquired since 1 April
2019.
11. Includes all properties sold since 1 April 2019.
Landsec // Annual Report 2021 » Additional information Lease lengths
Central London
Offices
London retail
Other central London
Total Central London
Regional retail
Regional shopping centres and shops
Outlets
Total Regional retail
Urban opportunities
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Page
226
Table 110
Weighted average unexpired lease term at 31 March 2021
Like-for-like portfolio
Mean1
Years
Like-for-like portfolio,
completed developments
and acquisitions
Mean1
Years
7.3
5.2
53.5
7.3
4.9
3.3
4.4
6.2
10.3
12.1
5.0
8.0
6.6
7.2
5.2
53.5
7.2
4.9
3.3
4.4
6.1
10.3
12.1
5.0
8.0
6.6
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.
Development pipeline
Development pipeline and trading property development schemes at 31 March 2021
Table 111
Description
of use
Ownership
interest
%
Size
sq ft
Letting
status
%
Market
value
£m
Net
income/
ERV
£m
Estimated
completion
date
Total
development
costs to date
£m
Forecast total
development
cost
£m
Property
Developments approved
or in progress
The Forge, SE1
21 Moorfields, EC2
Office
Retail
Office
Wardour Street, W11
Residential
Lucent, W1
Office
Retail
Residential
100
139,000
–
67
10
Jun 2022
523
8
95
38
n/a
13
Jul 2022
Jul 2022
Dec 2022
63
363
8
131
139
577
11
240
1,000
564,000
100
100
100
100
5,000
111,000
30,000
3,000
–
–
–
n2, SW1
Office
100
167,000
40
13
Jun 2023
54
205
Proposed developments
Timber Square, SE1
Portland House, SW1
Office
Retail
Office
Retail
100
365,000
15,000
100
360,000
40,000
n/a
n/a
n/a
n/a
n/a
Feb 2024
n/a
Sep 2024
n/a
n/a
n/a
n/a
1. Affordable housing component of the Lucent development.
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Development pipeline and trading property development schemes at 31 March 2021
Table 112
Property
Trading property
development schemes
Castle Lane, SW1
Description
of use
Ownership
interest
%
Size
sq ft
Number
of units
Sales
exchanged
by unit
%
Estimated
completion
date
Total
development
costs to date
£m
Forecast total
development
cost
£m
Residential
100
51,000
89
99
Apr 2023
11
46
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 2021. 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 2021, 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 2021 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
Nearest IFRS measure
Profit/loss before tax
Profit/loss attributable to shareholders
Basic earnings/loss per share
Diluted earnings/loss per share
Net assets attributable to shareholders
Net assets attributable to shareholders
n/a
Adjusted net cash inflow from operating activities
Net cash inflow from operating activities
Combined Portfolio
Adjusted net debt
Group LTV
Investment properties
Borrowings
n/a
Table 113
Reconciliation
Note 4
Note 5
Note 5
Note 5
Note 5
Note 5
Note 5
Note 13
Note 14
Note 20
Note 20
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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).
Page
228
Reconciliation of segmental information note to statutory reporting
Group
income
statement
£m
Joint
ventures1
£m
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
Bad and doubtful debts expense
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
Profit/(loss) on disposal of investment properties
Loss on disposal of trading properties
Exceptional items
Other
Operating (loss)/profit
Finance income
Finance expense
Loss before tax
Taxation
Loss attributable to shareholders
519
9
528
(7)
521
70
(75)
(5)
31
(56)
(110)
381
2
(75)
(5)
303
(192)
(1,448)
8
–
(4)
3
(1,330)
16
(79)
(1,393)
–
(1,393)
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Table 114
Year ended 31 March 2021
Revenue
profit
£m
Capital
and other
items
£m
569
9
578
(9)
569
79
(84)
(5)
32
(64)
(127)
405
2
(77)
(5)
325
–
–
–
–
–
–
325
15
(89)
251
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,646)
5
(1)
(4)
5
(1,641)
1
(4)
(1,644)
Total
£m
569
9
578
(9)
569
79
(84)
(5)
32
(64)
(127)
405
2
(77)
(5)
325
–
50
–
50
(2)
48
9
(9)
–
1
(8)
(17)
24
–
(2)
–
22
192
(198)
(1,646)
(3)
(1)
–
2
14
–
(14)
–
–
–
5
(1)
(4)
5
(1,316)
16
(93)
(1,393)
–
(1,393)
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.
Reconciliation of segmental information note to statutory reporting
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
Bad and doubtful debts expense
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
9
620
(13)
607
88
(90)
(2)
31
(65)
(28)
543
2
(69)
(4)
472
(151)
(1,000)
(6)
–
–
(5)
–
(690)
18
(165)
–
(837)
5
(832)
59
–
59
(2)
57
10
(12)
(2)
2
(11)
(5)
41
–
(3)
–
38
151
(181)
–
7
3
–
–
18
–
(16)
(2)
–
–
–
(1)
–
(1)
–
(1)
–
–
–
–
–
–
(1)
–
–
–
(1)
–
2
–
–
–
–
(1)
–
–
–
–
–
–
–
Table 114
Year ended 31 March 2020
Revenue
profit
£m
Capital
and other
items
£m
669
9
678
(15)
663
98
(102)
(4)
33
(76)
(33)
583
2
(72)
(4)
509
–
–
–
–
–
–
–
509
17
(112)
–
414
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,179)
(6)
7
3
(5)
(1)
(1,181)
1
(69)
(2)
(1,251)
Total
£m
669
9
678
(15)
663
98
(102)
(4)
33
(76)
(33)
583
2
(72)
(4)
509
–
(1,179)
(6)
7
3
(5)
(1)
(672)
18
(181)
(2)
(837)
5
(832)
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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.
Page
229
Ten year summary
Page
230
Year ended and as at 31 March
Table 115
2021
£m
635
(333)
302
(192)
8
–
–
2020
£m
741
(274)
467
(151)
(6)
–
–
2019
£m
757
2018
£m
830
2017
£m
781
2016
£m
936
2015
£m
765
2014
£m
712
2013
£m
734
2012
£m
670
(271)
(321)
(260)
(404)
(329)
(244)
(281)
(240)
486
(85)
–
–
–
509
27
1
66
–
521
69
19
(2)
13
532
199
75
–
–
436
326
107
3
–
468
196
16
2
–
453
59
(3)
–
1
430
52
45
–
–
(1,448)
(1,000)
(441)
(98)
(186)
739
1,771
607
197
170
(1,330)
(63)
(690)
(147)
–
–
–
–
(40)
(83)
–
–
–
5
4
(1,393)
(832)
(119)
505
(548)
434
(268)
1,545
2,643
1,289
(185)
(207)
(165)
–
–
(43)
(1)
(44)
–
–
166
1
167
–
–
2
–
5
–
1,360
2,438
1,129
2
–
8
1,362
2,438
1,137
707
(157)
1
–
551
–
551
697
(162)
–
(2)
533
8
541
(Loss)/profit before tax
(1,393)
(837)
(123)
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
Taxation
(Loss)/profit attributable
to shareholders
Net (deficit)/surplus on
revaluation of investment
properties1:
Investment portfolio
Share of joint ventures
Total
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(1,448)
(198)
(998)
(181)
(1,646)
(1,179)
(440)
(117)
(557)
(98)
(187)
7
40
(91)
(147)
736
171
907
1,768
269
2,037
609
155
764
197
21
218
170
21
191
Revenue profit
251
414
442
406
382
362
329
320
291
299
Results per share
Total dividend payable in respect
of the financial year
27.0p
23.2p
45.55p
44.2p
38.55p
35.0p
31.85p
30.7p
29.8p
29.0p
Basic (loss)/earnings per share
(188.2)p (112.4)p
(16.1)p
Diluted (loss)/earnings per share
(188.2)p (112.4)p
(16.1)p
Adjusted earnings per share
Adjusted diluted earnings per share
Net assets per share
Diluted net assets per share
EPRA net tangible assets per share
33.9p
33.9p
975p
973p
985p
55.9p
55.9p
1,182p
1,181p
1,192p
59.7p
59.7p
1,341p
1,339p
1,348p
(5.8)p
(5.8)p
53.1p
53.1p
1,404p
1,404p
1,410p
21.1p
21.1p
48.4p
48.3p
1,418p
1,416p
1,422p
172.4p
171.8p
45.9p
45.7p
1,434p
1,431p
1,433p
308.6p
307.4p
41.7p
41.5p
1,293p
1,288p
1,296p
144.8p
144.3p
40.7p
40.5p
1,016p
1,012p
1,016p
70.7p
70.5p
37.0p
36.8p
903p
900p
906p
69.9p
69.7p
38.5p
38.5p
863p
860p
866p
1. Includes our non-wholly owned subsidiaries on a proportionate basis.
Balance sheet
Investment properties
Intangible assets
Net investment in finance leases
Loan investments
Investment in joint ventures
Trade and other receivables
Other non-current assets
Table 116
As at 31 March
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
2012
£m
9,607
11,297
12,094
12,336
12,144
12,358
12,158
9,848
9,652
8,453
8
152
–
625
170
22
14
156
–
824
178
32
20
159
–
34
162
–
36
165
–
38
183
–
35
185
50
–
187
50
–
188
50
–
185
51
1,031
1,151
1,734
1,668
1,434
1,443
1,301
1,138
176
30
165
49
123
51
86
44
53
29
35
14
11
14
–
41
Total non-current assets
10,584
12,501
13,510
13,897
14,253
14,377
13,944
11,577
11,216
9,868
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
36
354
10
24
433
9
–
6
1,345
48
406
1,859
23
437
36
14
14
524
24
471
15
62
–
572
122
418
21
30
–
591
124
445
19
25
–
613
222
404
10
14
–
650
193
366
15
21
–
595
152
345
31
42
–
570
133
760
29
30
–
952
Non-current assets held for sale
–
–
–
–
–
–
283
–
–
–
Borrowings
Trade and other payables
Other current liabilities
Total current liabilities
(906)
(252)
(7)
(977)
(270)
(2)
(934)
(273)
(18)
(872)
(294)
(14)
(404)
(302)
(7)
(1,165)
(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)
Borrowings
(2,610)
(4,355)
(2,847)
(2,858)
(2,859)
(3,222)
(3,985)
(3,262)
(3,748)
(3,676)
Trade and other payables
Other non-current liabilities
Redemption liability
(1)
(2)
–
(1)
(5)
–
(1)
(5)
(36)
–
(8)
(37)
(25)
(9)
(36)
(28)
(47)
(35)
(30)
(45)
(35)
(23)
(4)
(33)
(18)
(11)
(118)
(28)
(9)
–
Total non-current liabilities
(2,613)
(4,361)
(2,889)
(2,903)
(2,929)
(3,332)
(4,095)
(3,322)
(3,895)
(3,713)
Net assets
Net debt
7,212
8,750
9,920
10,386
11,202
11,331
10,214
8,005
7,054
6,705
(3,509)
(3,942)
(3,747)
(3,654)
(3,219)
(3,229)
(4,193)
(3,744)
(4,132)
(3,634)
Market value of the Combined
Portfolio
10,791
12,781
13,750
14,103
14,439
14,471
14,031
11,859
11,446
10,331
Adjusted net debt
(3,489)
(3,926)
(3,737)
(3,652)
(3,261)
(3,239)
(4,172)
(3,948)
(4,290)
(3,981)
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Page
231
Subsidiaries, joint ventures and associates
Page
232
As at 31 March 2021, 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.
Company name
Blueco Limited
Company name
LC25 Limited
Bluewater Ground Lease Limited
Bluewater Outer Area Limited
Leisure II (West India Quay LP) Shareholder
Limited
Castleford (UK) Limited
Crossways 2000 Limited
Crossways 3065 Limited
Crossways 7055 Limited
Dashwood House Limited
Gunwharf Quays Limited
Harvest Nominee No. 1 Limited1
Harvest Nominee No. 2 Limited1
L.& P. Estates Limited
L.S.I.T. (Management) Limited
Land Securities (BH) Limited
Land Securities (Finance) Limited
Land Securities (Insurance Services) Limited
Land Securities (Media Services) BH
Limited2
Land Securities (Media Services) PQ
Limited2
Land Securities Buchanan Street
Developments Limited
Land Securities Capital Markets PLC
Land Securities Consulting Limited
Land Securities Development Limited
Leisure Parks I Limited
Leisure Parks II Limited
LS (Eureka) Limited
LS (Eureka Two) Limited
LS (Fountain Park) Limited
LS (Fountain Park Two) Limited
LS (Jaguar) GP Investments Limited
LS (Parrswood) Limited
LS (Parrswood Two) Limited
LS (Riverside) Limited
LS (Riverside Two) Limited
LS (Victoria) Nominee No.1 Limited
LS (Victoria) Nominee No.2 Limited
LS 1 New Street Square Limited
LS 1 New Street Square Developer Limited
LS 1 Sherwood Street Limited
LS 1 Sherwood Street Developer Limited
LS 105 Sumner Street Developer Limited
LS 123 Victoria Street Limited
LS 130 Wood St Limited
LS 21 Moorfields Development Management
Limited
Land Securities Ebbsfleet (No.2) Limited
LS 21 Moorfields Limited
Land Securities Ebbsfleet Limited
Land Securities Group PLC
Land Securities Intermediate Limited3
Land Securities Investment Trust Limited
Land Securities Lakeside Limited
Land Securities Management Limited
Land Securities Management Services
Limited
Land Securities Partnerships Limited
Land Securities Pensions Trustee Limited
Land Securities PLC
Land Securities Portfolio Management
Limited
Land Securities Properties Limited
Land Securities Property Holdings Limited3
Land Securities SPV’S Limited
Land Securities Trading Limited
Land Securities Trinity Limited
Landsec Limited
LS 25 Lavington Street Developer Limited
LS 60-78 Victoria Street Limited
LS 62 Buckingham Gate Limited
LS Aberdeen Limited
LS Aldersgate Limited
LS Banbridge Phase Two Limited
LS Bexhill Limited
LS Bracknell Limited
LS Braintree Limited
LS Buchanan Limited
LS Canterbury Limited
LS Cardiff (GP) Investments Limited
LS Cardiff Limited
LS Cardiff Holdings Limited
LS Cardinal Limited
LS Castleford Limited
LS Chadwell Heath Limited
LS Chattenden Marketing Limited
Landsec // Annual Report 2021 » Additional information Company name
Company name
Company name
LS Chesterfield Limited
LS City & West End Limited
LS City Gate House Limited
LS Company 2 Limited
LS Company 3 Limited
LS Company 10 Limited
LS Company 20 Limited
LS Company 21 Limited
LS Company 22 Limited
LS Company 23 Limited
LS Company 24 Limited
LS Company 25 Limited
LS Company 26 Limited
LS Company 27 Limited
LS Company 28 Limited
LS Company 29 Limited
LS Company 30 Limited
LS Company 31 Limited
LS Company 32 Limited
LS Company 33 Limited
LS Company 34 Limited
LS Company 35 Limited
LS Company 36 Limited
LS Company 37 Limited
LS Company 38 Limited
LS Company 39 Limited
LS Company Secretaries Limited
LS Developer 2 Limited
LS Developer 3 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 Finchley Road Limited
LS Forge Bankside Limited
LS Galleria Limited
LS Great North Finchley Limited
LS Greenwich Limited
LS Gunwharf Limited
LS Harbour Exchange Limited
LS Harrogate Limited
LS Harrow Properties Limited
Page
233
LS Harvest (GP) Investments Limited
LS Victoria Properties Limited
LS Harvest Limited
LS Harvest 2 Limited
LS Hill House Limited
LS Hotels Limited
LS Kings Gate Residential Limited
LS Voyager Limited
LS West India Quay Limited
LS Westminster Limited
LS White Rose Limited
LS Workington Limited
LS Kingsmead Limited
LS Xscape Castleford Limited
LS Lavington Street Limited
LS Xscape Milton Keynes Limited
LS Leisure Parks Investments Limited
LS Zig Zag Limited
LS Lewisham Limited
Nova Developer Limited
LS London Holdings One Limited
LS London Holdings Three Limited
Oriana GP Limited
Oriana LP Limited
LS Ludgate Development Limited
Oxford Castle Apartments Limited
LS Moorgate Limited
LS Myo Limited
Ravenseft Properties Limited
Retail Property Holdings Trust Limited
LS New Street Square Investments Limited
Rosefarm Leisure Limited
LS Nominees Holdings Limited
Sevington Properties Limited
LS Nova Development Management
Limited
The City of London Real Property Company
Limited
LS Nova GP Investments Limited
The Imperial Hotel Hull Limited
LS Nova LP1 Limited
LS Nova LP2 Limited
LS Nova Place Limited
LS n2 Limited
LS Occupier Limited
LS Old Broad Street Limited
LS One New Change Limited
The X-Leisure (General Partner) Limited
Tops Shop Estates Limited
Wallace City Limited
Westminster Trust Limited(The)
Whitecliff Developments Limited
Willett Developments Limited
X-Leisure (Bentley Bridge) Limited
LS One New Change Developments Limited
X-Leisure (Boldon) Limited
LS Park House Development Management
Limited
X-Leisure (Brighton Cinema) Limited
X-Leisure (Brighton Cinema II) Limited
LS Poole Retail Limited
LS Portfolio Investments Limited
LS Portland House Developer Limited
LS Property Finance Company Limited
LS QAM Limited
LS Red Lion Court Limited
LS Red Lion Court Developer Limited
LS Retail Warehouses Limited
LS Rose Lane Limited
LS Shepherds Bush Limited
LS Southside Limited
LS Street Limited
LS Taplow Limited
LS Thanet Limited
LS Tottenham Court Road Limited
X-Leisure (Brighton I) Limited
X-Leisure (Brighton II) Limited
X-Leisure (Cambridge I) Limited
X-Leisure (Cambridge II) Limited
X-Leisure (Leeds I) Limited
X-Leisure (Leeds II) Limited
X-Leisure (Poole) Limited
X-Leisure Limited
X-Leisure Management Limited
Xscape Castleford Limited Liability
Partnership
Xscape Milton Keynes Limited Liability
Partnership
1. Dissolved on 4 May 2021.
2. Dissolved 11 May 2021.
3. Subsidiary held directly by the Company,
Land Securities Group Plc.
Landsec // Annual Report 2021 » Additional information Page
234
Group
share %
50%
50%
50%
50%
100%
100%
100%
100%
Group
share %
100%
100%
100%
50%
Group
share %
n/a
Company name
Westgate Oxford Alliance GP Limited
Westgate Oxford Alliance Limited Partnership
Westgate Oxford Alliance Nominee No.1 Limited
Westgate Oxford Alliance Nominee No.2 Limited
Xscape Castleford Limited3
Xscape Castleford No.2 Limited3
Xscape Milton Keynes (Jersey) No.2 Limited3
Xscape Milton Keynes Limited3
Unit trusts
The X-Leisure Unit Trust3
Xscape Castleford Property Unit Trust3
Xscape Milton Keynes Property Unit Trust3
West India Quay Unit Trust3
Limited by guarantee
St David’s Dewi Sant Merchant’s Association Limited
1. 44 Esplanade, St Helier, JE4 9WG, Jersey.
2. Suite 1, 3rd Floor, 11-12 St. James’s Square, London, SW1Y 4LB, UK.
3. IFC 5, St Helier, JE1 1ST, Jersey.
4. PO Box 384, The Albany South Esplanade, St Peter Port, GY1 4NF, Guernsey.
5. 13-14 Esplanade, St Helier, JE1 1EE, Jersey.
Subsidiaries, joint ventures and associates
continued
As at 31 March 2021, the Company had an interest (as shown),
direct or indirect, in the ordinary share capital of the following
subsidiaries, joint ventures and associates. All entities
included below are registered in the UK at 100 Victoria Street,
London, SW1E 5JL, except for entities with a footnote which
indicates their country of registration and address. Where the
Group share of ordinary share capital is 100%, these entities
are subsidiaries of the Company. Where the share of ordinary
share capital is between 50% and 100%, these entities are joint
venture interests. All other holdings are associate interests.
Company name
Ebbsfleet Investment (GP) Limited
Ebbsfleet Nominee No.1 Limited
Greenhithe Holdings Limited1
Greenhithe Investments Limited1
Harbour Exchange Management Company Limited2
Harvest 2 GP Limited
Harvest 2 Limited Partnership
Harvest 2 Selly Oak Limited
Harvest Development Management Limited
Harvest GP Limited
Kent Retail Investments Limited3
Land Securities Insurance Limited4
Leisure II (North Finchley) Limited3
Leisure II (North Finchley Two) Limited3
Leisure II (West India Quay) Limited3
Leisure II (West India Quay Two) Limited3
Nova Business Manager Limited
Nova Estate Management Company 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
Southside General Partner Limited
Southside Limited Partnership5
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
Victoria Circle Developer Limited
West India Quay Limited
West India Quay Management Company Limited
Group
share %
50%
50%
100%
100%
26%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
50%
64%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
50%
63%
Landsec // Annual Report 2021 » Additional information Shareholder information
Financial calendar
Annual General Meeting1
Final dividend2
2021/22 Half-yearly results announcement3
2021/22 Financial year end
2021/22 Annual results announcement3
Table 117
2021
8 July
23 July
9 November
2022
31 March
17 May
1. The Annual General Meeting is scheduled to be held at 10.00 am on Thursday, 8 July 2021 at 80 Victoria Street, London SW1E 5JL. Due to Covid-19 social distancing measures,
we are asking our shareholders to pre-register your intention to attend the meeting. As an alternative to attending, we strongly encourage you to watch our AGM live on
our website, participate in the Q&A, and vote online. 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: www.landsec.com/agm.
2. The Board has recommended a final dividend of 9 pence per ordinary share, payable wholly as a Property Income Distribution, subject to shareholders’ approval at the
forthcoming Annual General Meeting.
3. Provisional.
Share register analysis as at 31 March 2021
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 2021
Held by:
Private shareholders
Nominee and institutional investors1
Total
1. Including 9,839,179 shares held in treasury by the Company.
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 (LSE:LAND).
COMPANY WEBSITE: LANDSEC.COM
The Company’s Annual Report, results announcements and
presentations are available to view and download from its website:
www.landsec.com/investors.
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
Our Company Registrar, Equiniti, can assist with queries regarding
administration of shareholdings, such as bank account payment
details, dividends, lost share certificates, change of address or
personal details, and/or amalgamation of accounts. You can
contact Equiniti direct:
Page
235
Number of
holders
7,005
2,237
320
376
149
234
192
Number of
holders
8,277
2,236
%
Number of ordinary shares
2,636,232
4,548,954
2,244,014
8,969,528
10,723,366
53,068,831
669,122,138
751,313,063
66.6
21.3
3.0
3.6
1.4
2.2
1.9
78.7
21.3
%
Number of ordinary shares
9,156,748
742,156,315
751,313,063
10,513
100.0
10,513
100.0
Table 118
%
0.3
0.6
0.3
1.2
1.4
7.1
89.1
100.0
Table 119
%
1.2
98.8
100.0
ONLINE:
Equiniti offer a free and secure online share management service
to shareholders called EQ Shareview, which also provides access
to current share prices, voting by proxy, buying and selling shares,
and receipt of electronic shareholder communications.
Registration to EQ Shareview is available on our website:
www.landsec.com/investors/shareholders-equity-investors or
Equiniti at: www.shareview.co.uk.
TELEPHONE:
At time of printing this Annual Report, due to Covid-19, longer wait
times may be experienced. Your shareholder account number will
be required when calling.
Telephone: 0371 384 2128¹
International dialling: +44 121 415 7049¹
www.shareview.co.uk
POST:
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA,
United Kingdom
Landsec // Annual Report 2021 » Additional information Shareholder information
continued
Page
236
ELECTRONIC COMMUNICATIONS
We encourage shareholders to consider receiving their
communications from the Company electronically. This will
enable you to receive such communications more quickly and
securely, whilst supporting Landsec’s sustainability commitment
by communicating in a more environmentally friendly and cost-
effective manner. Registration for electronic communications
is available via our website: www.landsec.com/investors/
shareholders-equity-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.
PAYMENT OF DIVIDENDS TO UK RESIDENT SHAREHOLDERS
Following shareholder approval at the 2019 AGM, as reconfirmed in
the 2020 Annual Report, dividend payments by cheque ceased from
October 2020, with the first payments made electronically by direct
credit to a bank/building society account from the January 2021
dividend payment. Dividend confirmations will continue to be sent
to the shareholder’s registered address or an Electronic Dividend
Confirmation will be sent if the shareholder has elected this option.
Receiving dividends directly into a nominated account has a
number of advantages, including the crediting of cleared funds
on the actual dividend payment date, removing the necessity of
physically having to deposit and waiting for the cheque to clear.
Shareholders who have not already done so are encouraged
to contact the Registrar (Equiniti) to complete a mandate
instruction to provide their nominated bank or building society
account details to enable payment of dividends, or to provide
these details via their Equiniti Shareview online account.
Registration to Shareview is free and available on our website:
www.landsec.com/investors/shareholders-equity-investors or
direct at Equiniti: www.shareview.co.uk.
Alternatively, shareholders may wish to sign up to the Dividend
Reinvestment Plan to build upon existing shareholding(s), (see below).
PAYMENT OF DIVIDENDS TO NON-UK RESIDENT SHAREHOLDERS
As applicable to UK resident shareholders, following shareholder
approval at the 2019 AGM, as reconfirmed in the 2020 Annual Report,
dividend payments by cheque ceased from October 2020. Payments
were made by direct mandate only from the January 2021 dividend
payment. Dividend confirmations will continue to be sent to
the shareholder’s registered address or an Electronic Dividend
Confirmation will be sent if the shareholder has elected this option.
Payments to overseas accounts are made a few days after the
Company’s dividend payment day by Citibank.
Shareholders who have not already done so are encouraged to
contact the Registrar (Equiniti) to complete an Overseas Mandate
form to provide their nominated overseas bank account details
to enable payment of dividends or provide these details via their
Equiniti Shareview online account.
Registration to Shareview is free and available on our website:
www.landsec.com/investors/shareholders-equity-investors or
direct at Equiniti: www.shareview.co.uk.
This service is available in over 90 countries worldwide, as listed
on the Equiniti shareholder online facility at www.shareview.co.uk,
or by contacting Equiniti by telephone or post at the address shown
above under ‘Registrar: Equiniti’. The local domestic currency the
payment will be converted to is also available on this list.
A small fee will be deducted prior to the overseas account credit,
though usually less than the charges for use of a UK Sterling
cheque. Please note the maximum payment is £50,000 unless
otherwise stated in the list.
Shareholders wishing to nominate a bank/building society account
in the Republic of Ireland are required to complete an Overseas
Mandate form.
Shareholders wishing to nominate a bank/building society account
in Northern Ireland should use the standard UK process as detailed
above.
DIVIDEND REINVESTMENT PLAN (DRIP)
The DRIP provides shareholders with the opportunity to use cash
dividends to increase their shareholding in Landsec. It is a
convenient and cost-effective facility provided by Equiniti Financial
Services Limited (FCA regulated). Under the DRIP, cash dividends
are automatically used to purchase shares in the market as soon
as possible after the dividend payment. Any residual cash will be
carried forward to the next dividend payment.
Details of the DRIP, including terms and conditions and
participation election forms, are available on our website:
www.landsec.com/investors/shareholders-equity-investors
These are also available by post from:
Dividend Reinvestment Plans
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: 0371 384 2268¹
International dialling: +44 121 415 7173¹
Landsec // Annual Report 2021 » Additional information 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 Landsec shares online, by telephone, or post.
The online and telephone 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 70371 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 access is available
at Equiniti’s website: www.shareview.co.uk/dealing. For postal
dealing, call 0371 384 2248¹ to request 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.
SHAREGIFT
Shareholders with a small number of shares, the value of which
would make them uneconomic to sell, may wish to consider
donating them to a 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. Further information about ShareGift is available at:
Website: www.sharegift.org.uk
Email: help@sharegift.com
Telephone: +44 (0)20 7930 3737
Post: ShareGift, PO Box 72253, London SW1P 9LQ
CORPORATE INDIVIDUAL SAVINGS ACCOUNT (ISA)
The Company has arrangements in place with Equiniti Financial
Services Limited to provide a Corporate ISA which shares may be
held. Further details are available from:
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.
DATA PROTECTION
A copy of the Shareholder Privacy Notice can be found on our
website: www.landsec.com/policies/privacy-policy/shareholders
UNCLAIMED ASSETS REGISTER
The Company participates in The Unclaimed Assets Register, which
offers a search facility to reunite financial assets, e.g. shares, which
may have been lost or forgotten to their owners. Further information
on how to use The Unclaimed Assets Register, provided by Experian,
is available via:
Website: www.uar.co.uk
Email: uarenquiries@uk.experian.com
Telephone: +44 (0)333 000 0182
UNSOLICITED MAIL
The Company is obliged by law to make its share register available
on request to other organisations which may result in shareholders
receiving unsolicited mail. To limit the receipt of unsolicited mail,
shareholders may register for free with the Mailing Preference
Service, an independent organisation by registering at their website
at www.mps.org.uk, or by telephone on: +44 (0)20 7291 3310
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) Register to ensure that they are authorised at
www.register.fca.org.uk;
› use the details on the FCA Register to contact the firm;
› call the FCA Consumer Helpline (freephone 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.
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 or email:
shareholder.enquiries@landsec.com
1. Lines are open 8.30am to 5.30pm (UK time), Monday to Friday, excluding
public holidays. 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.
Page
237
Landsec // Annual Report 2021 » Additional information Page
238
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
Company No. 4369054
Website: www.landsec.com
Telephone: +44 (0)20 7413 9000
COMPANY SECRETARY
Liz Miles
Company Secretary
Email: shareholder.enquiries@landsec.com
INVESTOR RELATIONS
Edward Thacker
Head of Investor Relations
Email: investor.relations@landsec.com
REGISTRAR
Equiniti
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Telephone: 0371 384 2128
Textel: 0371 384 2255
International dialling: +44 121 415 7049
Website: www.shareview.co.uk
AUDITOR
Ernst & Young LLP
1 More London Place London SE1 2AF
Telephone: +44 (0)20 7951 2000
Website: www.ey.com
EXTERNAL ADVISERS
Valuer: CBRE
Financial adviser: UBS
Solicitors: Slaughter and May
Joint brokers: JP Morgan Cazenove and UBS
Landsec // Annual Report 2021 » Additional information Glossary
Adjusted earnings per share (Adjusted EPS)
Earnings per share based on revenue profit after
related tax.
Adjusted net cash inflow from operating activities
Net cash inflow from operating activities including the
Group’s share of our joint ventures’ net cash inflow from
operating activities.
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 2019.
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.
Page
239
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.
F&B
Food and beverage.
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 period,
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 2019 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 end of the year.
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.
Landsec // Annual Report 2021 » Additional information Glossary
continued
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 cash rent
Passing cash rent is passing rent excluding units that
are in a rent free period at the reporting date.
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.
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-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.
Pre-let
A lease signed with an occupier prior to completion
of a development.
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.
Page
240
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 periods 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 for bad and doubtful debts,
expressed as a percentage of gross rental income
before rents payable adjusted for costs recovered
through rents but not separately invoiced.
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.
Landsec // Annual Report 2021 » Additional information Cautionary 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
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