Growth
in
action
Landsec Annual Report 2022
This has been a year of building momentum,
both on our performance and in strategic activity.
We have grown our portfolio value, our earnings
and our dividend. We have strengthened our team
and refreshed our sustainability framework to ensure
everything we do aligns with a sustainable future.
We identified opportunities to grow and we acted
on them – adding significantly to our mixed-use
urban pipeline. We’re creating and managing places
that excite and inspire people, places fit for today
and for the future, places that enable communities
to grow. Last year we promised growth with purpose.
Now we’re seeing growth in action.
We have a clear view and a clear focus on:
Offices
Retail
Urbanneighbourhoods
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Who we are – 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.
Our purpose – 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 areas of focus
01
Valuation
£7.8bn
Valuation
Valuation
£1.9bn
Major retail
destinations
£0.9bn
Urban
neighbourhoods
Central
London
Our performance
Valuation
EPRA earnings
Dividend per share
2021
2022
£10.8bn
2021
£251m
2021
£12.0bn
2022
£355m
2022
27.0p
37.0p
Contents
Strategic report
02 Our year in review
04 Chairman’s statement
06 Chief Executive’s statement
10 Market context
12 Our top 10 assets
13 Our stakeholders
14 Our business model
16 Our strategy
19 Key performance indicators
20 Our strategic focus
26 Operating and portfolio review
32 Financial review
38 Our people and culture
44 Our approach to sustainability
49 Build well – our commitment to
the environment
53 Live well – our commitment to our
communities
56 Act well – our commitment to being
a responsible business
58 Managing risk
60 Principal risks and uncertainties
70 Going concern and viability
72 Non-financial information statement
Introduction from the Chairman
Governance
74
75 Board of Directors
80 Executive Leadership Team
82 Our governance structure
84 The Board in action
87 The Board and our stakeholders
92 The Board and our culture
94
Introduction from the Chairman of the
Nomination Committee
95 Report of the Nomination Committee
96 Board evaluation
99 Board induction
100 Introduction from the Chairman of the
Audit Committee
102 Report of the Audit Committee
108 Directors’ Remuneration Report –
Chairman’s Annual Statement
110 Remuneration at a glance
114 Annual Report on Remuneration
125 Directors’ Remuneration Policy Summary
128 Directors’ Report
Financial statements
131 Statement of Directors’ Responsibilities
132 Independent Auditor’s Report
141 Income statement
141 Statement of comprehensive income
142 Balance sheets
143 Statements of changes in equity
144 Statement of cash flows
145 Notes to the financial statements
Additional information
198 Business analysis – EPRA disclosures
202 Business analysis – Group
204 Sustainability performance
211 Alternative performance measures
212 Combined Portfolio analysis
214 Reconciliation of segmental information
note to statutory reporting
216 Ten year summary
218 Subsidiaries, joint ventures and associates
223 Shareholder information
226 Key contacts and advisers
227 Glossary
IBC Cautionary statement
Strategic ReportLandsec Annual Report 2022 02
Our year in review
In the past year, we have moved from lockdown
to growth. From helping our customers survive,
to enabling them to thrive. The year ended with
new emerging challenges resulting from geopolitical
risk, and with rising inflation increasing pressure on
consumer incomes and affecting the construction
industry, but we remain very well placed.
Operational
review
Central London
In our Central London portfolio, we
achieved a record year of leasing,
with £63m of office lettings
completed, 4% ahead of valuers’
assumptions. Our overall
occupancy remains high, at 95.3%.
We also capitalised on strong
investment demand for office
assets, with £0.4bn of disposals at
an average yield of 4.1%. This was
in line with our strategy of selling
mature office assets to invest in
growth opportunities.
And we unlocked 507,000 sq ft
of potential new schemes, at
New Street Square, EC4 and in
Southwark, through two innovative
deals. This has increased our
potential future development
pipeline to 1.8 million sq ft.
Major retail destinations
During the year, we restructured
and strengthened our retail team
to focus on supporting brand and
guest relationships, and building
on opportunities to create a
best-in-class portfolio of major
UK retail destinations. We are
seeing the results of this work,
with £29m of lettings signed or
in solicitors’ hands, on average 2%
ahead of ERV.
We acquired an additional 18.75%
stake in Bluewater, Kent for £126m1,
capitalising on the opportunity
to invest in one of the UK’s leading
retail destinations at an attractive
8.15% initial yield.
Mixed-use urban
neighbourhoods
Demonstrating growth in action,
we grew our mixed-use pipeline by
c. 50% to c. £4bn total development
cost through two acquisitions, with
planned investment of c. £1.5bn
over the next five years expected
to deliver a return of c. £350m.
We acquired U+I for £269m2,
providing access to five mixed-use
projects in London, Manchester
and Cambridge, with the potential
to invest c. £400m-£600m over the
next five years.
We also acquired a 75% stake in
MediaCity, Greater Manchester, for
£426m1, providing a combination of
long-term income at an attractive
5.8% yield, and £400m+ of mixed-
use development potential.
1. This includes the
purchase price for
the property interest,
as opposed to the
consideration paid
for the acquisition,
which is net of
borrowings and other
applicable purchase
price adjustments.
2. This indicates the
Gross Asset Value
of U+I Group PLC
at 31 March 2021,
as opposed to the
consideration paid
for the acquisition,
which is net of
borrowings and other
applicable purchase
price adjustments.
Strategic ReportLandsec Annual Report 2022 03
ESG review
Landsec aims to be a sustainable
business, playing its part in tackling
key social and environmental
challenges. Therefore we identify
and respond to risks and
opportunities relevant to our
business and our stakeholders, and
over the past year have refreshed
our sustainability framework.
In April 2022, we launched this new
framework as Build well, Live well,
Act well.
To develop our revised approach,
we undertook a rigorous materiality
review, speaking to over 230
stakeholders including employees,
customers and partners, to
understand the environmental,
social and governance (ESG) issues
we should be addressing and
influencing. Subsequently, a team
of 30 colleagues from around the
business created the strategy,
setting a vision and targets.
Our vision
To design, develop and manage
buildings in ways that will enhance
the health of our environment and
improve quality of life for our people,
customers and communities, now
and for future generations.
Build well
We will build well by moving
towards net zero, enhancing green
spaces and using resources more
efficiently, with targets including:
→ reducing our operational carbon
emissions to meet our science-
based target by 2030.
→ reducing the embodied carbon
related to our developments.
Live well
We will enable people to live well by
creating job opportunities in our
communities and tackling local
issues, as well as by creating
inclusive places and improving
wellbeing, with targets including:
→ enhancing social mobility in
our industry and the places
we operate.
→ helping 30,000 people facing
barriers into work and creating
£200m of social value in our
local communities by 2030.
Act well
We will act well, making our
sustainability framework part of
everything we do, while managing
the basics brilliantly, including
sustainable procurement, health
and safety and business ethics,
with targets of:
→ every Landsec colleague setting
an individual objective in support
of our vision.
→ linking our energy and carbon
targets to a proportion of our
remuneration.
52%
Operational carbon
reduction since 2013/14
£5.1m
Social value delivered
(2021/22)
31%
Female representation
at Board, executive
and senior leader level
A-list
CDP 2021 (top 1.5%)
KEY
ACHIEVEMENTS
THIS YEAR
5-star
GRESB rating
(European Real Estate
sector leader)
99th
Percentile DJSI
(European Real Estate
sector leader)
Strategic ReportLandsec Annual Report 2022 04
Chairman’s
statement
A year of
transition
Dear shareholder
This has been a year of transition for your
company. Last spring the UK was still in
lockdown, with retail largely closed and
most office staff working from home,
including most of our Landsec colleagues.
However, since restrictions have been lifted
it has been very good to see people return
to our buildings. It is clear from the data
we get across our estate that in offices,
retail and hospitality many people are
keen to spend time with others again.
“The challenges of
the last years have
shown the importance
of our strong
corporate culture
which underpins
our performance.”
Overall I am pleased with how Landsec
has performed over the year, with strong
revenue growth and real progress made
in evolving our asset base. The Board is
proposing a final dividend of 13.0 pence,
meaning a total dividend for the year of
37.0 pence up 37%.
There are undoubtedly different patterns
of behaviour evolving as people return to
a more normal life, and as a business we
are spending a lot of time analysing what
our customers and stakeholders will want
in a “post-pandemic” world. In our own
business we have seen strong momentum
in colleagues returning to the office, and
can already see the benefits in collaboration,
wellbeing and productivity that sharing
physical space brings.
Cressida Hogg
Chairman
Strategic ReportLandsec Annual Report 2022 05
External benchmarks and our employee
surveys show already that our business
is seen as open and inclusive, but we can
make further progress here which will
underpin our efforts to make Landsec’s
workforce truly representative of the
communities we serve.
Our sustainability agenda
We are proud of the leadership position we
have on sustainability issues in the real
estate sector, but clearly recognise the
challenges that our sector and our portfolio
face in coming years. These challenges are
at the forefront of Board discussions. We
continue to make strong progress towards
meeting our longer term goals in this area
(see pages 44-57), and you can also see in
our Remuneration report on pages 108-124
how we are embedding ESG objectives into
remuneration targets.
Governance
Good governance is fundamental to the
long-term success of our company, and this
is covered in more detail in the Governance
review on pages 74-130. The composition
and evolution of our Board continues to
be important, and activity is focused on
ensuring that we are well positioned when
directors’ terms come to an end. The Board
continues to meet the recommendations
on gender and ethnic diversity contained
in both the Hampton-Alexander Review
and the Parker Review.
At the start of the year we welcomed
Vanessa Simms to Landsec as our new CFO.
She has already brought dynamism and
freshness to how we manage our business,
and she is working closely with Mark to
implement our strategy. As our business
needs evolve, the Board is supportive of
management plans to streamline our
finance and professional services functions
to make them fit for the future.
Over the year, the Executive Leadership
Team has also been reorganised and
changed, with new joiners from outside
Landsec. The Board has enjoyed hearing
fresh perspectives about our business in
discussions with ELT members.
Although conditions have made it more
challenging to visit our operations, we had
a Board meeting in Manchester in February
and visited both MediaCity and U+I assets.
The Board finds such visits very valuable,
and in addition we have continued our
programme of employee engagement
through Non-executive Director breakfasts
with colleagues and through meetings with
the Employee Forum.
Outlook
Your Board is pleased with the progress
that our business has made over the last
year, and we have strong momentum in
all key strategic areas. Our financial results
reflect how well Landsec has recovered
from the challenges of the pandemic.
However, we acknowledge that there are
headwinds in the economic environment in
the UK as we start our new financial year;
the cost of living challenges will have a
serious impact on our customers and wider
stakeholders, and supply chain issues and
geopolitical uncertainty will add to this.
We remain alert in assessing the risks
this will pose to our business, and take
comfort from the resilience that Landsec
has already shown, the underpinning of
our revenues and the prudent gearing levels
we have. We will continue to recycle capital
where appropriate.
Thank you
To finish, on behalf of all the Board I would
like to thank all our Landsec colleagues for
all their efforts through a year of change.
I look forward to working with them to build
on our growing momentum over the
coming year.
Cressida Hogg
Chairman
Progressing our strategy
In my letter to you last year, I covered the
strategic review that we had undertaken
following Mark’s arrival. Over the course
of this year, we have made significant
progress in implementing our strategy.
In central London we continue to focus
on curating our portfolio, developing new
best-in-class assets and recycling capital
through disposals where appropriate.
Despite operational and cost challenges
we continue to make good progress on
site, including at 21 Moorfields, EC2 in
the City, which is nearing completion.
Where we are developing on a speculative
basis (for example at Lucent) we are
focused on leasing up to the best tenants.
We have also made good progress on our
disposals, Harbour Exchange, EC14 and
32-50 Strand, WC2.
The pandemic has of course shifted
consumer behaviour. While the value of all
retail and hospitality assets has been hit,
values for high-quality assets like those in
our portfolio are recovering, and we have
robust, customer-facing plans for all our
major assets going forward. We have
strengthened our retail team by recruiting
external expertise to make us more
responsive to what customers and
consumers will want.
Our acquisitions of MediaCity and U+I
have been an exciting step change in
growing our mixed-use business, which we
highlighted as an important strand of our
new strategy last year. It has also shifted
our portfolio balance slightly away from
London, especially to Manchester which
we see as having exciting value potential.
The Board has been actively involved in
planning the integration of U+I and we look
forward to progressing the development
pipeline strengthened by both acquisitions.
Our culture
The challenges of the last years have
shown the importance of our strong
corporate culture which underpins our
performance. We continue to be proud
of the resilience our business has shown,
and the determination of our people to
support our customers and one another
through difficult times. As we look
forward, the Board is however keen to
see that our culture evolves appropriately
for our future business, becoming more
agile and effective, and creating an
environment where talented people
can thrive and progress.
Strategic ReportLandsec Annual Report 2022 06
Chief Executive’s
statement
Growth
in action
“What really binds
our three strategic
areas together is
the importance of
a sense of place.”
Mark Allan
Chief Executive
Strong operational and financial
performance. Delivering on strategy.
Our performance during the financial year
to March 2022 has been positive, as our
proactive approach to asset management
and strategic decisions have started to bear
fruit. At the start of the year, the UK was
still in lockdown, with non-essential retail
and hospitality closed and most office-
based staff working from home. However,
we have seen momentum build significantly
across our estate since restrictions were
lifted, as people seize on the attractions
of spending time together in stimulating,
inspiring places.
This is reflected in our operational results,
with strong leasing in London and a
recovery in occupancy and sales in retail,
and in our financial results, with a total
accounting return for the year of 10.5%.
EPRA EPS was up 42% to 48.0 pence, driven
by 4.1% growth in like-for-like gross rental
income and the reduction in bad debt
Offices
Retail
Urban
Strategic ReportLandsec Annual Report 2022 expense related to Covid-19 we recognised
in the prior year. We are proposing a dividend
of 13.0 pence per share for the final quarter,
bringing the total dividend for the year to
37.0 pence per share.
We saw a 3.6% valuation uplift on our
portfolio for the year. This reflects our
strong leasing activity in both retail and
London offices, with the latter driving 2.5%
growth in ERVs; a number of major lease
regears in London, highlighting the
continued demand for high-quality office
space; and upside from our profitable
development activity and strategic
investment decisions. Positively, virtually
every part of our portfolio witnessed
valuation growth in the second half of the
year, with retail values up 1.7%, leaving
them effectively flat for the full year. With
Central London values up 3.7% for the year,
this gave rise to a 7.9% increase in EPRA
NTA to 1,063 pence per share.
At the same time, we have made strong
progress against our strategic objectives.
We invested £821m in the acquisition of a
75% stake in MediaCity, U+I Group PLC
and a further stake in Bluewater, providing
us with a mix of attractive income returns
and future development upside. This was
balanced by the sale of £445m of mature
or non-core assets, including the £195m
disposal of 32-50 Strand post the year-end.
With clear visibility on expected future
returns, we anticipate further capital
recycling in the year ahead, as we start
to invest in the higher return opportunities
in our significant pipeline. Whilst our net
investment increased LTV slightly to 34.4%,
we expect this to reduce slightly to around
last year’s level in 2023.
Our strategy
Our strategy is focused on three key
areas – Central London offices, major
retail destinations and mixed-use urban
neighbourhoods. Although the proportions
of use differ, there is increasingly more
that unites these areas than divides them,
as the lines between where people work,
live and spend their leisure time blur. What
really binds these three areas together is
the importance of a sense of place.
This is evident in Central London, where
15% of our portfolio comprises non-office
space. It is this wide variety of restaurants,
bars and shops in or next to our offices
which create the vibrant places that
make people want to spend time here.
Across major retail destinations, we expect
c. 25% of space will not be retail in the
future, as we will introduce more diverse
food offerings, leisure and inner-city office
space. Similarly, for mixed-use urban
neighbourhoods, it is the blend of office,
residential, restaurants, bars, shops and
green space which creates the attraction
of a place and ensures its enduring success.
Our strategy is grounded in our purpose;
Sustainable places. Connecting communities.
Realising potential. We have a sustainable
or attainable competitive advantage in
each of our three areas of focus which will
help us create long-term value for all our
stakeholders. With our achievements over
the past year, we now have a significant
pipeline of opportunities in each area and
clear visibility on the potential returns on
offer and risks associated with these and
our existing portfolio.
Our focus is to deliver on the opportunities
we have created. In doing so, we continue
to be guided by three things; delivering
sustainably, delivering for our customers
and being disciplined with our capital.
Since September 2020, we have sold £1.1bn
of assets and over the coming years we
plan to recycle a further c. £3bn of mature,
low-yielding London offices and assets in
sectors where we have limited scale, such
as retail parks or hotels. As we reinvest
our capital into our pipeline and selective
retail acquisition opportunities, we expect
delivering on our strategy to drive a
meaningful increase in earnings and, on
average, a mid to high single digit total
return over time, whilst keeping LTV below
the mid 30% level.
Central London – high-quality
portfolio and unlocking of value
via development driving returns
Central London makes up 65% of our
overall portfolio by value. Of this, 56% is
located in the West End, with the remainder
in the City and Southwark. The quality
of our investment portfolio is high; 49%
of our assets have been developed over
the past ten years, compared to c. 20%
for the overall market, and 44% of our
completed London offices have an EPC
rating of ‘B’ or higher versus 15% for
the market. This is a key competitive
advantage, as customers increasingly
focus on flexibility, the best quality space
which offers the right amenities to attract
talent, and buildings which have the right
sustainability credentials.
07
This is borne out by our record leasing
activity, with £63m of leases completed
with new and existing office customers,
on average 4% above valuers’ assumptions,
and a further £6m in solicitors’ hands, 13%
ahead of valuers’ assumptions. We are also
seeing strong interest in our Myo flexible
offer, which we now plan to grow from
72,000 to c. 500,000 sq ft in the next five
years. Vacancy for the overall London office
market is elevated at 9.0%, but most of this
is second-hand, so vacancy in our portfolio
is only 4.7%. Office utilisation has continued
to grow, especially mid-week, as London is
becoming noticeably busier.
In line with our view this time last year that
prime rents would remain resilient and
yields could tighten, ERVs for our Central
London offices rose 2.5% and equivalent
yields fell 4bps to 4.6%, driven by our
successful lettings including a number of
major lease regears. Central London retail
and other values softened in the first half
of the year, but this fully recovered in the
second half, as the return to the city
gathered pace. Including development,
overall capital value growth in London was
3.7%. Over the next 12 months, we expect
office ERVs to grow by a low to mid single
digit percentage and the continued weight
of capital to keep yields broadly stable,
assuming bond yields do not rise materially
from here.
Strategic ReportLandsec Annual Report 2022 08
Chief Executive’s
statement continued
Our 1.0m sq ft committed pipeline is 56%
pre-let, with recent evidence on rents
ahead of our underwriting assumptions.
We are seeing good interest in the remaining
space, even though part of this will not
complete for another year. Construction
costs for our committed projects are 97%
fixed, but we have seen c. 5-7% cost
inflation on future schemes over the past
12 months. The upside to ERVs implied by
current negotiations offsets the impact this
had on total development cost, which also
includes land, and rising costs arguably put
further pressure on the shortage of prime,
sustainable space. Subject to continued
demand, we could start up to three new
schemes with c. £1bn total development
cost and an attractive 6.4% yield on cost
in the next 12 months.
Investor competition for development sites
remains high, so we are pleased to have
been able to unlock two new development
opportunities totalling 507,000 sq ft
off-market, one via the acquisition of U+I
and the other via a major lease-regear with
Deloitte at New Street Square, taking our
total future pipeline to 1.8m sq ft. We sold
Harbour Exchange during the period and
exchanged contracts shortly after the
year-end to sell 32-50 Strand, with
combined proceeds of £392m reflecting
a 4.1% yield and 13% premium to the
March 2021 book value. As investment
demand remains strong, we expect to
recycle more capital in the year ahead, in
line with our plans to reduce our Central
London weighting to 55-60% over time.
Major retail destinations –
improved operational performance
driving growth in best locations
Major retail destinations make up 16%
of our portfolio, c. 60/40% split between
prime shopping centres and outlets.
The pandemic accelerated the pre-existing
trend of retail sales moving online, which
combined with lockdowns has had a
marked impact on our portfolio. However,
our performance over the past year has
made us increasingly confident that the
prospects for prime retail destinations are
positive, with a growing polarisation
between our assets and those facing
structural obsolescence.
We maintain our view there is c. 25% excess
retail space across the UK, but most of this
is secondary where vacancy remains high.
Inflation is putting further pressure on
low-margin stores, which could lead brands
to accelerate the rationalisation of the
tail-end of their portfolios. Conversely,
prime destinations are getting stronger,
with occupancy in our portfolio up 170bps
to 93.2% over the year. For many leading
brands, online and physical channels are
now viewed as firmly inter-connected, so
we have seen existing brands upsize, new
brands opening stores as they move from
nearby locations to benefit from higher
footfall, and digital-native brands opening
physical stores to grow customer
connectivity and experience.
During the year, we restructured and
strengthened our retail team to focus more
on growing our brand relationships and
enhancing guest experience and less on
asset management, investing in new
capability and experience from a range of
global retailers to complement our existing
property skills. The feedback from brand
partners on this has been positive and as
retail continues to become more
operational, we believe this differentiated
approach will allow us to deliver genuine
added value in the future.
Our proactive approach to leasing during
the pandemic, prioritising occupancy
and supporting customers, is now yielding
results. We signalled a year ago that after
a material decline over the previous five
years, prime retail rents were approaching
sustainable levels. Our results over the past
year have confirmed this, as the £29m of
rent signed during the year or currently in
solicitors’ hands is on average 2% above
ERV. While lease terms are generally shorter
and there is more turnover-linkage than
a few years ago, incentives are down too.
We expect occupancy to grow further, so
despite some selective over-renting, we
expect like-for-like income to be broadly
stable this year, before returning to growth
in the medium term. Meanwhile, like-for-like
retail sales in our portfolio are now 1%
above the 2019/20 pre-Covid level.
This positive performance supported a return
to capital value growth, with values up 1.7%
in the second half, leaving them effectively
flat for the year as a whole at -0.1%. With
confidence in the sustainability of income
growing, we think yields of c. 7-8% for prime
shopping centres look attractive and may
well start to come in. During the year, we
acquired a further 18.75% stake in Bluewater
for £126m at an 8.15% initial yield and we
are actively exploring new opportunities.
We maintain our view that major retail
destinations could grow to 20-25% of our
portfolio, but as we recycle capital out of
subscale sectors such as retail parks and
leisure, our overall retail exposure would
remain relatively stable.
Mixed-use urban neighbourhoods –
clear visibility to grow to 20-25%
of portfolio
At our strategic review in late 2020 we
set out that we saw an opportunity to
materially grow our exposure to mixed-use
urban neighbourhoods. Many parts of
today’s built environment need remodelling
to make sure they are fit for changing
consumer expectations on how we live,
work and spend our leisure time and the
growing demands on sustainability. The
latter has been a strong focus for Landsec
for years, evidenced by the fact that we
were the first commercial real estate
business in the world to set a science-based
carbon reduction target in 2016. Combined
with our extensive experience in creating
thriving urban places in Central London and
for example Oxford and Leeds via some of
our major retail destinations, we are well
positioned to deliver on the opportunity
to reshape urban neighbourhoods in a
sustainable way.
Over the past year we have made
significant progress on these mixed-use
ambitions. We have grown mixed-use urban
neighbourhoods to 7% of our portfolio, up
from 3% a year ago and have now created
a pipeline of profitable development
opportunities, deliverable in the near term.
With potential capex of c. £1.5bn, this could
see mixed-use grow to 20-25% of our
portfolio in the next five years.
This marked acceleration in potential
growth has been driven by our acquisitions
of MediaCity and U+I in late 2021. Both
Strategic ReportLandsec Annual Report 2022 MediaCity in Greater Manchester and the
key U+I projects in London and Manchester
already have planning consent, so this
provides us with a clear opportunity to
invest c. £800m-£900m in a combination
of residential, work and leisure space
across these schemes in the next five years.
The integration of the U+I team also adds
strong placemaking skills to our business.
Combined with our existing mixed-use
opportunities in Glasgow and in Lewisham
and Finchley Road in London, where we
have made good progress in terms of
planning during the year, we therefore now
have an attractive pipeline of mixed-use
projects. These provide us with the ability
to adapt and, due to their diversified nature,
geographical spread and flexible phasing
of capex, offer a balanced risk profile.
Contrary to large individual developments
which are by nature binary, this means our
mixed-use business should start to deliver
reasonably repetitive development returns
in the coming years, whilst limiting our
speculative risk. Capital values were -2.8%,
as some of our future projects are still being
valued based on their existing retail use and
we are shortening leases to create future
flexibility. Overall, we expect ungeared
development IRRs to be in the low teens,
with attractive longer-term income return
and rental growth potential as we grow our
mixed-use portfolio. We envisage starting
on-site with the first phase of Mayfield,
Manchester later this year and at MediaCity
and, subject to planning, Finchley Road
next year.
Creating a more agile, customer-
focused and efficient culture
Our positive performance and strategic
progress over the year reflect the capability
and commitment of our people, who have
continued to deliver despite the challenging
operating environment during the first
part of the year in particular. Changing
the culture of our business is key to getting
the most out of the substantial talent
within Landsec and successfully delivering
on our strategy in the long term. Whilst our
progress to date means we have already
become more agile, more customer-
focused and better placed to respond
to changes in external market conditions,
there is more to do to ensure we deliver
on potential opportunities in an efficient
and effective way.
Building on our leading position
on sustainability
Sustainability has been at the heart of
Landsec for years and has become a key
decision driver for many of our customers.
To guide our sustainability initiatives, we
recently launched our new Build well, Live
well, Act well framework, which creates
a clear link with our purpose – Sustainable
places. Connecting communities. Realising
potential – and sets ambitious targets on
how we operate. For example, we have now
set a target to reduce embodied carbon
for our office developments by 50% by 2030,
to below 500kgCO2e/sqm, as part of our
Build well ambitions; to focus our efforts
on improving social mobility by supporting
30,000 people towards the world of work
by 2030 as part of our Live well programme;
and to link the remuneration of our people
to our sustainability targets as part of our
Act well pillar.
To ensure we remain at the forefront of
everything the sector is doing to tackle
the climate crisis, we were the first UK REIT
to publish a net zero transition investment
plan last year. This will see us invest £135m
in our existing portfolio by 2030, optimising
building management systems, installing
air source heat pumps and increasing
renewable capacity. This will ensure we
deliver our 70% reduction in carbon
emissions by 2030 versus the 2013/14 baseline
and stay ahead of the Minimum Energy
Efficiency Standards Regulation, which
require an EPC ‘B’ certification by 2030,
as well as other regulatory requirements.
During the year, we achieved a 20.7%
reduction in embodied carbon across our
development pipeline, reflecting amongst
others the use of steel with a greater
recycled content at 21 Moorfields. We saw
an 18% reduction in energy intensity
compared to 2020, although this partly
reflects the lower utilisation of space,
especially during the first part of the year.
In London, 44% of our office portfolio is
already rated EPC ‘B’ or higher versus c. 15%
for the wider UK office market, which given
the growing occupier focus on sustainability,
underpins the good demand and positive
rental value growth we are seeing.
Outlook
The recent surge in geopolitical risk has
the potential to upend decades of relative
international stability and increasing
globalisation, which is adding further
09
disruption to global supply chains already
affected by the pandemic. It also is putting
significant upward pressure on energy costs
in the short term, and potentially in the
long term through an accelerated energy
transition. This clearly creates uncertainty
around the economic outlook, with gilt
yields having risen to the highest level in six
years and UK inflation at its highest level in
30 years – something which will be felt by
many in the months ahead.
Whilst we are alive to the risks this creates,
we look forward to the future with
confidence. In London, we offer high-quality,
sustainable office space in places people
want to visit and office yields are well above
other key European cities, offering some
cushion against rising interest rates; in retail,
improved demand for space is supporting
income and valuation growth; and in
mixed-use we now have an attractive
pipeline of opportunities. Across central
London and mixed-use, we now have the
opportunity to invest c. £2.8bn in capex
over the next five years which could deliver
c. 20% profit on total development cost,
although we have flexibility about any future
commitments. Meanwhile, with an LTV of
34.4% and only 18% of our drawn debt
maturing in the next three years, our capital
base remains strong.
Despite the macroeconomic challenges,
we therefore remain confident that delivering
on our strategy will allow us to deliver, on
average, a mid to high single digit annual
return on equity over time. Our strategy of
recycling capital out of mature London
offices and subscale sectors into our London
and mixed-use pipeline has the potential
to deliver c. £120m growth in rental income
over time, whilst keeping our LTV at the
low 30% level. We expect the impact of
this on EPS growth to be relatively balanced
over the coming years, as we balance new
investment with disposals. For the current
year, making some allowance for our
planned capital recycling, we expect
continued operational performance to drive
EPRA EPS growth in the low to mid single
digit percent range, supporting further
growth in dividends.
Mark Allan
Chief Executive
Strategic ReportLandsec Annual Report 2022 10
Market context
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 a portfolio
of mixed-use urban development opportunities
in London, Manchester and Cambridge.
Market at a glance
£234m sq ft
of office space in central London
£14.3bn
of investment transactions in central
London in 2022 (2021: £7.2bn)
9.0%
vacancy rate in central London offices
(2021: 8.9%)
19.0%
shopping centre vacancy rate
(2021: 17.9%)
26%
Online sales as a percentage of all retail sales
(as at March 2022) (March 2021: 34%)
The UK real estate market
The real estate investable market in the
UK is estimated to be valued at £594bn,
with assets across a wide range of sectors
including offices, industrial, healthcare,
retail and residential. Rather than try
to invest in all areas, and spread our
management focus too thinly, we specialise
in three. These are: Central London offices,
Major retail destinations and Mixed-use
urban neighbourhoods – areas where we
have sources of competitive advantage and
expertise, to be able to maximise the value
from our portfolio.
Central London offices
London is well set to continue its position
as Europe’s pre-eminent global gateway
city. It has a unique ecosystem that
combines a rich network of world-class
universities, renowned research centres,
innovative small businesses and global
industry players. Alongside its global reach,
London’s ability to attract and retain talent
continues to be a competitive advantage,
and its reputation as a safe haven is
particularly valuable in times of turmoil.
The pandemic has changed the nature
and location of work, with many existing
trends materially accelerating. For many,
work has moved online through adopting
tech-enabled lifestyles and rearranging
working patterns. The historical link
between office-based employment growth
and demand for office space will change
as hybrid working becomes the norm.
Flexible working, and the way office space
is designed and used, will be important
factors as employers look to attract and
retain an engaged and motivated
workforce. Creating workplaces as overt
displays of a company’s culture, and places
that facilitate the benefits of collaborating
in person, will stimulate creativity and,
ultimately, productivity. We expect this
trend to continue, alongside the growing
requirement to ensure offices meet the
minimum credentials for sustainability
by 2030. These conditions lend themselves
to a potential divergence of the central
London office market as better-quality
assets become even more appealing
to many customers. This resonates with
the three pillars of our ‘future office’
proposition: partnership, experience,
and healthy and sustainable spaces.
It is still too early to draw firm conclusions
on how the office market will evolve, but
market activity in the last 12 months has
been encouraging. Both the occupational
and investment markets have rebounded
from their respective 2020 lows – the
take-up of office space is up 135% and the
level of investment up 101%, with activity
rising in the last six months.
Major retail destinations
Retail has been through a period of
significant change during approximately
the last five years, both in the UK and
worldwide. The rise in share of UK online
retail, from 16% five years ago to 26%
today, has been one of the main reasons
for this change. Its growth has been fuelled
by a rapid increase in smartphone use,
advances in technology, improvements
in supply chains, a shortening of delivery
times and, more recently, the change in
consumer habits caused by the pandemic.
Strategic ReportLandsec Annual Report 2022 11
on the best performers has historically
grown sales at a higher rate than the overall
market. We expect shopping centres to
move in a similar direction, although we
do not expect an identical model, given
the different nature of the brand offer.
As visibility on income stabilisation
becomes clearer and bank lending starts
to become available again, we expect
investment activity to continue to grow.
Given the high yield premium compared
to other markets and sectors, we believe
UK shopping centres could see material
yield compression as a result. This provides
a cyclical investment opportunity, as there
are few investors with both the capital and
operational expertise required.
Mixed-use urban neighbourhoods
We previously identified urban mixed-use as
an opportunity area for Landsec. The varied
potential uses are supported by long-term
trends, and our scale, existing pipeline and
ability to complete complex schemes mean
we are well placed to become a leading
player in this market.
The concept of individual localities (or even
potentially buildings) being reserved for
a single use is weakening, and there is
an increasing desire to see a mix of living,
working and leisure within distinct
neighbourhoods. The appeal of this has
further strengthened during the pandemic
and we expected it to be sustained, with
convenience being a key motivation in
a society where time is an increasingly
precious commodity.
In addition, quality of life, health, wellbeing
and environmental sustainability are all
important themes, and political and societal
awareness of these factors has increased
considerably in recent times. Done well,
mixed-use urban communities can achieve
strong returns, as the appeal of the location
and amenity increases values across phases
of development – known as placemaking.
At the same time, certain areas of cities
are rapidly becoming redundant and in need
of regeneration. There is increasing political
will behind redevelopment projects, but
they are complex and there are very few
developers with the scale and skills required.
From this perspective, developing strong
public sector partnerships is critical to
success. Not only are they political
stakeholders, but in many cases their
participation will be key to accessing
development land – with U+I’s Mayfield
project in Manchester a case in point.
However, online growth is not the only
change. Many other factors are adding
to the pressure on retailers – changing
consumer demands, excessive debt burden
on private-equity-owned retailers, under-
investment by brands, over-expansion
that has caused saturation in certain sub-
markets, and the rising costs in wages and
supply chains. Most of these were apparent
before Covid-19, but have been exacerbated
by the additional challenges it brought.
This has resulted in company failures for
those with the weakest business models.
But physical retail is not dead. There is clear
consumer demand for shopping centres
with an attractive mix of retail, leisure and
hospitality, but all these elements must be
present for shopping centres to thrive. And
brand partners with omnichannel strategies
are looking for the right space to support
their online businesses. Typically this means
operating a smaller number of larger stores,
in regionally-dominant shopping centres.
Shopping centres will become much more
operational assets, with shorter lease terms,
higher brand rotation, and more linkage of
rental income to turnover, to share in brands’
performance. This has been a successful
model for retail outlets for decades, as a
more proactive brand rotation that focuses
Central London office vacant space
Source: CBRE, Landsec
Chart 1
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Source: CBRE
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Strategic ReportLandsec Annual Report 2022
12
Our top 10 assets
Listed by value
1
New Street Square, EC4
2
21 Moorfields, EC2
3
80-100 Victoria
Street, SW1
4
One New Change, EC4
5
MediaCity, Greater Manchester
6
Nova, SW1
7
Gunwharf Quays,
Portsmouth
9
Queen Anne’s
Mansions, SW1
10
Piccadilly Lights, W1
8
Bluewater, Kent
Strategic ReportLandsec Annual Report 2022 Our stakeholders
13
To achieve our purpose, we need to understand our stakeholders, and the
most effective way of asking for their input and support. As the nature of
commercial real estate is becoming much more operational, we need to
work even more closely with our customers and other stakeholders.
WHO ARE THEY?
WHY ARE THEY
IMPORTANT TO US?
WHAT DO THEY WANT
FROM US?
HOW DO WE ENGAGE
WITH THEM?
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.
Everyone employed directly
by Landsec.
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.
Our people put our strategy into
practice, live our culture, and
enable us to achieve our purpose.
Ultimately they create value for
our stakeholders.
Those who live in areas
where we work or where
we have assets. For example,
local residents, businesses,
schools and charities.
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.
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.
Those who have a direct
working or contractual
relationship, or share
mutual interest with us.
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.
Customers want us to
understand and respond to
their changing needs. That
means providing sustainable,
efficient, fabulous space and
services that enhance their
working, shopping, leisure and
living experiences.
Our employees want a great
career, and a positive and
motivating work environment
where they can thrive,
underpinned by a supportive
culture that embraces
diversity and inclusion.
Local people want us to
enhance the physical and
social infrastructure in their
area, helping their community
thrive. They also want us
to provide the right mix of
services for their needs.
Investors want a clearly
articulated long-term
strategy, together with
shorter-term plans and
effective communication
of our progress.
Our partners want us to be
trustworthy and live up to
our promises.
Through regular contact with
our retail and office occupiers
to understand what’s important
to them, and evaluate the
service we provide.
We use engagement surveys,
our Employee Forum, weekly
updates from across the business
and ‘town hall’ presentations,
alongside relevant training and
development programmes.
Our activity ranges from providing
work experience and routes to
employment, to helping students
and addressing local socio-
economic needs. We consult
local communities ahead of all
development activity, and
maintain the relationships
following completion.
Formal results presentations
every six months plus 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.
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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.
See our Governance section on pages 87-91
You can find commentary on our culture on pages 38-43
Strategic ReportLandsec Annual Report 2022
14
Our business model
To create value, we buy, develop, manage
and sell property, drawing on a range of
financial, real estate and social resources.
INPUT
HOW WE CREATE VALUE
Financial
The different types of
funding deployed, from
shareholder capital to
borrowings.
Properties and places
Our land and buildings, the
materials and technologies
we use, and the natural
environment.
People and
relationships
The relationships we
have with customers,
communities and
partners, and the
capabilities of our
employees.
Our
focus
We focus on those areas
of the real estate market
where we have sources
of competitive advantage
and can maximise the
value from our portfolio
and our talent.
Our core
activities
Asset management
Building strong relationships
with our customers to
understand their needs
and those of their
customers to provide the
space and services that
help them succeed thereby
growing our income and
creating value.
Our
objective
To deliver the best
risk-adjusted returns from
our activity. We aim to
achieve mid to high single
digit annual return on
equity over time.
Development
and refurbishment
Creating new or
refurbished spaces and
places, from standalone
office and retail through
to urban mixed-use
neighbourhoods. With
a focus on sustainability,
design and wellbeing, these
spaces create long-term
value for our customers
and our business.
Investment activity
We balance our
investment activity,
acquiring income-
generating assets, or
potential development
schemes and funding this
through the disposal of
mature assets or those
where we have no sources
of competitive advantage.
Strategic ReportLandsec Annual Report 2022 15
Everything we do is driven by our purpose:
Sustainable places. Connecting communities.
Realising potential. Our culture, supported
by our values, provides a common language
to enable our people to thrive and realise
their potential.
We have 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 aim to be a sustainable business by
anticipating and responding to the changing
needs of our customers, communities,
partners and employees. We plan for the
long term, but have the flexibility to respond
to opportunities and challenges as they arise.
OUTPUT
GOAL
Creating sustainable long-term value with a focus on total accounting return
Financial
Long-term growth in asset
values and income, creating
value and potential for increased
dividends to shareholders.
To read our Financial review
go to pages 32-37
We aim to achieve mid-to-high single-digit
annual returns on equity through the cycle,
split almost equally between income and
capital growth.
Properties and places
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 26-31
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, creating a sense of place.
The transition to a net zero carbon portfolio
involves changing the design, materials
and the way we construct new buildings,
and how we operate our existing portfolio.
People and
relationships
Our ability to help businesses
and people thrive – including
our own employees.
To read more go to pages 38-43
We design our buildings to support wellbeing
and productivity, and provide a great experience
for everyone who uses our spaces.
For 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.
We help those further from the jobs market
access opportunities in our industry, believing
everyone must be treated and paid fairly, and
that our business should reflect and support
our diverse communities.
TOTAL
ACCOUNTING
RETURN
Our aim is to achieve
above-market total
business returns, together
with significant social and
economic value for all of
our stakeholders.
How we manage risk
see pages 58-69
How we monitor performance
see page 19
How we reward success
see pages 110-113
Strategic ReportLandsec Annual Report 2022 16
Our strategy
The real estate investable market in the UK comprises
£594bn of assets across a wide range of sectors
including offices, industrial, healthcare, retail and
residential. Rather than trying to invest in – and
spread our management time across – all areas, we
focus on three where we have sources of competitive
advantage and can maximise the value from our
portfolio and our talent.
See
pages
20-21
Central
London
offices
These areas are: Central London offices;
Major retail destinations; and Mixed-use
urban neighbourhoods. What binds these
three areas together is the importance of
a sense of place to their enduring success,
and to that of their surrounding areas.
We strive to create, curate and activate
places that inspire people, generating
value for all our stakeholders.
To achieve our strategy successfully, we
need a clear sense of purpose and a culture
that supports, respects and motivates our
people. The three – strategy, purpose,
culture – are inextricably linked.
While our strategy is grounded in this
central purpose, it is vital we make healthy,
sustainable returns to enable our business
to grow over time. Which is why we focus
on those areas where we believe we have
a genuine competitive edge.
We are a total-return business. In the
current environment, our aim is to achieve
mid to high single-digit annual returns
on equity through the cycle, split almost
equally between income and growth.
The three investment areas we focus on
are attractive because of the potential
returns they can generate. We are not
wedded to particular assets or regions,
and prefer to be nimble, applying our
skills to where we believe we can achieve
the best total return over the long term.
A CLEAR
FOCUS ON
DRIVING
GROWTH
IN THREE
KEY AREAS
Major
retail
destinations
See pages 22-23
Mixed-use
urban
neighbourhoods
See pages 24-25
Underpinned by a strong balance sheet
and disciplined capital allocation
Strategic ReportLandsec Annual Report 2022 AREAS OF FOCUS
CENTRAL LONDON
In central London, we develop, own
and manage offices that offer a variety
of propositions to meet the evolving
needs of occupiers, who range from
global corporates to small, fast-growing
businesses. Demand for our high-quality,
sustainable office space is healthy, and
this part of the portfolio can offer a
blend of returns; from high-quality,
low-risk income, through to profits from
new development.
MAJOR RETAIL DESTINATIONS
In retail, we own and manage high-
quality, major retail destinations
that offer something special to brands
and shoppers alike, in an increasingly
omnichannel world. Shoppers are
attracted to places that offer experiences
they can’t easily get elsewhere; brands
are drawn to places where they can
showcase their offer to a high number
of shoppers. Our job is to bring the
two together. Our high-quality portfolio,
strong brand partner relationships and
deep understanding of shoppers give
us a real competitive edge.
MIXED-USE URBAN NEIGHBOURHOODS
Our focus on developing and investing
in mixed-use urban neighbourhoods
recognises that the lines between where
we live, work and spend our leisure
time are becoming increasingly blurred.
This is creating an urgent need to reshape
our cities so they are fit for the future.
We are using our scale, expertise and
experience to help adapt the built
environment to meet people’s changing
needs. These projects take shape over
a number of years and multiple phases,
meaning each project can offer an
attractive blend of income, growth and
development-led returns over several
years. Importantly, the phased nature
of these projects means we can realise
returns in stages, rather than wait for
the overall completion of the project.
17
At our Capital Markets Day (CMD) in
October 2020, we set out plans to recycle
approximately £4bn of capital out of
mature properties and those in ‘subscale’
markets. This was made up of c. £2.5bn of
long-let London offices with limited asset
management, and our £1.5bn portfolio of
hotels, retail parks and leisure assets, where
we have neither the scale nor the sources
of competitive advantage to achieve our
target returns.
At the CMD, we also set out our plans for
reinvesting the proceeds from these disposals:
investing in London office development and
mixed-use urban schemes where the
potential returns are attractive.
We have made significant progress with our
strategy over the last 18 months. We have
sold c. £1.1bn of assets and invested £695m
in mixed-use urban opportunities through
the acquisition of U+I Group PLC and a
75% share of MediaCity UK in Manchester.
We have also invested £680m in our
existing London development programme
and the acquisition of a further 18.75%
stake in Bluewater. The charts below
show the progress we have made towards
rebalancing our portfolio to focus on
sectors with high-growth potential. With
development potential in the portfolio now
totalling c.£3bn, we have a clear path to
achieving this rebalancing over the next
five years or so.
In executing our strategy we are guided
by three things: developing sustainably,
succeeding for our customers and being
disciplined with our capital. The built
environment accounts for 40% of carbon
emissions globally, so everything we do
needs to have sustainability at its heart.
In 2016, we were the first commercial real
estate business in the world to set a science-
based carbon reduction target and, in 2019,
we increased our ambition to align with a
1.5-degree global warming scenario.
During this year, we announced a new net
zero transition investment plan across our
entire estate. This will ensure we remain at
the forefront of everything the property
sector is doing to tackle the climate crisis.
At the heart of our philosophy is a belief
that we can only be successful if our
customers are successful. We look to build
positive and lasting relationships with them,
to understand their businesses better, and
determine what we can do better or
differently to help them succeed.
We think constantly and very carefully
about where to invest, focusing in
particular on projected returns and the
associated risks. With visibility and expertise
across three distinct focus areas, we have
a unique perspective on relative risk and
returns, which enables us to be clear and
decisive in our capital allocation decisions.
Our strategy’s impact on portfolio weighting (%)
Chart 3
March 2021
£10.8bn
March 2022
£12.0bn
Medium term
Portfolio split
Central London
Major retail destinations
Urban mixed-use
Subscale sectors
March 2021
March 2022
69%
16%
3%
12%
65%
16%
7%
12%
Medium term
55-60%
20-25%
20-25%
N/A
Strategic ReportLandsec Annual Report 2022 18
Our strategy continued
A total return approach that is
aware of the importance of income
To generate the returns we are targeting,
we need to allocate capital to areas of
growth in a meaningful way. We are also
mindful of the importance of income –
it is a key part of the property return,
but should not be the key driver. We are
prepared to sell income-generating assets
to fund investment opportunities with
better return prospects, but we will also
preserve income growth through careful
phasing of our activity.
Strategy in action: Sustainability
Embodied carbon and ‘energy in
use’ are terms that are becoming
increasingly familiar to everyone in
the industry. But for us, they are
part of how we have approached
design and management for many
years. We have plans to invest
c. £120m over the next nine years to
replace carbon-intensive gas with
low-carbon fuels such as renewable
electricity. This is a long-term plan
for a long-term future. We have
targets for 2030, but they are
simply intermediate steps to ensure
we continue to work towards an
office portfolio that minimises the
embedded carbon in our buildings
and the amount of energy needed
to heat and cool them.
See pages 44-57 to read more about
our commitment to sustainability
c. £120m
Investment planned over the
next nine years to replace
carbon-intensive gas
Strategic ReportLandsec Annual Report 2022 Key performance
indicators
19
We set KPIs in line with
our strategy. They provide
direction for our people,
and offer clear links to
remuneration.
In addition to the performance metrics
below, everyone has personal objectives
to achieve for the year. For our Executive
Directors, these focused on strategic
development and execution, delivering
performance and culture and values.
In addition to the annual bonus KPIs below,
we set KPIs for LTIP awards in line with our
remuneration policy. The measures and
their weightings are:
Relative Total Shareholder Return 40%;
Total accounting return 40%;
ESG targets 20%.
Further information can be found in
Remuneration on pages 116-118
EPRA earnings
Total accounting return
ESG
How we measure it
We set targets for EPRA earnings in
line with our five-year strategic plan
How we measure it
The cash dividends per share paid
in the year plus the change in EPRA
net tangible assets (NTA) per share
How we measure it
We have two targets: energy
intensity reduction in all assets
and embodied carbon reduction
in assets under development
Link to remuneration
30% of annual bonus performance
is linked to this KPI
Link to remuneration
30% of annual bonus performance
is linked to this KPI
Link to remuneration
20% of annual bonus performance
is linked to this KPI
Our performance in 2021/22
ACHIEVED – EPRA earnings of £355m
were ahead of the £328m target
Our performance in 2021/22
ACHIEVED – Total accounting return
was 103p compared with the target
of 27.5p
Our performance in 2021/22
ACHIEVED – Energy intensity
reduction across all assets was 4%,
in line with the 4% target. Embodied
carbon reduction in our assets under
construction was 20.7%, ahead of
the target 16.5%
Strategic ReportLandsec Annual Report 2022 20
Our strategic focus
Focus on offices
Strategy in action
CUSTOMER
FOCUS
We have a long-standing relationship with Deloitte at
New Street Square. They occupied four buildings but
wanted to bring their teams together. This provided an
opportunity for us both. Deloitte have consolidated
operations into the two newest buildings and released
two assets we can redevelop. One will be home to Myo,
our flexible office offer, while the other has become a
redevelopment opportunity that we would not have
gained access to for many years. Both Deloitte and
Landsec benefit from these changes and, ultimately,
this will enhance the overall New Street Square site –
an attractive place to do business.
Our view of the market
Despite further disruption from Covid-19,
we have seen a more sustained recovery
in the office portfolio, and over the coming
months will be clearer about the space
our customers will need. Customers want
flexible options and strong sustainability
credentials – so only the best space will
thrive. Our portfolio is well placed to
benefit from these trends.
If overall demand recovers strongly, the
highest-quality space could see strong rental
growth due to relative scarcity of supply.
The weight of capital globally, and relative
affordability of London, is supporting strong
investor demand for the best space. We see
a potentially strong market to address with
our pipeline of developments, but pricing
will make it difficult to acquire further
development sites in the near future.
Our plan for our Central
London portfolio
We will recycle capital out of assets with
limited shorter-term prospects, taking
advantage of strong pricing, to fund
investment in growth opportunities across
the Group. We sold Harbour Exchange and
since the year-end exchanged contracts to
sell 32-50 Strand for £195m.
We will complete and lease committed
developments and secure planning consent for
our secured medium-term projects. We added
Liberty of Southwark, SE1 to our development
programme following the U+I acquisition.
We now have a pipeline of 1.8m sq ft of
office-led development opportunities.
We will broaden the range of propositions
across the portfolio so we can offer our
products – Myo, Customised and Blank
Canvas – in more locations. We introduced
Myo at Dashwood in the City, with 35,000
sq ft of space across four floors. We will also
add Myo to New Street Square and The Forge,
SE1, our development in Southwark, which will
open in the second half of this financial year.
With ESG as a consideration, our
investment in air-source heat pumps and
innovative AI systems to increase efficiency
will ensure our portfolio remains sustainable
and meets the needs of our customers.
Strategic ReportLandsec Annual Report 2022 Strategy in action
A SENSE
OF PLACE
Whether it’s our cluster of
buildings in New Street Square
or our portfolio of assets in
Southwark, we think it’s vital to
create a ‘place’ where people
want to work, shop, spend their
leisure time and live. Having the
portfolio with the right space
allowed us to meet the needs
of Deloitte when they wanted
to consolidate their space
(see left). And at Southwark,
we are adding to an already
vibrant area of London with
a mix of buildings that provide
sustainable, flexible space.
We’re transforming old industrial
buildings into modern places
that renew the local area, and
bring new people, businesses
and ideas to Southwark.
21
→
THE PORTFOLIO
£7.8bn
of prime office space
in central London with
ancillary retail space
4.7%
like-for-like vacancy
£1.2bn
£63m
committed development
programme due to
complete by June 2023
office lettings or
renewals, 4% ahead
of valuers’ assumptions
Committed development
56%
of space
already pre-let
4
Committed development
programme schemes
in strong locations in
central London
→
MARKET VIEW AND HOW WE CREATE VALUE
→ Investment market remains strong
→ Strong occupational demand for the
best space
→ Optimise portfolio and leverage strong
development track record
→ Provide sustainable, flexible space
which meets customers’ needs via
places we create
→
OUR ACTION PLANS
→ Leverage strong development expertise,
with up to three new starts this year
→ Monetise a further £1.5bn of mature
assets, having already sold £1bn since
late 2020
→ Grow our flexible office propositions
to c. 15% of our portfolio
Strategic ReportLandsec Annual Report 2022 Strategy in action
A SENSE
OF PLACE
Our focus is clear: we are curating social
spaces to offer guests time well spent.
Gunwharf Quays is on Portsmouth harbour,
a stunning and lively location. We offer a
great range of brands at this outlet centre,
and it is a destination in its own right.
But it is more than just a retail destination:
there are over 30 different places to eat
and drink, and there’s a cinema, bowling
alley and a hotel. It’s also a great place
to spend the evening, with plenty of
entertainment including bars and a casino.
This really is a social space that provides a
great environment for brand partners and
guests, and it also acts as a social hub for
the local community.
22
Our strategic focus continued
Focus on retail
configuration or mix of uses. On average,
we will look to invest the capital equivalent
to 10% of current asset values to ensure
our centres are fit for the future.
During the last year, we also restructured
our retail team. We now have teams
dedicated to our brand partners, our guests
and guest experience, and our portfolio.
This helps us better respond to and
anticipate our customers’ needs. All
property companies will need to become
more operational in their approach to
managing their businesses, and we are
confident we have the structure in place
to achieve this.
Our view of the market
Structural change in the retail sector has
been profound and was accelerated by
the pandemic. Shopping centre values are
down c. 65% from their peak, and rents are
down c. 40%. The UK has an over supply of
physical retail space, with perhaps 25% of it
likely to convert to other uses over the next
five years. But physical retail is not dead.
There is clear demand from guests for
shopping centres with a great mix of retail,
leisure and hospitality, but shopping centres
need all three elements to thrive. And brand
partners’ omnichannel strategies are
looking for the right space to support their
online businesses. Typically, this means
a smaller number of larger stores, in
regionally-dominant shopping centres.
There are clear signs of rents and values
stabilising, but landlords will bear more
operational risk – shorter lease terms,
linked to turnover. But with yields at c. 7.5%
to 8% for prime shopping centres, we
see opportunities to invest in the small
number of centres that meet the criteria
outlined above.
Our plan for our retail portfolio
We will concentrate on catchment-
dominant locations we are confident
will be long-term winners, by offering
an experience that draws shoppers time
and again. We will sell assets where we do
not have scale or sources of competitive
advantage: the retail parks from our
subscale sector, for example. We will also
make selective disposals and acquisitions,
to ensure our portfolio always holds retail
assets with long-term appeal to brand
partners and guests. In the last year,
we have made progress with our strategy
by selling two retail parks and acquiring
a further stake in Bluewater, Kent.
We will also invest in our portfolio. Some
of our centres are too large, and we will
replace some retail space with other
offers such as leisure, food and beverage.
Other centres may be the right size, but
need some investment to fine-tune the
Strategic ReportLandsec Annual Report 2022 Strategy in action
THE ‘CENTRE’
OF LEEDS
Our Trinity Leeds shopping centre is in the
heart of Leeds’ city centre shopping district.
It has a great line up of over 70 retail brands
and over 40 food and beverage brands,
ranging from casual bites to fine dining.
It also has an Everyman cinema and an
innovative street food offer. And Trinity
Leeds is popular with brands: Nespresso,
Levi’s and Space NK being the latest
additions to the line up. We are using our
space in innovative ways: the ‘Student Study
Hub’ is a wifi-enabled area where people
can work, study and meet. It adds a further
sense of community to a centre already
popular with the people of Leeds and the
wider catchment.
23
→
THE PORTFOLIO
£1.9bn
portfolio comprising six
high-quality regional
shopping centres and five
outlet centres
6.8%
like-for-like vacancy
at March 2022
£29m
lettings signed or in
solicitors’ hands
19.6%
Footfall down vs 2020
1.1%
228
Like-for-like sales
up vs 2020
lettings completed,
+2% vs ERV
→
MARKET VIEW AND HOW WE CREATE VALUE
→ Investment market stabilising
→ Occupational demand improving and
rents stabilising in prime locations
→ A restructured and strengthened
retail team
→ Provide the places for brands to thrive
→
OUR ACTION PLANS
→ Build on positive momentum with new,
restructured retail team in place
→ Continue to grow brand relationships,
guest experience and occupancy
→ Explore attractive prime opportunities
where our expertise can drive growth
Strategic ReportLandsec Annual Report 2022 24
Our strategic focus continued
Focus on mixed-use
urban neighbourhoods
Strategy in action
O2 FINCHLEY
ROAD
The O2 Finchley Road includes a
shopping centre, a large surface-level
car park and a DIY store. The site is
ideally located for development into
a mixed-use neighbourhood as its
local infrastructure includes two tube
and two overground stations within
walking distance. We submitted plans
this year for a three-phased scheme
of 1,800 homes, 180,000 sq ft of
commercial space and 7.5 acres of
public space and park. Work will start
on the first phase in 2023, subject
to planning, with earliest completion
in the first quarter of 2026.
Our view of the market
The idea of distinct areas or buildings being
reserved for single uses is weakening. There
is an increasing desire to see a mix of living,
working and play within neighbourhoods, an
appeal the pandemic highlighted. Quality of
life, health and wellbeing, and environmental
sustainability, are all themes that contribute
to this, while political and societal awareness
of these factors has increased considerably.
Done well, these mixed-use urban
communities can generate strong returns,
as the appeal of the location and its
amenity increases the value through phases
of placemaking. At the same time, certain
areas of our cities are rapidly becoming
redundant and in need of regeneration.
There is increasing political support for such
projects, but very few developers with the
scale and skills to take them on.
Our plan for our mixed-use urban
neighbourhoods portfolio
The acquisition of U+I and the 75% share of
MediaCity has expanded our development
pipeline and accelerated the potential
returns from this part of our strategy.
Our near-term programme consists of five
schemes which total 9m sq ft and include
7,000 homes. Two are in suburban London,
two are in Manchester, and one in Glasgow.
In Manchester, we will be able to start on site
at Mayfield later this year and MediaCity next
year. Our schemes in London are still subject
to planning approval, with earliest starts on
site of 2023 and 2024 for O2 Finchley Road
and Lewisham respectively.
The multi-phase nature of these projects
allows us to ration capital effectively and
adjust our strategy over time. They are
lower risk than a large, single-phase
development such as an office. In addition
to managing risk, the multi-phase nature
also accelerates the returns from these
schemes. When a phase is complete, it can
start to generate income – each phase can
then be retained as an income-generating
asset, or can be sold, realising value and
releasing capital to be deployed elsewhere.
Strategic ReportLandsec Annual Report 2022 Strategy in action
MAYFIELD,
CENTRAL
MANCHESTER
At Mayfield, we have the opportunity to
transform a former industrial area into a thriving
mixed-use neighbourhood. In the heart of
Manchester, this 24-acre site will be home to 1,500
apartments, 1.5m sq ft of offices and 120,000
sq ft of retail and leisure space, all set around 13
acres of public realm, including a 6.5 acre park –
the first new park in Manchester for over a
century. And sustainability is an essential part of
the story: creating and linking communities and
providing a sustainable place to live, work and
play, all in a net zero scheme. We are already
on site and have made good progress with the
new park. We aim to start the first commercial
building later this year, with completion of the
first block in 2025.
25
→
THE PORTFOLIO
£0.9bn
20%+
portfolio of potential
mixed-use urban schemes
in London, Manchester
and Glasgow
profit on cost expected
to be delivered
75%
stake in MediaCity
and recent acquisition
of U+I Group PLC
have accelerated
our programme
7,000
homes could be delivered
across five schemes
£1.5bn
of capex over the next
five years generating a
potential development
profit of £350m
c.4m
sq ft of office, retail
and leisure space
potential across five
schemes
→
MARKET VIEW AND HOW WE CREATE VALUE
→ Attractive mix of returns in sectors
with strong investment and
occupational demand
→ Closely aligned to our purpose
→ Build modern, sustainable mixed-use
places, serving customers and the
wider community
→
OUR ACTION PLANS
→ Deliver attractive mix of income,
growth and development upside
across multiple phases
→ Start Mayfield in 2022 and prepare
MediaCity and O2, Finchley Road
for start in 2023
→ Progress preparation of further
large, mixed-use opportunities
Strategic ReportLandsec Annual Report 2022 26
Operating and
portfolio review
The value of our portfolio
increased to £12.0bn during
the year, marking a 3.6%
increase adjusted for
investments and disposals,
and is made up of the
following categories:
Central London
Major retail destinations
Our high-quality office (85%)
and retail and other
commercial space (15%),
located in the West End (56%),
City (39%) and Southwark
(5%). Of our investment
assets, 49% has been
developed in the last ten years,
compared to c. 20% for the
overall London office market.
Our investments in six
shopping centres and five retail
outlets, with the seven largest
assets comprising 82% of the
overall retail portfolio value,
most of which are amongst
the highest selling locations
for retailers in the UK.
Proportion of Combined Portfolio
Proportion of Combined Portfolio
65%
16%
Mixed-use urban
neighbourhoods
Subscale
Our investments in mixed-use
assets and, principally, future
development opportunities
focused on five key sites in
London, Manchester and
Glasgow, some of which still
have a short-term use as retail
ahead of their medium-term
redevelopment.
Assets in sectors where we
have limited scale and which
we will therefore divest over
time, with a broadly equal
split between retail parks,
hotels and leisure assets.
Proportion of Combined Portfolio
Proportion of Combined Portfolio
7%
12%
W
E
I
V
R
E
V
O
→
We expect our weighting towards central
London to reduce to 55-60% over time, as
we plan to continue to sell mature assets
and focus investment on the opportunities
in our development pipeline. We expect
mixed-use urban neighbourhoods to grow
to 20-25% of our portfolio, as we build out
our current pipeline. We envisage major
retail destinations could grow to 20-25% as
well, although this would leave our overall
retail exposure largely stable, as we plan to
trade out of subscale retail park and leisure
assets over time.
Investment activity
We have made good progress on our
objective to reposition our portfolio towards
future growth. At the time of our Strategic
Review in late 2020, we said we intended to
sell c. £4bn of mature London office assets
and assets in sectors which were sub-scale
over the next six years. To date, we have
sold £1.1bn of assets, which means we are
well on track versus this target. Whilst our
initial focus in late 2020 and early 2021 had
been on disposals, over the past year we
switched our attention to acquisitions.
Our largest deal this year was the
acquisition of a 75% stake in MediaCity
in Salford, Greater Manchester for £426m,
Europe’s largest purpose built tech and
media hub. The existing estate covers
1.7m sq ft of offices, studios, residential,
leisure and retail space and is 96% let with
a 10-year WAULT. It provides an attractive
5.8% initial yield and over half of the
income is RPI-linked. There is consent to
develop a further 1.7m sq ft of residential
and commercial space, so we expect to
invest a further £400m+ in developing this
over the medium term.
Our second major acquisition was of U+I
Group PLC, which we acquired for £269m
(including £83m of net debt). This provides
us with access to five large development
projects in London, Manchester and
Cambridge. Three of these already have
consent, the largest of which is Mayfield;
a 24-acre site next to Piccadilly station in
Manchester with the potential to deliver
2.5m sq ft of residential and commercial
Strategic ReportLandsec Annual Report 2022
27
space. We plan to sell c. £190-210m of U+I’s
non-core assets over the next two years,
leaving an attractive in-price for the core
projects of c. £60-75m, and we have already
sold or exchanged contracts to sell £61m of
non-core assets, 10% above book value.
Aside from these two urban mixed-use
opportunities deals, we also acquired an
additional 25% stake in Bluewater shopping
centre for £168m, reflecting an attractive
8.15% initial yield, in line with our strategy to
grow exposure to major retail destinations.
We subsequently sold 25% of this stake to
our existing JV partner M&G at the same
valuation, which means our overall interest
in the centre increased from 30% to 48.75%.
We also agreed the £60m forward purchase
of the 77,000 sq ft Oval Works, SE11 office
development, which offers potential for our
Myo flexible office brand.
In terms of disposals, we sold Harbour
Exchange, E14 for £197m, reflecting a 11%
premium to the March 2021 book value and
a 3.99% initial yield. This was a mature asset
that offered little further upside, being a
fully let 1980’s building with a WAULT of
19.7 years. We also sold two small retail parks
for a combined £53m, representing a 15%
premium to book value. Shortly after the
year-end, we exchanged contracts to sell
32-50 Strand, WC2 for £195m, representing a
15% premium to the March 2021 book value
and a 4.2% yield, which following a regear
with the sole office occupier in August, was
relatively mature as well.
Looking ahead, we expect to make further
progress on our portfolio repositioning
over the next 12 months. We are in active
discussions on further disposals in central
London and we continue to monitor the
best timing to monetise our subscale
assets, as values continue to grow, as
expected. The significant potential in our
development pipeline means we will be
selective in terms of acquisitions, although
we could see some potential attractive
opportunities emerging in retail.
Portfolio valuation
Investment volumes in our key sectors
increased materially over the year.
Transaction volumes in London offices
doubled to £14.3bn, close to the long-term
average and following a dearth of
investment during the pandemic, retail
investment increased to the highest level
since 2017. Initially this was mostly focused
on retail parks and supermarkets, but
recently demand has started to spread to
shopping centres. Against this backdrop our
portfolio increased in value by 3.6% over the
year, including a 2.9% increase in the second
half of the year with positive valuation
growth across virtually all segments in the
second half. Our current portfolio valuation
fully reflects the costs required to achieve an
EPC rating of ‘B’ by 2030.
Our Central London portfolio value was up
3.7%. Office ERVs were up 2.5%, including
4.0% growth in West End ERVs driven by
our strong letting activity in Victoria. Yields
compressed slightly, principally driven by
a number of significant lease-regears, in
particular with our second-largest tenant
Deloitte, who regeared the lease of their
global HQ at New Street Square, EC4 for
15 years, in a deal which also saw us free
up a 170,000 sq ft 1970’s building for future
development. Our development activity
contributed positively to the valuation,
principally due to 21 Moorfields, EC2 which
is fully pre-let and set to complete later this
year. Central London retail and other values
softened during the first half, but this fully
recovered in the second half of the year
with a 5.3% increase as footfall and leasing
activity started to recover.
Our retail portfolio was up 1.7% in the
second half of the year, leaving it virtually
flat for the full year. Shopping centre
values increased 2.5% in the second half,
leaving them down 1.3% for the year as
a whole, whilst outlets were up 1.6% for
the year. Rental values were down 0.9%
for the year and up 0.4% in the second
half, supported by the our strong leasing
activity, on average 2% ahead of ERV.
Yields compressed slightly in the second
half, broadly offsetting a minor softening
in the first half.
Valuation analysis
West End offices
City offices
Retail and other
Developments
Total Central London
Shopping centres
Outlets
Total Major retail
Completed investment
Developments
Total Mixed-use urban
Leisure
Hotels
Retail parks
Total Subscale sectors
Total Combined Portfolio
Market value
31 March
2022
£m
Surplus/
(deficit)
£m
FY valuation
movement
%
H2
valuation
movement
%
3,013
1,928
1,131
1,709
7,781
1,141
743
1,884
409
486
895
569
422
466
1,457
12,017
86
100
16
65
267
(15)
12
(3)
8
(33)
(25)
41
14
115
170
409
3.0
5.6
1.5
4.0
3.7
–1.3
1.6
–0.1
2.0
–6.5
–2.8
7.4
3.5
31.9
12.9
3.6
2.6
5.0
5.3
–0.4
2.9
2.5
0.6
1.7
2.0
–3.9
–1.3
3.6
3.6
14.8
6.9
2.9
LFL rental
value change1,2
%
4.0
0.4
–
n/a
2.0
–2.4
1.4
–0.9
n/a
n/a
n/a
0.3
1.2
0.8
0.7
1.0
Net initial
yield2
%
Equivalent
yield2
%
Table 4
Movement
in LFL
equivalent
yield2
bps
4.2
3.6
4.4
0.5
3.3
7.7
5.8
7.0
5.1
5.5
5.3
6.7
4.2
5.7
5.6
4.3
4.6
4.6
4.7
4.3
4.5
7.4
6.7
7.1
5.7
5.3
5.5
7.1
5.5
5.7
6.2
5.2
–2
–8
15
n/a
–1
3
–10
–3
n/a
n/a
n/a
–40
–1
–187
–70
–11
1. Rental value change excludes units materially altered during the period.
2. Excluding developments.
Strategic ReportLandsec Annual Report 2022 28
Operating and
portfolio review continued
The value of our completed mixed-use
assets at MediaCity increased 2.0%, but
the value of our overall mixed-use urban
neighbourhoods portfolio reduced 2.8%,
as future development assets were down
6.5%. The majority of these are still valued
based on their existing retail use and as
we prepare these assets for redevelopment,
we are deliberately moving income to
shorter lease terms to create future
flexibility. This weighs on valuations in the
short term, but does not reflect any
potential future development upside.
This time last year we said we expected
the value of our subscale assets to recover
from the impact of the pandemic and that
we therefore did not plan to sell these in the
short term. This decision has clearly been
vindicated, as the value of our subscale
assets increased by £170m. Hotel values
were up 3.5%, as occupancy improved post
the end of lockdown restrictions, whilst
leisure assets were up 7.4%, partly reflecting
two significant lease regears. Meanwhile,
retail park values increased a marked 31.9%,
with 187bps of yield compression, driven by
a strong recovery in investment demand.
Looking ahead, there remains a significant
amount of capital targeting investment in
London offices, with yields offering a
premium compared to other key European
markets. Assuming bond yields do not rise
materially from here, we therefore expect
this weight of capital to keep yields broadly
stable over the next 12 months and we
anticipate ERVs to grow by a low to mid
single digit percentage. Despite the
headwinds to consumers of rising inflation,
we expect that the growing recognition
that income has stabilised post the
pandemic will increase investor demand for
retail and could drive shopping centre yields
down from their current all-time highs.
We expect to see further growth in the
value of subscale assets, driven by further
operational improvement in hotels and
strong investor demand for retail parks.
Leasing and operational performance
Occupational demand improved markedly
across our main markets over the past year.
In Central London, office take-up increased
to 10.6m sq ft, which was up 135% versus
the prior year. Demand continued to build
during the period, with activity in Q1 22 in
line with the 10-year first quarter average,
and space under offer is at 3.9m sq ft
ahead of the 3.3m sq ft 10-year average.
Overall market vacancy remains elevated
at 9.0%, although 83% of this is second-
hand space, much of which does not
necessarily fit today’s customer and
sustainability requirements, and most
of this is concentrated in the City, with
West End vacancy at a more modest 4.6%.
Following the end of lockdown restrictions,
demand for retail space in prime locations
has grown, although there remains a
surplus of secondary space in the wider
market. With this as a backdrop, we
have delivered a record year in terms of
leasing volumes.
Central London
In Central London, we signed 21 office
lettings or renewals totalling a record £63m
of rent, demonstrating strong demand
for space. This includes a deal with Deloitte
at New Street Square, who agreed a new
15 year lease on 478,000 sq ft of space via
a lease restructuring that saw us get access
to Hill House, EC4, a 170,000 sq ft 1970s
building, creating a future redevelopment
opportunity and a significant value uplift
across the overall New Street Square
estate. Other major lettings included a
100,000 sq ft regear with Bain & Company
at the Strand, a 97,000 sq ft lease renewal
with Wellington Management at 80 Victoria
Street, and a 77,000 sq ft lease renewal
with consultancy firm Alix Partners at
6 New Street Square.
On a net effective basis, office lettings were
4% ahead of valuers’ assumptions and we
have a further £6m of deals in solicitors’
hands, 13% above valuers’ estimates.
Vacancy in our office portfolio remains
well below the market average at 4.7%,
reflecting the high quality of our assets.
This is slightly higher than the 3.3% this
time last year, partly due to the completion
of Dashwood House, EC2, which added
c. 40 bps and a slight increase in vacancy
in our City assets.
Leasing in Central London retail and other
picked up as footfall started to recover,
with people returning to the office and
tourism growing. The increase in vacancy
during the year was principally driven by
two lease surrenders we agreed at Piccadilly
Lights, W1 as we are working on new
opportunities for this prime space in
conjunction with our adjacent Lucent
development.
Looking ahead, we continue to see good
demand for high-quality office space across
the three products we offer, Blank Canvas,
Customised and Myo, with current
negotiations on rents on average ahead
of ERV. Our flexible offerings, Customised
and Myo, now cover 104,000 sq ft across
three locations. Our fully serviced offer
Myo comprises 72,000 sq ft of this and is
98% let at 123 Victoria Street and 64% at
Dashwood, which opened during the year
and remains in lease-up stage. We intend
to open a further four Myo locations over
the next two years, growing this to
c. 237,000 sq ft.
Retail
Our proactive approach to leasing in the
prior year, prioritising occupancy over
protecting ERV, means we reached a clear
turning point in terms of occupancy and
income during 2022 for our retail portfolio.
We completed 228 lettings totalling £20m
– similar to 2019/20 – on average 2% ahead
of ERV and have a further £9m of lettings
in solicitors’ hands, on average 3% ahead
of ERV. Lease terms are often shorter than
a few years ago and c. 30% of our leases
now have a turnover element, although
overall turnover rent only makes up 11% of
our retail income. Incentives have reduced
as well and the growing insight in turnover
provides valuable data, supporting our view
that rents are broadly at sustainable levels.
For many leading brands, online and
physical channels are now seen as fully
inter-connected. This does not mean brands
will not rationalise store footprints, as we
think this could even be accelerated further
with inflation putting pressure on marginal
stores. This focuses demand on prime
Strategic ReportLandsec Annual Report 2022 29
locations, creating further polarisation
between winning destinations and those
at risk of obsolescence. Although market
vacancy is set to remain high, our
occupancy was up 170bps to 93.2% and
is expected to grow further.
We have further grown our relationships
with existing customers, with several of
them opening new stores in other locations,
such as Zara at One New Change and St
David’s in Cardiff, Mango at Bluewater, and
Decathlon at Trinity Leeds and Southside.
We also worked with existing brands to
increase their space in our centres, such as
Laings/Patek Philippe at St David’s, H&M
at Trinity and Nike at Gunwharf Quays,
and, in a flight to prime, we have attracted
several new brands to our assets from nearby
locations, such as Nespresso and Space NK
at Trinity. We signed several digital-native
brands to open physical stores, such as
Crep Collection Club at Bluewater and Kick
Game at Trinity, and we continue to grow
our food and leisure offer, for example
with the debut of the Formula 1 simulator
experience at One New Change, Hangloose
Adventure, The Real Greek and The Big Easy
at Bluewater, and The Ivy Asia at St. David’s.
Footfall was 19.6% below pre-Covid-19 levels
versus -18.5% for the UK average, but the
average basket size increased. As such,
like-for-like retail sales were 6.8% ahead
of 2019/20 levels for outlets and down
only 1.5% for shopping centres. Units in
administration reduced materially to 0.5%,
from 5.4% a year ago, and we have only
seen two retailers entering into CVA/
restructuring plans, covering £0.7m of
annual rent.
This recovery in shopping centre sales
to close to pre-pandemic levels is stark
compared to rents which are c. 40% lower
and values which are down c. 65% from
their peak. Whilst we are mindful that
the pent-up demand post lockdown could
moderate and rising inflation clearly provides
a near-term headwind, this provides
confidence in the sustainability of income
and valuations for prime destinations.
Looking forward, we expect occupancy
will continue to grow this year and despite
some historical over-renting, we expect
like-for-like income to be stable this year,
before returning to growth in the medium
term. We will continue to invest in
repositioning space to add more leisure,
food and work space, for example in Oxford
and Leeds where we are working up plans
to add new flexible office space.
Mixed-use urban neighbourhoods
The completed investment assets in our
mixed-use portfolio solely comprise our
investment in MediaCity, which we acquired
in late 2021, but this element of our portfolio
will grow materially in the coming years.
The existing assets at MediaCity are 96% let
and over half of the income is linked to RPI
with caps and collars at 2-5%, guaranteeing
future income growth. Our mixed-use
development assets include our shopping
centres in London and Glasgow but as
these are held for future development, the
existing income is managed on a short-term
basis to maximise our flexibility to obtain
access for development.
Subscale sectors
The operational performance of our
Subscale sectors improved strongly, driving
a significant increase in valuation, ahead of
our planned disposal in the medium term.
Our Hotels which are all let to Accor are
fully operational and occupancy recovered
to 67% of pre-pandemic levels and reached
92% for the month of March. Across our
Leisure assets, we completed 66 lettings,
on average 4% ahead of ERV and we signed
a number of major regears, for example
with SnoZone in Yorkshire for 20 years.
Retail parks have seen footfall recover fully
to pre-pandemic levels and we signed 28
lettings, which supported an increase in
occupancy to 96.5%.
Investing in sustainability,
people and culture
During 2021, we were the first UK property
company to announce a fully costed net
zero carbon transition plan. This will see
us invest £135m of capex in our existing
portfolio by 2030 to enable us to deliver
our science-based target and meet the
Minimum Energy Efficiency Standard of
EPC ‘B’ by 2030. Currently, 44% of our
office portfolio is already rated ‘B’ or higher,
which compared to 15% for the overall
office market highlights the quality of our
assets. Our plan also aligns our portfolio
with the Carbon Risk Real Estate Monitor
energy intensity pathway for commercial
buildings under a 1.5-degree global
warming scenario.
We are on track to complete The Forge, SE1,
which according to the UK’s Green Building
Council will be the UK’s first net zero office
development, later this year. As part of
our Build Well framework, we target to
reduce embodied carbon by 50% versus
a typical development by 2030, to below
500kgCO2e/sqm for offices. This will require
us to work closely with our supply chain
to change ways of working, focusing,
for example, on low carbon materials;
smart designs with modern methods of
construction; and standardised materials
that can be reused at end of life, but also
on the retention of existing structures.
Operational performance analysis
West End offices
City offices
Retail and other
Developments
Total Central London
Shopping centres
Outlets
Total Major retail
Completed investment
Developments
Total Mixed-use urban
Leisure
Hotels
Retail parks
Total Subscale sectors
Total Combined Portfolio
1. Excluding developments.
Annualised
rental
income
£m
Estimated
rental value
£m
LFL
Occupancy1
%
LFL
occupancy
change1
ppt
135
76
47
10
268
108
56
164
24
29
53
49
16
29
94
579
147
101
54
112
414
101
61
162
24
32
56
51
25
29
105
737
98.2
91.3
94.2
n/a
95.1
92.8
93.8
93.2
n/a
n/a
n/a
96.5
n/a
96.5
97.4
95.0
–0.8
–2.3
–2.2
n/a
–1.5
3.0
–0.4
1.7
n/a
n/a
n/a
2.7
n/a
1.5
1.5
–0.1
Table 5
WAULT1
years
6.9
5.9
7.4
n/a
6.6
4.4
3.0
3.9
10.1
n/a
10.1
10.4
9.4
4.4
8.1
6.2
Strategic ReportLandsec Annual Report 2022 30
Operating and
portfolio review continued
Our plans for Portland House, SW1 and
Timber Square, SE1 reflect this, as our
reworked designs retain more of the existing
buildings. We will also work with our supply
chain to improve social mobility where
we invest.
As we invest in building a sustainable
business, we are also investing in building
a more agile, customer-focused culture.
An example of this is the restructuring of our
retail team, where we brought in experience
and capabilities from international retailer
backgrounds to focus more on growing brand
relationships and customer experience. The
ongoing integration of U+I is also focused on
ensuring we preserve the unique placemaking
and design capability of the team and we
have made a number of leadership changes
in our own team during the year. Changing
the culture of our business is key to getting
the most out of the substantial talent within
Landsec and successfully delivering on our
strategy in the long term, and whilst we have
made good progress to date, we will continue
to invest in this, as there is more to do.
Development pipeline
Central London
We have continued to make good progress on
our committed development pipeline, despite
wider market challenges from supply chain
disruption and labour shortages. We have
seen a small 3% increase in cost as a result
during the year and a few months of delay in
terms of completions. However, as 97% of
costs are now fixed and based on current
levels of interest, we expect higher income will
make up for the small increase in cost. As
such, we expect this pipeline to deliver an
attractive profit on cost of over 20%.
Our fully pre-let scheme at 21 Moorfields is
set to complete this autumn. We are seeing
good demand across our speculative
pipeline, even though completion of some
of these projects is still more than one year
out. Part of this space is earmarked for our
Myo flexible office product, but 12% of the
remaining ERV is already pre-let and we
are in active negotiations on a further 16%,
ahead of expected ERVs. We anticipate
to see further progress in leasing over the
next six months.
After adding Old Broad Street, EC2 to our
future pipeline in late 2020, we managed to
unlock two further potential development
opportunities over the last 12 months,
bringing our total future pipeline to
1.8m sq ft, or c. 35% of our current London
office portfolio. The acquisition of U+I
provided us with Liberty of Southwark, SE1
a 200,000 sq ft consented scheme two
minutes walk from Borough Market and
London Bridge Station, while our lease
regear with Deloitte at New Street Square
unlocked the opportunity to redevelop the
adjacent Hill House, EC4. Given the
continued strong investor competition for
development sites, we are pleased to have
been able to expand our potential pipeline
in this ‘off-market’ way. This will remain an
objective, as we maintain capital discipline
in a competitive market.
At Portland House we have reworked our
plans to a redevelopment of the existing
space, reducing the size of the overall
scheme but maintaining more of the
existing structure, which materially reduces
the targeted embodied carbon of the
scheme to below 400kgCO2e/sqm. This also
mitigates the risk of further cost inflation,
as a much greater proportion of the total
development cost is made up of the
existing building. Combined with Timber
Square, SE1 and Liberty of Southwark, we
therefore now have the flexibility to start
up to three new projects this year. Whilst
expected development costs are up due
to higher construction costs, the impact
of this has been offset by growth in ERVs.
The expected yield on cost therefore
remains stable at 6.3%, providing an
attractive c. 20% profit on cost. Assuming
demand and inflation remain around
current levels, we could therefore start
up to three new projects this year.
Mixed-use urban neighbourhoods
During 2021, we have made considerable
progress on our strategy to grow our
mixed-use opportunities. Our acquisitions
of MediaCity and U+I virtually doubled our
mixed-use pipeline to 9.0m sq ft and as
both came with existing planning consents,
they also significantly accelerated the
potential delivery compared to our existing
schemes, which are at earlier planning
stages. We continue to closely monitor cost
inflation, which has a higher impact outside
of London than in the capital due to the
difference in land values but importantly,
the growth outlook for Manchester in
particular is strong and the multi-phased
nature of our schemes provides optionality.
Overall we continue to expect mixed-use
London projects to deliver a low double
digit IRR and our projects elsewhere to
deliver an IRR in the low to mid teens.
The U+I scheme at Mayfield, next to
Piccadilly station in Manchester, is a 24-acre
site with planning for 1,500 homes, 1.5m sq ft
of office space and 120,000 sq ft of retail/
leisure space. The site is held in a 50/50 JV
between us and Transport for Greater
Manchester, Manchester City Council and
LCR. During the year, we completed the
creation of a new 6.5-acre park and we plan
to start on site with the first phase of
316,000 sq ft of offices late this year.
The next phase of MediaCity comprises
a 15-acre site, with consent for c. 1,200
new homes and 637,000 sq ft office and
commercial space. The site is held in a 75/25
JV between us and Peel, who developed
the first phase of this successful scheme.
In the summer, we plan to submit a revised
planning application for a 330,000 sq ft
office building, nearly tripling the potential
space of this building. With a total cost of
c. £100-110m and a yield on cost of c. 7.5%,
we aim to start on site with this project in
Q2 2023. We also anticipate submitting a
revised outline planning application for the
entire remaining site later this year.
At Finchley Road, NW3 we submitted
a planning application for a new
pedestrianised, sustainable neighbourhood
of c. 1,800 homes and 180,000 sq ft of retail,
leisure and other space. 35% of homes are
affordable and public open space makes up
50% of this 14-acre site. We have made good
progress on our vacant possession strategy
and, subject to planning, we aim to start
the first phase in late 2023.
Strategic ReportLandsec Annual Report 2022 We also published our masterplan for
Buchanan Galleries, adjacent to Queen
Street station in Glasgow. Our plans for this
9-acre site comprise c. 300 homes and
1.4m sq ft of retail, office, cultural and
community space. We are in constructive
dialogue with the Council and the Scottish
Government, who are both supportive of
our plans, and we have further progressed
our VP strategy during the year, building
flexibility for a potential start on site in 2024.
In Lewisham, SE13 we started public
consultation on the proposed redevelopment
of this 13-acre site, with potential for c. 2,200
homes and c. 275,000 sq ft of retail, leisure
and office space. We acquired a 46,000 sq ft
site on the high street as part of our site
assembly strategy and are working closely
with the Council on activating the existing
1970’s shopping centre for the local
community in the near term.
This pipeline of projects provides an
attractive balance of income, development
upside and medium-term growth potential.
The ability to phase investments across
various projects means we have the
opportunity to create a relatively repetitive
stream of development returns over the
31
coming years, whilst retaining flexibility to
adapt to changes in demand. Meanwhile,
the flexibility to stage capex, mixed-use
nature and geographic spread of the
pipeline all add to its balanced risk-profile.
We see the potential to invest c. £1.5bn
across these schemes over the next five
years, which with a targeted profit on cost
of c. 20% provides us with a clear trajectory
to grow urban mixed-use to c. 20-25% of
our overall portfolio.
Size
sq ft
’000
564
140
144
167
1,015
Proposed
sq ft
’000
380
200
295
235
Committed development pipeline
Property
21 Moorfields, EC2
The Forge, SE1
Lucent, W1
n2, SW1
Total
Sector
Office
Office/retail
Office/retail/residential
Office
Future Central London development pipeline
Property
Near-term
Sector
Timber Square, SE1
Office
Liberty of Southwark, SE1
Office/residential
Portland House, SW1
Red Lion Court, SE1
Office
Office
Total near-term
Longer-term
Nova Place, SW1
Hill House, EC4
Old Broad Street, EC2
Total longer-term
Total future pipeline
Office
Office
Office
1. Gross yield on cost adjusted for residential TDC.
TDC
£m
400
240
400
320
1,110
1,360
40
310
290
640
1,750
Estimated
completion
date
Net income/
ERV
£m
Oct 2022
Dec 2022
Mar 2023
Jun 2023
38
10
14
14
76
Market
value
£m
733
115
159
104
1,111
Capital
expenditure
to complete
£m
Market
value +
future TDC
£m
116
42
62
105
325
849
158
222
209
1,437
Indicative
Indicative
Gross yield
Table 6
Gross yield
on MV +
future TDC
%
4.5
6.3
6.3
6.7
Table 7
ERV
£m
26
13
25
20
84
on TDC
%
Potential
start date
Planning status
6.5
6.11
6.3
6.2
6.3
H2 2022
H2 2022
H2 2022
H2 2023
Consented
Consented
Consented
Planning application
2023
2024
2025
Design
Design
Design
Mixed-use urban neighbourhoods development pipeline
Property
Mayfield, Manchester
MediaCity, Greater Manchester
Finchley Road, NW3
Buchanan Galleries, Glasgow
Lewisham, SE13
Total future pipeline
Landsec
share
%
Proposed
sq ft
’000
Earliest
start
on site
Number
of blocks
50
75
100
100
100
2,500
1,900
1,400
1,400
1,800
9,000
2022
2023
2023
2024
2024
18
8
10
11
14
Estimated
first/total
scheme
completion
2025/2032
2025/2030
Indicative
TDC
£m
750-900
500-600
2026/2033
900-1,100
2027/2031
550-700
2028/2037
1,000-1,200
3,700-4,500
Target
yield
on cost
%
6.5-7.0
6.5-7.0
5.5-6.0
6.5-7.0
5.5-6.0
Table 8
Planning
status
Consented
Consented
Application
Design
Design
Strategic ReportLandsec Annual Report 2022 32
Financial review
PRESENTATION OF FINANCIAL INFORMATION
→
Overview
Our financial performance for the year
has been positive, reflecting a strong
recovery from the pandemic. Our total
accounting return was 10.5% driven by
the growth in value of our portfolio we
delivered and a material increase in EPRA
earnings. The latter was up 41% versus
last year to £355m, primarily driven by
£17m growth in gross rental income and
a reduction in bad and doubtful debts
as trading conditions normalised post
the disruption of the Covid-19 pandemic.
Rent collection has normalised and for the
March quarter currently stands at 96%,
largely in line with pre-pandemic levels,
and we have continued to collect current
and historical arrears. As a result, EPRA
EPS increased 42% to 48.0 pence per share.
Net profit before tax increased to £875m
compared to a loss of £1,393m in the
prior year. Alongside our operational
performance which supported the increase
in EPRA earnings, this was primarily driven
by a £409m value uplift of our Combined
Portfolio, boosted by our profitable capital
recycling, development and leasing activity.
After the dividends we paid during the year,
EPRA NTA per share increased 7.9% during
the year to 1,063 pence. Adjusted net debt
increased from £3.5bn to £4.2bn due to our
investment in future growth opportunities,
so as a result our LTV increased slightly from
32.2% to 34.4%. As we plan to recycle
further capital in the year ahead, we expect
our LTV to remain below the mid 30% level.
Our financial position therefore remains
strong, with an average debt maturity of
9.1 years and only 18% of our drawn
borrowings mature in the next three years.
Reflecting our positive financial performance,
we are proposing a final dividend of 13.0
pence per share, to be paid on 22 July 2022
to shareholders registered at the close of
business on 17 June 2022. 100% of this will
be paid as Property Income Distribution.
Combined with the quarterly dividends paid
for the first three quarters, this would bring
the total dividend for the year to 37.0 pence
per share, up 37.0%. This is in line with our
policy that dividends annually are covered
1.2 to 1.3 times by EPRA earnings.
Vanessa Simms
Chief Financial Officer
Vanessa Simms reports on
our financial performance
and explains the movement
in our key financial measures.
Highlights
£355m
EPRA earnings1
(2021: £251m)
£875m
Profit/(loss) before tax
(2021: £(1,393)m)
48.0p
EPRA EPS1
(2021: 33.9p)
37.0p
Dividend per share
(2021: 27.0p)
£12.0bn
1,063p
Combined Portfolio1
(2021: £10.8bn)
EPRA NTA per share1
(2021: 985p)
1. An alternative performance measure. The Group
uses a number of financial measures to assess
and explain its performance, some of which are
considered to be alternative performance measures
as they are not defined under IFRS. For further details,
see table 80 in the Additional information.
Our property portfolio is a combination
of properties that are wholly owned by
the Group, part owned through joint
arrangements and properties owned
by the Group but where a third party
holds a non-controlling interest.
Internally, management review the
results of the Group on a basis that
adjusts for these different forms of
ownership to present a proportionate
share. The Combined Portfolio, with
assets totalling £12.0bn, 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. These alternative
performance measures are not defined
under IFRS and, where appropriate,
are based on best practice reporting
recommendations published by EPRA.
For further details see table 80 in the
Additional information.
Strategic ReportLandsec Annual Report 2022 Income statement
Our financial performance for the year
reflects our strong operational performance
and the normalising of trading conditions
as we emerged from the pandemic. The
wider retail sector was heavily impacted by
lockdowns in the prior year, but over the
past 12 months there has been a material
recovery in net rental income across our
Major retail destinations; Mixed-use, where
some of our future projects have an existing
retail use; and Subscale sectors, which
include our retail parks, leisure and hotels.
This reflects the improvement in occupancy
we have delivered and a sharp reduction
in bad and doubtful debt provisions.
Net rental income in Central London was
down driven by the disposal of several
mature London office assets, as we
continue to recycle capital into higher-
return opportunities.
Income statement1
Year ended 31 March 2022
Year ended 31 March 2021
Table 9
33
Central
London
£m
Major
retail
£m
Chart
Mixed-
use
urban
£m
Subscale
sectors
£m
289
(1)
(29)
(1)
161
(6)
(26)
13
43
(2)
(9)
2
93
(3)
(12)
(2)
10
258
142
34
76
Gross rental income2
Net service charge expense
Net direct property expenditure
Movement in bad and doubtful debts
provisions
Segment net rental income
Net administrative expenses
EPRA earnings before interest
Net finance expense
EPRA earnings
Capital/other items
Valuation surplus/(deficit)
Gain on modification of finance leases
Profit on disposals
Impairment charges
Fair value movement on interest rate swaps
Other net finance expense
Other
Profit before tax attributable to
shareholders of the parent
Non-controlling interests
Profit before tax
Total
£m
586
(12)
(76)
12
510
(84)
426
(71)
355
409
6
118
(12)
16
(15)
(8)
869
6
875
Central
London
£m
306
–
(9)
(17)
Major
retail
£m
157
(3)
(13)
(69)
Mixed-
use
urban
£m
Subscale
sectors
£m
Total
£m
569
(5)
(32)
Change
£m
17
(7)
(44)
80
(2)
(6)
(31)
(127)
139
26
–
(4)
(10)
280
72
12
41
405
(80)
325
(74)
251
105
(4)
101
3
104
(1,646) 2,055
–
4
(4)
(1)
(2)
5
6
114
(8)
17
(13)
(13)
(1,393) 2,262
–
6
(1,393) 2,268
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
2. Includes finance lease interest, after rents payable.
Net rental income
Net rental income increased £105m to
£510m during the year. Like-for-like gross
rental income increased £20m, or 4.1%, and
the net impact of our investment activity
was down £4m, but the main driver was the
reduction in bad and doubtful debt charges
as trading conditions normalised post the
disruption of lockdowns in the prior year.
Variable rent, which includes income from
hotels, Piccadilly Lights, parking and retail
turnover rent, increased £47m as Covid-19
restrictions reduced during the year and we
expect this will continue to grow in the year
ahead. Insolvencies and CVAs were minimal
during the year, hence 94% of the £11m
reduction in income from this relates to the
previous year. We received £7m of surrender
premiums during the period, which we
expect to reduce towards a normal level
in the year ahead.
Occupancy for our retail portfolio increased
over the past 12 months, but the higher
average vacancy versus the prior year still
had a negative impact on costs for the
year. We expect this drag to reduce in the
year ahead, reflecting our leasing success
over the last 12 months and our expectation
that occupancy will continue to grow from
here. Like-for-like net direct property costs
increased £36m, which reflects that our
assets are fully operational again, having
been closed or utilised at very low levels due
to lockdown restrictions for a major part
of the prior year. This saved c. £10m of cost
in the prior year, which reversed over the
past year, and the prior year also benefited
from the one-off release of a £4m provision.
Higher void costs due to the increase in
vacancy during the prior year added c. £8m
to direct property expenses, and was the
main driver for the c. £7m increase in net
service charge costs over the past 12
months. We also saw an £8m increase in
letting fees due to the increase in our
leasing activity. Overall, this meant our
gross to net rent ratio for the year was
87.0%, but as void and letting costs reduce
as occupancy normalises, we expect this
to grow to c. 90% over the next two years.
Strategic ReportLandsec Annual Report 2022 34
Financial review
continued
Net rental income1 (£m)
550
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450
400
350
300
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Chart 10
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1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
Gross rental income like-for-like movement in the period
Rent collection
In line with a normalisation in trading
conditions, rent collection has effectively
returned to normal levels, as we have now
collected 96% of the rent due on the March
quarter day, compared to 81% this time last
year. The customer support fund we
launched at the start of the pandemic has
further enhanced the relationship with our
customers, with £56m allocated to
customers over the past two years. We
have made good progress on arrears and
have collected the majority of the £87m
unprovided balance as of 31 March 2021,
leaving only £13m of this outstanding, all of
which is currently under discussion following
the end of the rent moratorium.
Rent collections
25 March 2022 quarter 1,2
Offices
Rest of Central London
Major retail
Mixed-use urban
Subscale sectors
Gross
amounts due
25 March
£m
Monthly
payment
terms agreed
£m
Net
amounts due
25 March
£m
Amounts
received
to date
£m
55
8
16
13
14
106
1
–
1
–
1
3
54
8
15
13
13
103
54
7
14
12
12
99
Table 11
Amounts
received
March 2021
%
98
63
58
40
50
81
Amounts
received
to date
%
100
88
93
92
92
96
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.
Net administrative expenses
Net administrative expenses increased by
£4m to £84m, largely driven by the U+I
acquisition and one-off business change
activity during the year. Looking ahead,
wage inflation will impact staff costs and
over the next two years we expect to incur
c. £5m p.a. of IT and data related cost
reflecting an investment in upgrading our
systems and data capability, which due
to updated IFRIC accounting guidance will
now be expensed instead of capitalised.
However, we are focused on making
sure our cost base is right so despite the
additional costs of wage inflation and
IT, we expect overall administrative
expenses to be broadly stable over the
next 12 months and to reduce slightly
in the year after.
Our EPRA cost ratio for the past 12 months
improved to 26.4%, although this number
is still impacted by costs related to the
disruption caused by Covid-19 during this
period and the prior year. In total, we
estimate this added c. 3% to 4% to the
EPRA cost ratio for the year. Through
a combination of income growth, a
normalisation of our gross to net rent
margin and a reduction in administrative
expenses, we therefore still expect this
to reduce towards 20% over the next
2-3 years in a phased manner.
Net finance expenses
Net interest costs reduced £3m to £71m,
principally reflecting a reduction in average
Strategic ReportLandsec Annual Report 2022
35
gross borrowings compared to the prior
year. Although we expect borrowings
to reduce over the next 12 months from
the current level due to further capital
recycling, we expect net interest costs to
increase slightly this year due to the higher
opening level of borrowings and the recent
increase in variable rates, which impacts
the 30% of our borrowings which is not
fixed or hedged. We anticipate the ratio of
variable rate borrowings to reduce in the
year ahead, as we expect borrowings to
reduce based on continued capital recycling.
Non-cash finance income, which includes
the fair value movements on derivatives,
caps and hedging and which is not included
in EPRA earnings, increased from a net
expense of £1m in the prior year to a net
income of £16m in the current year. This
is predominantly due to the fair value
movements of our interest-rate swaps as
a result of the increase in interest rates over
the past year.
Valuation of investment properties
and profit on disposals
The independent external valuation of our
Combined Portfolio showed a £409m value
surplus. Aside from the strong recovery
in value of assets in our Subscale sectors,
which we said we would only dispose of
in the medium term, the majority of this
surplus was driven by our actions, reflecting
profit on developments, several major lease
regears in London, and growth in London
office ERVs, reflecting the positive leasing
evidence we created. We also recognised
£6m upside from the regear of two long
leases in our leisure assets, which are
treated as tenant finance leases in our
financial statements. Virtually all Covid-19
related allowances in the valuation which
were introduced during 2020 have now
been reversed, contributing £63m to the
valuation surplus for the year.
We recognised a £107m profit on disposals
of investment property, principally related
to the sale of two retail parks for £53m and
the £197m sale of Harbour Exchange. On
average, these disposals were 12% ahead
of their March 2021 book value, but as
Harbour Exchange was treated as a finance
lease in our balance sheet, the IFRS profit
on sale related to this was £92m. As our
March 2021 EPRA NTA included the fair
value of this finance lease, the impact on
NTA and our total accounting return from
this disposal was £23m. We exchanged
contracts to sell 32-50 Strand for £195m
shortly after the year-end, 15% above the
March 2021 book value, with part of this
premium already reflected in the March
2022 valuation.
IFRS profit after tax
Substantially all our activity during the year
was covered by UK REIT legislation, which
means our tax charge for the year remained
minimal. Driven by the increase in EPRA
earnings and positive revaluation result,
IFRS profit after tax for the year was £875m,
compared to a loss of £1,393m in the
prior period.
Total accounting return
EPRA Net Tangible Assets, which principally
reflects the value of our Combined Portfolio
less adjusted net debt, increased to
£7,888m, or 1,063p on a per share basis,
marking a 7.9% increase on the prior year,
including a 5.0% increase in the second
half. Including dividends paid during the
year, this means our total accounting return
for the period increased to 10.5%.
Balance sheet1
Combined Portfolio
Adjusted net debt
Other net assets/(liabilities)
EPRA Net Tangible Assets
Shortfall/(excess) of fair value over net investment in finance leases book value
Other intangible asset
Fair value of interest-rate swaps
Net assets, excluding amounts due to non-controlling interests
Net assets per share
EPRA Net Tangible Assets per share (diluted)
Total accounting return
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
31 March
2022
£m
12,017
(4,179)
50
7,888
6
2
21
Table 12
31 March
2021
£m
10,791
(3,489)
(2)
7,300
(93)
2
3
7,917
7,212
1,070p
1,063p
10.5%
975p
985p
–15.9%
Strategic ReportLandsec Annual Report 2022 36
Financial review
continued
Movement in EPRA Net Tangible Assets1 (£m)
Chart 13
9,000
8,000
7,000
6,000
5,000
Diluted per share (pence)
985
47
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1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial
information above.
Net debt and LTV
Adjusted net debt, which includes our share
of JV borrowings, had been largely stable
during the first half of the year but increased
to £4,179m in the second half, principally
driven by our £821m investment in the
acquisitions of MediaCity, U+I and Bluewater,
offset in part by the £197m sale of Harbour
Exchange. Capital expenditure on our
Combined Portfolio was £350m, reflecting
our London office development programme,
the preparation of future developments and
the investment in our current portfolio. We
expect capex investment to grow, reflecting
our substantial pipeline and our net zero
investment plan.
The other key elements behind the
increase in net debt are set out in our
statement of cash flows and note 13 to
the financial statements, with the main
movements in adjusted net debt shown
below. A reconciliation between net debt
and adjusted net debt is shown in note 21
of the financial statements.
As a result of the increase in borrowings, our
Group LTV which includes our share of JVs,
increased slightly to 34.4%. This remains well
within the range of 25% to 40% we target
and in line with the low 30% level we said we
expected for the foreseeable future. As we
plan to continue to recycle further capital,
we expect adjusted net debt to reduce this
year and LTV to remain below the mid 30’s.
As a result of the transaction activity during
the year, which saw disposals of assets from
the Security Group and the acquisitions of
MediaCity and U+I financed by Security
Group debt with the assets remaining
outside Security Group, the Security Group
LTV has increased to 36.4%.
Net debt and LTV
31 March
2022
£m
Table 14
31 March
2021
£m
Net debt
£4,254m
£3,509m
Adjusted net debt1
£4,179m
£3,489m
Group LTV1
Security Group LTV
34.4%
36.4%
32.2%
32.7%
1. Including our proportionate share of subsidiaries and
joint ventures, as explained in the Presentation of
financial information above.
Movement in adjusted net debt1 (£m)
Chart 15
5,000
4,500
4,000
3,500
3,000
2,500
2,000
3,489
(401)
190
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A
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
Strategic ReportLandsec Annual Report 2022
Financing
Our £4,430m of gross borrowings are
diversified across a range of sources,
including £2,341m Medium Term Notes,
£1.6bn syndicated and bilateral bank loans
and £499m of commercial paper. Our MTN
and bank loans form part of our Security
Group, which provide security on a floating
pool of assets currently valued at £11.2bn.
This provides flexibility to include or exclude
assets and an attractive cost of funding,
with our MTN currently rated AA and AA-
with a stable outlook respectively by S&P
and Fitch.
To maintain capital discipline, we seek to
balance investments in our pipeline or
acquisitions with the disposal of assets
which are mature or in sectors where we
Available facilities1
Medium Term Notes
Drawn bank debt
Outstanding commercial paper
Cash and cash equivalents
Available undrawn facilities
Total committed credit facilities
Weighted average maturity of debt
Percentage of borrowings fixed or hedged
Weighted average cost of debt
37
have limited scale. This strategy allows us
to grow income and our overall return on
capital, whilst keeping net debt broadly
stable over time. Our strong financial
position provides ample flexibility to manage
any short-term differences between the
timing of disposals and investment, as
evidenced over the last few months.
We had £1.6bn of undrawn facilities at the
start of last year, which allowed us to move
quickly on the acquisitions of MediaCity, U+I
and Bluewater in November and December.
This temporarily increased floating debt as
a proportion of net debt to 30%, but as we
expect borrowings to reduce over the
coming year as we recycle further capital,
we expect the percentage of floating debt
to reduce towards c. 20% again.
We did not issue any new debt during the
year, although we assumed some existing
facilities through our acquisitions of
MediaCity and U+I, part of which we repaid.
This, alongside the increased utilisation of
our revolving credit facilities meant that
our average maturity of debt reduced to
9.1 years. Our average cost of debt for the
year was 2.4%, which we expect to increase
slightly in the year ahead. The fact that
only 18% of our borrowings mature in the
next three years provides us with a strong
financial base and mitigates our interest
rate risk, whilst we retain £1.1bn of
headroom based on our existing facilities,
providing ample flexibility with respect to
progressing developments.
31 March
2022
£m
2,341
1,519
499
(157)
1,119
2,980
Table 16
31 March
2021
£m
2,340
209
906
(31)
1,631
2,715
9.1 years
11.5 years
70%
2.4%
81%
2.3%
1. Including our proportionate share of subsidiaries and joint ventures, as explained in the Presentation of financial information above.
Vanessa Simms
Chief Financial Officer
Strategic ReportLandsec Annual Report 2022 38
Our people and culture
We want to ensure Landsec has a positive impact on
our communities and adds social value. Our culture is
central to this, describing how we interact with each
other, our customers and partners.
As we move to deliver on our strategy
positioning ourselves to grow with purpose,
the ability to attract, retain and develop our
people is even more critical to the success
of our business. We’ve acknowledged that
through our transformation programmes
coupled with a buoyant employment
market, the risk of attracting and retaining
people has increased. That’s why this year,
we’ve focused our actions on developing our
culture, developing our people through new
leadership programmes and continuing to
enhance diversity and raise awareness of
inclusive behaviours.
People and skills risks
Inability to attract, retain and develop the
right people and skills to drive and deliver
our strategic objectives, grow enterprise
value and meet shareholder expectations.
Example KRIs:
→ Employee turnover levels
→ High potential employee turnover
→ Employee engagement score
→ Succession planning up to date
→ Time to hire
For more information on how we are
mitigating our people and skills risks
please see page 64
Diversity and inclusion (D&I)
Following the launch of our D&I strategy
in 2020, we focused our efforts in 2021
on embedding the strategy, incorporating
D&I into the way we do things right across
the business.
Intersectionality
Over the past year, we have talked about
improving the way our different affinity
groups work together, and we use the
term ‘intersectionality’ to describe
how overlapping identities affect their
experiences. Our affinity networks bring
our theme of intersectionality to life by
collaborating on major network events,
such as International Women’s Day and
Black History Month.
The networks also organise a range of virtual
and in-person events to raise awareness and
bring people together. Colleagues from our
Diaspora, Women’s and LGBT+ Networks
organised events during Black History
Month, both for our customers and
colleagues. For the fourth consecutive year,
our Hand in Hand Network supported Purple
Tuesday to spread awareness for disabled
people, and the LGBT+ Allies and Women’s
Network also teamed up to introduce
all-gender toilets at our head office.
Our key achievements over the past 12 months can be seen throughout
this report with some of the highlights spotlighted here:
01
Build and maintain a diverse
workforce and talent pipeline
02
Embed inclusive behaviours
and values into our culture
→ Published our ethnicity pay gap
and associated action plan for the
first time
→ Increased female and ethnic
and minority representation at
‘Leader level’
→ Updated our wellbeing support pack
through a new partnership with
Peppy Health to support employees
and their partners through key
milestones such as fertility,
pregnancy, early parenthood
and menopause
→ Introduced a ‘transitioning at work’
policy and launched our gender
expression toolkit
03
Provide inclusive services
for our customers
04
Build an inclusive
employer brand
→ Achieved Disability Confident Level 2
at 13 assets and Level 3 at five of
our sites
→ Achieved Stonewall Bronze
Employer Award
→ Hosted a range of diversity events
with high-profile speakers across our
office, retail and commercial spaces
S
T
N
E
M
E
V
E
I
H
C
A
Y
E
K
→
Strategic ReportLandsec Annual Report 2022
39
HAND IN HAND NETWORK
Executive sponsor – Mark Allan
Key focus area – Disability and wellbeing
network, supporting the wellbeing of our
colleagues and customers.
The continuing effects of Covid-19 once
again ensured the Hand in Hand group
was instrumental in supporting health
and wellbeing, working with colleagues
to support them through the challenges
of working outside the normal office
environment.
This year, outside of lockdown, we were
able to promote Purple Tuesday at more
of our properties, including shopping centres
and commercial offices. The launch was held
at Piccadilly Lights and attended by Mike
Adams, the CEO of Purple Organisation.
Our Corporate Affairs Director Chris
Hogwood attended for Landsec.
Working with Genius Within, who are
experts in supporting neurominorities in
the workplace, has allowed us to expand
our support and knowledge of wider
neurodiverse conditions, and this year
we have focused on autism.
DIASPORA NETWORK
Executive sponsor – Chris Hogwood
Key focus area – Creating an inclusive
organisation supportive of multicultural
customers and colleagues.
This year, we worked with Involve to run a
series of programmes designed to train our
multicultural colleagues, open the door to
both mentees and mentors from ethnic
minority backgrounds, and introduce the
leadership teams to training on racial
inequality in the workplace and our
communities.
To celebrate Black History Month, we
worked with Black-owned businesses
and professionals to hold three impactful
events for our colleagues and customers.
Our ‘New Hues of Blackness’ art exhibition
showcased the works of Black artists in Myo
Victoria Street. We also hosted two panel
discussions with inspiring speakers, one
focusing on ‘The Intersectional Experience
through a Black and LGBTQ+ Lens’ in
collaboration with our LGBT+ allies network
and another in collaboration with the
Black Business Institute on ’technologically
advanced living, urbanisation and
sustainability through the Black lens’.
NETWORKS OUR AFFINITY NETWORKS
LANDSEC WOMEN
LGBT+ ALLIES NETWORK
Executive sponsor – Colette O’Shea
Key focus area – To celebrate gender
diversity and intersectionality within our
organisation, create positive change, and
promote gender-related issues with our
employees, customers and communities.
We launched a new mentoring programme
with social enterprise Diverse Leaders
Network, supporting female Year 12 students
from ethnic minority backgrounds in
Southwark. We ran our first cohort with
16 mentees in 2021, and we’re starting our
second cohort with 10 mentees this year. This
is a collaboration between Landsec Women,
the Diaspora Network and our sustainability
team, aiming to empower more future
leaders into our industry while increasing our
employees’ own inclusive leadership skills.
For International Women’s Day 2022, we ran
a series of events to celebrate and promote
open conversations about gender equality.
Our executive sponsor, Colette O’Shea,
hosted a live Q&A with Non-Executive
Director Manjiry Tamhane, who shared
insights into her career path so far with
members of our Landsec women’s network.
We also hosted Resurgo, our community
partner in Camden and Hammersmith,
to celebrate International Women’s Day.
Attendees heard from participants in
Resurgo’s Spear programme which
supports young people facing barriers
into employment and came together
to celebrate the day.
Executive sponsor – Bruce Findlay
Key focus area – To lead the property
industry in being more inclusive for the
LGBT+ community.
We led on the introduction of a gender-
transition expression and identity toolkit,
a ‘coming out at work’ intranet page,
a transitioning in the workplace policy
and all-gender toilets in our head office.
We launched an all-employee training
module on recognising and addressing
LGBT+ bullying and harassment. The
LGBT+ committee also received inclusion
training, delivered by the trans youth
charity Mermaids.
We collaborated with Diaspora on an event
to draw attention to the successes and
challenges of black LGBT+ experiences,
and used international inclusivity dates,
including Transgender Awareness Week,
and Non-Binary People’s Day, as
opportunities to educate and engage.
For LGBT History Month we also launched
a UK LGBT+ history exhibition.
We continue to sponsor Freehold and
Stonewall, including the Freehold 10 event
– celebrating ten years of the Group’s
focus on LGBT+ inclusivity in real estate.
We also completed our first submission to
Stonewall’s Workplace Equality Index (WEI),
securing a Bronze award for establishing
a strong foundation of LGBT+ inclusive
policies, tools and head office facilities.
Strategic ReportLandsec Annual Report 2022 40
Our people and culture
continued
Diversity charts and targets
Gender by level (%)
Whole organisation by ethnicity (%)
Chart 17
Executive
Senior leader
Leader
Manager
Professional
Support
Whole
organisation
78 22
Executive
100
70 30
65 35
50 50
43 57
49 51
21 79
Senior leader
Leader
Manager
Professional
Support
Whole
organisation
97
89
81
76
75
81
Chart 18
3
7
3
1
9
2
5
3
9
10
4
1
8
11
6
8
5
24
Male
Female
White
Asian
Black
Other
Prefer not to say
51% of our staff are female, exceeding our 2025 target of 50%.
We continue to focus on supporting good female representation at all
levels of our organisation and have increased female representation
from 31% to 35% at leader level, working towards our 40% 2025 target.
31% of our Board, executive and senior leaders are female, against a
2025 target of 50% female representation. 50% of our Non-Executive
Directors are also female.
17% of our employees are from ethnic minority backgrounds, exceeding
our 2025 overall target of 14%. Representation at leader level has
increased from 8% to 10% in 2022, working towards our 14% 2025
target. At Board, executive and senior leader levels, our ethnic minority
representation is 3%, showing we have more progress to make to
achieve our 14% target for these levels. We also have 17% ethnic
minority representation within our Non-Executive Directors.
Whole organisation by sexual orientation (%)
Whole organisation by disability (%)
Chart 19
Chart 20
Heterosexual
84
LGBT+
(Lesbian, gay, bisexual or other)
4
Prefer not to say
Not recorded
8
4
Disabled
No disability
Prefer not to say
Not recorded
5
91
3
1
4% of our employees are LGBT+. Over the past year we have reduced
the number of employees who haven’t recorded their data on the
system from 14% to 4%.
5% of our employees have told us that they have a disability, up from
4% last year. 4% of employees have not recorded their details or prefer
not to say, down from 5% last year.
Strategic ReportLandsec Annual Report 2022 41
As we come out of Covid-19, and like most
other businesses, we are seeing a very
active recruitment market with people
taking the opportunity to change career
or apply to work in a different organisation.
In addition, as a business, we have also
undergone a number of transformational
change programmes which have impacted
our turnover rate from both a voluntary
and involuntary perspective.
Against this backdrop of change, we have
continued to invest in developing the skills
and experience of our existing people whilst
also attracting people with more diverse
skills and capabilities. Over the last 12
months we have raised and approved 172
job requisitions. Of those 172 requisitions,
we have filled 46 (27%) positions with
internal hires, some of which will have
resulted in people moving into a higher-level
role. In addition, we have promoted a
further 22 people within their role.
Learning and development
Our learning and development approach
has evolved to align with our strategic plans
and in support of organisational change.
We are building self-sufficiency around
learning, maximising our online learning
platform; curating learning playlists,
and highlighting pertinent learning
solutions and hot topics. This has been
complemented by a focus on deepening
relationship effectiveness and leadership
and managerial capability.
Leadership and Management development
In 2021 we launched our new approach to
Leadership and Management development
through sister programmes – Stepping into
Leadership, which is aimed at those who
are newer to management, and Leading
with Purpose, which is for more seasoned
leaders. These programmes are designed
to provide the most up-to-date tools and
techniques, ensure alignment with our
cultural aims and develop a consistent
standard of leadership through practical
and relevant content. Both programmes
are accredited by the Institute of Leadership
& Management (ILM).
So far, we have 26 successful (ILM
accredited) participants with two more
cohorts in progress.
Culture
We continued to develop our culture based
on trust, empowerment and collaboration,
and we regularly measure our progress.
Our organisational cultural blueprint sets
out our cultural aspiration while the
corresponding personal blueprint
articulates what we value and how we work
together to create great experiences. We
have recently updated both blueprints to
reflect how our culture is evolving. We’ve
also initiated an annual culture cycle to
listen, understand and communicate how
we’re doing, how our culture feels to our
colleagues and customers, and offer a
range of practical tools so everyone can
act and work together.
Health and wellbeing
During the Covid-19 pandemic we ensured
that our people had access to information
about how they can get support. We also
continue to encourage individuals to focus
on their physical and mental health and
continue to train our mental-health first
aiders. We have 18 trained individuals
around the business to provide advice or
a ‘listening ear’.
We have created an information hub
where people have easy information about,
and access to, all our support including
our employee assistance programme,
our virtual GP, access to our external
occupational health team, apps providing
support including Unmind and Peppy
Healthcare, and a wealth of external
sources recommended by our networks,
including documentaries, apps, webinars,
podcasts and books.
We have also been leveraging our
partnerships by passing on free gym
sessions, posture masterclasses and sharing
useful guides around pensions and financial
wellbeing to equip our people as the cost-of-
living increases start to impact. We have also
given our employees access to the Peppy
Health App which focuses on three key areas;
fertility, new baby and menopause.
Recruitment and retention
Overall our turnover rate has increased
by approximately 10.15% over the last
12 months, largely due to an increase in
voluntary turnover of 7.21%, and a 3%
increase in involuntary turnover.
The 76 people who have left on a voluntary
basis were in roles that range from support
to senior leader level. 40 were female, 36
were male. There are a number of factors
influencing that.
Engagement
We continued to survey our employees on a
regular basis via pulse style surveys to have
an up-to-date understanding of their levels
of engagement. Our most recent pulse was
conducted in late January 2022 showing an
uptick in engagement levels to 7.3 out of 10
and a 13% increase in response rate to 72%.
We have revised our approach to formal
internal communications to provide
consistency and clarity to set pieces such as
interim and end of year results. This ensures
our strategy is clear and is supplemented
by a series of more informal, topical and
creative interventions to engage and inform
our people on a range of initiatives, ideas
and business updates.
From the summer of 2022, we will be
evolving our approach to create an
Engagement Listening Loop, integrating
our approach to culture, engagement and
internal communications and making sure
we are responding to the feedback of our
people. This will begin with an externally
benchmarked engagement survey which
will allow us to deep dive and target actions
to focus on key areas. We will complement
this with pulse surveys focusing in on key
engagement drivers such as Diversity &
Inclusion, Learning & Development and
Purpose and Culture. In addition, we will
seek informal feedback to add to the range
of data points giving ongoing sentiment
across the business, allowing a platform to
respond or make adjustments as needed.
Working flexibly
We have adapted well to the forced period
of remote working, and have sought to retain
this greater flexibility. To reflect this, we have
introduced our Working Smarter policy that,
while acknowledging the critical role the
office plays, encourages people to embrace
flexibility and regulate their work-life balance.
This also plays an important role in attracting
people to work for Landsec, as candidates
increasingly ask about this.
Strategic ReportLandsec Annual Report 2022 42
Our people and culture
continued
Female focused development
To date, 28 women have taken part in
our Thrive programme that aims to build
confidence and help them support their
career development. Across both cohorts
13 have achieved a promotion/change
in role. All 20 participants who completed
feedback would recommend the
programme to others.
Circl – empowering young people and
our employees
The Circl leadership programme is a unique
approach to professional development.
Business professionals train alongside
18-24 year old ‘Future Leaders’ from
under-represented backgrounds to learn
the ‘coach approach’ to leadership. In our
third year with Circl, we have successfully
completed four cohorts and we’re starting
our fifth.
With Circl, we can combine experiential
leadership training with social impact.
Our employees gain meaningful and
direct leadership experience by coaching
their Future Leader, while gaining new
perspectives from a young person from
our communities. This leads to greater
levels of engagement and real behavioural
change, empowering all those involved and
enhancing our inclusive culture at Landsec.
869
days of training completed
5,243
Courses completed
in total
Employees at each level of
the business have completed
learning throughout the year
“It helped me become more
confident which helped
significantly with my wellbeing.
Previously, I had always been
intimidated by talking to
professionals, particularly those
in higher positions. However,
after the programme, I’ve
become more comfortable.”
Future Leader, Circl Leadership Programme
“Receiving super honest feedback
from the Future Leaders was
always very energising. It was a
privilege to hear their ambitions
and plans. Overall, it’s left me with
a keen desire to coach both within
my profession and outside it.”
Landsec participant, Circl Leadership Programme
Strategic ReportLandsec Annual Report 2022 Pay gap
We are committed to reducing our pay
gaps through improving the representation
of women and ethnic minority staff at all
levels of the business.
While we have made progress in some
areas – notably in reducing our gender
pay gap – we have gone backwards on
our ethnicity pay gaps. Pay gap reporting
not only supports transparency it also
helps us to identify the actions we need
to take to address these gaps and we will
be setting out further actions in our full
pay gap report.
Our mean gender pay gap reduced from
36.6% to 30.8% in 2022 and our median
gender pay gap reduced from 29.3% to
28.7% over the same period.
This reduction in the gender pay gap
is primarily due to increases in the
representation of women in the upper
middle pay quartile (1.7 percentage
point increase) and upper pay quartile
(2.9 percentage point increase) over the
past 12 months. This is a result of a higher
number of male leavers in the upper pay
quartile than joiners and an increase in
female representation at executive level.
Our mean ethnicity pay gap increased
from 32.7% to 36.5% in 2022 and our
median ethnicity pay gap increased
from 27.6% to 37.6% in the same period.
Our ethnicity pay gaps have increased
because the representation of ethnic
minority staff has increased in the lowest
pay quartile and decreased in all other pay
quartiles. This is due to a high proportion
of ethnic minority new starters at our more
junior levels – 50-70% of new starters at
these levels over the past 12 months are
from ethnic minority backgrounds.
During the same period, we have had
a higher proportion of ethnic minority
staff leave the business at manager level
and this has decreased ethnic minority
representation within these more senior
roles. This points to the importance of our
affinity networks and the need for us to
increase our focus on retention.
43
Gender pay gap
Our mean gender pay gap
Our median gender pay gap
Chart 21
Chart 22
2022
30.8%
2021
36.6%
2022
28.7%
2021
29.3%
Quartile split (hourly rate – mean)
Table 23
Quartile proportions
Lower Income Quartile
Lower Middle Income Quartile
Upper Middle Income Quartile
Upper Income Quartile
No.
133
133
133
133
Male
Female
Total Avg
Male
Female
% Gap
30.8% 69.2% £17.65
£17.34
£17.78
–2.53%
42.9% 57.1% £27.96
£29.01
£27.16
6.37%
53.4% 46.6% £40.47
£40.26
£40.72
–1.15%
69.9% 30.1% £83.81
£85.64
£79.54
7.12%
Ethnicity pay gap
Our mean ethnicity pay gap
Our median ethnicity pay gap
Chart 24
Chart 25
32.7%
2021
27.6%
36.5%
2022
37.6%
2021
2022
Table 26
Quartile proportions
No.
White
Ethnic
minority
Prefer
not
to say
Quartile split (hourly rate – mean)
Total
Avg
White
Ethnic
minority
% Gap
Lower Income Quartile
133 70.7% 29.3% 0.0% £17.65 £17.34 £16.77
3.30%
Lower Middle Income Quartile
133 75.9% 22.6% 1.5% £27.96 £29.01 £28.07
3.24%
Upper Middle Income Quartile
133 90.2% 9.0% 0.8% £40.47 £40.26 £40.98 –1.80%
Upper Income Quartile
133 89.5% 6.8% 3.7% £83.81 £85.64 £65.72 23.26%
Strategic ReportLandsec Annual Report 2022 44
Our approach to sustainability
At Landsec we do more than build, manage
and operate buildings, we build communities
and workforces, and improve lives.
The world has changed significantly in
the last two years and as we recover from
the pandemic, societal expectations of
the role that businesses play in creating a
sustainable future have risen exponentially.
This year we’ve taken the opportunity to
refresh our approach to sustainability,
building on our strong foundations to
ensure that we continue to address the
environmental, social and governance
(ESG) issues relevant to our business and
stakeholders and align our approach to our
purpose – sustainable places, connecting
communities and realising potential.
Our purpose is the why underpinning our
actions and business decisions. Our approach
to sustainability enables us to deliver our
purpose by focusing on the issues that
need to be addressed to create the impact
we want.
Recognising that our industry accounts
for almost 40% of all emissions, and the
powerful impact the built environment
has on people’s lives, we have a unique
position to create spaces where shoppers
and residents are happy and workers are
productive. We are therefore committed to
Build well, Live well and Act well – designing,
developing and managing buildings
in ways that enhance the health of our
environment and improve the quality of life
for our people, customers and communities,
now and for future generations.
To remain at the forefront of everything
the property sector is doing to respond to
the climate crisis, we’re investing £135m by
2030 to transition our portfolio to net zero
supporting the current and future needs
of our stakeholders to transition to a
low-carbon world together.
Alongside this, we’ll be enhancing social
mobility in our industry empowering 30,000
people towards the world of work by 2030
– creating job opportunities and equipping
them with the essential skills needed to
realise their potential.
Our sustainability milestones
2016
First commercial
property company to
set a science-based
carbon target.
2030
Achieve our science-
based target aligned
with 1.5°C global
warming pathway.
2017
→ Launched UK’s first
scaffolding training
centre at Brixton Prison.
→ Committed to disclosing
climate risks in line
with TCFD.
2019
Increased ambition of
our science-based target
to align with a 1.5°C global
warming pathway.
2022
→ Supported nearly 500 people into jobs
(since 2019/20).
→ Launch of Build well, Live well, Act well
framework.
→ Awarded ‘International Safety Award’ at the
‘distinction’ level by the British Safety Council.
AUTUMN
The Forge will become our first net zero carbon
building on completion.
2021
→ ESG targets linked to all
employees’ remuneration.
→ Developed £135m ‘net zero
investment plan’ equating
to approximately 1% of
portfolio value.
Strategic ReportLandsec Annual Report 2022 45
→
ESG RISKS
Climate change risk
Climate change risk has two elements:
→ Security Service national threat level
(external metric)
1 Transition – failure to meet our 2030 carbon
→ Security risk assessment results of
reduction target leading to regulatory,
reputational and commercial impact.
2 Physical – failure to mitigate physical
impact on Landsec assets.
Example KRIs
→ Energy intensity
→ Renewable electricity
→ EPC ratings
→ Operational carbon emissions
→ Embodied carbon for new developments
→ Portfolio natural disaster risk
Major health, safety and security incident
Failure to identify, mitigate and/or react
effectively to a major health, safety or
security incident.
Example KRIs
→ Number of reportable health and
safety incidents
our properties
Information security and cyber threat
Data loss or disruption to business processes,
corporate systems or building management
systems resulting in a negative reputational,
operational, regulatory or financial impact.
Example KRIs
→ Speed of threat and vulnerability detection
(against agreed Pen test/External Assurance
Schedule)
→ Speed of threat and vulnerability resolution
→ Number of major cyber incidents or data
loss events
→ Incident Response and Recovery Plan Review
and Tested
→ Completion rates on cyber security and data
protection training
→ Number of critical, strategic or infosec partners
without current cyber security diligence
→ Progress of fire stopping and cladding
project against agreed milestones
→ Health and safety and training completion
For more information on how we
are mitigating our ESG risks please see
pages 64-65
Our material issues
In an ever-changing world, it’s important
that we understand and respond to the
shifting global challenges that may
influence our business and the issues that
matter most to our stakeholders. To revise
our sustainability framework, we partnered
with Salterbaxter to consult with over 230
customers, investors, community groups
and colleagues, listening to what they
believe are the issues we should be
prioritising and addressing.
We prioritised these issues according
to their importance to our business
(importance to employees) and their
importance to our stakeholders.
Though all issues are important and are
addressed within our strategy, the review
highlighted our high-priority issues as
shown in our materiality matrix.
These issues are reflected in our principal
risks where we monitor progress against
Key Risk Indicators (KRIs) and ensure
mitigation actions are in place.
These themes are reflected in our
refreshed sustainability framework
explained on pages 46-47
Mapping our material issues
Employment of groups facing barriers into work
Addressing inequality of young people
Business Ethics (including information and cyber security)
Integrating ESG in everything we do
S
R
E
D
L
O
H
E
K
A
T
S
L
A
N
R
E
T
X
E
O
T
T
N
A
T
R
O
P
M
I
Protecting, restoring and enhancing biodiversity
Responsible water use across construction and
building operation
Climate change adaption and resilience
Technology and smart buildings
Energy, carbon emissions and climate change across
construction and building operation
Sustainable design
Managing resources and waste responsibly across construction
and building operation
Health, safety and wellbeing of employees and those working
on behalf of Landsec in the supply chain
Human rights and fair wages for employees and those working
on behalf of Landsec in the supply chain
Diversity, equality and inclusion of employees and those working
on behalf of Landsec in the supply chain
Sustainable and circular building materials
Employee training and engagement
Customer health, wellbeing and productivity
Attract new talent in the real estate industry
Positive local economic impact
Inclusive communities and buildings
ESG finance investment
Stakeholder engagement
Data privacy and security
Key:
Environmental
Social
Governance
IMPORTANT TO OUR BUSINESS
Strategic ReportLandsec Annual Report 2022
46
Our approach to sustainability
continued
Our sustainability framework
Following our 2021 materiality review and
baseline assessment, we refreshed our
sustainability strategy framework to enable
us to work towards our purpose, and
address our key ESG risks and opportunities.
Building on the success of our existing
sustainability programme, our updated
sustainability framework is also helping us:
→ focus what we do on the issues where
we can have the greatest impact
→ remain relevant in a post-Covid-19
world, increasingly under pressure
for climate action
→ make sustainability part of everything
we do
→ ensure what we do is bold and
memorable so we can communicate
it to all stakeholders easily.
Build well, Live well, Act well
Our vision is to design, develop and manage
buildings in ways that will enhance the
health of our environment and improve
the quality of life for our people, customers
and communities, now and for future
generations. We deliver our vision through
three pillars: Build well, Live well and Act
well. Within each pillar, we focus on the
issues that matter most through themes.
We will build well, by creating, operating
and investing in low-carbon places and,
where possible, restore and repurpose
instead of taking down. We’ll also enhance
green spaces, improving air quality and
working to pioneer new models of
sustainable design.
S
T
N
E
M
T
I
M
M
O
C
R
U
O
→
We will enable people to live well, by
improving wellbeing and developing spaces
where shoppers, residents and workers are
happy and productive. This will help create
thriving communities, inclusive places and
job opportunities.
And we will act well, by embedding our
sustainability strategy in everything we do.
We’ve developed local plans so everyone,
including suppliers and customers, in
every building, can play a role in achieving
our vision.
Through our framework, we are
demonstrating our ongoing commitment
to the United Nations Global Compact’s
(UNGC’s) Ten Principles in the areas of
human rights, labour, environment and
anti-corruption, and continue substantially
advancing our vital work towards meeting
the Sustainable Development Goals.
COMMITMENT:
BUILD WELL
We will design, develop and manage
places to tackle climate change,
enhancing the health of the
environment by achieving net zero
and going beyond.
The ESG issues that matter most
→ Decarbonising our portfolio
transitioning to net zero
→ Enhancing nature and green spaces
→ Using resources efficiently
Our headline targets
→ Reduce operational carbon emissions
(tCO2e) by 70% by 2030 compared
with a 2013/14 baseline, for property
under our management for at least
two years.
→ Reduce average embodied carbon by
50% compared with a typical building
by 2030 by prioritising retention where
possible, adopting smart design and
using sustainable materials.
Linked SDGs
Strategic ReportLandsec Annual Report 2022
47
COMMITMENT:
LIVE WELL
We will create opportunities and inclusive
places to change lives, supporting
communities to thrive.
The ESG issues that matter most
→ Creating opportunities and tackling
local issues
→ Inclusive places
→ Improving wellbeing
Our headline targets
→ From a 2020 baseline, empower
30,000 people facing barriers into
employment with the skills and
opportunities to enter the world
of work by 2030.
→ From a 2020 baseline, deliver
£200 million of social value in
our local communities by 2030,
addressing social issues relevant
to each area.
Linked SDGs
COMMITMENT:
ACT WELL
We will be a fair and responsible
business in everything we do.
The ESG issues that matter most
→ Embedding ESG
→ Doing the basics brilliantly
Our headline target
→ All Landsec colleagues to have
individual objectives to support
the delivery of Build well, Live well,
Act well, with a proportion of
remuneration linked to our energy
and carbon targets.
Linked SDGs
Strategic ReportLandsec Annual Report 2022 48
Our approach to sustainability
continued
Our sustainability team is responsible
for recommending the strategic direction
for sustainability, measuring and
reporting progress; delivering group-wide
programmes to address issues that matter
most. The team also provide expert advice
and support on how to integrate ESG
considerations into the way we operate
and design and develop our buildings.
We monitor and report progress on our
framework every year through a Build well,
Live well, Act well scorecard.
See Additional information on pages 204-206
Executing our strategy
Under our Build well, Live well, Act well
pillars, we have a suite of targets to
demonstrate the actions we are taking
to address each of our material issues.
These targets will evolve over time as
we continue to develop our approach.
Our framework is delivered via business-
wide, portfolio and asset level actions –
helping us embed sustainability further
throughout the business. Our Build well,
Live well, Act well framework energises
all colleagues to focus our actions on the
issues where we can have the biggest
impact, ensuring we all have clear
understanding of the role we play in
supporting our commitments and targets.
Sustainability governance
The Board is responsible for the oversight
of our approach to sustainability and of
climate-related risks and opportunities
impacting our business. Our CEO, Mark
Allan, is our Board ‘Sustainability Executive’
and has overall responsibility.
This year, we have strengthened our
governance, disbanding our Sustainability
Committee and making our Executive
Leadership Team accountable for setting
the strategy, and ensuring we have the
resources and budget for it.
We are establishing a Sustainability Forum,
a senior management group, responsible
for executing the strategy and delivering
programmes of work needed to meet
our sustainability targets.
Roles and responsibilities
Board
Provides oversight and challenge for Landsec’s approach to
sustainability. CEO is Board ‘Sustainability Executive’ who has overall
accountability for sustainability.
Executive Leadership Team (ELT)
Sets sustainability strategy, within the parameters set by the Board,
ensuring resource and budget in place to deliver. Monitors progress
against strategy.
Sustainability Forum(s)
Sustainability Team
Executes sustainability strategy, delivers programmes of work to
meet corporate ESG commitments and embedding sustainability
into everything we do.
Recommends the approach to sustainability, delivers company-wide
programmes, guides and supports business to embed sustainability
and monitors and reports progress.
Strategic priority pillars:
Central London, Major retail
destinations, Mixed-use
urban neighbourhoods
Central functions
Conducts business in line with our approach to sustainability,
therefore contributing to the success of our corporate commitments.
Strategic ReportLandsec Annual Report 2022 49
Solar PV deployment
across our retail
centres to increase
amount of on-site
renewable electricity
generation
BMS optimisation,
advanced AI
technology and
lighting upgrades
to improve energy
efficiency of
buildings
Air source
heat pumps
to decarbonise
heat in our
buildings
Build well — our commitment
to the environment
OUR £135M
NET ZERO
TRANSITION
INVESTMENT
PLAN
This plan will help us achieve
our science-based target
and ensure that our existing
portfolio meets the Minimum
Energy Efficiency Standards
(MEES) of EPC B by 2030.
Here is how we will do it.
Customer engagement
programme to collaborate
with customers on energy
efficiency, helping them to
identify energy efficiencies
within their spaces
We will design, develop
and manage buildings to
tackle climate change,
enhancing the health of the
environment by achieving
net zero and beyond.
We’re creating, operating
and investing in low-carbon,
restorative places, enhancing
green spaces, improving
air quality and working to
pioneer new models of
sustainable design.
Decarbonising our portfolio and
transitioning to net zero
To play our part in tackling the climate
crisis, we have gone beyond best practice,
demonstrating leadership through our
industry-leading, science-based carbon
reduction target. We met this 11 years
early, in 2019, subsequently updating it
and aligning with the 1.5-degree global
warming scenario, targeting a 70%
reduction in carbon emissions by 2030,
compared to a 2013/14 baseline.
This year we have reduced operational
carbon emissions by 52% and energy
intensity by 34% from a 2013/14 baseline.
These reductions can be partly accounted
for by the lower utilisation of space during
the first part of the year. However, we
continue to implement a range of energy
saving projects across our portfolio. This has
included an ongoing and extensive lighting
upgrade project at Bluewater in which we’ve
replaced all lights in the mall area and car
parks to LEDs with a wireless control and
monitoring system.
Furthermore, at several office buildings we
have optimised energy-intensive chillers and
minimised their usage during periods where
demand for cooling is low. Recognising that
optimising our existing heating, cooling and
ventilation equipment is key to drive energy
and carbon reductions, we’ve undertaken
building performance appraisals across
our Central London portfolio uncovering
opportunities for improvement.
Our net zero transition investment fund
To help ensure we achieve our 2030 science-
based target and move towards net zero, in
November 2021 we established an ambitious
£135m net zero transition investment plan.
We will use the fund to finance a series of
initiatives over the coming eight years, to
reduce our carbon footprint and improve
innovation and best practice across the
wider industry. We expect the programme
to remove 24,000 tonnes of carbon
emissions from our operations.
Strategic ReportLandsec Annual Report 2022 50
Build well — our commitment
to the environment continued
This is informing our longer-term
approach to managing climate risks
across our portfolio.
For more details on our TCFD please
see pages 66-69
Engaging our customers
Recognising that approximately 40% of
all energy consumption comes from our
occupiers’ use of our buildings, we launched
a customer engagement programme to
raise awareness, change behaviour and
identify opportunities for collaborating
on energy and cost savings.
Working with these customers and energy
specialists we have been:
→ running energy audits with data analysis
and a site visit to understand data
trends, anomalies and opportunities
→ using energy-efficiency questionnaires
for customers’ employees to capture
their opinions, attitudes and ideas on
reducing energy
→ running interactive workshops to raise
awareness of net zero carbon and discuss
energy use
→ making recommendations to improve
efficiency.
To further raise awareness and drive energy
efficiency we entered 80-100 Victoria Street,
One New Change and New Street Square
into the CUBE competition. CUBE’s goal is to
help landlords and their occupiers improve
energy efficiency through gamification and
behaviour change. Participants are ranked
monthly on which building has registered
the largest percentage energy reduction,
measured from their own historic baseline
of energy use.
Designing and developing our new
schemes sustainably
Nearly 50% of whole life carbon emissions
of a building occur before it even completes
and this proportion is growing as the UK
grid decarbonises. We therefore continue
to design and build net zero buildings and
we are proud of delivering The Forge in
Portfolio EPC rating (by ERV)
Chart 27
24%
25%
20% 4%
2%
25%
36%
26% 28%
5%
1%
4%
2020/21
2021/22
2030
Retail and office breakdown
100%
Chart 28
Retail
Offices
29%
37%
19% 5%
2%
8%
44%
12%
38%
6%
A-B
C
D
E
F-G
EPC required
The fund will support initiatives to: move
to cleaner sources of energy by replacing
gas-fired boilers with electric systems such
as air-source heat pumps; optimise our
building management systems (BMS)
ensuring they operate in accordance with
the way the building is occupied; increase
the capacity of onsite renewable energy
and collaborate with customers to identify
opportunities for energy efficiency.
This investment programme equates to
approximately 1% of portfolio value, and
will enable us to stay ahead of the future
non-domestic Minimum Energy Efficiency
Standard (MEES) Regulations, which may
require all properties to achieve an Energy
Performance Certificate (EPC) rating of ‘B’
by 2030. With increasingly clear evidence
of stronger sustainability credentials
underpinning higher asset valuations and
stronger operational performance, it is
not only essential from an environmental
perspective but an economic one, too.
From April 2023, all properties that are
let will require an EPC ‘E’ or above. As of
31 March 2022, 96% of our portfolio by
asset value has an EPC rating between A-E.
The actions we are taking to transition to
net zero will ensure we meet this regulation
well before the compliance deadline.
This year we’ve trialled predictive and
self-adaptive Artificial Intelligence (AI)
commercial-building technology at
80-100 Victoria Street. Using deep
learning and cloud-based computing,
the technology optimises the building’s
existing heating, ventilation and air
conditioning (HVAC) system, which can
result in up to a 40% decrease in carbon
footprint as well as a reduction in HVAC
energy costs of up to 25%.
Alongside this plan we continue assessing
and quantifying climate-related risks
and the potential financial impact, at a
portfolio and asset level, for our existing
assets, new developments and potential
acquisitions.
Strategic ReportLandsec Annual Report 2022 51
At The Forge, SE1 we’re using pioneering
construction methods. Having received
funding from Innovate UK, we’re creating
the world’s first office building designed
and constructed using the ‘kit of parts’
solution built on a Design for Manufacture
and Assembly structural frame. By adopting
this approach we have reduced embodied
carbon emissions by over 25% compared to
design stage.
Once in operation, no energy will be
generated from fossil fuels, decarbonising
building operation and reducing the impact
on local air quality. It will also include highly
efficient air-source heat pumps, and on-site
renewable electricity from solar panels.
It is the UK’s first commercial development
to have been recognised by the UKGBC as
aligning with its framework definition of a
net zero carbon building.
Southwark. The Forge, SE1 is the first UK net
zero commercial building constructed and
operated in line with the UK Green Building
Council’s (UKGBC) framework definition for
net zero buildings.
We have been developing our net zero
carbon strategy for our mixed-use urban
neighbourhoods, aiming to apply the same
level of diligence on our residential-led
projects as we do for our offices. We looked
at the life-cycle impact of our masterplans
and set targets for embodied and
operational carbon based on in-depth
modelling and financial appraisal. We are
confident that this sets us on a path to
providing climate-resilient homes that will
stand the test of time.
Credible carbon offsetting
We recognise that despite our plans to
transition to net zero, we will need to offset
some unavoidable remaining emissions
from our development activity. We are
focused on ensuring each credit is
independently verified, transparent and
traceable meeting UKGBC and SBTi
principles. As such, we’ve joined The
Lowering of Emissions by Accelerating
Forest Finance (LEAF), a public-private
coalition, supported by governments (UK,
US and Norway), that seeks to mobilise
finance to protect tropical forests at huge
scale. LEAF carbon offsets are verified by
Architecture for REDD+ Transactions (ART).
CREATING
THE UK’S FIRST
NET ZERO
DEVELOPMENT
The first certified Design
for Performance Project
This year, our Timber Square, SE1 development
in Southwark achieved a 5-star Design
Reviewed Target Rating, making it the
UK’s first Design for Performance project
to complete its independent design review.
This means the project is on track to
receive a 5-star NABERS Energy Rating
on completion. This level of energy efficiency
aligns with the UKGBC’s 2025-2030 energy
performance targets for commercial offices
aiming to achieve net zero carbon in
operation. The partial reuse of the existing
structure of the Print Building, and the use
of a hybrid steel and cross-laminated timber
(CLT) structure, results in an embodied
carbon intensity of more than half of a
typical London office.
Strategic ReportLandsec Annual Report 2022 Additionally, to tackle tech poverty which
was brought into sharp relief during the
pandemic, we’ve donated over 265
reconditioned devices to charities across
the UK. The devices have been used to
support young people in accessing their
education, and helping people out of work
access support services and apply for jobs.
Using water wisely
With the change in climate, water stress
is becoming an important risk to consider.
We have already implemented a number
of initiatives to improve water efficiency
across our developments achieving more
than 50% reduction in water consumption
compared to a typical build on The Forge,
SE1 and n2, SW1.
We recognise however that more needs
to be done and we will be undertaking
water-management assessments at assets
under our operational control to identify
opportunities to use water more efficiently.
52
Build well — our commitment
to the environment continued
Enhancing nature and green spaces
This year we’ve achieved an average 13%
uplift in biodiversity net gain from a
2016/17 baseline, which has included over
50 biodiversity projects across the five
sites with greatest biodiversity potential.
At White Rose, Leeds, we restored ponds
with native species of planting, and
elsewhere we continue to manage and
enhance existing areas of landscaping
for nature, including kingfisher perches,
hedgehog boxes and over 500 trees
and shrubs.
Last spring, we worked with an ecologist
to conduct site visits at the five sites to
evaluate progress from our 2016/17 baseline.
The results of this are helping us identify
further enhancements for the sites so
we can reach our 2030 target to achieve
a 25% biodiversity net gain across our
operational sites currently offering the
greatest potential. Once these are
complete, we will undertake further
ecology studies to identify additional ways
to ensure we meet our biodiversity target.
We have a commitment to delivering
significant biodiversity net gain across all of
our new developments. Our scheme at the
O2, Finchley Road is achieving over 150%
net gain through a careful landscaping
design to reintroduce nature on a site with
limited vegetation and ecological value.
Using resources efficiently
Buildings are responsible for 50% of all
extracted material. We are committed to
using resources efficiently reducing the
materials we use in our development activity
and sourcing them from ethical and
sustainable sources, promoting reuse and
circular economy principles, encouraging
recycling and using water wisely. We operate
our buildings in accordance with our
company-wide Environmental and Energy
Management Systems, which are certified
to ISO 14001 and ISO 50001 respectively.
Sustainable materials
As part of our transition to net zero, we’re
focusing on lean design, using innovative
construction methods and low-carbon
materials. We include carbon consultants
in the design team from the very start,
to guide decisions on the most carbon-
efficient solution and we account for
the embodied carbon implications of
design options.
100% of our core construction materials
are from responsible sources and last year,
we signed up to SteelZero, committing to
purchasing 50% of our steel as low carbon
by 2030, and 100% by 2050. This will
influence collective purchasing power
across our industry as it sends a strong
signal about demand, to shift global
markets and policies towards responsible
production and sourcing of steel.
SteelZero steel must meet ResponsibleSteel
standards or be produced by a steelmaking
site where the owner has defined and made
public both a long-term emissions-
reduction pathway and a medium-term,
quantitative-science-based GHG emissions
target such as a science-based target
approved by the SBTi (Science Based
Targets initiative).
Managing our waste
Across our operations and developments,
we are committed to achieving at least a
75% annual recycling rate. In 2021/22, we
achieved a 71% recycling rate across our
operations and a 99% recycling rate across
our developments. We have increased
recycling rate across our operations by 6pp
since 2020/21.
This increase has been driven mainly by the
increase in recyclable materials produced
by our brand partners, in particular F&B
(such as packing materials, cardboard and
glass), as well as retail returning to normal
operations and easing of Covid-19-related
restrictions. We expect to see a
continuation of progress towards 75%
recycling throughout the coming year.
Strategic ReportLandsec Annual Report 2022 Live well — our commitment
to our communities
53
We will create opportunities
and inclusive places to
change lives, building strong
communities and tackling
local issues.
We have set new
commitments to enhance
social mobility in our industry,
empowering 30,000 people
towards the world of work,
creating £200m of social
value for our communities
by 2030.
£16.5m
Social value created through
our community programmes
since 2019/20
474
People further from the
job market supported into
employment since 2019/20
1,800+
Young people engaged
since 2019/20
Creating opportunities for young people
Since the start of the pandemic, we’ve
supported the government’s Kickstart
scheme to provide opportunities for young
people who have faced significant
challenges due to Covid-19, and risked
facing long-term unemployment. The
scheme has brought talented individuals
from our communities directly into Landsec,
helping them realise their potential.
Through Kickstart, we have employed seven
individuals who are working across a diverse
range of business functions including
sustainability, retail, customer, workspace
and innovation. The group are developing
their confidence and transferable skills,
while bringing valuable new perspectives
to our business.
One of our Kickstart colleagues said:
“Kickstart allows young people from
different backgrounds to work in job sectors
that they normally wouldn’t think of
applying to, thinking that it’s not for them.
Working at Landsec, I’ve been able to
improve my confidence and self-esteem,
gaining experience working on
community projects.”
Creating opportunities and
tackling local issues
We are a significant creator of jobs across
real estate, construction, customer service
and retail, and we have an important role
in helping create a fairer, more inclusive
economy. One that helps tackle the social
inequalities specific to our local areas, and
addresses the current and future skills we
need. We also know that our business does
not yet reflect the diverse communities
we’re part of, especially at senior levels.
Our social programme therefore aims to
empower people facing barriers with the
skills and opportunities to enter the world
of work and aims to tackle local socio-
economic issues in the areas we serve.
We do this through a suite of initiatives
in all our local communities which are
supported by volunteers from Landsec
and our partners. We run employability
workshops, focused on supporting prison
leavers, people experiencing homelessness,
and young people from disadvantaged
backgrounds, equipping them with the skills
and confidence to enter work. We deliver
educational interventions introducing
young people to the range of careers
available within real estate – seeking
to increase the diversity of the sector.
Where possible, beneficiaries of these
programmes are offered job opportunities
in our business and supply chain.
Strategic ReportLandsec Annual Report 2022 54
Live well — our commitment
to our communities continued
Addressing recruitment challenges
in Cardiff
The pandemic has not just impacted
people’s access to opportunities, it has
also presented challenges for many of
our partners to recruit, especially within
the retail and hospitality sector.
In Cardiff, we partnered with John Lewis,
Primark and Boots to run a Get Into
St. David’s scheme with The Prince’s
Trust. The two-week initiative supports
local young people aged 16-30 with
the essential skills required for work.
Participants received employability
training, interview practice and work
experience with six candidates being
successful in securing a job at the
shopping centre. Since 2016, this initiative
has supported 44 young people in Cardiff
find employment.
Tackling homelessness in The City
Across all of our communities, we build
long-standing partnerships with local
charities to support some of the most
vulnerable and excluded groups in our
society, and address the local issues
that matter. This includes homelessness,
a significant issue in many of our
communities.
This year, we launched an initiative
with our construction partner Sir Robert
McAlpine at our 21 Moorfields, EC2
development in The City of London,
alongside homeless charity Crisis.
The initiative was aimed at tackling job
and housing insecurity for vulnerable
candidates. It gave five people who
had experienced homelessness three
weeks of employability training, work
experience, accommodation support
and ultimately a job interview on site.
Several candidates have since moved
into full-time work at 21 Moorfields with
our supply chain partners.
Circle Collective’s employability
initiative, supported by Landsec,
celebrating at Lewisham Shopping Centre
Involving young people in climate
change activity
Young people have played an important
part in bringing the climate crisis to the
forefront of the international agenda, and
in recognition of this, in October, Piccadilly
Lights hosted artwork showing young
people’s ideas for tackling the climate crisis.
This was the result of a competition where
we invited young people from several of
our Westminster schools, and community
partners, to take part. We also showcased
the artwork in the reception of 80 Victoria
Street throughout November.
Inspiring the next generation
of property professionals
in Lewisham
We know our business, and our industry
as a whole, does not yet reflect the
diverse communities we are part of,
especially in senior roles. We need more
young people from our communities
to join our workforce. Our education
initiatives aim to address this, giving
our industry’s future leaders the
insights, mentoring and pathways
to pursue a career in real estate.
In Lewisham, we have been working
with the Construction Youth Trust,
our education partner that aims to
increase young people’s representation
in the real estate sector. We developed
a programme to engage young people
at four local schools in an exciting
careers project, supported by
volunteers from our Lewisham project
team. This project has engaged over
160 young people since 2020, with
20 individuals going on to receive
additional mentoring.
Strategic ReportLandsec Annual Report 2022 Inclusive places
Helping provide equal opportunities for all
We are committed to embedding inclusive
behaviours into our culture and providing
inclusive services for our employees,
customers and suppliers. Key activities in
this area have included: achieving Disability
Confident at a number of our assets,
achieving Stonewall Bronze Employer
Award and introducing a ‘transitioning
at work’ policy.
See Diversity and Inclusion on pages 38-39
As part of creating sustainable and
inclusive places, we are using our skills,
resources and people to provide
opportunities to address social inequalities.
A big part of this is our work to help young
people from diverse and under-represented
backgrounds into careers in our industry.
In April 2021, we launched a 12-week virtual
mentoring programme for young people
aged 16-18 years in Southwark, working with
the Diverse Leaders Network, a social
enterprise that develops the next generation
of leaders from diverse backgrounds. We
set the programme up in response to the
pandemic’s significant impact on young
people’s aspirations and opportunities.
Our 16 Landsec mentors worked one-to-one
with female students from diverse
backgrounds to increase their confidence,
career awareness, leadership abilities and
aspirations. The weekly sessions covered
setting goals, influencing, overcoming
challenges, growth mindset, respect, finding
your voice and getting ready for the world
of work, all of which aimed to redefine how
the students perceive leadership.
55
Improving wellbeing
We design and manage our assets to
enhance our customers’ and our colleagues’
physical and mental wellbeing, supporting
their productivity.
It has never been so important that the air
in our buildings is high quality. In 2021 we
signed up to the WELL Portfolio Programme
to ensure we provide a healthy and safe
environment for our office customers to
return to. Monitoring and raising awareness
around air quality is a fundamental part
of this and so this year we undertook
a four-month indoor air-quality testing
programme in 16 of our buildings. The
results showed very high levels of air quality
across our spaces. Following this testing,
we are now introducing sensors across our
entire portfolio.
We have a dedicated intranet site for all
colleagues to access a suite of resources
covering physical, psychological and social
aspects that contribute to a healthy life.
Our new health and wellbeing support
pack pulls together the policies and
services available to all employees, with
clear guidance on how to access them.
This includes our Employee Assistance
Programme (EAP), private healthcare,
online learning and external support
providers. Our Mental Health Support
Network includes 18 colleagues who are all
trained to have the practical skills to spot
the triggers and signs of poor mental health
– being able to step in and provide support
if required.
See page 41 for more information on
employee wellbeing
We invited local schools to participate in our climate crisis artwork competition,
showcasing the artwork on Piccadilly Lights in the run up to COP26.
Strategic ReportLandsec Annual Report 2022 56
Act well — our commitment
to being a responsible business
We will be a fair and
responsible business in
everything we do. Building
strong relationships with
our partners, customers,
suppliers, communities
and colleagues – developing
plans so that everyone and
every building has a role
in delivering our vision.
Embedding ESG
Our refreshed framework has been designed
to ensure business-wide accountability for
the fulfilment of our sustainability targets.
awarded an ‘International Safety Award’
at the ‘distinction’ level by the British Safety
Council in recognition of our commitment
to health and safety over the year.
This is the first year that we have linked a
proportion of all colleagues’ remuneration
to the delivery of our energy and carbon
targets. In the coming year we’re
encouraging all Landsec colleagues to set
individual objectives to support achieving
our vision.
To enable continuous safety and health
progress, we reviewed occupational hazards
in May 2021. Based on this, we identified
and prioritised seven key areas we could
improve. The topics focused on reducing the
risk of occupational safety hazards, hazards
to our people, partners and our customers.
Collaboration is a key enabler of our
sustainability framework and that’s why
we’re building stronger relationships with
our customers – listening to their views via
surveys and interviews and taking action.
We’re also working with customers to raise
awareness and change behaviour on energy
consumption.
See page 50 for more information
on how we are engaging our customers
Doing the basics brilliantly
On-site health and safety
Our goal is to achieve Landsec’s purpose
without causing harm to people; protecting
our customers, partners and people by
creating safe and successful places and
experiences. We have continued to make
health and safety considerations part
of our recovery from the pandemic,
by continuing to support and inform our
people of our Covid-19 conscious approach
and by providing clear, pragmatic guidance
to our site teams, to ensure they have the
tools to maximise our potential for a
healthy recovery. We continue to support
our strategy, for example by ensuring our
ever-evolving retail propositions provide a
safe, attractive offering for our occupiers
and visitors.
All our properties operate within a safety-
management system certified to ISO 45001,
and we continue to conform to it. In January
2022 we achieved certification to BS 9997
for our fire risk management system,
and produced clear requirements for our
development projects in anticipation of the
Building Safety Act. In March 2022 we were
We have worked with other leading
property companies to establish uniformity
in our safety and health data as a way of
enabling performance benchmarking
against our peer group.
Responsible procurement
We focus on building strong, long-term
relationships with our strategic suppliers
– including those suppliers who employ
people to work on our sites. All suppliers
are asked to comply with our Supplier Code
of Conduct which sets out our minimum
expectations on how we expect our
suppliers to act in relation to fairness,
wages, diversity, equality and inclusivity.
Additionally, all strategic suppliers are
expected to operate our sites with respect
to Landsec’s policies and standards on
health and safety, anti-harassment and
bullying, diversity and inclusion.
Furthermore, in accordance with the
Modern Slavery Act 2015, we publish
annually our Modern Slavery Statement
that describes the policies, processes and
actions we have undertaken to address and
prevent modern slavery across our business
and supply chain.
Business ethics
To achieve our purpose, we have to act
ethically and with integrity, behaving in
the right way and speaking up if we think
others are not doing this. During the year,
we have refreshed our Code of Conduct
which provides guidance on how to do the
right thing and behave in the right way
and highlights the key policies that all our
employees must follow. It covers a number
Strategic ReportLandsec Annual Report 2022 57
of topics about how we work together,
including sustainability, financial
commitments, communicating externally,
health and safety, owning our behaviour
and managing our data.
The way we identify, manage and mitigate
risks within our business is fundamental
to our success. You can read more about
how we manage risk, including the risk
management strategy that we have
established to identify, prioritise and
improve cyber resilience across all our
assets, in the Managing risk section on
pages 58-59 and also our Audit Committee
Report on pages 102-107.
The Board has 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.
Our Anti-Bribery and Corruption Policy
outlines the expected conduct of Landsec
employees and how they can report any
breaches. An updated training module
on Anti-Bribery and Corruption was also
launched last year which forms part of the
induction process for all new employees.
Strategic ReportLandsec Annual Report 2022 58
Managing risk
Our approach to managing risks and opportunities
has continued to evolve and improve this year
through close alignment with our strategy and
a deeper understanding of our risk landscape.
→
OUR KEY SUCCESSES IN 2021/22
→ Development of a fit-for-purpose risk
management framework to enable a
common approach to managing risks
across our key functions.
→ Established a Group Risk Register covering
the whole of Landsec’s risk landscape
including strategic, operational and legal
and compliance risks.
→ Alignment with the strategic review
process to ensure consistent language
and measurement and consider risks
across each of the strategic pillars.
→ Assessed the quality and completeness
of assurance provided against our
principal risks.
→ Development of assurance mapping
against our principal risks.
→
OUR KEY PRIORITIES IN 2022/23
→ Support the implementation of the
new strategy through risk deep dives
with the Executive Leadership Team.
→ Development of key risk indicator
thresholds and establishment of
quantitative risk appetite measures
for principal risks.
→ Development of key functional risk
registers to support the Group analysis.
→ Continue to promote risk awareness
and aid decision-making through
assessing and managing our strategic
and operational risks.
Risk management framework and
Governance
The Board and Executive Leadership Team
recognises the importance of identifying
and actively monitoring the financial and
reputational impact of our strategic and
operational risks. The Board has overall
responsibility for the oversight of risk and
for maintaining a robust risk management
and internal control system. The Executive
Leadership Team is responsible for day-to-
day monitoring and management of risks
that impact the business. The Audit
Committee supports the Board in the
oversight of risk and is responsible for
reviewing the effectiveness of the risk
management and internal control system
during the year.
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,
but to manage it within our appetite
for each risk. We focus on being risk
aware, clearly defining our risk appetite,
responding to changes to our risk profile
quickly and having a strong risk culture
among employees.
The Risk Management function, headed
by the Director of Risk and Assurance,
facilitates risk discussions and provides
challenge and insight where appropriate.
The Risk Management function also
oversees and provides support to various
functions across the business.
“Helping the business
to navigate the
challenges and
opportunities it faces
through proactive
risk management.”
Identification of risks
Identifying and quantifying risks is
a continual process. We work with
teams across the organisation, senior
management, external agencies and
stakeholders to identify the strategic,
operational and legal and compliance risks
facing our business. These are included on
our Group Risk Register, which is challenged
and validated by the Executive Leadership
Team. Our principal risks, which are a
sub-set of our Group risks, are reviewed
by the Audit Committee before being
presented to the Board. In addition, an
in-depth risk session is held with the Board
every year, with the next session taking
place in December 2022.
Evaluation of risks
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 risk (before any mitigating
action) and the residual risk (the risk that
remains after mitigating actions and
controls). From this, we identify principal
risks (current risks with relatively high
impact and certainty) and emerging risks
(risks where the extent and implications are
not yet fully understood). We have taken
the opportunity this year to enhance our
emerging risks process given the pace of
business change.
Strategic ReportLandsec Annual Report 2022 Management and assurance of risks
As part of its overall responsibility for
risk, the Board undertakes a bi-annual
assessment, taking account of those risks
that would threaten our business model,
future performance, solvency or liquidity
as well as the Group’s strategic objectives.
Scenario modelling has been used to better
understand the impact of these risks on
our business model when placed under
varying degrees of stress, enabling
interdependencies to be considered and
plausible mitigation plans to be tested.
The Audit Committee reviews our principal
risk register at least twice per year as
well as our Assurance Map, which sets out
the key controls and assurance activities
against each risk. This supports the
Committee’s evaluation of the control
environment and the adequacy of
assurance activity. The Committee also
receives a summary report at each meeting
describing key second and third line
assurance activities, including internal
audits, actions agreed and the status
of open risk mitigation actions.
Day-to-day ownership and management
of key risks is assigned to members of the
Executive Leadership Team. They are
responsible for ensuring the effectiveness
of controls and for implementing risk
mitigation plans, where necessary. The ELT
reviews the Group Risk Register in detail at
least twice per year and undertakes deep
dives into specific risks throughout the
year to evaluate the current risk level,
consider risk appetite and agree any
further actions needed.
Key operational principal risks, including
health, safety and security, and information
security and cyber threat are managed
by dedicated second-line functions that
define and implement policy and
mitigating controls, and undertake
assurance activities.
The Group Insurance Team sits within the
overall Risk and Assurance function, which
enables collaboration between Insurance
and Risk teams and detailed consideration
of risk treatment planning, residual risk
and transference to the insurance market,
where appropriate.
We identify where the impact of controls is
greatest i.e. where there is a relatively high
inherent risk and relatively low residual risk,
and this helps to focus the work of Internal
Audit and other assurance providers.
59
Risk appetite
The Board is responsible for defining the level
of risk that the Group is willing to take and
ensuring it remains in line with our strategy.
Landsec’s risk appetite differs for each risk
and varies significantly between strategic and
operational risks. The risk appetite reflects
Landsec’s risk management philosophy, and
in turn influences culture and operating style.
To embed risk appetite effectively in the
business requires management to establish
limits and thresholds for the key risk indicators
associated with each risk. Scenario planning
assists in setting these thresholds. Our Group
Risk Register outlines high level Key Risk
Indicators (KRIs) which are monitored
regularly against thresholds set for our key
risks. These risks are aligned to the strategy
refresh process and stress-tested as part of
a scenario planning exercise.
Landsec has an Internal Audit function,
which reports to the Director of Risk and
Assurance that provides independent
assurance over key controls and processes
to management and the Audit Committee.
See page 102 for more information
in the Report of the Audit Committee
In addition, the Internal Audit team
manages Landsec’s Key Controls Toolkit.
The Toolkit is a set of clearly defined
controls that are self-certified by control
owners within the business to provide
ongoing assurance and coverage of key
risks areas. The results of this process are
monitored by the Audit Committee.
Risk management framework
Top-down
Oversight,
identification,
assessment and
mitigation of risk
at a Group level
Bottom-up
Identification,
assessment and
mitigation of
risk at business
unit and
functional level
e
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Board
→ Set the risk culture
→ Approve risk appetite
Audit Committee
→ Supports the Board
in monitoring risk
exposure against
risk appetite
→ Agree the risk programme
→ Discuss the Group principal risks with the Executive
Leadership Team
→ Review the effectiveness of our risk management
and internal control system
1st line of defence
2nd line of defence
3rd line of defence
Internal Audit
→ Provide assurance
on effectiveness
of the risk
programme,
testing of key
controls and risk
response plans for
significant risks
Risk
management
→ Aggregate risk
information
→ Assist management
with the
identification and
assessment of
principal and
emerging risks
→ Monitor risks and
risk response plans
against risk
appetite and
tolerance levels
→ Create a common
risk framework and
language
→ Provide direction on
applying framework
→ Provide guidance
and training
→ Facilitate risk
escalations
Support functions
→ Provide guidance/
support to the
risk team and
business units
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 risk
management and
internal control
system, and for
ensuring its
operational
effectiveness
→ Identify and monitor
emerging risks
Business units
→ Identify and
assess risks
→ Respond to risks
→ Monitor risks and
risk response
→ Ensure operating
effectiveness of
key controls
Strategic ReportLandsec Annual Report 2022
60
Principal risks and uncertainties
Understanding and effectively managing our principal
risks and uncertainties allows management and the
Board to make informed decisions.
Our principal risks consist of the nine most
significant Group risks and includes seven
strategic and two operational risks. The
strategic risks relate to the macro-economic
environment; our key markets – office and
retail; our capital allocation; development;
climate change; and people and skills.
The most significant risks impacting the
Group are the strategic risks that relate
to structural changes in our markets often
driven by customer behaviour or the wider
economy such as growth, rising inflation,
interest rates and the availability of capital.
The operational risks are health, safety or
security incident, and cyber attack.
There have been a number of changes
to our principal risks since the half-year
update, which have largely impacted our
strategic risks and were most commonly
driven by Covid-19 and its ongoing impact
on behaviours and the wider economy.
The risk from the macroeconomic outlook is
our most significant risk due to rising
inflation and the impact that it is expected
to have on the economy, yields and interest
rates; plus the war in Ukraine and resultant
volatility in oil prices and supply chain
impacts may increase the threat of an
economic retrenchment. The net risk has
remained stable as, so far, Landsec has
been resilient against these headwinds.
The other big movement has been in
the Retail and hospitality occupier market
risk. This was Landsec’s biggest risk due
to falling retail asset values and the
uncertainty created by Covid-19 and the
acceleration of online retailing. However,
over the past year, many of the factors that
drove that increase have subsided leading
to a downgrade of the risk, though the
macroeconomic headwinds noted above
continue to be carefully monitored.
The Office occupier market risk is our
biggest market-specific strategic risk
due to the size of our office portfolio.
It has remained stable, due to strong
market signals and the post-Covid-19
return to office.
The risk related to Capital allocation was
considered in the context of our refreshed
strategy and move into urban mixed-use
neighbourhoods with associated residential
units. The risk has remained largely stable
but will be reviewed again as delivery of
our strategy progresses.
The last significant change has been the
inclusion of Development strategy risk
amongst our principal risks. Given the
planned increases in our development
pipeline, especially following the acquisition
of U+I and MediaCity, it was deemed
appropriate to include this risk.
Other changes in principal risks to note were:
→ Climate change – Net risk reduced as
the further planning and development
of our fully costed plan to achieve net
zero has reduced the transitional element
of the risk. Physical elements have
remained constant.
→ People and skills – This risk largely relates
to succession planning risk for senior
management. Progress on delivering the
strategy and the enterprise value created
as a result have increased the potential
impact of an unexpected departure of
a key member of the leadership team.
This risk has also increased to reflect
increasing attrition rates due to external
market conditions and a buoyant
recruitment market post pandemic.
→ Major health, safety or security incident –
The likelihood of a major health, safety
or security incident was briefly elevated
during the year as a result of the
acquisitions of U+I and MediaCity
properties, which temporarily increased
uncertainty over these recently acquired
assets. We have since reduced the
likelihood of the risk as we have now fully
evaluated the assets and established risk-
prioritised integration plans.
→ Information Security and Cyber threat –
The risk of information security and cyber
incidents has increased due to the
prevalence of ransomware attacks,
though the net risk is unchanged as
Landsec’s defences have sought to
match and offset this increase. Following
the acquisition of U+I, steps are being
taken to migrate U+I staff and data/
systems to the Landsec IT environment.
The principal risk heatmap is shown below
which shows the relative position of each
risk before mitigating controls (gross) and
after controls (net).
Strategic ReportLandsec Annual Report 2022 Our risk
assessment
The Group Risk Register consists
of 22 risks in total, with nine
strategic, ten operational risks
and three legal and compliance
risks. The principal risks are a
sub-set and represent the most
significant items that are
considered by the Board and
Audit Committee.
Map key
Before mitigating actions
After mitigating actions
T
C
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3
9
8
4
5
1
6
1
7
2
4
9
2
3
7
6
5
8
Low (<25%)
Medium (26-50%)
High (51-75%)
Very high (76-100%)
PROBABILITY
Principal risks overview
1 Retail and hospitality occupier market S
2 Office occupier market S
3 Macroeconomic outlook S
4 Capital allocation S
5 Development strategy S
6 Climate change S
7 People and skills S
8 Major health, safety and security incident O
9 Information security and cyber threat O
Key: S Strategic risk O Operational risk
CHANGE IN THE YEAR
Decrease
No change
No change
No change
New risk
Decrease
Increase
No change
No change
Strategic ReportLandsec Annual Report 2022
62
Principal risks and uncertainties
continued
1 Retail and hospitality occupier market
Executive responsible | Colette O’Shea
Changes in consumer
behaviours leading to a change
in demand for retail or
hospitality space and the
consequent impact on income
and asset values.
Example KRIs
→ Number of people visiting
Landsec assets
→ UK net retail openings and
shopping centre vacancy rates
→ Void rates across our portfolio
→ Percentage of lease expiries over
five-years
→ Customer credit risk and tenant
counter-party risk
Mitigation
→ Retail leadership team monitor
key risk indicators
→ Management accounts include
lease expiries, breaks, regears
and compare new lettings
against estimated rental value
→ Customer relationship
management monitors customer
base performance
→ Brand Account, Channel
Management and Guest
Experiences teams established
→ Customer satisfaction surveys
→ Credit policy and process defines
acceptable level of credit risk
→ Finance reviews customers at risk
and agrees the best plan of action
CHANGE IN YEAR | DECREASE
This risk has now slightly decreased
following the significant reductions
in valuations and the impact of the
pandemic experienced in the past
two years.
We completed 228 lettings totalling
£20m –similar to 2019/20 – on
average 2% ahead of ERV, which has
contributed to the reduction in the
vacancy levels.
Despite a more positive outlook,
the business faces macroeconomic
headwinds such as inflation,
consumer spending, challenges on
staffing and disruption in the global
supply chain. We are also aware of
the potential for future pandemic
related impacts on retail.
2 Office occupier market
Executive responsible | Colette O’Shea
Changes in office use leading to
a long-term change in demand
for office space and the
consequent impact on income
and asset values.
Example KRIs
→ Office usage percentages
→ Percentage of lease expiries over
our five-year plan
→ Void rates across our portfolio
→ Like-for-like rental income metrics
→ Customer and space churn
→ Serviced office take-up
→ Vacancy rate of secondary space
versus vacancy prime net zero space
Mitigation
→ Customer relationship
management monitor our
customer base
→ Office leadership team review KRIs
each month
→ Monthly management accounts
review lease expiries breaks,
regears and compare new lettings
against estimated rental value
→ Customer satisfaction measured
regularly
→ Our Insight team holds a Future of
Work forum examining disruption
themes and megatrends in ways
of working
→ Forward looking market intelligence
information reviewed regularly
→ Market-led demand and customer
expectations for environmentally
sustainable office space is closely
monitored
→ Robust credit policy and process
and Finance reviews customers
at risk
CHANGE IN YEAR | NO CHANGE
There remains some uncertainty
as organisations review their
office space requirements to
reflect the change towards hybrid
work patterns.
However, we have seen increased
confidence from overseas investors
who are looking past the pandemic
and are showing a readiness to
invest in prime offices and the net
position for Grade A office space
is positive.
Equally we have seen some
regearing and upsizing by occupiers
and we are engaging with tenants
in new space.
Our assets are supported by the
continued differentiation of our
product offerings aligned to
customer needs, including our
flexible office products.
Balancing the remaining uncertainty
with recent positive market signals
has led us to hold the risk constant.
Strategic ReportLandsec Annual Report 2022 3 Macroeconomic outlook
Executive responsible | Mark Allan
Changes in the macro-
economic environment results
in reduction in demand for
space or deferral of decisions
by occupiers. Development
projects may be started in
a positive market, but be
completed in a recession due
to the length of build projects.
Example KRIs
→ UK Gross Domestic Product
→ UK household spending levels
→ Inflation rate
→ Employment intentions
→ Interest rates
→ Business confidence
→ Our loan to value ratio
Mitigation
→ Key risk indicators monitored
→ Scenarios are modelled based on
plausible economic trajectories
→ Our Research team prepare a
report for Executive Leadership
Team and Investment Committee
on macroeconomic and internal
risk metrics
→ 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
→ Our business portfolios prepare
a quarterly report reviewing the
market risk for each of our sectors
CHANGE IN YEAR | NO CHANGE
The UK economy has been
recovering at a rapid rate, fuelled
by the reopening of many sectors,
but significant risks to recovery
remain, most notably inflation at a
30 year high and the war in Ukraine.
Surging bills are creating an inflation
squeeze for households, with
consumer confidence in the UK
down to a near all-time low in March
as a result. Still, there is c. £170bn of
excess savings from the pandemic
(7% of GDP) and employment is
strong, which should absorb part
of the pressure on spending. Future
economic impact of Covid-19 cannot
be ruled out.
63
Downside factors that will impact
recovery and growth include:
→ High inflation
→ Interest rate rises
→ Pressure on household spending
business costs and tax rises
→ Supply chain disruption
Considering the recovery in the past
12 months and the future outlook,
our overall view is that the risk has
remained stable.
4 Capital allocation
Capital allocated to specific
assets, sectors or locations
does not yield the expected
returns i.e. we are not effective
in placing capital or recycling.
Specifically:
→ Mixed-use urban neighbourhood
developments do not yield
expected returns
→ Development of assets not
matched to expected demand
→ Retaining assets with low yields
which should be recycled
Example KRIs
→ Committed Development pipeline
10% GDV
Executive responsible | Colette O’Shea
→ Portfolio liquidity
→ Loan to value
→ Headroom versus development
capital expenditure
→ Speculative development,
pre-development and trading
property risk exposure
→ Group hedging
→ Net debt
Mitigation
→ Capital disciplines and KRIs
monitored by the Investment
Committee and ELT on a
monthly basis
→ Detailed market and product
analysis to enable optimal
investment decisions
→ Robust and established governance
and approval processes, including
the Investment Committee
→ Investment Appraisal Guidelines
define the key investment criteria,
the risk assessment process, key
stakeholders and the delegations
of authority
CHANGE IN YEAR | NO CHANGE
We have a clear view of the scale of
the opportunity in each sector and
relative returns achievable across
Central London, Major retail
destinations and Mixed-use urban
neighbourhoods. The acquisition of
U+I and MediaCity brings experience
of delivering mixed-use urban
neighbourhood developments.
We have reviewed our capital plan
following the pandemic and remain
focused on recycling capital out of
mature retail and office assets into
growth sectors. Landsec embraces a
robust, systematic approach to
capital allocation, providing us with
the flexibility in our balance sheet to
expedite and progress existing
developments if required. Recycling
capital from assets which do not offer
opportunities for us to add value
remains a core part of our strategy.
Overall, our view is that the risk has
remained constant over the year.
5 Development strategy
Executive responsible | Colette O’Shea
We may be unable to generate
expected returns as a result
of changes in the occupier
market for a given asset during
the course of the development,
or cost/time overruns on
the scheme.
Example KRIs
→ Take up level for offices
→ Tender price inflation
→ Monitor Build to sell/Build to rent
ratios to determine phasing
approach of development(s)
Mitigation
→ Development strategy addresses
development risks that could
adversely impact underlying
income and capital performance
→ A detailed appraisal is undertaken
by the Investment Committee
prior to committing to a scheme
→ Financial modelling and scenario
planning is used to determine
expected yields
→ Tested project management
approach and highly experienced
development team
→ Control processes over key risk areas
including: project organisation and
reporting; financial management;
quality; schedule; change; risk and
contingency management; health
and safety; and project objectives
→ Each project is supported by
internal stakeholders in
Operations, Sustainability and
Tech as evidenced through key
monitoring reviews and gateway
sign-offs
→ Strong community involvement
in the design process for our
developments
→ Early engagement and strong
relationships with planning
authorities
CHANGE IN YEAR | NEW RISK
Our development programme has
increased significantly and therefore,
the risk associated with our future
development programme is greater
now and this is a key driver of value
creation for the business.
Our mixed-use urban neighbourhoods
strategy is currently in the early stages
which allows sufficient time to address
the challenges.
Strategic ReportLandsec Annual Report 2022 64
Principal risks and uncertainties
continued
6 Climate change
Climate change risk has two
elements:
1) Transition – Our commitment to
reduce Landsec’s carbon footprint
by 2030 is not met in time or
achieved at a significantly higher
cost than expected leading to
regulatory, reputational and
commercial impact.
2) Physical – Failure to mitigate
physical impact on Landsec assets
from climate change.
Example KRIs
→ Energy intensity
→ Renewable electricity
→ EPC ratings
→ Operational carbon emissions
→ Embodied carbon for new
developments
→ Portfolio natural disaster risk
Executive responsible | Chris Hogwood
Mitigation
→ Fully costed net zero transition
investment plan
→ Delivery of the net zero plan
overseen by the Energy and
Decarbonisation Steering
Committee
→ Climate risks and opportunities for
potential acquisitions assessed
against our Responsible Property
Investment Policy
→ Developments designed to be
resilient to climate change and
net zero both in construction
and operation
→ All properties comply with
ISO 50001 Energy Management
System
→ We continue to monitor portfolio
exposure to physical climate risks
and we review mitigation actions
for sites located in high-risk areas
CHANGE IN YEAR | DECREASE
The transitional risks of climate
change have reduced since the half
year as we have fully costed and
committed to invest £135m to
achieve our science-based net zero
target by 2030.
The fund will be used to finance a
series of initiatives over the next
eight years to reduce our carbon
footprint and drive innovation and
best practice across the wider
industry. This will include initiatives
like optimising our building
management systems, replacing
gas-fired boilers with electric
systems like air-source heat pumps
and investing in renewable energy.
7 People and skills
Executive responsible | Barry Hoffman
Inability to attract, retain
and develop the right people
and skills to drive and deliver
our strategic objectives, grow
enterprise value and meet
shareholder expectations.
Example KRIs
→ Employee turnover levels
→ High potential employee turnover
→ Employee engagement score
→ Succession planning up to date
→ Time to hire
Mitigation
→ Executive remuneration and
long-term incentive plans are:
• benchmarked
• overseen by the Remuneration
Committee
• aligned to the Group and
individual performance
→ Regular reviews of succession
plans for senior and critical roles
→ Remuneration plans for other key
roles are benchmarked annually
→ The talent management
programme identifies high-
potential individuals
→ Clear employee objectives and
development plans
→ Health and Wellbeing Statement
of Practice
→ Regular employee engagement
surveys
CHANGE IN YEAR | INCREASE
The risk has increased as we are now
in the execution phase of our new
strategy and share price and
enterprise value have increased over
the past six months. As a result,
succession planning becomes even
more relevant as the unplanned exit
of key individuals could have a more
significant impact.
The risk has also increased due to
a combination of voluntary and
forced attrition due to ongoing
transformation programmes.
Further, a buoyant employment
market post pandemic has
highlighted a skills gap in certain
sectors and pushed up salary levels
that have affected retention levels.
Changes in our management team
and the acquisition of U+I has
helped to bring new skills and
capabilities into our business.
Strategic ReportLandsec Annual Report 2022 65
8 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
→ Reputational impact
Example KRIs
→ Number of reportable health and
safety incidents
→ Progress of fire stopping and
cladding project against agreed
milestones
→ Health and safety and training
completion
→ Security Service national
threat level
→ Security risk assessment results
of our properties
Mitigation
→ Regular reviews by The Health,
Safety and Security Committee,
(Chaired by the COO), ELT
and Board
→ Health & Safety management
system accredited to ISO 45001
standard
→ Fire safety management system
accredited to the BS 9997
standard
→ Accelerated asset integration
assessment process for
new acquisitions (e.g. U+I
and MediaCity)
→ Taskforce of internal SMEs and
independent fire engineering
firm progressing cladding project
at pace
→ H&S audits by Internal Audit,
plus annual programme of
data-led and second line audits
by H&S team
→ Legal and best practice
compliance monitored in real time
→ Strict H&S standards applied to
the selection of key service and
construction partners; assessed
by KPIs and regular reviews
→ All our properties have completed
security risk assessments, which
drives the physical security
response
CHANGE IN YEAR | NO CHANGE
The likelihood of a major health,
safety or security incident was
briefly elevated during the year as
a result of the acquisitions of U+I
and MediaCity properties, which
temporarily increased uncertainty
over these recently acquired assets.
We have since reduced the likelihood
of the risk as we have now fully
evaluated the assets and
established risk-prioritised
integration plans.
9 Information security and cyber threat
Executive responsible | Barry Hoffman
Data loss or disruption to
business processes, corporate
systems or building
management systems resulting
in a negative reputational,
operational, regulatory or
financial impact.
CHANGE IN YEAR | NO CHANGE
The risk has remained stable;
however, we have continued to
develop and invest in the maturity
of our mitigating controls as a
result of an increasing number
of attempted cyber attacks from
actors with rapidly improving tools
and processes. This includes cyber
security frameworks for our property
and corporate environments to drive
a structured risk reduction
programme.
Example KRIs
→ Speed of threat and vulnerability
detection (against agreed Pen
test/External Assurance Schedule)
→ Speed of threat and vulnerability
resolution
→ Number of major cyber incidents
or data loss events
→ Incident Response and Recovery
Plan reviewed and tested
→ Completion rates on cyber
security and data protection
training
→ Number of critical, strategic or
infosec partners without current
cyber security diligence
Mitigation
→ IT security policies set out our
standards for security and
penetration testing, vulnerability
and patch management, data
disposal and access control
→ A dedicated Cyber Security team
and Data Protection Officer
→ Quarterly assessment that key IT
controls are operating effectively
→ All colleagues complete
mandatory cyber security and
GDPR training
→ Third-party IT providers complete
an information security vendor
assessment
→ We work closely with our IT service
partners to manage risk and
improve technical standards
→ Defined technical IT standards
for all building systems
→ Extensive use of cloud-based
systems
→ All our properties have business
continuity, crisis management
and IT disaster recovery plans that
are tested regularly
→ Regular penetration testing across
our IT estate and vulnerability
management system
Strategic ReportLandsec Annual Report 2022 66
Principal risks and uncertainties
continued
→
TASK FORCE ON CLIMATE-RELATED
FINANCIAL DISCLOSURES (TCFD) STATEMENT
With time running out to address the
climate crisis, we recognise the risks and
opportunities posed by climate change
on our business model and strategy.
Climate change was introduced as a
principal risk in 2020 and we were one of
the first companies to report our approach
against the recommended disclosures of
the Task Force on Climate-Related Financial
Disclosures (TCFD) in 2017. The focus this
year has been on evolving our approach
to identifying and assessing the risks
of climate change employing a new
methodology; publishing a fully-costed plan
on the actions we need to take to meet our
science-based carbon reduction target
transitioning to net zero; and incorporating
these actions into our financial statements.
This statement is consistent with the
requirements of the London Stock Exchange
(LSE) Listing Rule 9.8.6 R and all 11 TCFD
Recommendations and Recommended
Disclosures and can confirm that we have
made climate-related financial disclosures
for the year ended 31st March 2022 in
relation to governance; strategy; risk
management and metrics and targets.
Governance
Climate change is considered a principal
risk and as such is governed and managed
in line with our risk management process.
More details are provided within the
Managing risk section on pages 58-59
Our CEO has overall responsibility for
climate-related risks and opportunities.
The Board is responsible for the oversight
of our approach to sustainability and of
climate-related risks and opportunities
impacting the business. The Board is
updated on our sustainability and climate-
related performance twice a year and this
year has focused on the impact of climate
risks and opportunities on our strategy,
revising our approach to sustainability
to ensure it is still relevant and monitoring
performance against our science-based
target. As climate change is considered
a principal risk, the Board considers the
impact of climate risks when discussing
Landsec strategy and long-term success,
including significant investment decisions.
The Audit Committee supports the Board in
the management of risk and is responsible
for reviewing our principal risk register at
least twice a year, the effectiveness of our
risk management and internal control
processes. This year, the Committee
focused on increasing their understanding
of the TCFD recommendations with a
teach-in session delivered by an external
advisor and the sustainability team, which
supported the Committee in their review
of the TCFD disclosures.
Ongoing ownership and management of
climate-related risks is carried out by the
Executive Leadership Team (ELT), chaired
by our CEO and supported by our CFO, COO
and Managing Directors. ELT is responsible
for developing the sustainability strategy
to ensure it addresses our relevant
environmental, social and governance
(ESG) risks and opportunities including
those pertaining to climate change.
Sustainability and climate risks are
discussed quarterly or more often if required.
The ELT is supported by the Sustainability
Forum, a senior management group
responsible for delivering programmes
of work to meet our sustainability
targets and to mitigate climate risks.
The Sustainability Team, led by the Head
of ESG and Sustainability, is responsible
for co-ordinating the delivery of the
sustainability strategy and updating
the climate risks, collaborating with all
areas of the business to ensure appropriate
mitigation and adaptation plans are
in place.
Our commitment to address climate
change risks is embedded across the
business with climate-related targets linked
to Long-Term Incentive Plans (LTIP) and
employees’ remuneration, including our
science-based carbon reduction target,
energy efficiency and embodied carbon
from new developments.
A diagram showing the governance
structure and reporting lines to manage
climate-risk is provided within Our approach
to sustainability section on page 48.
Strategy
Identifying risks and opportunities
As a UK real estate company, our business
is exposed to both physical and transition
risks and opportunities from climate
change. Physical risks relate to the physical
impacts of climate change such as
flooding events, windstorms, increase in
temperature and sea level rise. Transition
risks relate to the transition to a lower-
carbon economy to avoid the worst physical
impacts of climate change, such as existing
and emerging regulatory changes.
In accordance with the TCFD
recommendations, we’ve assessed these
risks against two science-based scenarios
(below 2°C and 4°C scenarios) and
considered them over two time frames:
short-to-medium term (now until 2030)
and long term (2030–2100).
These timescales have been chosen as from
now until 2030, we are taking actions to
meet our science-based carbon reduction
target mitigating against transitional risks
and with the designed lifespan of our assets
being over 60, identifying long-term risks
until 2100 are important for our investment
and development decisions to ensure our
portfolio remains resilient in the long term.
Below 2°C scenario
This scenario is aligned with the
Intergovernmental Panel on Climate
Change’s (IPCC) RCP 2.6 and Shared
Socioeconomic Pathways (SSPs) SSP1-1.9, in
which there is a high likelihood that global
temperatures will not exceed more than
2°C over pre-industrial levels by the end
of the century. The scenario assumes
proactive and sustained action to reduce
carbon emissions over the next 30 years
to build a low carbon economy. For this
scenario to be possible, global efforts to
mitigate climate change will need to
intensify immediately, led and supported
by strong policy, regulatory and legal
Strategic ReportLandsec Annual Report 2022 67
responses. Furthermore, rapid investment
in low-carbon technology will need to
occur, with widespread adoption of
sustainable consumption, business
practices and lifestyles.
In this scenario, predicted changes in
the UK climate are marginally higher
year-round temperatures and lower
precipitation in summer. The risk to
our business under this scenario from
flooding and windstorm remains within
the current and natural variability.
4°C scenario
This scenario is aligned with the IPCC’s
RCP 8.5 and SSP 5-8.5, where climate
change will increase by up to 4°C by 2100.
The scenario assumes that competitive
markets, innovation and participatory
societies act to produce rapid growth
at whatever costs. There is an increasing
adoption of resource and energy intensive
lifestyles around the world and the push
for economic and social development is
coupled with the exploitation of abundant
fossil fuels.
In the 4°C scenario, in the lead-up to 2030,
limited actions are taken to mitigate
climate change, current levels of
investment in low-carbon technology
continue, and emissions continue to rise
along their current trajectory. In the period
between 2030 and 2100, the physical
effects of climate change begin to intensify
rapidly, and government, business and
society will need to adapt to the effects.
In this scenario it is likely we will experience
an increase in flash flooding, river floods,
coastal flooding and storm surges.
Increases in year-round temperature
are predicted, with summer temperatures
at 5.4°C higher and winter temperatures
at 4.2°C higher than the current climate.
Higher levels of precipitation are predicted
in winter at up to +35%, and lower levels
of summer precipitation are predicted at
down to -47%.
We’ve assessed physical and transitional
risks for our business against these scenarios
and the output of our scenario analysis is
summarised below. As we continue to evolve
our approach to identify and assess climate
risks, this year we have used MSCI’s Climate
Value at Risk (VaR) methodology to assess
our portfolio exposure to physical climate
risks. Physical risks are assessed based on
the geolocation of assets and their exposure
to individual hazards as a consequence of
climate change.
Short term (until 2030)
High transition risks associated with aggressive mitigation
actions to reduce emissions
→ Enhanced existing and emerging regulations, for example Minimum
Energy Efficiency Standards (MEES) raised requirements for all non-
domestic rented properties to meet a minimum EPC B, potentially
impacting nearly 64% of our portfolio value
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
→ Warmer summers with +1.7°C maximum temperatures but no significant
→ Increased pricing of carbon emissions expected to reach £87/tCO2
risk of heat stress
($100/tCO2), impacting operational costs
→ Change in customer expectations regarding offices, as more companies
committed to becoming net zero and set science-based targets
No significant changes to current physical risks (as described below).
Transition risks remain high as further mitigation actions and legislative
changes are expected to continue driving reductions in carbon emissions.
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.
→ 2.1% of portfolio located in areas highly exposed to river flood with
a return period of 100 years
→ 4.6% of portfolio located in areas highly exposed to storm surge
(coastal flooding) with a return period of 100 years
→ Significantly hotter summers with +4°C to +7.6°C maximum temperatures
→ Sea level rise between 21-80cm on average which would put additional
strain on the Thames Barrier
→ 21 to 56% increase in river peak flows and potential flood defence failures
across the UK, leading to higher portfolio exposure
As consequence of the changes in climate and associated physical risks,
significant increase in risks linked with adaptation measures are expected.
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In line with our risk management and
control framework, we use a risk scoring
matrix to ensure risks are evaluated
consistently and actions are prioritised
accordingly. Our matrix considers likelihood,
financial impact to income and capital
values and reputational impact. When we
evaluate risk, we consider the inherent risk
(before any mitigating action) and the
residual risk (the risk that remains after
mitigating actions and controls). From this,
we identify principal risks (current risks with
relatively high impact and certainty) and
emerging risks (risks where the extent and
implications are not yet fully understood).
Based on risks identified in our scenario
analysis, climate change is considered a
principal risk in our risk register and the
following climate-related risks have been
prioritised, due to the significant impact to
our business strategy in the short-medium
timeframe: enhanced MEES regulation with
minimum EPC B by 2030 and change in
customer preferences, requiring reduction
in carbon emissions and energy
consumption across our portfolio.
More details about our risk identification
and assessment processes are provided within
the Managing risk section on pages 58-59
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.
Strategic ReportLandsec Annual Report 2022
68
Principal risks and uncertainties
continued
Impact on strategy
Our strategy to address climate-related
risks and opportunities spans all areas of
our business including investment and
divestments, development and operations,
and is a critical element of our approach
to sustainability, Build well, Live well, Act
well which seeks to design, develop and
manage buildings in ways that enhance
the health of the environment and improve
the quality of life for our people, customers
and communities, now and for future
generations.
Investment and divestment
Our Responsible Property Investment
Policy details how we assess climate risks
during the sale and acquisition of assets.
We conduct thorough due diligence
understanding the asset’s performance
metrics, including: energy consumption,
energy performance certificates and other
sustainability certifications, flood risk
assessment and embodied carbon
assessment.
Development
We are committed to design and build net
zero buildings. For each development, we
aim to reduce emissions associated with
construction by focusing on prioritising
retention and material reuse; adopting
smart design; employing modern methods
of construction and standardising core
construction elements to reduce waste.
We’re also driving change in our supply
chain, balancing upfront carbon with whole
life carbon to ensure that our design
decisions do not negatively impact the
longer term carbon impacts of our assets.
Additionally, our developments are typically
designed to last over 60 years, and
therefore we’re designing buildings to be
more resilient and able to cope with our
changing climate. We manage the impact
of physical risks such as higher cooling costs
and lower heating demand by adapting
building services design, reducing heating
capacity and maintaining summer cooling
capacity to cope with heatwaves. The
performance of our facades and fabric
materials is designed to address the
expected higher temperatures to minimise
energy demand, as well as to be able to
withstand extreme temperatures and
increased wind speeds to avoid
maintenance issues or damage to buildings
in future. Our drainage strategies are
designed to mitigate foreseen rain levels
and flood risks using physical and nature-
based solutions.
Operations
We operate our buildings in accordance
with our company-wide Environmental
and Energy Management Systems, which
are certified to ISO 14001 and ISO 50001
respectively, having Energy Reduction Plans
(ERPs) and action plans for all our assets,
which outline how we will reduce the energy
use and carbon emissions of the asset
effectively. Through these plans, we will
continue to plan and deliver improved
controls and efficient energy systems.
The ERPs form part of the operational
financial planning for each asset.
For all assets located in areas highly exposed
to physical risks, we have developed plans
to ensure that adequate protection and
mitigation plans are in place, including
Business Continuity and Emergency
Response Plans.
To meet our science-based target and stay
ahead of impending 2030 Minimum Energy
Efficiency Standards (MEES) requirements of
minimum EPC B, we’ve developed a £135m
net zero transition investment plan that
will be used to fund the following initiatives:
→ Optimising building management
systems across our portfolio, deploying
innovative technologies such as artificial
intelligence to reduce operational energy
consumption;
→ Reducing our reliance on fossil fuels
replacing gas-fired boilers with electric
systems such as Air-Source Heat
Pumps (ASHP);
→ Increasing on-site renewable electricity
generation by installing solar PVs across
our retail assets; and
→ Engaging and collaborating with our
customers on energy efficiency to drive
down consumption within their spaces.
Further details on our transition to net zero
are provided on pages 49-52
As we continue to build relationships with
our suppliers, we ask suppliers to provide
climate-related information such as carbon
emissions, energy consumption and
relevant climate-related targets. This
information helps us to better understand
suppliers operations and prioritise future
engagement activities.
Impact on financial planning
We have considered how these climate-
related risks and opportunities may impact
on our financial statements. For the current
year the main impact is the recognition of
impending ESG investment relating to our
£135m net zero transition investment fund.
We have factored key actions such as the
installation of air source heat pumps and
refurbishment costs to increase EPC ratings
into the asset valuations of relevant assets.
Resilience of our strategy and
business model
Our analysis gives us confidence in
the resilience of our strategy, as we’re
supporting the transition to a low-carbon
world whilst managing the impact of
climate-related risks to our portfolio.
We recognise our strategy and adaptation
measures may need to evolve in the long
term, particularly under a 4°C scenario.
Strategic ReportLandsec Annual Report 2022 Under a 4°C scenario, our analysis
demonstrates that changes to our
strategy and financial planning will be
required. This will likely include divestment
of assets which are less resilient to extreme
heat and rainfall, or investment into
infrastructure to limit the impact of
flooding and coastal surge. This scenario
could also result in changes to our
customers’ and supply chain partners’
businesses, including business failures or
supply chain disruption. Increased due
diligence in supply chain selection will
be required, particularly considering the
sourcing of construction materials which
may be processed or manufactured in
countries where the effects of climate
change are more extreme.
Risk management
Climate change is identified as a principal
risk and therefore is governed and
managed in line with our risk management
and control framework. This framework
enables us to effectively identify, assess and
manage climate-related risks – evaluating
the potential impact, the consequences,
allocation of risk owner, description of
controls and control owners, and finally
an evaluation of any residual risks.
As part of its overall responsibility for
risk, the Board undertakes a bi-annual
assessment, taking account of those risks
that would threaten our business model,
future performance, solvency or liquidity
as well as the Group’s strategic objectives.
Scenario modelling, including the climate
scenario analysis detailed on pages 66-67,
is used to better understand the impact
of these risks on our business model when
placed under varying degrees of stress,
enabling interdependencies to be considered
and plausible mitigation plans to be tested.
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 senior leader responsible for climate-
related risk is the Head of ESG and
Sustainability, who ensures appropriate
mitigation actions are taken. Our climate-
change principal risk includes both
69
→ Reduce energy intensity by 45% by
2030 compared with 2013/14 baseline
→ Source 85% of total energy (electricity,
gas, heating and cooling) consumption
from renewable sources by 2030
→ Ensure 100% of assets located in areas
highly exposed to climate risks have
adaptation measures in place
Additional targets and relevant
performance against targets are further
discussed within Our approach to
sustainability section on pages 44-57 and
Additional information on pages 204-206
In addition to targets, we also monitor
a number of climate-related metrics
that support our risk assessment, as
provided below:
transition and physical climate risk and
is monitored on a quarterly basis using
a series of Key Risk Indicators as detailed
in the Metrics and Targets section.
Our risk management process to
address our principal risks and uncertainties,
including climate change is discussed further
on pages 58-65
Metrics and Targets
In order to address climate change risks, we
have set ambitious climate-related targets:
→ Science-based target, aligned with a
1.5°C scenario to reduce our carbon
emissions (tCO2e) by 70% by 2030
compared with a 2013/14 baseline
→ Reduce embodied carbon across our
developments by 50% compared with
a typical building by 2030 by prioritising
asset retention where possible, smart
design and using sustainable materials
Key Metrics and Targets
Percentage of portfolio which is BREEAM certified
(by value)
60% 57%
2021/22
2020/21
Percentage of portfolio which is already EPC B or above
(by value)1
Percentage of portfolio with EPCs rated below E or with
expired EPC rating (by value)1
36%
4%
Investment in energy efficiency measures implemented
in the year
£1.3m £1.6m
Estimated annual savings from energy efficiency measures
implemented in the year
£0.6m £0.8m
Percentage value of portfolio located in areas exposed
to a 10% risk of inland, coastal and flash flooding in a
ten-year period2
6.8% 7.2%
Portfolio Climate Value at Risk (VaR) based on aggregated
physical risks 1, 3
4.9%
1. New metric added to the TCFD disclosure in 2021/22.
2 Exposure is based on asset location and doesn’t consider any local flooding protection or existing
mitigation actions in place.
3 The CVaR represents the combined discounted physical risks costs (extreme cold, extreme heat, flooding,
windstorm/tropical cyclones and wildfire) based on probable change in physical climate risks for the next
15 years expressed as a percentage of the portfolio’s value.
Additional carbon emissions data, including full carbon footprint (scope 1, scope 2
and scope 3), is disclosed in our Streamlined Energy and Carbon Reporting (SECR) on
pages 208-210
Strategic ReportLandsec Annual Report 2022
70
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.
considerably worse macroeconomic
conditions than are currently expected,
which forms the basis of the Group’s
‘Viability scenario’.
Given the recent unfavourable 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 Directors’
assessment of the viability of the Group.
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 30 September 2023 from the Group’s
budget. 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
over the year ended 31 March 2022 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 2022.
Viability statement
The viability assessment period
The Directors have assessed the viability of
the Group over a five-year period to March
2027, 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 this is consistent with the
Group’s five year strategic planning horizon.
Process
Our financial planning process comprises
a budget for two financial years and a
strategic plan for five financial years.
Generally, the budget has a greater level
of certainty and is used to set near-term
targets across the Group. The five-year
strategic 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 macroeconomic
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
Strategic ReportLandsec Annual Report 2022 71
Key risks
The table below sets out those of the Group’s
principal risks (see pages 60-69 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.
Principal Risk
Viability scenario assumption
Retail and hospitality occupier market
Changes in consumer behaviours leading to a
change in demand for retail or hospitality space
and the consequent impact on income and
asset values.
→ Increased customer failures lead to increased
void periods, negative valuation movements
and downward pressure on rental values over
the period
→ A post-Covid-19 recovery seen in the 2022
actuals and modelled into the budget does
not arise
Office occupier market
Changes in office use leading to a long-term
change in demand for office space and the
consequent impact on income and asset values.
→ Reduced demand leads to increased void
periods, negative valuation movements and
downward pressure on rental values over the
whole assessment period
Macroeconomic outlook
Changes in the macroeconomic environment
results in reduction in demand for space or
deferral of decisions by occupiers.
Development projects may be started in a
positive market, but be completed in a recession
due to the length of build projects.
→ Declines in capital values and outward yield
movements across offices, retail and leisure
→ Additional impact of a higher inflationary
market captured within costs
→ No issuance of additional fixed term bonds
through the assessment period
Capital allocation
Capital allocated to specific assets, sectors
or locations does not yield the expected returns
i.e. we are not effective in placing capital
or recycling.
→ Capital that is accretive to the portfolio but
not essential has been removed
→ Any uncommitted budgeted acquisitions,
disposals and developments do not take place
due to reduced liquidity
Development strategy
We may be unable to generate expected returns
as a result of changes in the occupier market for a
given asset during the course of the development,
or cost/time overruns on the scheme.
→ A reduction in recognised development
profits for committed schemes that will
continue to be advanced over the viability
assessment period
We considered whether the Group’s climate change principal risk would impact our
assessment of the Group’s viability but concurred that as we have fully costed and
committed to invest £135m to achieve our science-based net zero target by 2030, this
mitigated the risk sufficiently.
Impact on key metrics
We have assessed the impact of these
assumptions on the Group’s key financial
metrics over the assessment period, including
profitability, net debt, loan-to-value ratios
and available financial headroom.
Key Metrics
Table 29
Viability
scenario
31 March
2027
31 March
2022
Security Group LTV
36.4%
40.7%
Adjusted net debt
£4,179m £4,091m
EPRA net tangible
assets per share
Available financial
headroom
1,063p
856p
£1.1bn
£(206)m
The viability scenario represents a
contraction in the size of the business over
the five-year period considered, with the
Security Group LTV at 40.7% in March 2027,
its highest point in the assessment period.
The Group maintains a positive financial
headroom from March 2022 through to
March 2026 and the Group will only be
required to secure new funding, or exercise
extension options in the March 2027 financial
year for the minimum of £0.2bn of its debt
facilities 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 2027.
Strategic ReportLandsec Annual Report 2022 72
Non-financial information
statement
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: landsec.com/sustainability/
governance-policies, landsec.com/about/corporate-governance
and landsec.com/sustainabilityour-stakeholders/our-employees.
Topic
Our policies and standards that govern our approach
Where information can be found
in this report
Build well – our commitment to
the environment on pages 49-52
Environmental
matters
Employees
Respect for
human rights
Social matters
→ 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
Our people and culture
and externally, in line with our values
on pages 38-43
→ 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
→ Right to work policy: provides best practice guidance to those
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
Act well – our commitment
to being a responsible business
on pages 56-57
Directors’ Report
on pages 128-130
Our approach to sustainability
on pages 44-48
Our people and culture on
pages 38-43
Strategic ReportLandsec Annual Report 2022 73
Where information can be found
in this report
Act well – our commitment
to being a responsible business
on pages 56-57
Audit Committee Report
on pages 102-107
Topic
Our policies and standards that govern our approach
Anti-bribery and
corruption
→ 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:
our employees must act in the best interests of the Company
and not make decisions for personal gain
→ Speak up 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
Description of principal
risks and impact of
business activity
Description of
business model
→ We consider both external and internal risks, evaluate
Managing risk on pages 58-59
them, assess the impact and put in place mitigating actions
and controls
Principal risks and uncertainties
on pages 60-69
Report of the Audit Committee
on pages 102-107
→ 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 14-15
Non-financial key
performance indicators
→ In addition to our financial performance metrics,
we set ourselves a range of KPIs for the year including
sustainability targets
Key performance indicators
on page 19
The EU taxonomy
The EU taxonomy has been developed to support the transformation
of the EU economy to meet its European Green Deal objectives,
helping to redirect capital flows towards a more sustainable
economy. It aims to set a common language and clear definition
to help companies, investors and policymakers understand whether
an economic activity is environmentally sustainable.
As a UK company, Landsec is not in scope of the EU Taxonomy
Regulation. However, we recognise the importance of providing our
investors and stakeholders with information about the sustainability
of our activities and portfolio of assets. For that reason, we have
started working towards voluntarily disclosing information that
can help investors to assess the alignment of our activities with
the EU taxonomy.
The EU taxonomy is a classification system, establishing a list of
sustainable economic activities that substantially contribute to
the EU’s six environmental objectives:
1. Climate change mitigation
2. Climate change adaptation
3. The sustainable use and protection of water and marine resources
4. The transition to a circular economy
5. Pollution prevention and control
6. The protection and restoration of biodiversity and ecosystems
To date, details for only the first two environmental objectives were
released: climate change mitigation and climate change adaptation.
In addition, the UK has already established a Green Technical
Advisory Group to develop a UK Green Taxonomy, which will
build on the EU taxonomy and will focus on net zero in the UK
context. Taking steps to understand the requirements from the
EU taxonomy, it helps us to prepare Landsec for the incoming
implementation of the UK Green Taxonomy.
In the Build well section on pages 49-52, we provide information
on how we are investing across our portfolio to transition to net
zero, its current EPC ratings, and approach to new developments.
We provide further information on our portfolio EPC ratings
and building certifications in our Sustainability Performance
and Data Report.
This Strategic Report was approved by the Board of Directors on 16 May 2022 and signed on its behalf by:
Mark Allan
Chief Executive
Strategic ReportLandsec Annual Report 2022 74
Introduction from
the Chairman
challenge and debate so we can be
confident we make good decisions for
long-term success of the business. The Board
is supportive of management’s drive for
more empowerment and accountability in
our decision-making through the business.
Workforce engagement
The pandemic has created challenges
for our employees, and the Board is very
conscious that this has impacted our
progress on cultural change. As a Board,
we are therefore keen to increase our
direct engagement with employees and
seek opportunities where we can hear
employees’ views. This helps the Board
to monitor and assess culture effectively.
We introduced our Non-executive Director/
employee breakfasts this year which allow
a small number of employees from across
the business to meet with two Non-executive
Directors on each occasion. Feedback from
our Non-executive Directors and our
employees has been very positive, with
colleagues feeling that their views are
being listened to. It also gives attendees
an opportunity to hear about the
Non-executive Directors’ own perceptions
and experiences.
You can read more about workforce
engagement on page 90
Our purpose and our stakeholders
Our purpose – sustainable places, connecting
communities, realising potential – puts all our
stakeholders at the forefront of the Board’s
decision-making. This has been a key part of
the major decisions that the Board has made
during the year, including the acquisition of
U+I and our 75% stake in MediaCity.
In February, the Board benefited from
meeting with representatives from
Manchester City Council to discuss Mayfield’s
role in the city’s growth agenda, and also
spent time with the U+I management team
understanding the context and vision for
the Mayfield site. The Board also met with
Salford City Council and our joint venture
partner The Peel Group at MediaCity, which
Cressida Hogg
Chairman
Dear shareholder
I am pleased to introduce
the governance section of
this year’s Annual Report.
This section of the report gives more detail
on the governance structures that we have
in place, and how we comply with the UK
Corporate Governance Code.
The Board takes seriously its responsibility
for the long-term sustainable success of
the Company, generating value for our
shareholders and contributing more widely
to society.
As I outlined in my Chairman’s statement
on page 4, this has been a year of delivering
our new strategy as we emerge from the
challenges of the pandemic. Covid-19 has
impacted all aspects of our business and
all our stakeholders. Effective governance
together with the strength of leadership
of our Board provides structure and stability
in times of uncertainty.
Governance and culture
Strategy and culture need to be aligned for
us to achieve our purpose, and governance
has a key role to play in the culture that we
want to create. We want to be a data-
driven, customer-centric business which is
able to respond quickly to the changing
needs of our customers and stakeholders.
However, we also need to ensure that our
governance structures create sufficient
gave the Board a greater understanding
of the mixed-use nature of MediaCity,
the range of customers and an insight into
plans for the second phase of development.
For further information on the Board
and our stakeholders, see pages 87-91
Board and committee changes
There have been a number of changes to
the Board and its Committees this year.
Vanessa Simms joined Landsec on 4 May
2021, and became CFO on 1 June 2021,
succeeding Martin Greenslade. Stacey
Rauch stepped down on 24 June 2021,
having served over nine years on the Board
and as a result of Stacey’s departure, we
made some changes to our committee
composition which you can read about
in our Nomination Committee report on
pages 94-99. The chairs of the Audit and
Remuneration committees report on their
activities through the year later in this
report, and I would like to thank them for
their hard work during the year on behalf
of the Board.
External Board evaluation
This year our Board evaluation was carried
out externally by the advisory firm No 4.
The evaluation concluded that the Board
and its Committees are working well, and
all the Board members feel confident that
the Board is working in a collaborative and
open way. Areas of focus for the year ahead
will be Board and management succession
planning, continued execution of our
strategy, cultural change and continued
focus on Landsec becoming a data-driven
business. Next year’s evaluation will be
conducted internally.
Conclusion
I would like to conclude by thanking
members of the Board for their continued
support and commitment over the past
year. We have all appreciated being able to
hold Board meetings in person once again,
and have enjoyed the benefits of more
informal engagement in face-to-face
meetings both at Board level and with
our employees.
I hope that you find this section of the
report informative and useful.
Cressida Hogg
Chairman
GovernanceLandsec Annual Report 2022 Board of Directors
75
Chairman of the Board
Senior Independent Director
Cressida Hogg
Chairman
Edward Bonham Carter
Non-executive Director*
Years on the Board – Eight (Chairman since July 2018)
Years on the Board – Eight
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Role
Leads the Board, responsible for governance, major shareholder and other
stakeholder engagement.
Role
A sounding board for the Chairman and a trusted intermediary for other
directors and shareholders.
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 brings significant board experience to the Group, together
with a strong corporate background in infrastructure and private equity,
mergers and acquisitions, and investment. Cressida was one of the
co-founders of 3i Group’s infrastructure business in 2005, becoming
Managing Partner in 2009, and she was also Global Head of Infrastructure
at Canada Pension Plan Investment Board between 2014 and 2018.
In addition to her senior executive positions, Cressida has broad experience
as a non-executive in a variety of sectors.
Skills and experience
Edward has significant experience of general management as a former
CEO of a private equity backed and a 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 Group
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.
Cressida chairs the Nomination Committee. Cressida was independent
upon appointment as Chairman.
Other current appointments
Senior Independent Director and Chair of Remuneration Committee,
London Stock Exchange Group plc. Non-executive Director, Troy Asset
Management.
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.
GovernanceLandsec Annual Report 2022 76
Board of Directors
continued
Non-executive Directors
CONTINUED →
Nicholas Cadbury
Non-executive Director*
Years on the Board – Five
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Madeleine Cosgrave
Non-executive Director*
Years on the Board – Three
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Christophe Evain
Non-executive Director*
Years on the Board – Three
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Manjiry Tamhane
Non-executive Director*
Years on the Board – One
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
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 was appointed Chief Financial Officer of International Airline
Group (IAG) in March 2022. Prior to this, Nicholas was Group Finance
Director of Whitbread PLC, a position he held from November 2012 until
March 2022. Before that, he was Chief Financial Officer of Premier Farnell
PLC and Chief Finance Officer of Dixons Plc. Nicholas originally qualified
as an accountant with Price Waterhouse.
Nicholas chairs the Audit Committee and became a member of the
Nomination Committee on 1 June 2021.
Skills and experience
Madeleine is an experienced investor with deep knowledge in relation to
investment, asset management and market dynamics from her extensive
career in the property industry. She is a member of the Royal Institution
of Chartered Surveyors and has been a member of a number of boards.
Madeleine was Managing Director and Regional Head of Europe at GIC Real
Estate until she retired from the role in June 2021. She led GIC’s European
real estate business and was a voting member of the 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
Skills and experience
Christophe has extensive investment experience in private equity, debt and
Manjiry brings over 20 years’ of client and agency side experience in the
other alternative asset classes. As the former CEO of a UK listed company,
data, technology and advanced analytics industry gained from working
he also has management and leadership strengths, having successfully led
in marketing, customer insight and strategy roles. She is Global Chief
the transformation of Intermediate Capital Group PLC (ICG) from a principal
Executive Officer of Gain Theory, a global foresight consultancy, a
investment business into a diversified alternative asset management group
subsidiary of WPP plc. Manjiry was part of a team which founded Gain
with €34bn assets under management. Christophe’s broad experience,
theory in 2015, having previously been Managing Director of another
both as a business leader and an investor, is a valuable asset to the Board.
of WPP’s consultancies also focused on data and analytics, Ohal Ltd.
Having started his career in banking, holding various positions at NatWest
Prior to that, Manjiry spent the first part of her career in the retail sector,
and Banque de Gestion Privée, he joined ICG in 1994 as an investment
latterly as Head of Customer Insight and Strategy at Debenhams. In 2017,
professional, became CEO in 2010 and stepped down from that position in
Manjiry was named as one of the top 20 Women in Data & Technology,
2017. During this time he held various investment and management roles,
led by The Female Lead and Women in Data.
Manjiry became a member of the Remuneration Committee on 1 June 2021.
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.
Christophe chairs the Remuneration Committee. He was appointed a
member of the Audit Committee on 1 June 2021 and has been a member
of the Nomination Committee since 24 March 2022.
Other current appointments
Chief Financial Officer, International Airline Group (IAG).
Other current appointments
None.
Other current appointments
Chairman, Bridges Fund Management. Non-executive Director,
Quilvest Capital Partners.
Other current appointments
Chief Executive Officer, Gain Theory, a subsidiary of WPP plc.
Advisory Board member, Saracens Women’s Rugby.
*Independent as per the UK Corporate Governance Code.
GovernanceLandsec Annual Report 2022 Non-executive Directors
The role of our Non-executive Directors
Our Non-executive Directors are responsible for bringing an external
perspective, sound judgement and objectivity to the Board’s
deliberations and decision-making. They support and constructively
challenge the Executive Directors using their broad range of
experience and expertise and monitor the delivery of the agreed
strategy within the risk management framework set by the Board.
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.
77
Nicholas Cadbury
Non-executive Director*
Years on the Board – Five
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Madeleine Cosgrave
Non-executive Director*
Years on the Board – Three
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Christophe Evain
Non-executive Director*
Years on the Board – Three
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Manjiry Tamhane
Non-executive Director*
Years on the Board – One
Committees
A Audit Committee
N Nomination Committee
R Remuneration Committee
Skills and experience
Skills and experience
Nicholas brings wide-ranging and international financial and general
Madeleine is an experienced investor with deep knowledge in relation to
management experience to the Group gained from working in consumer-
investment, asset management and market dynamics from her extensive
facing businesses, particularly in the retail, leisure and hospitality sectors.
career in the property industry. She is a member of the Royal Institution
He also has extensive commercial and operational knowledge and skills
of Chartered Surveyors and has been a member of a number of boards.
in relation to strategy and IT development. This broader commercial
Madeleine was Managing Director and Regional Head of Europe at GIC Real
perspective adds breadth to Board discussions and enables Nicholas
Estate until she retired from the role in June 2021. She led GIC’s European
to provide effective challenge as Chairman of the Audit Committee.
real estate business and was a voting member of the real estate Global
Nicholas was appointed Chief Financial Officer of International Airline
Investment Committee. Prior to GIC, Madeleine held various positions
Group (IAG) in March 2022. Prior to this, Nicholas was Group Finance
with JLL in London and Sydney. Madeleine’s global real estate experience,
Director of Whitbread PLC, a position he held from November 2012 until
combined with her knowledge and perspective of investment decisions,
March 2022. Before that, he was Chief Financial Officer of Premier Farnell
real estate asset management and market dynamics, is an asset to Board
PLC and Chief Finance Officer of Dixons Plc. Nicholas originally qualified
discussions, especially on all property matters.
as an accountant with Price Waterhouse.
Nicholas chairs the Audit Committee and became a member of the
Nomination Committee on 1 June 2021.
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.
Christophe chairs the Remuneration Committee. He was appointed a
member of the Audit Committee on 1 June 2021 and has been a member
of the Nomination Committee since 24 March 2022.
Skills and experience
Manjiry brings over 20 years’ of client and agency side experience in the
data, technology and advanced analytics industry gained from working
in marketing, customer insight and strategy roles. She is Global Chief
Executive Officer of Gain Theory, a global foresight 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. In 2017,
Manjiry was named as one of the top 20 Women in Data & Technology,
led by The Female Lead and Women in Data.
Manjiry became a member of the Remuneration Committee on 1 June 2021.
Other current appointments
Other current appointments
Chief Financial Officer, International Airline Group (IAG).
None.
Other current appointments
Chairman, Bridges Fund Management. Non-executive Director,
Quilvest Capital Partners.
Other current appointments
Chief Executive Officer, Gain Theory, a subsidiary of WPP plc.
Advisory Board member, Saracens Women’s Rugby.
*Independent as per the UK Corporate Governance Code.
GovernanceLandsec Annual Report 2022 78
Board of Directors
continued
Executive Directors
Company Secretary
CONTINUED →
Mark Allan
Chief Executive
Years on the Board – Two
Vanessa Simms
Chief Financial Officer
Years on the Board – One
Colette O’Shea
Chief Operating Officer
Years on the Board – Four
Liz Miles
Company Secretary
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. Mark is also a member of the Royal
Institution of Chartered Surveyors.
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 extensive experience in finance 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.
Skills and experience
Skills and experience
Colette brings extensive property experience to the Board including
Liz is a solicitor and company secretary with significant experience of listed
investment, asset management and development. She joined Landsec
company governance and compliance. Liz joined Landsec as Deputy Company
in 2003 and was Head of Development, London Portfolio, before being
Secretary in 2017, having previously worked at Vodafone Group Plc in a variety
appointed its Managing Director in April 2014. Colette led the London
of legal and company secretariat roles and prior to that in private practice at
business through its 2010 three million sq ft speculative London development
Linklaters. Liz is a Fellow of the Chartered Governance Institute.
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 the leadership of the Group, implementation of strategy,
managing overall business performance and leading the Executive
Leadership Team.
Role
Works closely with the Chief Executive in developing and implementing
vision and strategy. Responsible for Group financial performance, financial
planning and management of financial risks.
Role
Role
Responsible for operational activity throughout our portfolio.
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.
Other current appointments
In January 2022 Mark became Vice President of the British Property Federation.
Other current appointments
Audit Chair and a Non-executive Director at Drax Group Plc.
Other current appointments
None.
Management committees
Chairman of the Group’s Executive Leadership Team and Investment
Committee. Mark is invited to attend the Audit, Remuneration and
Nomination Committees at the invitation of the chairs.
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.
Management committees
A member of the Group’s Executive Leadership Team and
Investment Committee.
Other Directors on the Board during the year
→ Stacey Rauch stepped down as Non-executive Director on 24 June
2021 after serving nine years on the Board.
→ Martin Greenslade stepped down as Chief Financial Officer on
31 May 2021 having served 15 years on the Board.
GovernanceLandsec Annual Report 2022 Executive Directors
Company Secretary
Gender diversity of Board
56%
Board tenure
Chart 30
44%
50%
17%
79
Chart 31
33%
Female
Male (All Directors)
0-3 years
4-6 years
7-9 years (Non-executive Directors including Chairman)
Mark Allan
Chief Executive
Years on the Board – Two
Vanessa Simms
Chief Financial Officer
Years on the Board – One
Colette O’Shea
Chief Operating Officer
Years on the Board – Four
Liz Miles
Company Secretary
Skills and experience
Skills and experience
Mark brings extensive knowledge and experience of the property sector
Vanessa brings extensive financial experience to Landsec from the property
combined with strong operational leadership and financial and strategic
sector in the UK, most recently as Chief Financial Officer at Grainger plc.
management skills to the Board. Prior to joining Landsec, Mark was Chief
Vanessa has particular expertise in leading and implementing strategic
Executive of St. Modwen Properties PLC for three years. Prior to that he was
change in businesses and substantial experience in senior finance leadership
Chief Executive of The Unite Group PLC from 2006 until 2016. He moved to
roles in a listed environment. Vanessa has extensive experience in finance and
Unite in 1999 from KPMG and held a number of financial and commercial
immediately prior to joining Grainger held a number of senior positions within
roles in the business, including Chief Financial Officer from 2003 to 2006.
The Unite Group PLC, including Deputy Chief Financial Officer. Prior to that
A qualified Chartered Accountant. Mark is also a member of the Royal
Vanessa was UK finance director at SEGRO plc. Vanessa is a Chartered
Institution of Chartered Surveyors.
Certified Accountant (FCCA) and has an executive MBA (EMBA) from
Ashridge Business School.
Role
Role
Responsible for the leadership of the Group, implementation of strategy,
Works closely with the Chief Executive in developing and implementing
managing overall business performance and leading the Executive
vision and strategy. Responsible for Group financial performance, financial
Leadership Team.
planning and management of financial risks.
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 operational activity throughout our portfolio.
Other current appointments
Other current appointments
In January 2022 Mark became Vice President of the British Property Federation.
Audit Chair and a Non-executive Director at Drax Group Plc.
Other current appointments
None.
Management committees
Management committees
Chairman of the Group’s Executive Leadership Team and Investment
A member of the Group’s Executive Leadership Team and Investment
Committee. Mark is invited to attend the Audit, Remuneration and
Committee. Vanessa attends Audit Committee meetings at the invitation
Nomination Committees at the invitation of the chairs.
of the Committee Chairman.
Management committees
A member of the Group’s Executive Leadership Team and
Investment Committee.
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 and prior to that in private practice at
Linklaters. 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.
Other Directors on the Board during the year
→ Stacey Rauch stepped down as Non-executive Director on 24 June
2021 after serving nine years on the Board.
→ Martin Greenslade stepped down as Chief Financial Officer on
31 May 2021 having served 15 years on the Board.
GovernanceLandsec Annual Report 2022 80
Executive Leadership Team
Our Executive Leadership Team is made up of our
Executive Directors and the Managing Directors set
out on this page. It is chaired by our CEO.
Biographies for our Executive Directors, Mark, Vanessa and Colette
can be found on pages 78 and 79
The Executive
Leadership Team
is responsible for
→ Oversight of
development
and execution
of strategy
→ People and
organisation
→
Strategic
performance
→ Major change
initiatives
Barry Hoffman
Managing Director | People and Corporate Services
Marcus Geddes
Managing Director | Central London
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.
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
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.
Role
Marcus is responsible for the performance of our Central London Portfolio
and executing Group investment acquisitions and disposals.
Other current appointments
Barry is a Non-executive Director for international charity Sightsavers.
Other current appointments
Marcus is Vice-Chairman of the Westminster Property Association.
Remco Simon
Managing Director | Strategy & Capital Markets
Joined Landsec January 2022.
Chris Hogwood
Managing Director | Corporate Affairs & Sustainability
Skills and experience
Skills and experience
Remco has over 15 years’ prior experience in international real estate
Chris joined Landsec in 2021 having worked in leading communications
capital markets. Before joining Landsec, Remco was Managing Director
agencies for the previous ten years and before that, in London local
at St. Modwen, with responsibility for strategy, investment and capital
government. He has worked across a range of sectors, from real estate
markets and prior to that worked as director of equity research at BofA
through to infrastructure, retail and tech.
Merrill Lynch and Kempen & Co. He holds a MSc in management and
a BSc in construction engineering.
Role
Role
Remco is responsible for strategic planning, capital allocation and capital
Chris leads our Corporate Affairs and Sustainability teams. His role is jointly
markets activity, providing a much stronger link between our strategy, its
focused on ensuring that our purpose and approach to sustainability is
development and equity capital markets.
embedded within Landsec, and on managing our organisation’s reputation
with media, politicians and the communities in which we operate.
GovernanceLandsec Annual Report 2022 81
Bruce Findlay
Managing Director | Retail
David Heaford
Managing Director | Development
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.
Barry Hoffman
Managing Director | People and Corporate Services
Marcus Geddes
Managing Director | Central London
Skills and experience
Skills and experience
Barry has extensive prior experience in HR. He was previously Group HR
Marcus Geddes is a qualified chartered surveyor with over 20 years’
Director at Computacenter PLC. In addition, he has held various senior
experience in the Central London market. A Cambridge Land Economy
HR roles, both in the UK and internationally. Barry is a Chartered Secretary
graduate, he qualified and spent 13 years at Savills before joining
and has an MBA from Ashridge Business School.
Landsec in 2011.
Role
Role
Barry is responsible for HR including Landsec’s people strategy. His role
Marcus is responsible for the performance of our Central London Portfolio
also incorporates the Company Secretariat and Governance function as
and executing Group investment acquisitions and disposals.
well as delivering IT for the Group.
Other current appointments
Other current appointments
Barry is a Non-executive Director for international charity Sightsavers.
Marcus is Vice-Chairman of the Westminster Property Association.
Remco Simon
Managing Director | Strategy & Capital Markets
Joined Landsec January 2022.
Chris Hogwood
Managing Director | Corporate Affairs & Sustainability
Skills and experience
Remco has over 15 years’ prior experience in international real estate
capital markets. Before joining Landsec, Remco was Managing Director
at St. Modwen, with responsibility for strategy, investment and capital
markets and prior to that worked as director of equity research at BofA
Merrill Lynch and Kempen & Co. He holds a MSc in management and
a BSc in construction engineering.
Role
Remco is responsible for strategic planning, capital allocation and capital
markets activity, providing a much stronger link between our strategy, its
development and equity capital markets.
Skills and experience
Chris joined Landsec in 2021 having worked in leading communications
agencies for the previous ten years and before that, in London local
government. He has worked across a range of sectors, from real estate
through to infrastructure, retail and tech.
Role
Chris leads our Corporate Affairs and Sustainability teams. His role is jointly
focused on ensuring that our purpose and approach to sustainability is
embedded within Landsec, and on managing our organisation’s reputation
with media, politicians and the communities in which we operate.
GovernanceLandsec Annual Report 2022 82
Our governance
structure
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
Approves property and
investment decisions
above £150m
Audit Committee
Remuneration Committee
Nomination Committee
Responsible for oversight
of the Group’s financial and
narrative reporting processes
Responsible for the integrity
of financial statements and
internal control
Supports the Board in
risk identification and
management
Ensures transparency
and financial governance
Recommends to the Board the
Executive Remuneration Policy
Determines remuneration
packages of the Executive
Directors and the Executive
Leadership Team
Oversight of remuneration
practices for all employees
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 COMMITTEE
Investment Committee
Responsible for property and investment decisions between £10m 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
Responsible for execution of strategy, strategic performance,
all people and organisation matters and major change initiatives
For information on our Executive Leadership Team
please see pages 80 and 81
How we make decisions
Decisions that can only be made by
the Board, together with the terms of
reference for our Committees, can be
found on our website landsec.com/
aboutcorporate-governance/
board-committees.
Decision-making on investments,
commercial agreements, including the
acquisition, disposal and development
of assets, is delegated according to
financial values.
Our Delegation of Authorities framework
sets out levels of authority for decision-
making throughout the business.
During the year the decision was taken
to discontinue the Property Committee
and to instead empower each of the
Managing Directors with the authority
to make approvals of up to £10m for
their respective areas of the business.
This embeds our culture of
empowerment and accountability.
We have continued to review and
update our Delegated Authorities to
aid decision-making and to help people
to manage their assets effectively.
Capital Allocation & Performance
Review (CAPR) is a group set up this
year to oversee business performance
and the capital allocation aspects of
strategy. This was to ensure that in the
absence of a Property Committee,
capital allocation and performance
received sufficient management
attention without overloading the
Executive Leadership Team meetings.
The key areas of focus for CAPR
include: capital allocation aspects of
strategy; portfolio risk management;
a detailed review of business KPIs by
segment; and ‘deep dives’ into key
areas of capability relevant to capital
allocation and performance.
CAPR is chaired by the CEO, and other
members are the CFO, COO, the
Managing Directors, Group Finance
Director and Head of Investment.
INVESTMENT COMMITTEE
£10m-
£150m
BOARD
Over
£150m
GovernanceLandsec Annual Report 2022 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.
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 continued her induction
throughout the year, visiting our assets
and spending more time with people
throughout our business.
An introduction programme was also
established for Vanessa Simms upon joining
as CFO. As an Executive Director with a
property background, Vanessa’s induction
had a different emphasis to Manjiry’s and
was focused more on communicating with
the right people and establishing
relationships to facilitate an effective
transition onto the Landsec Board.
More information on Manjiry and Vanessa’s
induction can be found on page 99
Training and development
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.
83
In June, as a standalone Board development
session, EY provided the Board with a deep
dive session on the UK Governments’
proposals on restoring trust in audit and
corporate governance. This session covered
what the impact of the proposals would be
for Landsec and the Audit Committee,
including the proposed publication of a
resilience statement, audit and assurance
policy and mandatory shared audits.
As part of the July Board agenda, the
sustainability team provided the Board
with a teach-in session covering an overview
of the climate change crisis, how Landsec
is responding, Landsec’s commitments,
progress to date and plans for the future.
This session was built upon in February
when EY and the sustainability team
provided the Audit Committee and other
members of the Board with a session
on the implications of the disclosures
resulting from the recommendations of
the Task Force on Climate-related Financial
Disclosures, what this means for Landsec’s
reporting and what it means for the
Audit Committee.
In February, the Board held its strategy
away day in Manchester developing a
more detailed on-site understanding of
the recent assets acquired as part of the
U+I Group and MediaCity acquisitions.
More information can be found on page 85
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)
Madeleine was Regional Head of Europe at GIC Real
Estate, and may have had commercial relationships
with peer/competitor companies. GIC owns a 17.5%
stake in Bluewater and Madeleine was 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 the role at
Jupiter that he now has taken on which is a non-board position focusing on
stewardship and corporate responsibility.
Madeleine stepped down from GIC on 1 July 2021 and, therefore, this
potential conflict is no longer relevant.
GovernanceLandsec Annual Report 2022 84
The Board in action
The Board has made some significant decisions this
year as Landsec’s new strategy is delivered. The Board
has also continued to focus on culture and the
importance this plays in the execution of strategy.
Board meetings
The Board attends eight scheduled Board
meetings per year and will meet as required
for additional discussions. This year, the
Board held two additional Board meetings
to discuss the acquisition of U and I Group
PLC (trading as U+I).
All members of the Board attended all
Board and Committee meetings during
their tenure and membership, with the
exception of the Chairman who missed one
Board meeting due to family bereavement.
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, have
had the opportunity to ask questions and
are therefore in a position to make a fully
informed decision.
This year due to the lifting of Covid-19
restrictions we have been able to once
again hold the majority of Board meetings
in person. The Board has enjoyed the
benefits of the more informal engagement
that face-to-face meetings provide both
at Board level and with Landsec employees.
The Board met for three
dinners throughout the year.
Each had a focus for discussion:
changes to the finance
function; U+I integration; and
talent strategy. In addition,
these occasions provided the
Board with an opportunity
for informal, free flow
conversation, away from the
time restrictions of Board
meetings. The Non-executive Directors also
met without the Executive Directors being
present at the end of every meeting.
Execution of strategy
This year, much of the focus of the Board
has been on execution of strategy, the
development of Landsec’s equity story and
how all of Landsec’s stakeholder interests
are being taken into account during a year
of significant internal and external change.
Ahead of Landsec’s two acquisitions in
Manchester, the Board carried out a deep
dive into the Manchester market to ensure
that it fully understood the macro, office and
residential market and environment ahead of
making any decision on investment. Several
members of the Board visited Manchester
over the summer to experience firsthand
what the city has to offer and in particular to
visit MediaCity, Europe’s largest purpose built
creative, tech and media hub.
Throughout the year, the Board continued
to reinforce the importance of culture as
an important aspect to strategic success.
You can read more about the Board and
our culture on pages 92 and 93.
Sustainability deep dive
for the Board
In July the Board received a
session from our sustainability
team on net zero and what
this means for Landsec. The
purpose of the session was
to bring the Board’s level of
understanding up to speed on:
understanding terminology;
the net zero landscape and
what moving to a net zero
economy means for Landsec;
and Landsec’s commitments.
The sustainability team
returned to the Board later in
the year to present its refreshed
sustainability framework to
the Board.
GovernanceLandsec Annual Report 2022 85
BOARD’S
AWAY DAY IN
MANCHESTER
The Board experienced a fascinating day in
Manchester in February to visit Landsec’s newly
acquired assets at MediaCity and Mayfield.
The Board met with representatives from
Manchester City Council to discuss Mayfield’s
role in the city’s growth agenda and spent time
with the U+I management team understanding
the context and vision for the project as well
as the business plan overview. The Board was
keen to hear from Manchester City Council
what it thought were the biggest challenges
and opportunities for the city and in particular
the Mayfield development. It was insightful for
the Board to hear firsthand the history of the
Mayfield site and how elements of its heritage
were preserved in the design.
The Board enjoyed a tour around the site and
welcomed the opportunity to ask questions
to the U+I management team. The Board was
impressed by the scale of the site and could
envisage how the park will provide such an
important community space in the centre
of the city.
The Board then went on to MediaCity where it
received a presentation from Salford City Council
and also its joint venture partner The Peel Group.
The Board heard from The Peel Group about the
environmental and social targets at MediaCity
based on The Peel Group’s ESG strategy and
social value framework.
The Board had a tour of MediaCity, including
the Studios, which gave the Board a sense
of the mixed-use nature of the site, the range
of customers and an insight into the plans for
the second phase of development which will be
split into commercial and residential use.
Read more on landsec.com
GovernanceLandsec Annual Report 2022 86
The Board in action continued
Board discussions during the year
Topics
Outcomes
→ Establishment of the revised strategic plan
→ Focus on retail strategy
→ Understanding what mixed-use urban opportunities means
for Landsec
→ Optimum capital recycling and capital allocation
→ Reimagine Retail
→ Acquisitions of MediaCity and U+I
→ Capital Markets Day held in Manchester
→ Approval of sale of Harbour Exchange
→ Purchase of additional stake in Bluewater
→ Budget and five-year plan
→ Key business targets
→ Dividend consideration
→ Going concern and viability statement
→ Investor relations
→ Portfolio valuation
→ Debt funding and gearing levels
→ Preliminary Results
→ Annual Report and Accounts
→ Half-year Report
→ Reinstated dividend payments from Q2 onwards
→ Publication of rent collection data for Q1 and Q2
→ Annual Tax Report
→ The impact on the business of the changing needs
of customers coming out of the pandemic
→ Development pipeline and pre-let activity
→ Market and sector trends
→ Investment and sales
→ Continued business recovery
→ Board’s focus on the use of data throughout the business
to make informed decisions on customer and market trends
→ Flexible retail and office models
→ Adaptability to accommodate customers’ changing needs
→ Monitoring pre-let activity
→ Succession planning
→ Talent
→ Diversity and inclusion
→ Culture
→ Gender pay
→ Sustainability
→ Health and safety
→ Fire safety
→ Data strategy and governance
→ Risk identification, management and internal control
→ Cyber security
→ Meeting reports from Chairs of Audit, Remuneration
and Nomination Committees
→ Modern slavery
→ Board and Committee effectiveness
→ Importance of diversity reinforced at Board level and
throughout the business
→ Embedding organisational design and embracing the new
ways of working
→ Net zero education for the Board
→ Gender Pay Gap Report
→ New sustainability strategy and targets
→ Health and safety updates provided at every Board meeting
with particular focus on the anticipated fire safety legislation
and ensuring that Landsec’s residential portfolio will be in
compliance
→ Driving cultural change remains a focus of discussion at
the Board
→ Risk appetite and tolerance ranges for each principal risk
→ External Board evaluation
→ Annual General Meeting
→ Approval of modern slavery statement
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GovernanceLandsec Annual Report 2022
The Board and
our stakeholders
Our purpose – sustainable places, connecting
communities, realising potential – puts all our
stakeholders at the forefront of the Board’s
decision-making.
This is our Section 172 Statement.
OUR FIVE KEY
STAKEHOLDERS
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87
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, 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 page 13
Stakeholders and Board
decision-making
Our stakeholders’ interests and priorities
continue to change as we adapt to the
impact the pandemic has had on our
lives, the way we work, shop and engage
with each other. Therefore, effective
communication with our stakeholders so
that we continue to keep pace with their
evolving needs continues to be important
for our long-term success. The Board’s
engagement with stakeholders is both
direct and by management reporting up
to the Board on stakeholder engagement,
the importance of which is embedded
throughout our business.
Data and our stakeholders
The Board has monitored closely during
the year how the business is increasingly
using data as a catalyst for business
transformation and how it will manage
data as a strategic asset going forward.
Manjiry Tamhane’s data analytics
background has kept data at the heart
of the Board’s decision-making, ensuring
that data is enabling the business to act
with pace, responding to our people,
partners’ and customers’ ever-changing
needs and using data to predict how those
needs may change in the future. The way
we use data effectively is a crucial part of
our stakeholder relationships and ensuring
that stakeholders’ interests are addressed
in our decision-making.
GovernanceLandsec Annual Report 2022 88
The Board and
our stakeholders continued
→
KEY BOARD DECISIONS MADE
THROUGHOUT THE YEAR
Site teams at our assets provided practical
assistance during the pandemic, for example,
linking our food retailers in London to local
homeless charities we work with for
food donations.
You can read more about our community
support on pages 53-55
Our partners
Board agenda time was spent on
understanding Manchester as a market
in advance of the proposed acquisitions.
The Board met with representatives from
Salford and Manchester City Councils to
ensure we understand their priorities and
challenges and what support Landsec
can provide.
The Board met with representatives from
The Peel Group, our new joint venture
partner at MediaCity, and also encouraged
increased communication and alignment
with existing joint venture partners.
A particular focus of the Board during the
year was Landsec’s response to Government
and residents on fire safety at our residential
assets as the new legislation impacting our
assets has been brought into force.
The Board was updated by our Managing
Director of Corporate Affairs at several
Board meetings throughout the year on
local and national Government issues
impacting our business. The Board also
discussed the output of Landsec’s local and
national Government engagement.
The Board was kept updated about
communication with service providers
as restrictions were imposed and lifted
on our assets to ensure smooth and
safe transition.
Our customers
The Board receives reports on retail and
office customers as part of the business
update at Board meetings. This has helped
to understand the changing requirements
of office customers as a result of the
pandemic in terms of less space or
requiring space to be used in a different
way and the increased demand for ‘healthy
buildings’. As a business we have listened
to office occupiers regarding their needs,
resulting in us providing greater flexibility
of office leases.
The Managing Director for Retail presented
to the Board the role that physical retail
might have to play in the future, which
provided the Board with a deep dive on
our retail strategy. The Reimagine Retail
change programme is based on three main
strategies: the future asset, brand partners
and guest experience, and the Board will
continue to monitor progress going forward.
The Board was briefed on the impact
of the rent moratorium and Landsec’s
engagement with the Government
proposal. There was further pressure on
occupiers to pay rent due to lockdown
restrictions during the year and we
continued to work with occupiers most in
need of support during trading restrictions.
Our communities
The Board’s focus on execution of the
mixed-use urban opportunities strategy
discussed the importance that these
developments play in the community
and the connection between our purpose
and our strategy.
The Board heard directly from Manchester
City Council on the importance of the
Mayfield development to the community
and the environment with the provision
of community parkland in the middle of
the city. Community and sustainability are
at the heart of the Mayfield development.
The Board was kept up to date on
community support which continued to be
challenged through further lockdowns and
social distancing measures. Community
employment and education programmes
have continued remotely.
BLUEWATER
In December 2021, the Board approved
the acquisition of an additional 25%
share in Bluewater from Lendlease Retail
Partnership for £168m. In a separate
deal, Landsec agreed to sell 25% of this
additional 25% share to co-owner M&G
for its pro rata share of the purchase
price with the deal completing in March
2022. As a result of this separate deal,
Landsec’s ownership of Bluewater is
now 48.75%.
Bluewater is one of the UK’s largest
out-of-town shopping centres and the
largest of its kind in the South East of
England. The Board considered that this
acquisition was an opportunity at a time
when retail values and rents are starting
to stabilise. Together with the other
co-owners, we have a clear vision for
Bluewater which builds on what is
already a thriving retail destination.
This investment underlines our strategic
commitment to major retail destinations
that offer something that can’t easily be
replicated online.
In order to make the decision to proceed
with this additional investment in
Bluewater, the Board discussed at length
the future of retail, what opportunities
lay ahead for Landsec, together with
the risks.
GovernanceLandsec Annual Report 2022 89
U+I GROUP ACQUISITION
In December 2021 we completed the
public takeover of U and I Group PLC
(trading as U+I) for £269m. U+I owns
two key sites of interest to Landsec,
Mayfield in Manchester and the Liberty
of Southwark and, in addition, brings a
proven front-end placemaking capability.
Two additional Board meetings were
held to discuss the acquisition, and in
particular the contents of the offer
document. Sign-off for the final
documentation was delegated to a
Sub-Committee of the Board composed
of the Chairman and the three
Executive Directors.
The U+I team has a proven track
record of building strong relationships
with local authorities and securing
attractive planning consents based on
strong visioning and placemaking skills.
The Board determined this to be an
attractive addition to Landsec’s existing
development capabilities and the
U+I approach could be applied to
existing Landsec projects as well as
future opportunities.
The Board further concluded that there
was an alignment of cultures between
Landsec and U+I with a shared focus on
developing sustainable communities in
the interests of our broader stakeholders.
The acquisition was in line with Landsec’s
strategy to recycle investment in order to
drive growth and generate higher returns,
including through urban opportunities in
London and other major regional cities.
The Covid-19 pandemic has accelerated
the blurring of lines between where
people live, work and socialise. In response
to this, mixed-use developments with
a clear sense of place are becoming a
more important part of the fabric of
cities. The Board believes that Landsec
is well positioned with its existing
development and asset management
capabilities and balance sheet strength
to create these places and achieve
attractive risk-adjusted returns.
The Board continues to discuss the
integration of U+I into the Landsec
business as well as monitoring progress
on these key sites.
will provide the opportunity to deliver
the long-term vision for MediaCity
by delivering culture and inclusivity
through industry-leading placemaking
activity, building a sustainable
community and designing and delivering
workspace for the future creative and
technology workforce.
Greater Manchester is well placed to
support Landsec’s strategy. It is currently
the UK’s largest regional economy, the
largest regional office market in terms of
stock, take up and transactional liquidity
and is at the forefront of the emerging
institutional build-to-rent market.
In September 2021, the Board approved
the acquisition of 75% of MediaCity for
£425.6m
MEDIACITY ACQUISITION
The Board concluded that the acquisition
of a 75% interest in MediaCity would be
a positive acceleration of Landsec’s urban
regeneration strategy, offering scale in a
mix of uses with a blend of investment and
development returns and diversification
into the Manchester market.
The Board appreciates that mixed-use
developments with a clear sense of
place are becoming an increasingly
important ingredient in the fabric of
cities. Opportunities to participate
in large scale, established mixed-use
developments are scarce and
MediaCity was one such opportunity.
The acquisition presented Landsec
with the opportunity to deploy capital
immediately into high-quality income
producing assets and also to invest
further over time through the
development of a second phase
of development.
The Board also considered that the
acquisition would be a positive
opportunity to work alongside The Peel
Group as our joint venture partner, whose
experience and expertise complements
our own. The Peel Group’s extensive
experience in the North West, combined
with Landsec’s development capabilities,
GovernanceLandsec Annual Report 2022 90
The Board and
our stakeholders continued
Our employees
Face-to-face interaction between the Board
and the workforce returned this year as
social distancing measures and work
from home guidance lifted. The Board is
conscious that the past two years have
presented challenges for employees as a
result of the pandemic and the increased
pace of change within the business and
the impact that this has had on culture.
At every Board meeting, the Board has
continued to ask the Executive Directors
for a report on the sentiment and morale
within the business, how change has been
communicated and received and the
resulting cultural impact.
Employee Forum meetings were held monthly
throughout the year. Our Chairman, Cressida
Hogg, met with the Employee Forum in July,
October and November 2021. Many topics
were raised including cultural change,
employee engagement, talent and
development and communication.
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.
Two employee breakfasts with the Non-
executive Directors took place during
the year which gave the opportunity for a
small group of employees from across the
business to meet with two Non-executive
Directors on each occasion. The Non-
executive Directors who have attended
the breakfasts have reported that it was
a great opportunity to get an insight into
culture and receive feedback directly
from employees.
Manjiry Tamhane and Colette O’Shea
held a Q&A event for Landsec’s Women’s
Network at which Manjiry shared her
challenges and achievements and tips for
success and responded openly to questions
from employees about all aspects of her
career. This event was very positively
received by our employees and a great
opportunity to get to know the newest
member of the Board.
→
THEMES RAISED AT THE NED/
EMPLOYEE BREAKFASTS INCLUDED
→
FEEDBACK FROM THE EMPLOYEES
ON THE NED/EMPLOYEE BREAKFASTS
“ I really enjoyed the
event, particularly
because I really felt
like our feedback
was being listened to.”
“ Fun, engaging, and
insightful and a brilliant
opportunity to speak
openly and hear about
our Non-executive
Directors’ own
experiences.”
“ We all enjoyed the
session, and it was very
interactive and positive.
Nicholas and Manjiry
were very approachable
and interested in
everyone’s view which
felt empowering.”
→ There is genuine excitement
and positivity amongst
employees around the recent
acquisitions.
→ There is now clarity on
strategy, but some people
are still unsure how to
articulate what the culture
is at Landsec.
→ Town Halls have been seen
as a positive step-change on
transparent communication.
→ Through the pandemic
communications were
exemplary and there is a
desire to get back to this level.
Could even more be done to
facilitate channels for listening
to employees?
→ The Employee Forum could
be used more effectively as a
two-way flow of information
and feedback.
The themes raised are
being collated with
feedback received from
employees through other
means and are being
actioned as appropriate by
the Executive Leadership
Team. The Board will be
kept updated on actions
taken and progress made.
GovernanceLandsec Annual Report 2022
91
Our investors
We want to create sustainable value for our three types of investors: institutional, private and debt.
It is important to us that our investors understand our strategy and our equity story so they can support the execution
of our strategy and our capital recycling.
Institutional investors
Private investors
Debt investors
Our Executive Directors once again held
meetings with investors representing more
than half the share register by value during
the year.
Our private investors are encouraged to
give feedback and communicate with
the Directors via the Company Secretary
throughout the year.
2021 Annual General Meeting
For the first time in 2021 we held our
AGM as a hybrid meeting. We invited
shareholders to ask questions and vote
on the resolutions online or they could
join the meeting physically.
All resolutions put to the meeting received
overwhelming support of investors. The
results of the voting at all general meetings
are published on our website: 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.
Private investors queries
We work closely with our registrar
Equiniti to address all queries that we
receive from our private shareholders
throughout the year.
The investor relations programme continued
to be impacted by Covid-19 during the
early part of the year. Our annual results
presentation in 2021 was an online-only
event and subsequent investors meetings
were conducted primarily using online
meetings and conference calls. We were
delighted to be able to host our half-year
results presentation in person and recent
investor meetings have been conducted
in the same way.
In February 2022, we held a Capital Markets
Day in Manchester for institutional investors.
In addition to providing an update on our
mixed-use urban neighbourhoods strategy,
we conducted tours of two major assets
we have recently added to our development
pipeline: MediaCity UK and Mayfield.
We engaged with investors throughout
the year on all aspects of environmental,
social and governance matters.
Industry conferences
Industry conferences provide Executive
Directors with a chance to meet a large
number of investors on a formal and
informal basis. Conferences attended
this year included the UBS Global
Property conference in London, the
Kempen conferences in Amsterdam and
New York, the Bank of America conference
in New York, the Citi conference in Florida,
Barclays’ real estate conference in London
and Morgan Stanley’s real estate
conference in London.
All events were virtual with the exception
of the UBS and Citi conferences.
Credit side institutional investors
and analysts
Our treasury team engaged with investors
via a public consent solicitation process in
order to transition away from LIBOR in our
bonds. In line with our view of best practice,
a special committee of the Investment
Association was convened to discuss the
proposals, which were subsequently
approved. Ad hoc queries from investors
were also answered as they arose. 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.
Credit rating agencies
During the year, business and financial
updates were provided by our treasury team
and senior managers to Standard & Poor’s,
Fitch Ratings and Moody’s 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: landsec.com/investors.
No. of listed bonds
11
Institutional investors
Private investors
No. of equity investors
2,026
98.9%
of shares 7,909 1.1%
of shares
9,935
GovernanceLandsec Annual Report 2022 92
The Board and our culture
The culture we are driving at Landsec is founded
on the creation of a leaner, more data-driven
and customer-centric business. A flatter organisation
focused on achieving our strategic objectives and
addressing stakeholder interests together,
with a greater degree of change resilience.
DRIVING
CULTURAL
CHANGE REMAINS
A FOCUS FOR
THE BOARD
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 great 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 our
culture continues to evolve throughout times
of significant change.
Last year, we started a journey to shape the
culture we all want to be part of, which has
involved input from employees throughout
the business. Continued periods of remote
working have challenged our ability to
evidence and embed our new culture but
progress is being made.
GovernanceLandsec Annual Report 2022 93
FINANCIAL YEAR 2022
Purpose and meaning
We give our employees a sense
of purpose as to why Landsec
exists with a focus on our role
£5.1m
Value of social
contribution
100%
Employees with
energy and carbon
reduction targets
in wider society. Our purpose – sustainable
places, connecting communities, realising
potential – reflects our role in wider society
and consideration of all our stakeholders
continues to be more important than ever
and has been at the forefront of Board
discussions and central to our culture.
Ethics and fairness
We behave ethically and
treat all our stakeholders fairly.
Our employees are critical to
our business and we continue to nurture
talent and development and to assess
our gender pay gap to build a balanced,
diverse workforce for the long term.
Transparency
and openness
We share information openly
and discuss our challenges and
mistakes. The importance of effective
communication and transparency is
crucial to our culture. We continue to
hold town halls and have introduced Non-
executive Director/employee breakfasts
to offer a means of direct, informal
engagement between our Board and our
workforce. 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.
Collaboration
and growth
We collaborate, innovate and
collectively contribute to
Landsec’s growth. Our culture promotes
personal development and growth and
we encourage internal moves and
promotion from within our business.
Succession planning and promotion of
our talent at all levels within the business
is identified as an area of improvement.
Key for status
On track –
Flagged for improvement
Zero
02
Equal pay claims
Grievances raised
04
Diversity
network groups
03
Town hall
meetings
52
Exit interviews
completed
Zero
Whistleblowing
incidents
03
Employee surveys-
Pulse surveys
71%
Employee engagement
average score
16
22
Employee forum
meetings
Number of
company-wide events
12
26.7%
Leadership roles with
succession plans in place
Roles filled by
internal candidates
38
People promoted
in the last year
14
People on new
female development
programme
Our culture is underpinned by
our values: inclusive, united,
driven and determined
Culture is a standing Board agenda item
twice a year but the Board recognises the
accentuated importance of cultural change,
particularly with the return to the physical
office, the execution of strategy and the
amount of operational change within the
business. Therefore the Board has discussed
the impact that all these aspects are having
on culture and the morale and sentiment
amongst the workforce at every Board
meeting throughout the year.
The Board has greatly benefited from
receiving a first-hand insight into culture
through the introduction of the Non-
executive Director/employee breakfasts
which have proved to be a great success.
These occasions allow our Non-executive
Directors to hear directly from employees
about what they feel is going well, anything
that could be improved or done differently
and gives the Board a direct sense of culture.
Read more on our workforce engagement
on page 90
The Board has challenged management
about whether it is doing enough to shift
the culture at Landsec and whether blockers
to cultural change are being adequately
identified and addressed. The Board has
particularly focused on specific culture
drivers including promotion of talent and
development within the business, and
diversity and inclusion.
Throughout the year, the Board has
requested a number of changes to give it
greater oversight of the progress being
made. For example, talent management
and development was moved from a
Nomination Committee agenda item to
the main Board and similarly, diversity and
inclusion was moved from a Remuneration
Committee discussion to the main Board.
The Board has also requested that the
method of employee engagement survey
is revisited so that Landsec can be
benchmarked externally against other
employers to provide more meaningful data.
Set out on this 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 and our
assessment of our progress. These metrics
are provided to the Board as additional
context for its discussions on culture.
GovernanceLandsec Annual Report 2022 94
Introduction from
the Chairman of the
Nomination Committee
Cressida Hogg
Chairman of Nomination Committee
Committee members
→ Cressida Hogg (Chairman)
→ Edward Bonham Carter
→ Nicholas Cadbury
(from 1 June 2021)
→ Stacey Rauch (until 1 June 2021)
→ Christophe Evain
(from 24 March 2022)
Highlights
→ External Board evaluation
Key responsibilities
→ Composition of the Board and
Committees
→ Succession planning
→ Board appointment process
→ Corporate governance
Number of meetings
and attendance
→ Three scheduled meetings
→ 100% attendance from all
members at all meetings
during their membership
Dear shareholder
I am pleased to present the
report from the Nomination
Committee for the year.
The Committee has continued to assess
the composition, succession plan and
skills of the Board and its Committees,
promote diversity and have oversight
of corporate governance.
Board evolution
A balanced and diverse Board with a mix
of skills, expertise, background and tenure
is critical to the success of the Company.
The composition of the Board underpins
the quality of debate and challenge
during discussions.
The process for Board appointments is
led by the Nomination Committee which
makes recommendations to the Board
for its approval. It is the Nomination
Committee’s responsibility to keep Board
composition under review, including
reviewing director independence and
tenure. During the year the Committee
reviewed the composition and skills of
the Board, and developed an ongoing plan
for Board succession, taking into account
recent and likely future Board changes.
The Committee is currently leading a search
for one more Non-executive Director to
join the Board to complement the Board’s
existing composition. The Committee is
using an external search firm to help with
this, and we will report on the outcome
of this process in due course.
The Committee has responsibility for
oversight of Executive Leadership Team
and senior management succession.
This is also discussed by the Board as
a whole, with a focus on diversity and
inclusion and developing and maintaining
the internal talent pipeline.
Diversity
The Board believes that diversity at Board
level sets the tone for diversity throughout
the business. We promote diversity in the
broadest sense, not just gender or ethnicity
but also experience, skills, professional
background and tenure. The Nomination
Committee monitors our talent pipeline
to ensure we have a diverse pool of talent
being developed at all levels of the business.
Maintaining a diverse workforce is as
important as diverse recruitment and
we continue to assess and promote this.
Whilst the new Listing Rule requirements
on diversity do not come into force until
FY 22/23, I am pleased to report that we
already meet these targets. 56% of our
Board members are women, our Chair
and CFO positions are held by women,
and we have one member of the Board
from an ethnic minority background. We
acknowledge that more work is needed to
increase diversity of our Executive Leadership
Team and its direct reports whilst ensuring
that appointments and succession plans
are based on merit and objective criteria
and the Committee, and the Board will
continue to monitor progress.
You can read more about diversity at
Landsec in our People and Culture section
on pages 38-43
Committee effectiveness
The Committee’s effectiveness was
assessed as part of the external Board
review. The review highlighted that whilst
the Committee operates effectively,
its focus over the past two years has
particularly been on Executive succession.
With a new leadership team in place it
is appropriate to reset the Committee’s
priorities to focus more on wider Board
succession, while continuing to cover all
areas of the Committee’s remit including
ongoing management succession planning.
Further details on the external Board
evaluation can be found on pages 96-98
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 2022. The Code is published
by the Financial Reporting Council and is
available from frc.org.uk.
Cressida Hogg
Chairman, Nomination Committee
GovernanceLandsec Annual Report 2022 95
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.
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.
External evaluation of the
effectiveness of the Nomination
Committee
The external review of the performance
of the Nomination Committee has led to a
reassessment of the Committee’s priorities
in the two years ahead. The forward
agendas for the Committee have been
restructured to make the Committee
more systematic and proactive, driving
succession planning at Board and Executive
Leadership Team and with more detailed
reporting back to the main Board.
Report of the
Nomination Committee
Diversity is also addressed at the
Remuneration Committee, particularly
in the context of gender pay gap, and
discussed at the main Board in light of
its increased focus on the promotion
and maintenance of diversity at all levels
of talent throughout our business.
Further information on diversity at Landsec
can be found on page 40
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 appointments of Vanessa Simms
and Manjiry Tamhane were ratified by
shareholders at the AGM in July 2021.
All the Directors will stand for re-election
at the AGM in July 2022 with the support
of the Board.
Executive Director changes
During the year, Vanessa Simms 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 2021. We set out the
appointment process for our CFO in last
year’s report.
Non-executive Director changes
Stacey Rauch stepped 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.
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 creating 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.
GovernanceLandsec Annual Report 2022 96
Board evaluation
Our Board evaluation provides the Board
and its Committees with an opportunity
to reflect on effectiveness and performance.
Board evaluation cycle
YEAR 1
YEAR 2
YEAR 3
Independent, externally
facilitated review
→ Performance review against
targets set for 2021/22
→ An external evaluation
carried out by the advisory
firm No 4
→ Areas of focus identified
for 2022/23
Internal review focused
on Year 1 issues raised and
any new issues arising.
The process for internal review
is determined on a year-by-
year basis.
Year 2 progress reviewed
internally, and areas of
focus identified ahead
of external evaluation
the following year.
External Board evaluation process
2021/22
In line with our three-year cycle, this year’s
review of the Board’s effectiveness was
carried out by an external facilitator.
We used No 4, which operates as an
independent board evaluator and has
no other connection with the Company.
No 4 was selected to conduct the
evaluation through a process overseen
by the Nomination Committee.
No 4 interviewed each of the Directors
and the Company Secretary individually
on a confidential and unattributable basis
and attended a Board meeting as observer.
The output of the evaluation was presented
in a report to the Board at its February
meeting and the Directors discussed the
points raised by the review.
The No 4 report addressed the views
of Directors on: the effectiveness of the
organisation and dynamics of the Board
and the Committees; the purpose and
culture of the business; stakeholder
engagement; the relationships between
the Non-executive Directors and the
management; the composition of the
Board; the leadership of the Board; and
the papers and topics covered at the
Board and Committee meetings.
To ensure that the process was robust,
following the Board meeting at which
the report was discussed, No 4 provided
confirmation to the Senior Independent
Director that all the information provided
in the report was a fair reflection of the
range of views provided by each of the
Directors during the interviews and that
the conclusions in the report were not
influenced inappropriately by any Director.
GovernanceLandsec Annual Report 2022 Progress against objectives set for 2021/22
Our objectives 2021/22
Risks and opportunities coming out
of the global pandemic
The Board will increase its focus on risk
particularly in the context of oversight
of execution of the new strategy whilst
coming out of the global pandemic
and the risks and opportunities that
this presents.
People and talent pipeline
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 and dinners.
97
Workforce engagement and culture
The Board would like more
opportunities to meet with employees
to follow up on themes raised at the
Employee Forum and will allow the
Non-executive Directors 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.
The Board would benefit from
hearing more from external experts
to talk about trends impacting the
property sector.
Our performance 2021/22
A refreshed approach to risk and
assurance has been implemented this
year through the Audit Committee,
driven by the arrival of our new CFO,
Vanessa Simms. In particular, the
Board asked management to
undertake a review of how Landsec
went into the pandemic and how we
came out of it, and how our business
resilience has improved as a result.
The Board is conscious that with
continued uncertainty ahead,
financial, strategic and operational
flexibility, agility and resilience remain
key and a focus for the Board.
Talent development and succession
has been an increased focus of the
Board throughout the year. Mark Allan
attended the Non-executive Director
dinner held in March to share his view
of talent within the business.
Members of the Executive Leadership
Team and their direct reports have
spent time with Board members at site
visits and presenting to the Board at
formal meetings. Further opportunities
will be sought for more informal
interactions over the course of the
coming year.
This year we introduced our Non-
executive Director/employee breakfast
events. This is an opportunity for eight
employees to have breakfast with
two of our Non-executive Directors
to have an informal discussion about
any aspect of working life at Landsec.
Our Non-executive Directors have also
attended the Employee Forum and
Manjiry Tamhane joined a session with
our Womens’ Network.
More detail on our workforce
engagement can be found on page 90
Output of 2021/22 Board evaluation: areas of focus for the year ahead
Succession planning
Continue to evolve the Board
to meet the needs of the
business and to work
effectively with management.
A key part of this is Board and
Executive Leadership Team
succession. The Board would
like more visibility of the
talent coming up through
the business and how diverse
talent is being maintained
and developed.
Execution of strategy
Execution of strategy and
evolving and adapting
the strategy to reflect
the changing external
environment and
investor needs.
Culture
Accelerating the pace
of change and of the
turnaround for the
business, looking both
shorter and longer term.
The Board would like
more agenda time on
culture and business
transformation.
Data strategy
and governance
Continued focus and drive
on Landsec becoming
a data-driven business.
The Board needs to
monitor and support
Landsec on this journey.
GovernanceLandsec Annual Report 2022 98
Board evaluation
continued
Conclusions of evaluation
The overall conclusion of the Board
evaluation this year is that the Landsec
Board is functioning very well. The Board is
collaborative and open and is addressing
the right issues in the right way.
Our new CEO and CFO have made a
significant impact to the working of the
Board and together with the COO, form
a strong and effective Executive Director
team, bringing an excellent balance of
skills and experience.
The Board agenda and topics have the
right focus on strategy, balanced with
operational updates and the Chairman
sets an inclusive and collaborative tone.
The Board would like to continue to
focus on talent, diversity, data and ESG,
all of which are crucial for the successful
execution of our strategy. Becoming
a leader in ESG is likely to be a key
differentiator for all our stakeholders
and the Board would like to stay close
to the progress being made.
The Board will continue to focus on how
Landsec uses data to transform the
business with the right systems and IT
infrastructure, assessing what data is
needed and how it is analysed and applied.
The table below sets out more detail on the
outputs of the evaluation. The performance
evaluation of the Committees is discussed
in the Committee reports.
Topic
Feedback from the Board
Strategy development and
business transformation
→ There has been a concerted focus on developing a new strategy for Landsec and this is felt by all the
Board members to have gone well
→ The future business environment for Landsec and the industry as a whole, post the pandemic, is still
unclear. This means that although a strategy has been agreed, being nimble and agile as the conditions
change and future trends become clearer will be essential
Culture change, engagement
and operating environment
→ All the Board agreed that cultural change is an essential part of moving Landsec forward successfully and
the Board needs to monitor this closely
Risk appetite and risk
management
→ The Board members have embraced the decision to change the approach to risk management in the
business
→ There is overall buy-in to Landsec being prepared to take more risks, but calculated risks. Exercising the
right amount of challenge on this will be the most crucial role for the Board to perform in the years ahead
→ All are agreed that health and safety is a key priority to manage effectively, with the Board having a clear
responsibility for oversight
→ At present, the Non-executive Directors feel the level of risk across the business is well contained
Succession planning for the
Board and Executive
→ Executive succession planning is seen by everyone as a clear priority for Landsec
→ A detailed analysis of the skills gap against the future organisation, strategy and plans, including the use
of data, will be essential
→ The Board would find it helpful to become much closer to the plans for and progress in developing
Landsec’s people and building the talent pipeline
GovernanceLandsec Annual Report 2022 Board induction
99
Manjiry further received an overview of the
following topics:
→ Investor relations and market overview
from the Head of IR
→ Governance and disclosure obligations,
directors’ duties and corporate calendar
from the Company Secretary
→ Risk and Internal Audit from the Director
of Risk and Assurance
Additionally, Manjiry spent time with the
Non-executive Directors who she had not
met during the selection process and our
external advisers (CBRE and Slaughter
and May).
Asset visits
Manjiry was able to visit the following assets
during the year: 21 Moorfields, 55 Old Broad
Street, Dashwood House and Lewisham.
Manjiry also went to Manchester during
the summer and had a tour of MediaCity
ahead of our investment in the joint venture.
Corporate Services and our Remuneration
consultants FIT-Rem who provided Manjiry
with information as to the role of the
Committee in determining Executive
remuneration, particularly the process for
exercising its discretion and considerations
for the remuneration of the wider workforce.
This helped Manjiry integrate as a member
of the Remuneration Committee and to
provide challenge and contribute to debate
from the start.
“My introduction to Landsec, its
strategy, culture and its people
enabled me to contribute to Board
discussions right from the start.
Spending time with key people
throughout the business and
visiting assets was invaluable.”
Manjiry Tamhane, Non-executive Director
Manjiry Tamhane’s induction
We reported on the first month of Manjiry
Tamhane’s induction in our report last year.
Manjiry’s induction continued throughout
this year.
Manjiry met with the Executive Leadership
Team members to get a deeper
understanding of their areas of the business,
their priorities and their challenges.
Manjiry also spent time with our Head of
Investment who explained our investment
appraisal process and provided Manjiry with
greater insight into how we make capital
allocation decisions and general principles
of property investment.
Remuneration Committee Induction
On 1 June 2021, Manjiry became a
member of the Remuneration Committee.
Ahead of this, Manjiry spent time with
our Remuneration Committee Chairman,
our Managing Director, People and
Vanessa Simms’ induction
Joining the Board as an Executive Director
with extensive experience in the property
sector, Vanessa’s induction to Landsec
and the Board had a very different focus
to Manjiry’s.
Providing Vanessa with access to information
and the right people from the start enabled
Vanessa to very quickly build up an
impression of Landsec’s business and
strategy and to decide what she wanted
to prioritise going forward.
Over a number of months prior to joining
Landsec and upon joining, Vanessa met
with internal and external stakeholders and
spent time with her direct reports, building
her knowledge of the Landsec business and
visiting our assets.
“My induction focused on building
relationships and knowledge of the
business to enable me to prioritise
activity and set my vision for my
area to support the strategic
change required.”
Vanessa Simms, Chief Financial Officer
GovernanceLandsec Annual Report 2022 100
Introduction from the
Chairman of the Audit Committee
Dear shareholder
Throughout the financial
year, the Audit Committee
continued its focus on the
financial statements, the
integrity of the reporting
process and oversight of
risk management and
internal controls.
Risk focus
On behalf of the Board, the Committee
manages the process by which risks are
identified and quantified.
The Committee used the risks contained
in the Group’s principal risk register (set
out on pages 60-65 of this Annual Report)
as a basis for its activity during the year.
We also used the lines of defence model
and assurance mapping to monitor how
we manage and assure our principal risks.
A key operational risk that was focused
on throughout the year was information
security and cyber threat. A risk
management strategy has been established
to identify, prioritise and improve cyber
resilience across all our assets and
corporate systems and the Committee
will continue to monitor progress.
Climate reporting
In February, the Committee had a session
with our sustainability team and our
auditor Ernst & Young LLP (EY) to discuss
the requirements of the Task Force on
Climate-related Financial Disclosures
(TCFD) and what this means for the
Audit Committee.
Landsec has already taken key steps
towards improving its climate risk
disclosures and a series of metrics were
already disclosed annually, which are in line
with the TCFD recommendations. It was
helpful however to discuss how the Audit
Committee needs to focus on how the
impact of climate change has been
considered in the preparation of the
financial statements, how the risks and
opportunities have been reflected and
if the assessment of viability over the
longer term is taking into account climate
related issues.
I can confirm that Landsec has made
disclosures consistent with the TCFD
recommendations and the Committee
will continue to monitor disclosures
going forward.
Our TCFD disclosures can be found on
pages 66-69
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.
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 Committee reviewed the Royal Institute
of Chartered Surveyors (RICS) Independent
Review of Valuations that was published
this year. Generally the governance and
structures that we have in place and our
improvement plans in progress, are broadly
aligned to the recommendations in the
review. However, we have identified
potential areas of enhancement to consider
and will work with our external valuers to
address these points in the year ahead.
Nicholas Cadbury
Chairman of Audit Committee
Committee members
→ Nicholas Cadbury (Chairman)
→ Madeleine Cosgrave
→ Stacey Rauch (until 1 June 2021)
→ Christophe Evain
(from 1 June 2021)
Highlights
→ Continued focus on integrity
of reporting process
→ Rigorous assessment of
risk management and
internal controls
→ Cyber and information security
→ Accounting treatment
of significant acquisitions
and disposals
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 during
their membership
GovernanceLandsec Annual Report 2022 101
Committee effectiveness
The composition of the Committee changed
on 1 June 2021 when Stacey Rauch stepped
down and Christophe Evain became an
Audit Committee member. We welcome
Christophe’s contribution to the Committee.
The Committee’s performance was
considered as part of the external 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. We are also currently carrying out an
in-depth internal review of the work of the
Committee to ensure that the Committee’s
focus remains on the appropriate areas.
I would like to thank the other members of
the Committee, together with management,
CBRE and EY, for their support during the
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
The valuation process 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,
EY, as part of its audit scope.
Acquisitions and disposals
During the year, in the execution of its new
strategy, Landsec sold Harbour Exchange,
acquired 75% of MediaCity, increased
its stake in Bluewater and in addition
acquired U+I Group PLC. The Committee
discussed the accounting treatment of
these material transactions and concluded
they were appropriate.
Provisions for bad debt
Over the year, the Committee has closely
monitored the cash collections of rents
across the whole portfolio and by the end
of the year we saw cash collections return
to pre-pandemic levels. However, bad
debt provisions remain in respect of
some occupiers who have been unable to
satisfy their rent obligations. This analysis
involves a significant amount of judgement
therefore the Committee continues to
monitor the provisions remaining.
Internal audit
Landsec’s internal audit team is within
the wider Risk and Assurance Function.
The Committee believes that this works
well based on the quality of the reporting
from the Director of Risk and Assurance.
The Committee commissioned an external
review of the scope, skills and competencies
of Internal Audit during the year. This
confirmed that the knowledge, skills and
resources of our internal team remain
appropriate and are supported by specialist
external expertise as and when needed.
This year, the internal audit plan has
reviewed matters including our recent
acquisitions at MediaCity and U+I, our
flexible office product (Myo), our cultural
framework, cyber security and UK Data
Protection compliance. In the year ahead,
the internal audit plan includes reviews
for turnover rent, major developments
and key outsourced service providers.
Fair, balanced and understandable
Following discussion, the Committee
concluded and recommended to the Board
that, taken as a whole, the Company’s
2022 Annual Report is fair, balanced and
understandable. Our assessment included
climate change matters.
Going concern and viability
statement
We continue to focus on the appropriateness
of adopting the going concern assumption
in preparing the financial statements for
the year ended 31 March 2022. The going
concern statement is set out on page 70.
The viability statement, together with
the rationale behind the chosen five-year
time horizon, is also set out on page 70.
Audit tender
The Group’s audit was put out to tender
in 2013, with EY performing its first audit
for the year ended 31 March 2014. In line
with the UK Corporate Governance Code,
we are required to tender our audit, on
a comply or explain basis, every ten years.
Therefore, we are currently carrying out
a competitive tender with the successful
auditor signing the 31 March 2024 accounts.
UK Corporate Governance Code/
Financial Reporting Council (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.
GovernanceLandsec Annual Report 2022 102
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 additional focus on the requirements of climate
reporting and the impact this has for the Committee.
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
→ EY
Regular attendance
at meetings
to support the
Committee
→ Chairman of the
Board
→ Chief Executive
→ Chief Financial
Officer
→ Company Secretary
→ Director of Risk and
Assurance
→ Members of senior
finance team
→ Representatives of
the external auditor
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:
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 and
Assurance, 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 full year and half-year
property valuation.
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 76 and 77.
GovernanceLandsec Annual Report 2022 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, the Committee Chairman reports
on the main discussion points and findings
to the Board.
In addition to benefiting from a session with
EY on TCFD, the Committee also had a deep
dive session with EY on the Government’s
proposals on restoring trust in audit and
corporate governance, discussing what
the impact of the proposals would be for
Landsec and the Audit Committee, including
the proposed publication of a resilience
statement, audit and assurance policy
and mandatory shared audits.
Risk management
The Board is responsible for the Group’s risk
management framework and risk appetite.
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, the changes to the impact and
likelihood of risks over the year and the
key risk management priorities for 2022/23
are described on page 58. This includes
the Executive Leadership Team’s detailed
review of the business risks, controls and
mitigation strategies which forms the basis
for the principal risks, before being assessed
by the Audit Committee.
The risk dashboard uses indicators to
track whether each risk level is within our
appetite and this triggers discussion by
the Committee as to how the principal risks
are moving and whether the risk tolerance
ranges remain appropriate.
You can read about our principal risks
and the changes to risk levels this year
on pages 60-65
Primary responsibility for the 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 assurance and internal control
Under the overall supervision of the
Committee, there are several sub-
committees and working groups that give
assurance over risks being managed within
the business. The Group has a Director of
Risk and Assurance (with a direct reporting
line to the Audit Committee Chairman)
who provides regular oversight of risk
matters, evaluates emerging risks 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 of the Risk and
Assurance function to ensure alignment
with the needs of the business.
Internal audits are carried out in accordance
with an agreed annual assurance plan and
reviewed by the Committee throughout
the year.
The Internal Audit team also provide
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 risk
management and internal control systems
are as follows:
→ an established organisational 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
→ a compliance certification process
conducted in relation to the half-yearly
and full year results, and business
activities generally
103
→ a quarterly key controls self-certification
by management
→ an internal audit function whose work
spans the whole Group
→ a focused post-acquisition review and
integration programme to ensure the
Group’s governance, procedures,
standards and control environment are
implemented effectively and on time
→ a financial and property information
management system
→ a whistleblowing process that enables
concerns to be reported confidentially
and on an anonymous basis and for
those concerns to be investigated.
Additionally, the Committee discusses on
a quarterly basis:
→ the Group’s 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 reports.
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.
GovernanceLandsec Annual Report 2022 104
Report of the Audit Committee
continued
Audit plan
EY presented its proposed audit plan
(reviewed by senior management and
the Director of Risk and Assurance), 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
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. These regular discussions
were useful to the Committee but no
matters of concern emerged.
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 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.
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 and
Assurance 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 and members of the
Audit Committee to whom they report.
The Committee Chairman meets privately
with the audit engagement partner
before the Committee meeting to consider
the results of the effectiveness review.
The Committee’s preliminary view is that EY
has continued to perform 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. An audit tender
process is underway and the successful
auditor will be appointed to perform its first
audit for the 31 March 2024 financial year.
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 the 31 March 2023 financial year.
The Company has complied with the
Statutory Audit Services Order 2014 for
the year under review.
Audit fee
The audit fees payable to EY for 2021/22
(including the audit of the Group’s joint
ventures) are £1.8m (2020/21: £1.4m).
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.
GovernanceLandsec Annual Report 2022 The total of £205,000 paid for non-audit
services represented 12.9% 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. Additionally this year, Savills (UK)
Limited (Savills) was engaged to perform
the valuation of the MediaCity portfolio
and Jones Lang LaSalle Limited (JLL) was
engaged to perform the valuation of part
of the U+I Group PLC portfolio.
The valuation helps to determine a
significant part of the Group’s total
property return and net asset value, which
have consequential implications for the
Group’s reported performance and the
level of variable remuneration received by
senior management through bonus and
long-term incentive schemes. Accordingly,
the scrutiny of each valuation and the
valuer’s objectivity and effectiveness
represent an important part of the
Committee’s work.
Valuations for the full and half-year were
presented to the Committee by CBRE.
These were reviewed and challenged by
the Committee, with reference to CBRE’s
approach, methodology, valuation basis
and underlying property and market
assumptions. Other Non-executive
Directors attended the full and half-year
presentations. The Committee Chairman
and other members of the Committee
also had separate meetings with CBRE
as part of this process to provide an
opportunity to test and challenge the
valuation outcomes and the principles
and evidence used in the determination.
105
Additionally, CBRE, Savills and JLL 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 32 properties (comprising 72%
of the portfolio) for substantive review
by its valuation experts primarily on the
basis of their value, type, risk profile and
location. 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
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,
Savills and JLL during the year represented
less than 5% of their total fee income for
the year.
Significant financial matters
The Committee reviewed three significant
financial matters in connection with the
financial statements, namely the valuation
of the Group’s property portfolio, revenue
recognition, and the accounting for the
acquisition of U+I Group PLC. Further details
are set out in the table on page 107.
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.
Audit vs. non-audit fees 2021/22
Chart 32
Audit
89.7%
Non-audit
10.3%
12.9% non-audit fees as a ratio to Group
audit fee (excluding the audit of the Group’s
joint ventures).
The Committee monitors compliance with
the policy, including the prior approvals
required for non-audit services, which are
as follows:
Table 33
Per assignment
(£)
Aggregate
during the year
(£)
Chief
Financial
Officer
0–25,000
<100,000
Audit
Committee
Chairman
25,000–
100,000
100,000–
400,000
Committee >100,000
>400,000
All approvals are noted at the Audit
Committee.
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
interest 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 £205,000. Details of the fees charged by
EY during the year can be found in note 8
to the financial statements.
GovernanceLandsec Annual Report 2022 106
Report of the Audit Committee
continued
In addition, the Committee considered,
and made onward recommendations to the
Board, as appropriate, in respect of other
key matters including accounting for other
acquisitions and disposals, impairment of
trade receivables, including lease incentive
balances, maintenance of the Group’s
REIT status, going concern, 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.
We report on alternative performance
measures on page 211. The Committee
debated and discussed these measures
and agreed that they were appropriate
for the business.
Fair, balanced and understandable
The Committee applied the same due
diligence approach adopted in previous
years in order to assess whether the
Annual Report is fair, balanced and
understandable, one of the key UK
Corporate Governance Code requirements.
The Committee received assurance from
the verification process carried out on
the content of the Annual Report by
the Executive Leadership Team to ensure
consistent reporting and the existence of
appropriate links between key messages
and relevant sections of the Annual Report.
Particular attention has been given this
year to the consistency of the narrative
disclosures around climate risks, our
strategy and the financial statements.
Taking the above into account, together
with the views expressed by EY, the
Committee recommended, and in turn
the Board confirmed, that the 2022 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
twice a year and has overall responsibility
for whistleblowing but the Audit
Committee supports the Board in this
respect. The Audit Committee reviews
the Group’s Speak up 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, Managing Director, People
and Corporate Services and the Director
of Risk and Assurance and escalated to
the Committee, as appropriate. During
the year, no whistleblowing incidents
were reported.
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.
GovernanceLandsec Annual Report 2022 Significant financial matters
Significant financial matters – what is the risk?
How the Committee addressed the matters
107
Valuation of the Group’s property portfolio
(including investment properties, investment properties
held in joint ventures)
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.
Revenue recognition (including the timing of revenue
recognition and the treatment of lease incentives)
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 EPRA
earnings 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.
Accounting for the acquisition of U+I Group PLC
(and other acquisitions in the year)
The acquisition of U+I required management to assess the
contractual arrangements from the transaction and consider the
requirements of IFRS 3 Business Combinations in order to assess the
initial acquisition accounting. The initial accounting was complex
and required significant judgements and estimates to be made,
including: assessing whether the acquisition represents a business
combination or asset acquisition; making judgments and estimates
to determine the purchase price allocation (PPA); identifying any
intangible assets acquired which are not recorded in the U+I
financial statements and estimating their fair value; and assessing
any goodwill recognised for impairment.
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 principal 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 the valuers separately from management and its remit extends
to investigating and confirming that no undue influence has been exerted
by management in relation to the valuers arriving at their 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 Committee reviewed management’s assessment in determining the
accounting treatment for the acquisitions and discussed the audit procedures
carried out by EY in making its assessment. The Committee and EY concluded
that the accounting applied by management was appropriate, including the
impairment of goodwill to nil.
The above description of the significant financial matters should be read in conjunction with the Independent Auditor’s Report on
pages 132-140 and the significant accounting policies disclosed in the notes to the financial statements.
GovernanceLandsec Annual Report 2022 108
Directors’ Remuneration Report –
Chairman’s Annual Statement
Dear shareholder
I am pleased to present,
on behalf of the Board, the
Directors’ Remuneration
Report for the year ended
31 March 2022.
The year under review has delivered strong
business results for Landsec. At the start of
the year Covid-19 dominated the news and
there was much uncertainty. As the year
progressed, the Landsec team worked hard
to deliver the strategy we set out last year
and I thank colleagues, customers and
partners alike who showed commitment
and tenacity to deliver the positive financial
and wider business outcomes detailed in
this Annual Report.
Directors’ remuneration policy
This year we have operated under the
Remuneration Policy approved by
shareholders at our 2021 AGM.
We consulted with our major shareholders,
the main shareholder representatives and
with our people and the policy received a
positive vote of 96.4%. The Committee
believes that the policy provides strong
alignment with best practice in corporate
governance and an appropriate level of
flexibility to allow meaningful incentivisation
to deliver our ambitious strategy.
Performance for the 2021/22
financial year
During the course of the year we have driven
our business forward, making acquisitions
and disposals that will accelerate the
delivery of our strategy and provide greater
opportunities for growth.
We are a purpose-led business and aim
to create value for all stakeholders. Our
strategy focuses on shaping three distinct
places – Central London offices; Major retail
destinations; and Mixed-use urban
neighbourhoods – and we have made
significant progress in all three areas over
the last year while maintaining a strong
financial position.
For the year ended 31 March 2022, EPRA
Earnings were up 41.4%. Adjusted EPRA
earnings per share were also up 41.6%
to 48.0p. Asset values increased by 3.6%
in aggregate reflecting record leasing in
London offices, growth returning in major
retail destinations and clear progress on
our objective to grow in mixed-use urban
neighbourhoods. This resulted in a 7.9%
increase in EPRA net tangible assets per
share to 1,063p.
These results are clearly reflected in the
variable pay awarded to the Executive
Directors in respect of the year ended
31 March 2022.
Annual bonus performance
The performance of the executive team
has been both focused and decisive,
with progress made in all areas of the plan
that was set out at the start of the year.
We have a healthy pipeline of capital
reinvestment projects and increased clarity
of the risks and opportunities in our capital
recycling programme. We have made some
significant investments and our positive
business performance reflects the
capability and commitment of our teams,
despite the challenging environment that
everyone has been operating in.
The Committee has carefully considered
the business outcomes and the wider
stakeholder context (see our discretion
framework on page 113). The Committee
believes that it is appropriate for the
Executive Directors to receive annual
bonuses for 2021/22.
The Committee set the annual bonus
targets at the start of the year during a
period of great uncertainty. As the year
unfolded and as the timing in respect of
disposals became clearer, the Committee
carefully reviewed the EPRA Earnings
targets and increased them, to make them
more stretching. In addition the Committee
agreed to exercise downward discretion to
remove the positive effect of the pandemic
on energy intensity, which forms part of the
ESG element of the annual bonus.
Christophe Evain
Chairman, Remuneration Committee
Committee members
→ Christophe Evain1
→ Edward Bonham Carter
→ Cressida Hogg
→ Manjiry Tamhane2
→ Stacey Rauch3
Highlights
→ New Policy Approved
→ LTIP extended to senior
management
→ Workforce engagement
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
→ 100% attendance from
all members during
their membership
1. Committee Chairman
2. From 1 June 2021
3. Until 24 June 2021
GovernanceLandsec Annual Report 2022 109
Employee voice
I took the opportunity to meet with
members of our Employee Forum in early
2022. This is an important activity and
I was pleased to answer a number of
questions posed by the forum. In particular,
I noted the wider use of LTIPs amongst
senior management was welcomed by
the forum, bringing greater alignment
with shareholders. In addition, the forum
confirmed that the simplified bonus scheme
for staff had been very well received. Finally,
the shift from relative total property return
to absolute total accounting return was
much appreciated as a more easily
understood and relevant measure of
performance. More generally, a number
of the Non-Executive Directors met with
employees during the year, as detailed on
page 90.
Conclusion
Despite the disruption and changing nature
of society as a result of the Covid-19
pandemic, Landsec’s performance has been
most encouraging.
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
This resulted in overall bonus outcomes
of 87.4% to 90.4% of maximum (equating
to 131.1% to 135.6% of salary), which is
considered to be appropriate in the context
of the performance of the business.
2. Pension
Consistent with the UK Corporate
Governance Code, all Executive Directors’
pension contributions are aligned to the
wider workforce at 10.5% of salary.
See page 116 for further details
Long-Term Incentive Plan
performance
Vesting of the 2019 LTIP in 2022 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 2022 was below the
threshold level and as such there will be no
vesting in respect of the 2019 LTIP award.
In addition, Mark Allan’s buyout award,
measured against the same targets as the
2019 LTIP award, albeit over two years to
31 March 2022, will also not vest.
Management changes
As previously disclosed, Martin Greenslade
stepped down as CFO on 31 May 2021 and
his employment with Landsec ended on
29 September 2021. Vanessa Simms joined
the Board on 4 May 2021 as CFO designate
and assumed the role of CFO on 1 June
2021. Full details of the remuneration
arrangements relating to this change were
disclosed in the 2021 Annual Report.
Discretion
No positive discretion was exercised in
the year ended 31 March 2022. 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 116.
Executive remuneration 2022/23
1. Base salary
As disclosed in our last Annual Report, base
salaries are due for review in 2022. Mark
Allan was appointed CEO in April 2020 and
Vanessa Simms was appointed CFO in June
2021 and no increases have been applied
since appointment. Colette O’Shea’s salary
was last reviewed in January 2020. From
1 June 2022, Executive Director salaries will
increase by 3%, which is below the
workforce average of 5%.
3. Annual bonus
For the year ending 31 March 2023, Executive
Directors will be eligible for an annual bonus
of up to 150% of salary. Our simplified bonus
scheme remains appropriate to our strategy
and combines stretching targets for earnings,
total return and ESG based on milestone
targets for the year ending 31 March 2023.
Personal objectives will continue to be
operated for a minority of the award.
Further detail is provided on page 121.
4. Long-Term Incentive Plan
We intend to grant awards under the LTIP
in June 2022, which will be subject to
performance conditions over a three-year
performance period. Performance targets
will continue to be based on total accounting
return, relative TSR, and carbon reduction.
Any awards which vest will be subject to
a two-year post-vesting holding period.
Further detail is provided on page 121.
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 in
this regard. The Committee takes account
of the interests of all internal and external
stakeholders when making any decisions
on remuneration matters. During the year
ended 31 March 2022, we broadened the
eligibility criteria for LTIP awards below
the Executive Leadership Team, more
closely aligning those who execute our
strategy on a daily basis with the interests
of our shareholders.
Gender and Ethnicity pay gaps
During the course of the year, the
Committee was pleased to see that the
Company’s gender pay gap had improved.
However, we are aware that further progress
is required here and continue to review
management’s response to this important
topic. For the first time last year,
management published the ethnicity pay
gap, ahead of any formal regulations, and
it is evident there is much progress still to
be made. More information can be found
on page 38 and on the Company’s website.
GovernanceLandsec Annual Report 2022 110
Remuneration
at a glance
Our at a glance summary sets out clearly
and transparently the total remuneration
paid to our Executive Directors in 2021/22.
We aim to align the total
remuneration for our
Executive Directors to
our business strategy
through a combination
of fixed pay, bonus and
long-term incentives,
underpinned by stretching
performance targets.
Remuneration structure
2021/22 in numbers
REMUNERATION PRINCIPLES – SUPPORTING LONG-TERM SUCCESS
AND SUSTAINABLE VALUE
PERFORMANCE
– We will materially differentiate
– We will provide a balance between
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.
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
→
→
→
Base salary
Benefits
Pension
Annual bonus
Long-term
incentive
More on
page 125
More on
page 126
More on
page 126
£354.9m
EPRA Earnings
(2021: £251m)
8.2%
Ungeared TPR
(2021: -9.6%)
19.1%
Annual TSR
(2021: 27.2%)
47.7p
Adjusted
diluted EPS
(2021: 33.9p)
REMUNERATION ACROSS THE GROUP
£66m
Total pay bill
(2021: £49m)
8.4%
Change in
average salary
(2021: 1.5%)
82.6%
Employees
received an
annual increase
(2021: 14.7%)
88.4%
Employees paid
a bonus
(2021: 89.6%)
CHIEF EXECUTIVE REMUNERATION
£1,999,930
Single figure
(2021: £2,919,6291)
0%
LTIP vesting
(2021: 0%)
90.4%
Annual bonus
percentage
(2021: 16.2%)
–31.5%
Change in total
remuneration
(2021: 86.0%)
GENDER PAY GAP REPORTING
30.8%
Mean hourly
pay gap
(2021: 36.6%)
28.7%
Median hourly
pay gap
(2021: 29.3%)
21.9%
Mean bonus
pay gap
(2021: 68.4%)
47.9%
Median bonus
pay gap
(2021: 52.2%)
1. Includes £1,692,042 in relation to buyout awards made on appointment.
Excluding relocation and buyout awards the single figure for 2020/21
was £1,027,587.
GovernanceLandsec Annual Report 2022 Summary of Executive Directors’ total remuneration (£000)
111
Table 34
Mark Allan
Chief Executive
Martin Greenslade
Chief Financial Officer1
Colette O’Shea
Chief Operating Officer
Vanessa Simms
Chief Financial Officer2
3,000
2,000
1,000
0
1,692
188
1,040
1,085
915
2021/22
2020/21
171
110
2021/22
88
4
18
65
504
21
110
–
Base salary
Benefits
Pension allowance
Annual bonus paid in cash
Annual bonus deferred
into shares
800
31
84
400
685
733
230
77
–
Other3
–
1,692
–
–
188
106
129
129
635
629
548
117
524
973
605
518
2020/21
2021/22
2020/21
2021/22
2020/21
480
456
446
18
50
240
389
–
18
50
–
117
–
25
47
223
382
973
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Total remuneration
2,000
2,920
281
764
1,177
641
2,096
1. Retired from the Board 31 May 2021.
2. Appointed 4 May 2021.
3. Recruitment awards in respect of compensation from previous employment.
Summary of Executive Directors’ total remuneration
Weighting
Outturn
% of weighting achieved
EPRA earnings
30%
27.4%
Total accounting return
30%
30%
ESG
20%
15%
ANNUAL
BONUS
Total Company bonus opportunity
80%
72.4%
Individual targets
20%
17%1
Total bonus
100%
89.4%
Three-year relative TSR
Three-year ungeared TPR
Total LTIP
LONG-TERM
INCENTIVE
50%
50%
100%
0%
0%
0%
1. Average assessment across the CEO, CFO and COO.
To read more on our strategy, go to pages 16-25
GovernanceLandsec Annual Report 2022 112
Remuneration
at a glance continued
Linking remuneration outcomes to Purpose and Strategy
Purpose
Strategy
Outcomes
Pay for
performance
Sustainable places
Optimise our Central
London business
Connecting
communities
Realising potential
Reimagine our
retail business
Grow through urban
opportunities
Realise capital from
Subscale sectors
Growth in
asset values
Growth
in income
Total
accounting
return
Remuneration
outcomes
Leadership in sustainability
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
GovernanceLandsec Annual Report 2022 113
Discretion framework
The following chart illustrates the process that the Committee undertakes when considering the appropriateness of the outcomes for
performance related awards.
How the business
has performed
Remuneration
outcome
Our stakeholder
groups and what
they consider
How the
Committee can
use discretion
Where the
Committee
publishes its
decisions
01
→ Underlying
financial
performance
02
→ Formulaic
incentive
outturns
→ Single figure
of remuneration
→ CEO pay ratio
SHORT-TERM TARGETS
• EPRA earnings
• Total accounting return
• Energy intensity
reduction
• Embodied carbon
reduction
LONG-TERM TARGETS
• Total Shareholder Return
• Total accounting return
• Carbon reduction
04 05
→ Directors’
→ Underlying
financial
performance
• Determining the timing
Remuneration
Report
→ Remuneration
Committee
Annual Statement
03
→ Investors
• Total Shareholder
Return Performance
versus market
• Dividend payments
→ Employees
• Redundancies
• Restructurings
• Salary review
• Fair pay
• CEO pay ratio
• Gender pay gap
• Working conditions
→ Customers
• CEO pay ratio
• Financial performance
• ESG performance
→ Community
• Use of Government
funding
• Community impact
→ Environment
• Significant environmental
impact
• Net zero commitments
of awards and/or
payments
• Determining the
quantum of awards and/
or payments
• Determining the
weighting between cash
and share-based
incentives
• Reviewing the
constituents of the TSR,
TPR or other comparator
groups
• Determining the extent
of vesting based on the
assessment of
performance
• Making the appropriate
adjustments required in
certain circumstances
(e.g. rights issues,
corporate restructuring
events, variation
of capital, special
dividends etc.)
• Setting targets for the
annual bonus plan and
LTIP from year to year
Section 40 disclosures
When considering the Remuneration Policy and its implementation for 2022, the Committee was mindful of Provision 40 of the UK Corporate
Governance Code and considers that the executive remuneration framework addresses the following factors:
Factor
Clarity
Approach
We provide open and transparent disclosures regarding our executive remuneration arrangements.
Simplicity
The policy was simplified in 2021 and is in line with market standards, corporate governance best practice and linked to our strategy.
Predictability
Our remuneration policy contains details of maximum opportunity levels for each component of pay. Actual incentive outcomes vary
depending on the level of performance achieved against specific measures.
Proportionality,
risk and
alignment to
culture
The annual bonus and LTI plans have a clear link to the success of the business and the achievement of our strategy. Stretching performance
conditions are set to deliver rewards commensurate with performance.
The use of annual bonus deferral, LTIP holding periods and our shareholding requirements (including after leaving Landsec) provide
a clear link to the ongoing performance of the business and therefore alignment with shareholders.
The Committee considers that our variable pay structures do not encourage inappropriate risk-taking. The annual bonus and LTIP are
subject to the achievement of stretching performance targets, and the Committee’s holistic assessment of performance can result in
the application of discretion. The Committee also has the discretion to apply malus and clawback to both the annual bonus and LTIP.
GovernanceLandsec Annual Report 2022 114
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 2022 and how the policy will operate
in the financial year ending 31 March 2023.
01
Remuneration outcomes
02
Directors’ interests
03
Application of Policy for 2022/23
04
Total Shareholder Return and CEO pay
05
The context of pay in Landsec
06
Dilution
07
Remuneration Committee meetings
08
Shareholder voting
Colour key
Fixed
pay
Annual
bonus
Long-term
incentive
N
O
I
T
C
E
S
S
I
H
T
N
I
→
During the course of 2021/22, the Remuneration
Committee was engaged in a number of key
matters, including:
→ Reviewing remuneration 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) in 2019 and Mark Allan’s buyout award
made in 2020
→ Reviewing the variable pay arrangements
below Executive Director level
→ Determining the annual level of LTIP grants
to Executive Directors and ELT members
→ Reviewing and integrating remuneration
packages with respect to the U+I acquisition
→ 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
Unless otherwise stated, narrative and tables
are unaudited.
GovernanceLandsec Annual Report 2022
115
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 2022. Tables 35 and 36 show the
payments we have made or expect to make and tables 37-40 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 2022 in connection with performance achieved in the financial year ended 31 March 2022.
Single figure of remuneration for each Executive Director (£000)
Executive Directors
Mark Allan
Martin Greenslade6
Vanessa Simms7
Colette O’Shea
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
2021/22
2020/21
Base
salary1
Benefits2
Pension
allowance3
Annual
bonus
paid in
cash4
Annual
bonus
deferred into
shares4
800
733
88
504
446
–
480
456
31
230
4
21
25
–
18
18
84
77
18
110
47
–
50
50
400
–
65
–
223
–
240
–
685
188
106
129
382
–
389
117
Other5
Total
–
1,692
–
–
2,000
2,920
281
764
973
2,096
–
–
–
–
1,178
641
Table 35
Total
variable
pay
1,085
1,880
171
129
1,578
–
630
117
Total
fixed
pay
915
1,040
110
635
518
–
548
524
1. Base salary earned during 2020/21 after the voluntary reduction of 20% of base salary between May and July 2020 due to the impact of Covid-19.
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 in 2020/21, which would have been repayable had he left 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, Vanessa Simms and Colette O’Shea was a cash
allowance of 10.5% of base salary.
4. In response to the Covid-19 pandemic, Executive Directors’ 2020/21 annual bonus awards were deferred into shares vesting in 2024.
5. Vanessa Simms’ award relates to the acquisition of 91,281 shares in the Company following the exercise of options granted under a recruitment Deferred Share Bonus Plan
and LTIP award and a replacement bonus of £288,852 as set out in last year’s Annual Report on Remuneration. As also set out in last year’s Annual Report on Remuneration,
Mark Allan received a cash bonus payment of £674,630 and share-based recruitment awards valued at £1,017,412 which vested on 7 July 2020 and 22 March 2021, in respect
of compensation for awards lost from his previous employer.
6. Martin Greenslade stepped off the Board on 31 May 2021. His bonus is for the three month period to 30 June 2021 (see page 116).
7. Vanessa Simms joined Landsec’s Board as CFO designate on 4 May 2021, taking up the post of CFO on 1 June 2021.
Single figure of remuneration for each Non-executive Director (£000)
Fees1
Benefits
Pension
allowance
Annual
bonus
paid in
cash
Annual
bonus
deferred
into
shares
Long-term
incentives
vested
Non-executive Directors
Cressida Hogg
Stacey Rauch2
2021/22
2020/21
2021/22
2020/21
Edward Bonham Carter 2021/22
Nicholas Cadbury
2020/21
2021/22
2020/21
Madeleine Cosgrave
2021/22
Christophe Evain3
Manjiry Tamhane
2020/21
2021/22
2020/21
2021/22
2020/21
375
356
18
66
85
82
90
86
70
66
90
83
70
6
–
–
2
5
–
–
–
–
–
–
3
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Table 36
Total
variable
pay
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
fixed
pay
375
356
20
71
85
82
90
86
70
66
93
83
70
6
Total
375
356
20
71
85
82
90
86
70
66
93
83
70
6
1. Fees paid to Directors during 2020-21 reflect the voluntary reduction of 20% between May and July 2020 due to the impact of Covid-19.
2. Stacey Rauch, who is based in the US, received UK tax return support which is treated as a benefit in kind. Stacey retired from the Board on 24 June 2021.
3. Christophe Evain, who in based in France, received national insurance contribution support, which is treated as a benefit in kind.
GovernanceLandsec Annual Report 2022 116
Annual Report
on Remuneration continued
1.2 Payments to former Directors
As previously disclosed, Martin Greenslade retired from his role as CFO and as a Director of the Board on 31 May 2021, continuing in
employment until 29 September 2021. In respect of his remuneration arrangements he:
→ received his normal remuneration in terms of basic salary, pension allowance, car allowance and company benefits, in accordance
with his service agreement, up to 29 September 2021. The total value for the period from 1 June to 29 September was £217,362
(less all necessary deductions);
→ was awarded an annual bonus award for the three month period from 1 April 2021 to 30 June 2021 of £171,022, which was paid at the
same time and on the same basis as the Company’s Executive Directors. £65,231 was paid in cash and £105,791 was deferred into shares
under the Landsec Deferred Share Bonus Plan 2021 (the DSBP). Reflecting that the handover process was completed on 30 June 2021,
no bonus was awarded for the period 1 July 2021 to 29 September 2021 when his employment ended;
→ was treated as a good leaver in respect of his outstanding unvested options granted under the DSBP. Such awards granted/to be granted
in 2020, 2021 and 2022 vested/will continue to vest on the normal vesting dates; and
→ was treated as a good leaver in respect of his outstanding unvested share awards under the Landsec Long-Term Incentive Plan 2015 (the LTIP).
In accordance with the rules of the LTIP, Mr Greenslade’s unvested LTIPs will vest on their normal vesting dates, subject to satisfaction of the
relevant performance conditions and on a time pro-rated basis. In this regard, his 2018 LTIP lapsed in full in 2021, and his 2019 LTIP will lapse in
full in 2022, as a result of failing to hit the relevant threshold performance targets. His pro-rated 2020 LTIP award remains outstanding.
1.3 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, 120%
of salary was dependent on meeting Group targets and 30% of salary was dependent on meeting personal objectives. All targets were set at
the beginning of the year. The following table confirms the targets and their respective outcomes.
Annual bonus performance 2021/22
Measure
Weighting
Description
Performance outcome
Threshold
Target
Maximum
Actual
EPRA Earnings (£m)
Total accounting return
(pence per share)
ESG
Personal objectives
30%
30%
10%
10%
20%
EPRA Earnings targets in line with overall
five-year strategic plan1.
Delivery of growth in asset values measured by
EPRA NTA growth (adjusted for dividends)
through pro-active asset management.
Energy intensity reduction in all assets2.
Embodied carbon reduction in assets under
development.
311.4
5p
3.5%
16%
A mix of individual goals set at the beginning
of the year.
0%
Total annual bonus
100%
327.8
27.5p
4%
16.5%
360.6
50p
5%
17%
354.9
103p
4%
20.7%
50%
100%
See table 38
Table 37
Outturn
27.4%
30%
5%
10%
17%3
89.4%
1. Recognising that the EPRA Earnings targets were set during a period of great uncertainty, and to reflect the actual timing of disposals, targets were increased during the year
to ensure they remained appropriately challenging.
2. The Remuneration Committee agreed to exercise its discretion in respect of the ESG Energy Intensity metric to remove the flattering impact of Covid-19-related low occupancy.
This element of the bonus would have been achieved in full had discretion not been applied.
3. Average assessment across the CEO, CFO and COO.
GovernanceLandsec Annual Report 2022 Annual bonus performance 2021/22: Personal objectives
The Executive Directors shared a number of common targets which were as follows:
Target
Detail
Committee Performance Assessment
Strategy
Development
Strategy
Execution
Driving
Performance
Culture and
Values
Total
To identify specific strategic
plans and target outcomes
for each part of the business.
To carry out a detailed review
of the financing structure.
To build momentum in the
strategy and accelerate
outcomes including focusing
on acquisitions, disposals,
restructuring and value
creation opportunities.
To introduce asset-based plans
across the urban mixed-use
and retail portfolios.
To lead the business with a
focus on improved operational
performance.
To restructure the
Management Information
(MI) pack and review
timetable delivery.
To deliver the post-Covid-19
recovery with consideration
of sales performance,
customer engagement and
development progress.
To lead by example,
establish the ELT as a
high performing team.
Engage proactively with
priority projects, force the
pace and focus resources.
Embed data, customer
centricity, change resilience and
proactive risk management.
During 2021/22, several areas of strategic focus were identified and
debated with the Board (primarily covering capital allocation, strategic
capabilities and sector prospects), the underlying financial model was
rebuilt and a final plan was presented to the Board in December 2021.
A full review of the financing structure was undertaken and the
conclusions were presented to the Board in September 2021.
In assessing this target, the Committee considered the positive
strategic momentum in each area of the business and how clarity
of plans is translating into faster, more confident action.
Demonstrating momentum in execution was a significant priority for
the year, with good progress made with the acquisitions of U+I and
MediaCity in particular.
In addition, the restructure of the retail business has already started
to deliver positive outcomes, as evidenced by leasing momentum
and in London, the team has successfully unlocked value creation
opportunities in a very competitive market.
Finally, the Committee noted that asset level plans are now in
place across the urban mixed-use and retail portfolios where none
existed previously.
During the year, the MI pack has been comprehensively restructured
and the timetable for delivery materially accelerated.
Post-Covid-19 recovery has been stronger than initially expected and
the team have responded quickly and decisively to changing
conditions. This has helped support a strong sales performance across
the retail estate, higher levels of customer engagement across the
London office portfolio and good cash collection rates.
Progress on developments has been maintained despite Covid-19-related
pressures and, although slow initially, pre-letting momentum (and leasing
activity more generally) ended the year strongly.
The Committee has observed the significant progress that has been
achieved in shifting organisational culture and values, despite the
limitations imposed by Covid-19 restrictions being in place for much of
the year, discouraging a return to the office.
Progress has also been achieved through role modelling by the
Executive Directors and members of the ELT, particularly in engaging
more proactively with priority projects, driving performance and
focusing resources.
While progress has been made in respect of embedding data,
customer centricity, change resilience and proactive risk management,
further improvement in these areas will be targeted in FY2023.
1. Mark Allan and Vanessa Simms received an award of 18/20 and Colette O’Shea and Martin Greenslade received 15/20.
Annual bonus achievement as a percentage of salary
117
Table 38
Maximum
Average
Award
5%
5%
5%
4%
5%
5%
5%
3%
20%
17%1
Table 39
Mark Allan
Vanessa Simms
Martin Greenslade
Colette O’Shea
Company bonus (80%)
Individual bonus (20%)
Total bonus (100%)
120%
120%
120%
120%
108.6%
108.6%
108.6%
108.6%
30%
30%
30%
30%
27%
27%
22.5%
22.5%
150%
150%
150%
150%
135.6%
135.6%
131.1%
131.1%
Vanessa Simms’ bonus was pro-rated based on the date of her appointment to the Board on 4 May 2021. Martin Greenslade’s bonus was
pro-rated based on his departure as CFO and the end of his handover on 30 June 2021 (see section 1.2 above on payments to former directors).
GovernanceLandsec Annual Report 2022 118
Annual Report
on Remuneration continued
1.4 Long-Term Incentive Plan outturns
The table below summarises how we have assessed our 2019 LTIP grant performance achievement over the three years to 31 March 2022.
LTIP performance 2019-2022
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 +1.13%
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 40
Outturn
(% of
maximum)
0%
0%
0%
In addition, one third of Mark Allan’s May 2020 buyout award, as assessed on the same performance targets as the 2020 LTIP awards, albeit
over a two year performance period, was similarly assessed to be below threshold for both TSR and TPR with 0% vesting.
2. Directors’ interests
2.1 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
Vanessa Simms3
Colette O’Shea
Cressida Hogg
Stacey Rauch4
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain
Manjiry Tamhane5
Salary/
base fee at
31 March
2022
(£)
Minimum
shareholding
requirements
(% of salary/
base fee)
Required
holding
value
(£)
Holding
(ordinary
shares)
1 April 2021
800,000
–
490,000
480,000
375,000
–
70,000
70,000
70,000
70,000
70,000
300% 2,400,000
200% 1,060,000
980,000
200%
960,000
200%
375,000
100%
70,000
100%
70,000
100%
70,000
100%
70,000
100%
70,000
100%
70,000
100%
193,552
452,960
–
74,481
41,375
8,000
9,375
7,481
4,883
8,000
–
Holding
(ordinary
shares)
31 March
2022
214,531
491,297
48,292
107,730
41,375
8,000
9,375
7,481
10,535
8,000
4,473
Table 41
Deferred
bonus shares
under holding
period
Value of
holding
(£)1
Compliant
with policy
14,288
1,797,602
9,815 3,936,736
421,522
5,364
916,159
8,889
325,042
–
62,848
–
73,650
–
58,771
–
82,763
–
62,848
–
35,140
–
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
1. Using the closing share price of 785.6p on 31 March 2022 and including any deferred bonus shares, net of the notional tax and employee NIC.
2. Martin Greenslade retired from the Board on 31 May 2021 and is required to hold shares equivalent to 200% of the value of his salary for two years post cessation.
3. Vanessa Simms was appointed to the Board on 4 May 2021.
4. Stacey Rauch retired from the Board on 24 June 2021.
5. Manjiry Tamhane was appointed to the Board on 1 March 2021.
GovernanceLandsec Annual Report 2022 119
2.2 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.
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 share awards and those which vested during the year
Mark Allan
LTIP shares
Martin Greenslade
Deferred shares
LTIP shares
Deferred shares
Vanessa Simms
LTIP shares
Deferred shares
Colette O’Shea
LTIP shares
Deferred shares
Market price
at award
date
(p)
913.81
547.2
695.4
695.4
953.0
819.6
547.2
547.2
695.4
526.24
526.24
695.4
526.24
526.24
713.4
953.0
819.6
547.2
695.4
547.2
695.4
Award date
12/05/2020
24/07/2020
25/06/2021
25/06/2021
25/06/2018
25/06/2019
24/07/2020
24/07/2020
24/06/2021
04/05/2021
04/05/2021
25/06/2021
04/05/2021
04/05/2021
25/05/2021
25/06/2018
25/06/2019
24/07/2020
25/06/2021
24/07/2020
25/06/2021
Options
awarded
113,753
438,596
345,125
26,959
163,960
193,9972
290,5703
65,400
18,520
69,994
110,160
211,389
19,219
5,431
10,122
88,881
134,211
219,298
172,562
60,463
16,773
Market price
at date of
vesting
(p)
Options
vested
Table 42
Vesting date
01/06/2022
24/07/2023
25/06/2024
25/06/2024
0
n/a
25/06/2021
25/06/2022
24/07/2023
65,400
692.6
24/07/2021
69,994
749.0
14/12/2021
25/06/2024
25/06/2023
25/06/2024
19,219
749.0
14/12/2021
12/12/2022
25/05/2024
0
n/a
25/06/2021
25/06/2022
24/07/2023
25/06/2024
60,463
693.8
24/07/2021
25/06/2024
1. Based on the Landsec share price as at 15 November 2019. These awards will lapse as the performance criteria were not achieved.
2. Subject to performance conditions and time pro-rating, although the percentage vesting will be zero. The maximum number of shares which could have vested is 145,497.
3. Subject to performance conditions and time pro-rating. The maximum number of shares which could vest is 112,999.
4. Based on the Landsec share price as at 27 October 2020.
Awards were granted under the LTIP in July 2021, subject to three performance conditions measured over a three-year performance period,
as set out below. No awards will vest if the threshold performance targets are not met. In the performance period from 1 April 2021 to
31 March 2024, the performance conditions are 40% TSR relative to the FTSE 350 Real Estate Super Sector, measured over a three-year
period, 40% Total accounting return performance based on the percentage change in EPRA Net Tangible Assets per share over the
performance period and 20% ESG performance, measuring the reduction in carbon emissions. Details of the performance targets are
set out on page 129 of the 2021 Annual Report.
Mark Allan
Vanessa Simms
Colette O’Shea
Number of awards
345,125
211,389
172,562
Share
price (p)1
695.4
695.4
695.4
Table 43
Face value
£2,400,000
£1,470,000
£1,200,000
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.
GovernanceLandsec Annual Report 2022 120
Annual Report
on Remuneration continued
2.3. Directors’ options over ordinary shares (Audited)
The options over shares set out below relate to the Land Securities Group PLC Sharesave scheme (Sharesave). The Sharesave is open to all
qualifying employees (including Executive Directors) and under HMRC rules does not include performance conditions.
Outstanding grants and those which were exercised during the year
Table 44
Martin Greenslade
Total
Colette O’Shea
Total
Number of
options at
1 April 2021
Exercise price
per share
(p)
Number of
options
granted in year
to 31 March
2022
2,373
2,373
1,186
1,734
–
2,920
759
759
519
584
–
–
–
–
1,541
1,541
Number
options
exercised/
lapsed1
2,373
2,373
1,186
–
–
1,186
Market price
at exercise
(p)
Number of
options at
31 March 2022
792
–
n/a
–
–
–
–
–
–
1,734
1,541
3,275
Exercisable dates
08/2021-02/2022
08/2021-02/2022
08/2023-02/2024
08/2024-02/2025
1. Colette O’Shea took a repayment at maturity of the scheme on 1 August 2021 and the options therefore lapse at 1 February 2022.
2. Sharesave awards may be exercised during the six-month period after the end of the three-year contract.
3. The exercise price for the Sharesave awards was determined based on a three-day average mid-market share price prior to the invitation date of the scheme, discounted by 20%.
2.4 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. Mark Allan is currently Vice President of the British Property Federation although he does not receive a fee. Vanessa Simms
holds the positions of Non-executive Director and Audit Committee Chair of Drax Group plc and received fees of £66,300 in respect of the
2021/22 financial year. Colette O’Shea does not currently hold any external directorships.
2.5 Directors’ Service Contracts and Letters of Appointment
Dates of appointment for Directors
Name
Executive Directors
Mark Allan
Vanessa Simms
Colette O’Shea
Non-executive Directors
Cressida Hogg
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain
Manjiry Tamhane
Date of appointment
Date of contract
Table 45
14 April 2020
21 November 2019
4 May 2021
27 October 2020
1 January 2018
1 January 2018
12 July 2018
1 January 2014
1 January 2017
14 May 2018
13 May 2015
1 January 2017
1 January 2019
22 November 2018
1 April 2019
1 March 2021
14 March 2019
29 January 2021
GovernanceLandsec Annual Report 2022 3. Application of Policy for 2022/23
3.1 Executive Directors’ base salaries
Executive Directors
Name
Mark Allan
Vanessa Simms
Colette O’Shea
1. From 1 June 2022.
121
Table 46
Percentage
increase
3.0%
3.0%
3.0%
Current salary
(£000)
New salary1
(£000)
800
490
480
824
505
494
Executive Directors’ base salaries will increase by 3%, which is below the workforce average increase of 5%.
3.2 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 2022/23. In line with the Committee’s Terms of Reference, no individual was involved in the decisions relating
to their own remuneration.
Non-executive Directors’ fees
Base fees
Chairman
Non-executive Director
Additional fees
Audit Committee Chairman
Remuneration Committee Chairman
Senior Independent Director
1 April 2022
(£000)
375
70
20
20
15
Table 47
1 April 2021
(£000)
375
70
20
20
15
3.3 Performance targets for the coming year
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 2022/23: Performance criteria
Measure
Weighting
Description
Performance range
Table 48
EPRA Earnings (£m)
Total accounting return
(pence per share)
ESG
30%
30%
20%
EPRA earnings targets in line with overall five-year strategic plan.
Full details will be provided in the 2023 report.
Delivery of growth in asset values measured by EPRA NTA growth
(adjusted for dividends) through pro-active asset management.
Reflecting the challenges of setting ESG targets following the impact of
Covid-19, a milestone target approach will be adopted for the year ending
31 March 2023 based on energy efficiency and embodied carbon reduction.
Full details will be provided in the 2023 report.
Full details will be provided in the 2023 report.
Personal objectives
20%
A mix of individual goals set at the beginning of the year.
Full details will be provided in the 2023 report.
Total annual bonus
100%
LTIP 2022-2025: Performance criteria
Table 49
Measure
Relative Total
Shareholder
Return (TSR)
Total accounting
return (TAR)
ESG
Weighting
Description
Performance range1
40%
40%
20%
TSR relative to the constituents of the FTSE 350 Real Estate Index, measured
over a three-year period, from 1 April 2022.
Threshold (8%)
Median
Maximum (40%)
Upper quartile
Growth in EPRA NTA per share over the three-year performance period as
adjusted for dividends.
Threshold (8%)
6% p.a.
Reduction of carbon emissions over the three-year performance period aligned
to achieve our published science-based target to achieve net zero by 2030.
Threshold (4%)
27%
Maximum (40%)
11% p.a.
Maximum (20%)
33%
1. Vesting takes place on a straight-line basis between threshold and maximum values.
The approach for the 2022 LTIP awards reflects both Landsec’s focus on delivering returns to shareholders combined with our approach to
sustainability and our ambition to be a net zero carbon business by 2030. Relative TSR is based on an unweighted, median to upper quartile
vesting schedule and total accounting return targets deliver a close alignment to strategy and a clear line of sight for management.
The 2022 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 to no more than 300% of salary for future grants).
GovernanceLandsec Annual Report 2022 122
Annual Report
on Remuneration continued
4. 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 2022, of £100 invested in Landsec on 31 March 2012, compared with the value of £100 invested in
the FTSE 100 and FTSE 350 Real Estate Indices on the same date.
Total Shareholder Return
)
d
e
s
a
b
e
r
(
)
£
(
e
u
a
V
l
250
200
150
100
50
191.3
190.7
130.9
155.2
151.5
123.1
178.5
172.8
124.1
177.9
172.2
153.0
191.9
158.8
153.3
191.4
165.1
163.4
121.8
119.1
115.4
193.6
164.3
132.0
163.6
134.8
103.8
Chart 50
234.0
190.7
157.3
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Mar-17
Mar-18
Mar-19
Mar-20
Mar-21
Mar-22
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
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
Chief Executive
Mark Allan
Mark Allan
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
Robert Noel
1. Includes £1,692,042 in relation to buyout awards made on appointment.
Single figure
of total
remuneration
(£000)
Annual bonus
payment
(% of maximum)
Long-term
incentive vesting
(% of maximum)
Table 51
2,000
2,9201
1,569
1,624
1,693
2,692
2,011
4,776
2,274
2,678
90.4
16.2
43.8
50.5
58.8
58.8
67.5
94.5
71.0
86.0
0.0
n/a
0.0
0.0
0.0
50.0
13.1
84.7
62.5
76.1
GovernanceLandsec Annual Report 2022
123
5. The context of pay in Landsec
5.1 Pay across the Group
a. Senior management
For the year under review, performance-related pay for our 35 most senior employees (excluding the Executive Directors) ranged from 33%
to 87% of salary (2021: 17% to 27%), equating to 74% to 90% of the maximum potential. The average bonus was 51.4% of salary (2021: 19.7%),
equating to 87.0% of the maximum potential. The LTIP awards made to senior management in June 2019 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 in 2021. Pay increases were reinstated
in 2022 and will be detailed in next year’s report. As at 31 March 2022, the ratio of the base salary of the Chief Executive to the average base
salary across the Group (excluding Executive Directors) was 11:1 (£800,000: £70,836).
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 for all current Directors compared
to all employees.
2020-2021
2021-2022
Salary/fee change1
(%)
Benefits change
(%)
Bonus change
(%)
Salary/fee change1
(%)
Benefits change
(%)
Bonus change
(%)
Table 52
Executive Directors
Mark Allan
Vanessa Simms
Colette O’Shea
Non-executive Directors
Cressida Hogg
Edward Bonham Carter
Nicholas Cadbury
Madeleine Cosgrave
Christophe Evain
Manjiry Tamhane
Average employee
n/a
n/a
3%
-5%
-15%
-5%
-5%
16%
n/a
7%
n/a
n/a
-3%
n/a
n/a
n/a
n/a
n/a
n/a
6%
n/a
n/a
-65%
n/a
n/a
n/a
n/a
n/a
n/a
-49%
9%
n/a
5%
5%
3%
5%
5%
7%
n/a
-1%
-75%
n/a
0%
n/a
n/a
n/a
n/a
100%
n/a
2%
479%
n/a
389%
n/a
n/a
n/a
n/a
n/a
n/a
219%
1. Director salary changes were impacted by the 20% voluntary reduction between May and July 2020 due to the impact of Covid-19.
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 remuneration table on page 115. Figures are calculated by reference to 31 March 2022 using actual pay data from April 2021 to March
2022. Excluded from our analysis are joiners, leavers and long-term absentees from the Company during the year. The strong performance
year, reflected in the CEO’s bonus payment, has increased the ratios relating to Option A since 2021. Given the alignment of incentive
arrangements cascaded below Board level, the Remuneration Committee believes the pay ratios are consistent with the pay, reward and
progression policies for the company’s UK employees taken as a whole.
Year
2022
2021
2020
Method
Option A
Option A1
Option A
1. The 2021 figures exclude all one-off recruitment-related awards.
e. Total pay and benefits
Year
2022
2021
2010
CEO
£1,999,930
£1,027,5871
£1,569,474
1. The 2021 figures exclude all one-off recruitment-related awards.
25th percentile pay ratio
40:1
22:1
36:1
Table 53
Median pay ratio
25:1
14:1
23:1
75th percentile pay ratio
16:1
10:1
15:1
25th percentile pay
£50,620
£45,752
£44,140
Median pay
£79,746
£73,212
£69,393
Table 54
75th percentile pay
£122,832
£105,848
£104,438
GovernanceLandsec Annual Report 2022 124
Annual Report
on Remuneration continued
f. Salary component of total pay
Year
2022
2021
2020
CEO
£800,000
£733,3331
£811,620
25th percentile pay
£38,038
£39,000
£29,785
Median pay
£58,083
£55,776
£58,565
Table 55
75th percentile pay
£77,600
£77,000
£79,203
1. Actual salary/remuneration earned during the year after a 20% voluntary reduction between May and July 2020 due to the impact of Covid-19.
5.2 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 2022
(£m)
66
274
March 2021
(£m)
49
200
Table 56
%
change
34.7%
37.0%
6. Dilution
Awards granted under the Company’s long-term incentive arrangements (LTIP, Deferred Share Bonus Plan, Restricted Share 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 888,400 ordinary shares (2021: 1,224,468) and 3,049,943
treasury shares (2021: n/a) at 31 March 2022.
The exercise of share options under the Land Securities Group PLC Sharesave (Sharesave), 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 2022,
the total number of shares which could be allotted under this Scheme was 635,473 shares (2021: 666,526), which represents less than
0.09% of the issued share capital of the Company.
7. Remuneration Committee meetings
The Committee met for four scheduled meetings over the course of the year. All members attended all the scheduled meetings. The Committee
meetings were also attended by the Chief Executive, the MD, People and Corporate Services and the Company Secretary who acted as the
Committee’s Secretary.
The Committee received advice on remuneration and ancillary share plan matters from FIT Remuneration Consultants LLP. FIT 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 FIT received fees of £66,610 in
connection with advice provided to the Committee. In 2020/21, Aon plc and FIT received fees of £32,386 and £78,184 respectively in connection
with advice provided to the Committee.
8. Shareholder voting
Directors’ Remuneration Policy (2021 AGM)
Annual Report on Remuneration (2021 AGM)
1. A vote withheld is not a vote at law.
% of votes
For
96.4
95.7
% of votes
Against
3.6
4.3
Table 57
Number of votes
withheld1
286,920
10,965,068
The Directors’ Remuneration Report was approved by the Board on 24 May 2022 and signed on its behalf by:
Christophe Evain
Chairman, Remuneration Committee
GovernanceLandsec Annual Report 2022 Directors’ Remuneration
Policy Summary
125
A summary of our Directors’ remuneration Policy, which was approved by shareholders at the 2021 AGM, is set out below. The full policy can
be found in the 2021 Annual Report.
1. Executive Directors
Base salary
Purpose and link
to strategy
→ To aid the recruitment, retention and motivation of high performing Executive Directors
→ To reflect the value of their experience, skills and knowledge, and importance to the business
Operation
Opportunity
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 salary, in line with the maximum employer contribution for all employees in the Company’s Group Personal Pension Plan
Performance measures
→ n/a
GovernanceLandsec Annual Report 2022 126
Directors’ Remuneration
Policy Summary continued
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
→ Reward 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
→ 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
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
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
GovernanceLandsec Annual Report 2022 127
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.
2. 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
GovernanceLandsec Annual Report 2022 128
Directors’
Report
The Directors present their report for the
year ended 31 March 2022.
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 58
Pages
6-9
41
70-71
74-130
157
178-179
Credit, market and liquidity risks
179-183
Related party transactions
Energy and carbon reporting
Workforce engagement
Stakeholders
Section 172 Statement
193-194
204-210
90
13
87-91
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 UK
law. 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.
Dividends
The results for the year are set out in the financial statements on pages 141-197.
The Company has paid three interim dividends to shareholders for the year under review.
The first interim dividend of 7 pence was paid to shareholders in October 2021, a second
interim dividend of 8.5 pence was paid to shareholders in January 2022; and third interim
dividend of 8.5 pence per share was paid to shareholders on 7 April.
1st Interim
2021/22
2nd Interim
2021/22
3rd Interim
2021/22
Final 2021/22
(proposed)
7 pence (PID)
8.5 pence (PID)
8.5 pence (PID)
13 pence (PID)
Table 59
Property Income
Distribution (PID)/
Non-PID
Record date
27 August 2021 26 November 2021 11 March 2022
17 June 2022
Payment date
8 October 2021 4 January 2022
7 April 2022
22 July 2022
A Dividend Reinvestment Plan (DRIP)
election is currently available in respect
of all dividends paid by Landsec.
Events after the reporting period
The following matters are disclosed in
Note 42 to the Financial Statements as
events occurring after the reporting period.
On 11 May 2022, contracts were exchanged
to sell the wholly owned subsidiary, LS City
& West End Limited, for a headline price
of £195m.
Since 31 March 2022, the Group sold or
exchanged contracts to sell certain
interests in joint venture arrangements and
trading properties, all acquired as part of
the U+I Group PLC on 14 December 2021.
The Building Safety Act 2022 was enacted
on 28 April 2022, for which work is underway
to assess the potential impact on the Group.
Directors
The names and biographical details of
the current Directors and the Board
Committees of which they are members
are set out on pages 75-79.
All the Directors proposed for re-election
held office throughout the year.
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 125.
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 2022 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.
GovernanceLandsec Annual Report 2022 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 2022, there
were 751,328,142 ordinary shares in issue
and fully paid. To satisfy future awards
under the Company’s shareholder approved
employee share plans, on 3 June 2021, of
the 9,839,179 existing shares held by the
Company in Treasury, 3,049,943 were
transferred to the Company’s Employee
Benefit Trust, leaving, 6,789,236 shares held
in Treasury. The voting rights and dividend
entitlements have been waived for the
shares held by Treasury and the Employee
Benefit Trust. This transfer has not affected
total number of voting rights. No shares
were bought back during the year. Further
details relating to share capital, including
movements during the year, are set out in
note 36 to the financial statements.
At the Company’s AGM held on 8 July 2021,
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 2022 AGM and a renewal of that
authority will be sought.
From 1 April 2022 to 16 May 2022, being the
period from the year end through to the
date on which this report has been signed
we have received a number of DTR
notifications from BlackRock, Inc., the
latest of which was made on 16 May 2022
reflecting a holding of 79,970,684 ordinary
shares which constitutes a holding of
10.78%. In addition, we received a DTR
notification from Schroders Plc which was
made on 9 May 2022 reflecting a holding
of 37,944,213 ordinary shares which
constitutes a holding of 5.12%. 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 did not purchase any shares in
the market during the year (2021: 500,000).
On 3 June 2021, 3,049,943 Treasury shares
were transferred to the EBT. The EBT released
336,068 shares during the year to satisfy
vested share plan awards. At 31 March, the
EBT held 888,400 ordinary shares purchased
on the market and 3,049,943 ordinary
shares previously held in treasury in Land
Securities Group PLC.
A dividend waiver is in place from the Trustee
in respect of all dividends payable by Landsec
on shares which the EBT 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 35-37 to the financial statements.
Substantial shareholders
As at 31 March 2022, 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 60
Shareholder name
BlackRock, Inc.
Government of Norway
Schroders Plc
State Street Corporation
The Vanguard Group, Inc.
Legal & General Group
Number of
ordinary shares
Percentage of total voting rights
attaching to issued share capital1
83,853,888
68,192,775
36,204,429
33,921,780
33,496,156
24,973,617
11.3
9.2
4.9
4.6
4.5
3.4
1. The total number of voting rights attaching to the issued share capital of the Company on 31 March 2022 was
741,488,963.
129
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 2022 AGM. These documents
are available on Landsec’s website at:
landsec.com/agm.
Change of control
There are a number of agreements that
take effect, alter or terminate upon a
change of control of the Company
following a takeover. None of these are
considered significant. The Company’s
share plans contain provisions that take
effect in such an event but do not entitle
participants to a greater interest in the
shares of the Company than created by
the initial grant or award under the relevant
plan. There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of office
or employment or otherwise that occurs
specifically because of a takeover.
GovernanceLandsec Annual Report 2022 130
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 30 September 2021 and
posted on our website the same day.
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 on pages 38-43.
Political donations
The Company did not make any political
donations or expenditure in the year that
require disclosure (2021: 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 2022
AGM. The reappointment has been
recommended to the Board by the Audit
Committee and EY has indicated its
willingness to remain in office.
2022 Annual General Meeting
This year’s AGM is scheduled to be held
at 10.00 am on Thursday, 7 July 2022 at
80 Victoria Street, London SW1E 5JL.
We will once again hold this meeting as a
hybrid meeting with shareholders having
the option to attend the meeting virtually
where attendees will be able to watch
presentations from our Chairman and CEO.
Questions can be raised verbally by those
attending the AGM in person, submitted
in writing via the messaging function on
Lumi’s online meeting platform, or verbally
via the Virtual Mic. Shareholders are also
able to cast their votes online.
A separate circular, comprising a letter
from the Chairman, Notice of Meeting
and explanatory notes in respect of the
resolutions proposed, can be found on
our website: landsec.com/agm.
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 16 May 2022.
By Order of the Board.
Liz Miles
Company Secretary
Land Securities Group PLC
Company number 4369054
GovernanceLandsec Annual Report 2022 Statement of
Directors’ Responsibilities
131
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 UK adopted
international accounting standards (IFRSs
and IFRICs). Directors must not approve the
financial statements unless they are satisfied
that they give a true and fair view of the
state of affairs of the Group and the
Company and of the profit and loss of the
Group and the Company for that period.
In preparing these financial statements,
the Directors are required to:
→ 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 UK adopted international
accounting standards) 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 UK adopted international accounting
standards is insufficient to enable users
to understand the impact of particular
transactions, other events and conditions
on the Group’s and Company’s financial
position and performance; and
→ 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 UK adopted
international accounting standards)
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 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
→ Vanessa Simms, Chief Financial Officer
→ Colette O’Shea, Chief Operating Officer
→ Edward Bonham Carter, Senior
Independent Director*
→ Nicholas Cadbury*
→ Madeleine Cosgrave*
→ Christophe Evain*
→ Manjiry Tamhane*
*Non-executive Directors
The Statement of Directors’ Responsibilities
was approved by the Board of Directors on
16 May 2022 and is signed on its behalf by:
Mark Allan
Chief Executive
Vanessa Simms
Chief Financial Officer
Financial statementsLandsec Annual Report 2022 132
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 2022 and of the Group’s profit for
the year then ended;
→ the Group financial statements have been properly prepared in accordance with UK adopted international accounting standards;
→ the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting
standards 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 2022 which comprise:
Group
Parent Company
Consolidated balance sheet as at 31 March 2022
Balance sheet as at 31 March 2022
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 42 to the financial statements, including a summary of
significant accounting policies
Related notes 1 to 42 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 UK adopted international accounting
standards 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Group and Parent Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical Standard as applied to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
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.
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:
→ We assessed the risk around going concern in planning our audit, at the interim and again at the year-end phase.
→ We assessed the appropriateness of the process followed by Management to prepare the Group’s going concern assessment, including
assessing the ongoing impact of the Covid-19 pandemic and financial pressures on tenants leading to a continued credit risk, the impact
of acquisitions made by the Group including any facilities acquired and climate change considerations.
→ 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 30 September 2023 and the additional downside scenarios.
→ For each of the modelled scenarios, we challenged the key assumptions used by Management by comparing to corroborative evidence
and searching out independent contradictory evidence. We assessed Management’s consideration of downside sensitivity analysis taking
into account current events and market conditions and historic performance of the Group. We also applied further sensitivities on
income and expense cashflows where appropriate to stress test the impact on liquidity.
Financial statementsLandsec Annual Report 2022 133
→ 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
(as defined in the Glossary on page 228) 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 downside 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.
→ We reviewed the disclosures in the financial statements relating to going concern with a view to confirming that they appropriately
disclose the risk, the impact on the Group’s operations and results and potential mitigating actions.
The results of the severe downside scenarios modelled by Management indicate that the Group would maintain available facility and
covenant headroom to be able to withstand the impact of plausible downside sensitivities throughout the period of the going concern
assessment to 30 September 2023.
As at 31 March 2022, the Group has a cash balance of £159m (which includes £31m in relation to the Group’s share of cash held within
jointly controlled operations). In addition, the Group also has substantial available facilities of £3,022m at 31 March 2022. This includes
facilities of £26m expiring during the going concern period.
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 30 September 2023.
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’s 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 through four segments: Central London, Major retail, Mixed-use urban
neighbourhoods and Subscale sectors.
→ During the year, the Group acquired U and I Group PLC (‘U+I’) which has been identified as a separate component for the purpose
of scoping the audit. U+I accounted for 1% of absolute Profit before tax, 0.5% of Revenue and 3% of Total assets. U+I has been
designated as a specific scope component with the audit work being performed by the Group audit team.
→ The Group audit team also performed 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 2022) Accounting for the acquisition of U and I Group PLC.
→ Overall Group materiality of £110m which represents 0.9% of total assets in the Group balance sheet at 31 March 2022. Overall
materiality is applied to account balances related to investment properties, trading properties (either wholly owned or held within
joint ventures) and related loans and borrowings.
→ Specific materiality of £18m, which represents 5% of EPRA Earnings before tax. Specific materiality is applied to account balances
not related to investment properties, trading properties (either wholly owned or held within joint ventures) and loans and
borrowing.
→ Parent Company materiality of £56m, 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.
Financial statementsLandsec Annual Report 2022 134
An overview of the scope of the Parent Company and Group audits
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the
Group. This enables us to form an opinion on the consolidated financial statements. We take into account size, risk profile, the organisation
of the group and effectiveness of group-wide controls, changes in the business environment and other factors such as recent Internal audit
results when assessing the level of work to be performed.
U+I has been identified as a separate component for the purpose of scoping the audit and designated a specific scope which is a change
from the prior year. Specific scope involves a focus on balances that are considered material to the Group. U+I accounted for 1% of the
Group’s absolute Profit before tax, 0.5% of Revenue and 3% of Total assets. The audit scope of this component may not have included
testing of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group.
The components we performed audit procedures on accounted for 100% of the Group’s profit before tax, Revenue and Total assets.
All audit work performed for the purposes of the audit was undertaken by the Group audit team.
Climate change
There has been increasing interest from stakeholders as to how climate change will impact the Group. The Group has determined that
the most significant future impacts from climate change on its operations will be to deliver on their commitment to be a net zero business
by 2030, with the UK government’s minimum energy and efficiency standards requiring an EPC rating of ‘B’ by 2030. Management has
currently estimated the cost of meeting this commitment to be £135m. This is explained on pages 66-69 in the required Task Force on
Climate Related Financial Disclosures in the Principal risks and uncertainties section of the Strategic Report, which form part of the
‘Other information’, rather than the audited financial statements. Our procedures on these disclosures therefore consisted solely of
considering whether they are materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appear to be materially misstated.
As explained in Note 2 of the financial statements, the Group has considered the impact of climate change on the financial statements,
taking into account the relevant disclosures in the Strategic Report. However, governmental and societal responses to climate change risks
are still developing, and are interdependent upon each other, and consequently financial statements cannot capture all possible future
outcomes as these are not yet known. The degree of certainty of these changes may also mean that they cannot be taken into account
when determining asset and liability valuations and the timing of future cash flows under the requirements of UK-adopted international
accounting standards.
Our audit effort in considering climate change was focused on the adequacy of the Group’s disclosures in the financial statements and
their conclusion that no issues were identified that would materially impact the valuation of the investment properties, investment
properties held in joint ventures and trading properties or have any other material impact on the financial statements. We also challenged
the Directors’ consideration of climate change in their assessment of going concern and viability and associated disclosures.
Key audit matters
Key audit matters are those matters that, in our professional judgment, 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: Accounting for the acquisition of U and I Group PLC (U+I). The audit partner and other
senior members of the audit team spent a significant amount of time assessing the judgments made and the appropriateness of the
balances recorded, due to the complexity of the accounting treatment and the level of judgements and estimates Management made.
In the prior year, we included a key audit matter: impairment of trade receivables, including lease incentive balances. As a result of the
improved cash collections and the ease of restrictions in relation to Covid-19, we have not considered this as a key audit matter in the
current year.
Independent Auditor’s ReportcontinuedFinancial statementsLandsec Annual Report 2022 135
Key observations
communicated to
the Audit Committee
We have tested the
inputs, assumptions
and methodology
used by CBRE, JLL
and Savills. 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 2022.
We concluded that
the sample of
properties reviewed
by our Chartered
Surveyors was within
the reasonable
range of values as
assessed by them.
We concluded that
climate change has
been appropriately
considered within the
valuations where
appropriate.
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.
Risk
Our response to the risk
The valuation of property,
including investment properties
and investment properties held
in joint ventures
2022: £11,207m in investment
properties and £771m (the Group’s
share) in investment properties held
in joint ventures (2021: £9,607m in
investment properties and £735m
share in investment properties held
in joint ventures).
Refer to the Report of the Audit
Committee (pages 102-107);
Accounting policies (pages 161-162);
Note 14 & 16 of the Financial
statements (pages 163-171).
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 (namely in respect of
estimated rental value and yield
profile applied) 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.
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 valuers, CBRE, JLL and
Savills, which included consideration of their qualifications and expertise.
We met with CBRE, JLL and Savills 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, JLL and Savills
in light of the Covid-19 pandemic, continued turbulence in the retail sector and
costs associated with climate change.
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
72% 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, JLL and Savills. 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 valuers, such as the estimated rental values,
voids, tenant incentives and development costs to complete were supported by
available data. They also considered whether other market transactions
contradict the assumptions used in the valuation.
Together with our Chartered Surveyors, we met with the external valuers to
further discuss the findings from our audit work described above and to seek
further explanations as required.
We challenged whether sustainability costs identified by Management have
been appropriately considered within the valuation.
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 those properties 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, CBRE 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 five site visits. Where properties are under development, 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. We considered the reasonableness of
forecast costs to complete included in the valuations as well as the identified
contingencies and the exposure to remaining risks, by comparing the total
forecast costs to contractual arrangements and other supporting evidence.
We challenged forecast cost and cost to complete for evidence of overruns
through risks identified during our development meetings, review of meeting
minutes and other supporting information. 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 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 the valuation of properties,
including investment properties and investment properties held in joint ventures.
Financial statementsLandsec Annual Report 2022 136
Risk
Our response to the risk
Our audit procedures over revenue recognition included:
We tested certain manual 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 testing of certain manual
controls 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 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 Group was subject to full scope audit procedures over revenue, excluding U+I
as this was determined to be immaterial.
Management have determined that the acquisition represents a business
combination. We obtained and assessed Management’s accounting paper on
the application of IFRS 3 Business Combinations, including judgements in
determining whether the acquisition represents an asset acquisition or a business
combination, and the purchase price allocation (PPA) assessment.
We obtained and reviewed relevant sale and purchase agreements and other
contractual arrangements entered into in relation to the acquisition, to assess
the date when control of U+I was obtained.
We performed the following testing on opening balances to determine the
appropriateness of the balances recorded at the date of acquisition.
→ We obtained the property valuations prepared at acquisition date by CBRE
and those prepared internally by the Directors. We selected a sample of five
properties which equated to 36% of the opening asset balance for which the
valuation was tested for reasonableness by EY’s Chartered Surveyors.
→ We challenged Management and searched for evidence of other assets or
liabilities that have been acquired but not identified by Management.
→ We assessed the judgements made in recognising and measuring any
goodwill arising as a result of the purchase price allocation including
subsequent impairment.
We determined the impact of the integration of U+I on the current processes
at the Group, including whether there are any differences in accounting
policies applied.
We assessed the completeness and adequacy of the disclosures made in the
financial statements.
Revenue recognition, including the
timing of revenue recognition and
the treatment of lease incentives
2022: £537m rental income
(2021: £519m rental income)
Refer to the Report of the Audit
Committee (pages 102-107);
Accounting policies (pages 152-153);
Note 6 of the Financial statements
(pages 152-153).
Market expectations and EPRA
Earnings-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 the incorrect
treatment of lease incentives.
Accounting for the acquisition of
U and I Group PLC
Refer to the Report of the Audit
Committee (pages 102-107);
Accounting policies (page 195);
Note 41 of the Financial statements
(pages 195-197).
The acquisition of U+I requires
Management to assess the
contractual arrangements from
the transaction and considers the
requirements of IFRS 3 Business
Combinations in order to assess
the initial acquisition accounting.
The initial accounting may be
complex and require significant
judgements and estimates to be
made, including:
→ Assessing whether the acquisition
represents a business combination
or asset acquisition
→ Making judgments and estimates
to determine the purchase price
allocation (PPA)
→ Identifying any intangible assets
acquired which are not recorded
in the U+I financial statements
and estimating their fair value
→ Assessing any goodwill recognised
for impairment
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.
Based upon the
audit procedures
performed, we
concluded that
the acquisition has
been appropriately
accounted for as a
business combination.
We concluded that
the opening balances
determined by
management are
appropriately stated
and the sample of
properties reviewed
by our Chartered
Surveyors
were determined
to be reasonable.
We concluded that
Management’s
impairment of
goodwill is
appropriate.
We concluded that
the disclosures in the
financial statements
are appropriate in
relation to the
acquisition.
Independent Auditor’s ReportcontinuedFinancial statementsLandsec Annual Report 2022 137
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, trading
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 (2021: 0.9% of
total assets)
5% of EPRA Earnings before tax
(2021: 5% of average revenue profit
before tax over two years)
£110m
(2021: £99m)
£18m
(2021: £17m)
£83m
(2021: £74m)
£13m
(2021: £13m)
£6m
(2021: £5m)
£1m
(2021: £1m)
0.9% of total assets (2021: 0.9% of
total assets)
£56m
(2021: £55m)
£42m
(2021: £41m)
£3m
(2021: £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 (2021: 0.9% of total assets). We
applied overall materiality to the investment property and trading 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 determined that for other account balances not related to investment properties, trading 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 determined that materiality for these areas should be based upon 5% of EPRA earnings before tax. EPRA earnings is considered an
important performance metric and aligned with industry earnings measures. In the prior year we used an average of the Group’s 2021 and
2020 EPRA earnings before tax. For the 2021 audit, we concluded that the specific materiality was more appropriately determined using
a normalised basis based on past results and that better reflected a normalised level of earnings. This was due to the decline in ERPA
earnings because of the impact of Covid-19 and the bad debt charges. This is no longer relevant for the current year audit.
We reassessed initial materiality at the year-end date which has not resulted in a change from our planning materiality.
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 was that
performance materiality was 75% (2021: 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.
Audit work at U+I for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken based on
a percentage of total performance materiality. The performance materiality set for U+I is based on the relative scale and risk of the
component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year, our
performance materiality allocated to U+I was £2.6m.
Financial statementsLandsec Annual Report 2022 138
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 £6m
(2021: £5m), as well as audit differences in excess of £1m (2021: £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 1-130, 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 this gives rise
to 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
We have reviewed 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 by the Listing Rules.
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 70-71 and 131;
→ 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 pages 70-71;
→ Director’s statement on whether it has a reasonable expectation that the Group will be able to continue in operation and meets its
liabilities set out on page 131;
→ Directors’ statement on fair, balanced and understandable set out on page 131;
Independent Auditor’s ReportcontinuedFinancial statementsLandsec Annual Report 2022 139
→ Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on pages 60-69;
→ The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out
on pages 58-69; and;
→ The section describing the work of the Audit Committee set out on pages 100-107.
Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement set out on page 131, 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 (UK adopted
international accounting standards, 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;
• Reading of internal audit reports;
• 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 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 https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Financial statementsLandsec Annual Report 2022 140
Other matters we are required to address
→ Following the recommendation from the Audit Committee, we were appointed by the Parent Company on at the AGM 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 eight years, covering the years ending
31 March 2014 to 31 March 2022.
→ 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
25 May 2022
Independent Auditor’s ReportcontinuedFinancial statementsLandsec Annual Report 2022 Income statement
for the year ended 31 March 2022
EPRA
earnings
£m
Capital
and other
items1
£m
Notes
647
13
(273)
387
29
–
–
–
–
416
9
(70)
355
32
–
(48)
(16)
4
107
2
416
6
519
16
(15)
520
Revenue
Costs – movement in bad and doubtful debts provisions
Costs – other
Share of post-tax profit/(loss) from joint ventures
Profit on disposal of investment properties
Profit on disposal of investment in joint ventures
Net surplus/(deficit) on revaluation of investment
properties
Gain on modification of finance lease
Operating profit/(loss)
Finance income
Finance expense
Profit/(loss) before tax
Taxation
Profit/(loss) for the year
Attributable to:
Shareholders of the parent
Non-controlling interests
Profit/(loss) per share attributable to shareholders
of the parent:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
6
7
7
16
14
10
10
12
5
5
141
2021
Total
£m
635
(110)
(223)
302
(192)
8
–
(1,448)
–
(1,330)
16
(79)
(1,393)
–
(1,393)
(1,393)
–
(1,393)
EPRA
earnings
£m
Capital
and other
items1
£m
631
(110)
(218)
303
8
–
–
–
–
311
15
(75)
251
4
–
(5)
(1)
(200)
8
–
(1,448)
–
(1,641)
1
(4)
(1,644)
2022
Total
£m
679
13
(321)
371
33
107
2
416
6
935
25
(85)
875
–
875
869
6
875
117.4p
117.1p
(188.2)p
(188.2)p
1. All revenue and costs are classified within the ‘EPRA earnings’ column of the income statement, with the exception of proceeds from, and costs of, the sale of trading properties,
income from and costs associated with long-term development contracts, amortisation and impairment of intangibles and costs attributable to business acquisitions, which are
presented in the ‘Capital and other items’ column.
Statement of comprehensive income
for the year ended 31 March 2022
Profit/(loss) for the year
Items that may be subsequently reclassified to the income statement:
Movement in cash flow hedges
Items that will not be subsequently reclassified to the income statement:
Movement in the fair value of other investments
Net re-measurement gain/(loss) on defined benefit pension scheme
Deferred tax (charge)/credit on re-measurement above
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Attributable to:
Shareholders of the parent
Non-controlling interests
Notes
34
12
2022
Total
£m
875
(1)
(3)
22
(5)
13
2021
Total
£m
(1,393)
–
(3)
(12)
2
(13)
888
(1,406)
882
6
888
(1,406)
–
(1,406)
Financial statementsLandsec Annual Report 2022 142
Balance sheets
at 31 March 2022
Non-current assets
Investment properties
Intangible assets
Net investment in finance leases
Investments in joint ventures
Investments in associates
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
Equity attributable to shareholders of the parent
Equity attributable to non-controlling interests
Total equity
Notes
2022
£m
14
20
19
16
17
29
27
30
15
27
23
24
31
22
28
32
22
28
33
36
Group
2021
£m
9,607
8
152
625
–
–
170
22
10,584
36
354
10
–
6
406
2022
£m
–
–
–
–
–
6,222
–
–
6,222
–
–
2
–
–
2
Company
2021
£m
–
–
–
–
–
6,101
–
–
6,101
–
–
3
–
–
3
11,207
8
70
700
4
–
177
61
12,227
145
368
22
128
5
668
12,895
10,990
6,224
6,104
(541)
(320)
(11)
(872)
(4,012)
(8)
(12)
(4,032)
(906)
(252)
(7)
(1,165)
(2,610)
(1)
(2)
(2,613)
–
(2,912)
–
(2,912)
–
(2,630)
–
(2,630)
–
–
–
–
–
–
–
–
(4,904)
(3,778)
(2,912)
(2,630)
7,991
7,212
3,312
3,474
80
317
9
–
7,511
7,917
74
7,991
80
317
28
–
6,787
7,212
–
7,212
80
317
9
374
2,532
3,312
80
317
28
374
2,675
3,474
The profit for the year of the Company was £15m (2021: loss of £205m).
The financial statements on pages 141-197 were approved by the Board of Directors on 16 May 2022 and were signed on its behalf by:
Mark Allan
Directors
Vanessa Simms
Financial statementsLandsec Annual Report 2022 Statements of changes in equity
for the year ended 31 March 2022
At 1 April 2020
Attributable to shareholders of the parent
Ordinary
shares
£m
80
Share
premium
£m
317
Other
reserves
£m
27
Retained
earnings
£m
8,326
Total
£m
8,750
Total comprehensive loss for the financial year
Transactions with shareholders of the parent:
Share-based payments
Dividends paid to shareholders of the parent
Acquisition of own shares
Total transactions with shareholders of the parent
–
–
–
–
–
–
–
–
–
–
–
4
–
(3)
1
(1,406)
(1,406)
–
(133)
–
(133)
4
(133)
(3)
(132)
At 31 March 2021
80
317
28
6,787
7,212
Total comprehensive income for the financial year
Transactions with shareholders of the parent:
Share-based payments
Dividends paid to shareholders of the parent
Transfer of treasury shares
Total transactions with shareholders of the parent
Acquisition of subsidiaries
–
–
–
–
–
–
–
–
–
–
–
–
At 31 March 2022
80
317
–
2
–
(21)
(19)
–
9
882
882
2
(181)
21
(158)
4
(181)
–
(177)
–
–
7,511
7,917
143
Non-
controlling
interests
£m
–
–
–
–
–
–
–
6
–
–
–
–
68
74
Group
Total
equity
£m
8,750
(1,406)
4
(133)
(3)
(132)
7,212
888
4
(181)
–
(177)
68
7,991
At 1 April 2020
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
Total comprehensive income for the financial year
Transactions with shareholders:
Share-based payments
Dividends paid to shareholders
Transfer of treasury shares
Total transactions with shareholders
At 31 March 2022
1. Available for distribution.
Attributable to shareholders
Company
Ordinary
shares
£m
80
Share
premium
£m
317
Other
reserves
£m
27
Merger
reserve
£m
374
Retained
earnings1
£m
3,013
Total
equity
£m
3,811
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
–
(3)
1
28
–
2
–
(21)
(19)
–
–
–
–
–
(205)
(205)
–
(133)
–
(133)
4
(133)
(3)
(132)
374
2,675
3,474
–
–
–
–
–
15
2
(181)
21
(158)
15
4
(181)
–
(177)
80
317
9
374
2,532
3,312
At 31 March 2021
80
317
Financial statementsLandsec Annual Report 2022 144
Statement of cash flows
for the year ended 31 March 2022
Cash flows from operating activities
Net cash generated from operations
Interest received
Interest paid
Rents paid
Capital expenditure on trading properties
Disposal of trading properties
Other operating cash flows
Net cash inflow from operating activities
Cash flows from investing activities
Investment property development expenditure
Other investment property related expenditure
Acquisition of investment properties
Disposal of investment properties
Acquisition of subsidiaries
Deferred consideration received
Cash distributions from joint ventures
Other investing cash flows
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from new borrowings (net of finance fees)
Repayment of bank debt
Redemption of medium term notes
Premium paid on redemption of medium term notes
Net cash outflow from derivative financial instruments
Dividends paid to shareholders of the parent
Decrease/(increase) in monies held in restricted accounts and deposits
Other financing cash flows
Net cash inflow/(outflow) from financing activities
Increase/(decrease) in cash and cash equivalents for the year
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
13
2022
£m
448
23
(84)
(8)
(5)
8
(1)
2021
£m
322
4
(83)
(9)
(1)
–
–
13
381
233
(302)
(42)
(147)
265
(399)
–
22
–
(603)
(177)
(41)
(99)
631
–
10
16
(6)
334
1,053
–
(489)
(1,755)
–
–
(3)
(190)
(12)
(9)
350
128
–
128
(12)
(3)
(12)
(127)
(1)
(2)
(1,912)
(1,345)
1,345
–
16
22
22
22
22
11
24
The Company did not hold any cash and cash equivalents balances at 31 March 2022 (2021: none) and therefore did not have any cash
flows in the year then ended (2021: none).
Financial statementsLandsec Annual Report 2022 145
Notes to the financial statements
for the year ended 31 March 2022
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 UK adopted international accounting
standards (IFRSs and IFRICs) and, as regards the Parent Company financial statements, applied in accordance with the provisions of
the Companies Act 2006. The financial statements have been prepared in Pounds Sterling (rounded to the nearest one million), which
is the presentation currency of the Group (Land Securities Group PLC and all its subsidiary undertakings), and under the historical cost
convention as modified by the revaluation of investment property, financial assets at fair value through 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
While the impact of Covid-19 has reduced in the year to 31 March 2022, we are still in a period of recovery and therefore 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 2022. The Group’s going concern assessment considers changes in the Group’s principal risks
(see pages 70-71) 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 22.
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 macroeconomic 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.
The Group’s key metrics from the Viability scenario as at the end of the going concern assessment period, which covers the 16 months to
30 September 2023, are shown below alongside the actual position at 31 March 2022.
Key metrics
Security Group LTV
Adjusted net debt
EPRA net tangible assets
Available financial headroom
31 March 2022
30 September 2023
Viability scenario
36.4%
£4,179m
£7,888m
£1.1bn
38.9%
£4,363m
£7,266m
£1.2bn
Financial statementsLandsec Annual Report 2022 146
1. Basis of preparation and consolidation continued
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 16 months from the date of authorisation of these financial statements. The value of our assets
would need to fall from 31 March 2022 values by at least 55% 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 £155m in the year ending 31 March 2023 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. 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 30 September 2023 to a level that would result in a breach of the interest cover covenant.
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 2022.
Basis of consolidation
The consolidated financial statements for the year ended 31 March 2022 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.
Where equity in a subsidiary is not attributable, directly or indirectly, to the shareholders of the parent, this is classified as a non-controlling
interest. Total comprehensive income or loss and the total equity of the Group are attributed to the shareholders of the parent and to the
non-controlling interests according to their respective ownership percentages.
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.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 147
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)
→ Accounting for acquisitions of subsidiaries (note 41)
Estimates
→ Valuation of investment and trading properties (note 14)
→ Impairment of trade receivables (note 27)
In preparing the financial statements, the Group has considered the impact of climate change, taking into account the relevant disclosures
in the Strategic Report, including those made in accordance with the recommendations of the Taskforce on Climate Related Financial
Disclosure. These considerations included the limited exposure in terms of our investment properties, as we fully costed and committed
to invest £135m to achieve our science-based net zero target by 2030. On this basis, the Group has concluded that climate change did not
have a material impact on the financial reporting judgements and estimates, consistent with the assessment that this is not expected to
have a significant impact on the Group’s going concern or viability assessment.
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.
Financial statementsLandsec Annual Report 2022 148
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 £12.0bn, 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.
EPRA earnings is the Group’s alternative measure of the underlying pre-tax profit of the property rental business. EPRA earnings has
replaced revenue profit as the Group’s primary measure of underlying performance in the year ended 31 March 2022 to align with industry
standard. Adjusted earnings, adjusted basic earnings per share and adjusted diluted earnings per share are also no longer reported.
There were no differences between these measures at 31 March 2022 and 2021. EPRA earnings excludes all items of a capital nature, such as
valuation movements and profits and losses on the disposal of investment properties, as well as exceptional items. The Group believes that
EPRA earnings provides additional understanding of the Group’s operational performance to shareholders and other stakeholder groups.
A full definition of EPRA earnings is given in the Glossary. The components of EPRA earnings are presented on a proportionate basis in
note 4. EPRA earnings is an alternative performance measure.
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 EPRA earnings, 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 EPRA earnings 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 EPRA earnings 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.
4. Segmental information
The Group’s operations are all in the UK and are managed across four operating segments, being Central London, Major retail destinations
(Major retail), Mixed-use urban neighbourhoods (Mixed-use urban) and Subscale sectors.
The Central London segment includes all assets geographically located within central London. Major retail destinations, which was
previously referred to as Regional retail, includes all regional shopping centres and shops outside London and our outlets. The Mixed-use
urban segment, which was previously referred to as Urban opportunities, includes those assets where we see the most potential for capital
investment. There has been no change to the classification of these segments other than the change of name during the year to 31 March
2022. Subscale sectors mainly includes assets that will not be a focus for capital investment and consists of leisure and hotel assets and
retail parks.
Management has determined the Group’s operating segments based on the information reviewed by Senior Management to make
strategic decisions. The chief operating decision maker is 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.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 149
The Group’s primary measure of underlying profit before tax is EPRA earnings. 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 administrative costs, which are
predominantly staff costs for centralised functions, are all treated as administrative 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 82.
EPRA earnings
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
Movement in bad and doubtful
debts provisions
Segment net rental income
Other income
Administrative expense
Depreciation
EPRA earnings before interest
Finance income
Finance expense
Joint venture finance expense
EPRA earnings attributable
to shareholders of the parent
Central
London
£m
Major
retail
£m
Mixed-use
urban
£m
Subscale
sectors
£m
287
6
293
(4)
289
40
(41)
(1)
13
(42)
(1)
167
–
167
(6)
161
39
(45)
(6)
11
(37)
13
258
142
43
–
43
–
43
7
(9)
(2)
2
(11)
2
34
89
2
91
2
93
–
(3)
(3)
2
(14)
(2)
76
Central
London
£m
Major
retail
£m
Mixed-use
urban
£m
Subscale
sectors
£m
300
9
309
(3)
306
39
(39)
–
18
(27)
(17)
162
–
162
(5)
157
35
(38)
(3)
10
(23)
(69)
26
–
26
–
26
5
(5)
–
1
(5)
(10)
81
–
81
(1)
80
–
(2)
(2)
3
(9)
(31)
280
72
12
41
2022
Total
£m
586
8
594
(8)
586
86
(98)
(12)
28
(104)
12
510
3
(82)
(5)
426
9
(70)
(10)
355
2021
Total
£m
569
9
578
(9)
569
79
(84)
(5)
32
(64)
(127)
405
2
(77)
(5)
325
15
(75)
(14)
251
1. Included within rents payable is lease interest payable of £2m (2021: £2m) for the Central London segment and £2m (2021: £1m) for the Subscale segment.
Financial statementsLandsec Annual Report 2022 150
4. Segmental information continued
Reconciliation of EPRA earnings to profit/(loss) before tax
EPRA earnings attributable to shareholders of the parent
Capital and other items
Valuation and profit on disposals
Net surplus/(deficit) on revaluation of investment properties
Gain on modification of finance leases
Movement in impairment charge on trading properties
Profit on disposal of investment properties
Profit on disposal of investment in joint ventures
Profit/(loss) on disposal of trading properties
Net finance income/(expense) (excluded from EPRA earnings)
Fair value movement on interest-rate swaps
Premium on redemption of medium term notes (MTNs)
Other net finance (expense)/income
Exceptional items
Impairment of intangible asset
Impairment of goodwill
Other
Gain on settlement of liability
Business combination costs
Other
Profit/(loss) before tax attributable to shareholders of the parent
Profit before tax attributable to non-controlling interests
Profit/(loss) before tax1
1. Refer to Table 82 for a reconciliation of the Group income statement to the segmental information presented above.
2022
Total
£m
355
2021
Total
£m
251
409
(1,646)
6
(6)
115
2
1
–
–
5
–
(1)
527
(1,642)
16
–
(15)
1
–
(6)
(6)
–
(8)
–
(8)
869
6
875
(1)
(3)
1
(3)
(4)
–
(4)
4
–
1
5
(1,393)
–
(1,393)
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 151
5. Performance measures
In the tables below, we present earnings per share and net assets per share attributable to shareholders of the parent, calculated in
accordance with IFRS, together with 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 EPRA
earnings per share, EPRA Net Tangible Assets per share and total accounting return, which was previously referred to as total business
return. There has been no change to the calculation of this measure other than the change of name during the year to 31 March 2022.
EPRA earnings, which is a tax adjusted measure of underlying earnings, is the basis for the calculation of EPRA earnings per share. We believe
EPRA earnings and EPRA 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.
Year ended
31 March 2021
Loss for
the year
£m
EPRA
earnings
£m
(1,393)
(1,393)
–
–
–
–
1,642
3
4
(5)
251
EPRA
33.9p
33.9p
Earnings per share
Profit/(loss) attributable to shareholders of the parent
Valuation and profit on disposals
Net finance (income)/expense (excluded from EPRA earnings)
Exceptional items
Other
Year ended
31 March 2022
EPRA
earnings
£m
869
(527)
(1)
6
8
Profit for
the year
£m
869
–
–
–
–
Profit/(loss) used in per share calculation
869
355
(1,393)
Basic earnings/(loss) per share
Diluted earnings/(loss) per share1
IFRS
117.4p
117.1p
EPRA
48.0p
47.8p
IFRS
(188.2)p
(188.2)p
1. In the year ended 31 March 2021, 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
31 March 2022
Net assets
£m
EPRA NDV
£m
EPRA NTA
£m
Net assets attributable to shareholders of the parent
7,917
7,917
7,917
(Shortfall)/excess of fair value over net investment in finance leases
book value
Deferred tax liability on intangible asset
Goodwill on deferred tax liability
Other intangible asset
Fair value of interest-rate swaps
Excess of fair value of debt over book value (note 22)
–
–
–
–
–
–
Net assets used in per share calculation
7,917
(6)
–
(1)
–
–
(107)
7,803
Net assets
£m
7,212
–
–
–
–
–
–
(6)
1
(1)
(2)
(21)
–
7,888
7,212
31 March 2021
EPRA NDV
£m
EPRA NTA
£m
7,212
93
7,212
93
–
(1)
–
–
(244)
7,060
1
(1)
(2)
(3)
–
7,300
Net assets per share
Diluted net assets per share
IFRS
EPRA NDV
EPRA NTA
IFRS
EPRA NDV
EPRA NTA
1,070p
1,067p
n/a
n/a
1,052p
1,063p
975p
973p
n/a
953p
n/a
985p
Financial statementsLandsec Annual Report 2022 152
5. Performance measures continued
Number of shares
Ordinary shares
Treasury shares
Own shares
Number of shares – basic
Dilutive effect of share options
Number of shares – diluted
Weighted
average
million
2022
31 March
million
Weighted
average
million
2021
31 March
million
751
(7)
(4)
740
2
742
751
(7)
(4)
740
2
742
751
(10)
(1)
740
1
741
751
(10)
(1)
740
1
741
Total accounting 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 accounting return based on EPRA NTA
Increase/(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 accounting return (a/b)
6. Revenue
Accounting policy
Year ended
31 March
2022
pence
78
25
103
985
10.5%
Year ended
31 March
2021
pence
(207)
18
(189)
1,192
–15.9%
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.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 153
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.
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 ‘EPRA earnings’ 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
Trading property sales proceeds
Other property related income
Finance lease interest
Long-term development contract income
Gain on settlement of liability
Other income
EPRA
earnings
£m
552
(18)
534
77
–
25
8
–
–
3
Capital
and other
items
£m
31
–
3
11
27
–
–
1
–
–
2022
Total
£m
555
(18)
537
78
27
25
8
1
–
3
EPRA
earnings
£m
Capital
and other
items
£m
548
(29)
519
70
–
31
9
–
–
2
–
–
–
–
–
–
–
–
4
–
4
Revenue per the income statement
647
32
679
631
1. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is
consolidated in the Group numbers.
The following table reconciles revenue per the income statement to the individual components of revenue presented in note 4.
Adjustment
for
non-wholly
owned
subsidiaries1
£m
Joint
ventures
£m
52
9
15
3
–
–
–
–
(3)
(1)
–
–
–
–
–
–
Group
£m
537
78
27
25
8
1
–
3
2022
Total
£m
586
86
42
28
8
1
–
3
Group
£m
519
70
–
31
9
–
4
2
Joint
ventures
£m
50
9
4
1
–
1
–
2
679
79
(4)
754
635
67
Adjustment
for
non-wholly
owned
subsidiaries1
£m
–
–
–
–
–
–
–
–
–
Rental income
Service charge income
Trading property sales proceeds
Other property related income
Finance lease interest
Long-term development contract income
Gain on settlement of liability
Other income
Revenue in the segmental
information note
1. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is
consolidated in the Group numbers.
2021
Total
£m
548
(29)
519
70
–
31
9
–
4
2
635
2021
Total
£m
569
79
4
32
9
1
4
4
702
Financial statementsLandsec Annual Report 2022 154
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 ‘EPRA earnings’ 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, and other attributable
costs, 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
Administrative expenses
Impairment of trading properties
Cost of trading property disposals
Long-term development contract expenditure
Amortisation of other intangible asset
Impairment of intangible asset
Impairment of goodwill
Business combination costs
Costs – other per the income statement
Movement in bad and doubtful debts expense – rent
Movement in bad and doubtful debts expense – service charge
Total costs per the income statement
EPRA
earnings
£m
Capital
and other
items
£m
6
88
94
85
–
–
–
–
–
–
–
273
(9)
(4)
260
–
21
–
–
6
25
1
–
–
6
8
48
–
–
48
2022
Total
£m
6
90
94
85
6
25
1
–
–
6
8
321
(9)
(4)
308
EPRA
earnings
£m
Capital
and other
items
£m
7
75
56
80
–
–
–
–
–
–
–
218
98
12
328
–
–
–
–
–
–
–
1
4
–
–
5
–
–
5
2021
Total
£m
7
75
56
80
–
–
–
1
4
–
–
223
98
12
333
1. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is consolidated
in the Group numbers.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 155
The following table reconciles costs per the income statement to the individual components of costs presented in note 4.
Group
£m
Joint
ventures
£m
Rents payable
Service charge expense
Direct property expenditure
Administrative expenses
Impairment of trading properties
Cost of trading property disposals
Long-term development contract
expenditure
Amortisation of other intangible asset
Impairment of intangible asset
Impairment of goodwill
Business combination costs
Movement in bad and doubtful debts
expense – rent
Movement in bad and doubtful debts
expense – service charge
6
90
94
85
6
25
1
–
–
6
8
(9)
(4)
Costs in the segmental information note
308
2
10
10
2
–
16
–
–
–
–
–
2
(1)
41
Adjustment
for
non-wholly
owned
subsidiaries1
£m
–
(2)
–
–
–
–
–
–
–
–
–
–
–
2022
Total
£m
8
98
104
87
6
41
1
–
–
6
8
(7)
(5)
Group
£m
7
75
56
80
–
–
–
1
4
–
–
98
12
(2)
347
333
Adjustment
for
non-wholly
owned
subsidiaries1
£m
Joint
ventures
£m
2
9
8
2
–
5
1
–
–
–
–
15
2
44
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2021
Total
£m
9
84
64
82
–
5
1
1
4
–
–
113
14
377
1. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is
consolidated in the Group numbers.
The Group’s costs include employee costs for the year of £78m (2021: £58m), of which £5m (2021: £5m) is within service charge expense,
£60m (2021: £53m) is within administrative expenses and £13m (2021: £nil) is within direct property expenditure.
Employee costs
Salaries and wages
Employer payroll taxes
Other pension costs (note 34)
Share-based payments (note 35)
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
2022
£m
63
8
3
4
78
2021
£m
46
5
3
4
58
2022
Number
2021
Number
412
184
14
6101
443
81
6
530
1. Of the increase during the year, 62 employees are attributable to the acquisition of U+I Group PLC.
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 (2021: 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 108-127.
Details of the employee costs associated with the Group’s key management personnel are included in note 39.
Financial statementsLandsec Annual Report 2022 156
8. Auditor remuneration
Services provided by the Group’s auditor
Audit fees:
Audit of parent company and consolidated financial statements
Audit of subsidiary undertakings
Audit of joint ventures
Non-audit fees:
Other assurance services
2022
£m
2021
£m
0.9
0.7
0.2
1.8
0.2
2.0
1.0
0.3
0.1
1.4
0.2
1.6
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.
9. External valuers remuneration
Services provided by the Group’s external valuers
Year end and half-yearly valuations – Group
– Joint ventures
Other consultancy and agency services
2022
£m
0.7
0.1
0.9
1.7
2021
£m
0.7
0.1
1.7
2.5
CBRE Limited (CBRE) is the Group’s principal valuer and values the majority of the portfolio, including the majority of the portfolio acquired
as part of the purchase of U+I Group PLC during the year. The fee arrangement with CBRE for the valuation of the Group’s properties is fixed,
subject to an adjustment for acquisitions and disposals. Savills (UK) Limited (Savills) was engaged to perform the valuation of the MediaCity
portfolio and Jones Lang LaSalle Limited (JLL) was engaged to perform the valuation of part of the U+I Group PLC portfolio for the year
ended 31 March 2022. The fees of CBRE, Savills and JLL have been included in the table above. CBRE, Savills and JLL undertake other
consultancy and agency work on behalf of the Group. CBRE, Savills and JLL have confirmed to us that the total fees paid by the Group
represented less than 5% of their total revenues in the current year.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 10. Net finance expense
Finance income
Interest receivable from joint ventures
Fair value movement on interest-rate swaps
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
Other interest payable
Interest capitalised in relation to properties under development
Net finance (expense)/income
Joint venture net finance expense
Net finance expense included in EPRA earnings
EPRA
earnings
£m
Capital
and other
items
£m
2022
Total
£m
9
16
–
25
(67)
(19)
–
–
(16)
(102)
17
(85)
–
16
–
16
–
–
–
–
(15)
(15)
–
(15)
1
(60)
9
–
–
9
(67)
(19)
–
–
(1)
(87)
17
(70)
(61)
(10)
(71)
157
EPRA
earnings
£m
Capital
and other
items
£m
–
–
1
1
–
–
(1)
(3)
–
(4)
–
(4)
(3)
15
–
–
15
(68)
(17)
–
–
(1)
(86)
11
(75)
(60)
(14)
(74)
2021
Total
£m
15
–
1
16
(68)
(17)
(1)
(3)
(1)
(90)
11
(79)
(63)
Lease interest payable of £4m (2021: £3m) is included within rents payable as detailed in note 4.
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
2021
2022
£m
£m
For the year ended 31 March 2020:
Third interim
Final
For the year ended 31 March 2021:
First interim
Second interim
Third interim
Final
For the year ended 31 March 2022:
First interim
Second interim
Gross dividends
Dividends in the statement of changes in equity
Timing difference on payment of withholding tax
Dividends in the statement of cash flows
–
–
–
4 January 2021
30 March 2021
23 July 2021
8 October 2021
4 January 2022
–
–
–
12.00
6.00
9.00
7.00
8.50
–
–
–
–
–
–
–
–
–
–
–
12.00
6.00
9.00
7.00
8.50
–
–
–
89
44
133
133
(6)
127
66
52
63
181
181
9
190
Financial statementsLandsec Annual Report 2022 158
11. Dividends continued
The third quarterly interim dividend of 8.5p per ordinary share, or £63m in total (2021: 6.0p or £44m in total), was paid on 7 April 2022 as
a Property Income Distribution (PID). The Board has recommended a final dividend for the year ended 31 March 2022 of 13.0p per ordinary
share (2021: 9.0p) to be paid as a PID. This final dividend will result in a further estimated distribution of £96m (2021: actual distribution of
£66m). Subject to shareholders’ approval at the Annual General Meeting, the final dividend will be paid on 22 July 2022 to shareholders
registered at the close of business on 17 June 2022.
The total dividend paid and recommended in respect of the year ended 31 March 2022 is 37.0p per ordinary share (2021: 27.0p) resulting in
a total estimated distribution of £274m (2021: actual distribution of £199m).
The first quarterly dividend for the year ending 31 March 2023 will be paid in October 2022 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 1 July 2022.
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.
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 2021, there was no income tax charge in the income
statement. There is a deferred tax charge of £5m (2021: £2m credit) included within Other comprehensive income.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 159
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.
Profit/(loss) before tax
Profit/(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
Total income tax charge 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
2022
£m
875
166
(154)
12
(11)
(3)
1
1
–
2022
£m
1
6
7
2021
£m
(1,393)
(265)
274
9
(10)
(1)
1
1
–
2021
£m
1
1
2
Deferred tax is calculated at the rate substantively enacted at the balance sheet date of 25% (2021: 19%). The movement in the deferred
tax liability arising on the re-measurement gain on the defined benefit pension scheme surplus, and on the re-measurement following the
change in the deferred tax rate during the year, 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
2022
£m
220
272
313
805
2021
£m
53
272
381
706
The other unrecognised temporary differences relate to the premium paid on the redemption of the Group’s medium term notes.
Financial statementsLandsec Annual Report 2022 160
13. Net cash generated from operations
Reconciliation of operating profit/(loss) to net cash generated from operations
Operating profit/(loss)
Adjustments for:
2022
£m
935
Group
2021
£m
(1,330)
2022
£m
90
Company
2021
£m
(143)
Net (surplus)/deficit on revaluation of investment properties
(416)
1,448
Gain on modification of finance leases
Profit on disposal of trading properties
Profit on disposal of investment properties
Profit on disposal of investment in joint ventures
Share of (profit)/loss from joint ventures and associates
Share-based payment charge
Impairment of intangible asset
Impairment of goodwill
(Reversal)/impairment of investment in subsidiary
Rents payable
Depreciation
Other
Changes in working capital:
Decrease in receivables
Increase/(decrease) 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 activities1
(6)
(2)
(107)
(2)
(33)
4
–
6
–
8
5
7
399
28
21
448
2022
£m
381
23
(8)
5
401
–
–
(8)
–
192
4
4
–
–
7
5
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(117)
116
–
–
–
–
–
–
328
(27)
(27)
8
(14)
322
Group
2021
£m
233
19
(4)
1
249
–
27
–
–
27
–
2022
£m
Company
2021
£m
–
–
–
–
–
–
–
–
–
–
1. Includes cash inflows relating to the interest in MediaCity which is not owned by the Group, but which is consolidated in the Group numbers.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 161
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 and properties owned by the Group but where a third party holds a non-controlling interest are presented as either ‘Investment
properties’ or ‘Trading properties’. The Group applies equity accounting to its investments in joint ventures, which requires the Group’s share
of properties held by joint ventures to be presented within ‘Investments in joint ventures’.
Internally, management review the results of the Group on a basis that adjusts for these forms of ownership to present a proportionate
share. The Combined Portfolio, with assets totalling £12.0bn, is an example of this proportionate share, reflecting the economic interest
we have in our properties regardless of our ownership structure. We consider this presentation provides further insight to stakeholders
about the activities and performance of the Group, as it aggregates the results of all of the Group’s property interests which under IFRS
are required to be presented across a number of line items in the statutory financial statements.
The Group’s investment properties are carried at fair value and trading properties are carried at the lower of cost and net realisable value.
Both of these values are determined by the Group’s external valuers. The combined value of the Group’s total investment property portfolio
(including the Group’s share of investment properties held through joint ventures) is shown as a reconciliation in note 14.
Accounting policy
Investment properties
Investment properties are properties, either owned or leased by the Group, that are held either to earn rental income or for capital
appreciation, or both. Investment properties are measured initially at cost including related transaction costs, and subsequently at fair
value. Fair value is based on market value, as determined by a professional external valuer at each reporting date. The difference between
the fair value of an investment property at the reporting date and its carrying amount prior to re-measurement is included in the income
statement as a valuation surplus or deficit. Investment properties are presented on the balance sheet within non-current assets.
Some of the Group’s investment properties are owned through long-leasehold arrangements, as opposed to the Group owning the freehold.
Where the Group is a lessee, a right-of-use asset is recognised at the commencement date of the lease and accounted for as investment
property. Initially, the cost of investment properties held under leases includes the amount of lease liabilities recognised, initial direct costs
incurred, and lease payments made at or before the commencement date less any lease incentives received. The investment properties held
under leases are subsequently carried at their fair value. A corresponding liability is recorded within borrowings. Each lease payment is
allocated between repayment of the liability and a finance charge to achieve a constant interest rate on the outstanding liability.
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.
Financial statementsLandsec Annual Report 2022 162
Transfers between investment properties and trading properties
When the Group begins to redevelop an existing investment property for continued future use as an investment property, the property
continues to be held as an investment property. When the Group begins to redevelop an existing investment property with a view to sell,
the property is transferred to trading properties and held as a current asset. The property is re-measured to fair value as at the date of the
transfer with any gain or loss being taken to the income statement. The re-measured amount becomes the deemed cost at which the
property is then carried in trading properties.
Disposal of properties
Properties are treated as disposed when control of the property is transferred to the buyer. Typically, this will either occur on unconditional
exchange or on completion. Where completion is expected to occur significantly after exchange, or where the Group continues to have
significant outstanding obligations after exchange, the control will not usually transfer to the buyer until completion.
The profit on disposal is determined as the difference between the sales proceeds and the carrying amount of the asset at the beginning
of the accounting period plus capital expenditure to the date of disposal. The profit on disposal of investment properties is presented
separately on the face of the income statement. Proceeds received on the sale of trading properties are recognised within Revenue, and
the carrying value at the date of disposal is recognised within Costs.
Significant accounting judgement
Acquisition and disposal of properties
Property transactions can be complex in nature and material to the financial statements. To determine when an acquisition or disposal
should be recognised, management consider whether the Group assumes or relinquishes control of the property, and the point at which
this is obtained or relinquished. Consideration is given to the terms of the acquisition or disposal contracts and any conditions that must be
satisfied before the contract is fulfilled. In the case of an acquisition, management must also consider whether the transaction represents
an asset acquisition or business combination.
Significant accounting estimate
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 2021 contained a ‘material uncertainty’ clause in relation to the valuation of hotels due
to the disruption to the market at that date caused by Covid-19. As hotels only form a small portion of the Group’s portfolio, the range
of sensitivities disclosed in the tables on pages 165-166 have been deemed to provide sufficient information on the assumptions upon
which the external valuer has based its valuations. The Valuers’ reports for the year ended 31 March 2022 did not contain a material
uncertainty clause.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 14. Investment properties
Net book value at the beginning of the year
Acquired through acquisition of group of subsidiaries
Acquisitions of investment properties
Capital expenditure
Capitalised interest
Net movement in head leases capitalised1
Disposals
Net surplus/(deficit) on revaluation of investment properties
Transfers to trading properties
Net book value at the end of the year
163
2022
£m
2021
£m
9,607
11,297
619
247
343
17
62
(98)
416
(6)
11,207
–
115
221
11
1
(579)
(1,448)
(11)
9,607
1. See note 22 for details of the amounts payable under head leases and note 4 for details of the rents payable in the income statement.
The market value of the Group’s investment properties, as determined by the Group’s external valuers, 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.
2022
Adjustment
for
non-wholly
owned
subsidiaries2
£m
Joint
ventures1
£m
Combined
Portfolio
£m
Group
(excl. joint
ventures)
£m
800
(145)
12,017
10,025
–
9
(38)
771
–
–
–
(66)
132
(250)
(145)
11,833
(249)
61
(230)
9,607
Group
(excl. joint
ventures)
£m
11,362
(66)
123
(212)
11,207
Joint
ventures1
£m
766
–
9
(40)
735
416
(3)
(4)
409
(1,448)
(198)
Adjustment
for
non-wholly
owned
subsidiaries2
£m
–
–
–
–
–
–
2021
Combined
Portfolio
£m
10,791
(249)
70
(270)
10,342
(1,646)
Market value
Less: properties treated as finance leases
Plus: head leases capitalised
Less: tenant lease incentives
Net book value
Net surplus/(deficit) on revaluation
of investment properties
1. Refer to note 16 for a breakdown of this amount by entity.
2. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is consolidated
in the Group numbers.
The net book value of leasehold properties where head leases have been capitalised is £2,908m (2021: £2,484m).
Investment properties include capitalised interest of £249m (2021: £232m). The average rate of interest capitalisation for the year is 2.5%
(2021: 2.6%). The gross historical cost of investment properties is £8,604m (2021: £7,554m).
Valuation process
The fair value of investment properties at 31 March 2022, except those in the MediaCity portfolio and part of the portfolio acquired as part
of U+I Group PLC, was determined by the Group’s external valuer, CBRE. The MediaCity portfolio was valued by Savills and the part of the
U+I Group PLC portfolio not valued by CBRE was valued by JLL at 31 March 2022. 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 valuers are reviewed
internally by Senior Management and other relevant people within the business. This process includes discussions of the assumptions used
by the valuers, 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 valuers on a half-yearly basis.
The valuers’ 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 valuers’ 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.
Financial statementsLandsec Annual Report 2022 164
14. Investment properties continued
Properties in the development programme are typically valued using a residual valuation method. Under this methodology, the valuer
assesses the completed development value using income and yield assumptions. Deductions are then made for estimated costs to complete,
including finance and developer’s profit, to arrive at the valuation. Costs include future estimated costs associated with refurbishment or
development (excluding finance costs), together with an estimate of cash incentives to be paid to tenants. As the development approaches
completion, the valuer may consider the income capitalisation approach to be more appropriate.
The Group considers all of its investment properties to fall within ‘Level 3’, as defined by IFRS 13 and as explained in note 26(iii).
Accordingly, there have been no transfers of properties within the fair value hierarchy in the financial year.
The table below summarises the key unobservable inputs used in the valuation of the Group’s wholly owned investment properties, and
properties owned by the Group but where a third party holds a non-controlling interest, at 31 March 2022:
Central London
West End offices
City offices
Retail and other
Total Central London
Major retail
Shopping centres
Outlets
Total Major retail
Mixed-use urban
Completed investments
Developments
Total Mixed-use urban
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Developments:
income capitalisation method
Developments: residual method
Development programme
Market
value
£m
2,613
1,928
1,096
5,637
852
743
1,595
545
473
1,018
515
422
466
1,403
923
786
1,709
Estimated rental value
£ per sq ft
Equivalent yield
%
2022
Costs
£ per sq ft
Low
Average
High
Low
Average
High
Low
Average1
High
19
56
8
8
22
19
19
15
3
3
6
7
12
6
52
34
34
65
112
56
79
77
280
84
280
26
48
36
29
19
24
12
16
18
12
67
65
66
36
56
56
72
55
72
16
30
24
30
75
94
94
3.8%
4.3%
2.5%
2.5%
6.3%
6.1%
6.1%
4.7%
4.5%
4.5%
6.5%
4.8%
4.0%
4.0%
4.7%
4.6%
4.2%
4.6%
5.0%
6.0%
6.5%
6.5%
7.4%
7.8%
6.8% 12.8%
7.1% 12.8%
5.7%
6.7%
6.2%
8.4%
9.7%
9.7%
7.4% 10.5%
5.7%
5.7%
7.4%
7.7%
5.7% 10.5%
4.1%
4.2%
5.0%
4.0%
4.0%
4.2%
4.2%
5.4%
5.4%
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
18
42
2
23
2
2
2
–
–
–
4
–
3
3
–
–
–
96
95
23
96
19
6
19
11
–
11
23
–
32
32
–
–
–
Market value at 31 March 2022 – Group 11,362
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.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 The sensitivities below illustrate the impact of changes in key unobservable inputs (in isolation) on the fair value of the Group’s properties:
165
Sensitivities
Total Central London (excluding developments)
Total Major retail (excluding developments)
Total Mixed-use urban (excluding developments)
Total Subscale sectors (excluding developments)
Developments: Mixed-use urban
Developments: income capitalisation method
Developments: residual method
Market
value
£m
5,637
1,595
545
1,403
473
923
786
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
2022
202
66
15
53
16
29
69
(190)
(250)
(14)
(50)
(15)
(29)
(68)
311
(269)
60
24
61
16
74
47
(56)
(22)
(55)
(15)
(66)
(81)
2
1
–
1
–
10
34
48
(4)
(1)
–
(1)
–
(9)
(34)
(49)
Market value at 31 March 2022 – Group
11,362
450
(616)
593
(564)
The table below summarises the key unobservable inputs used in the valuation of the Group’s wholly owned investment properties, and
properties owned by the Group but where a third party holds a non-controlling interest, at 31 March 2021:
Estimated rental value
£ per sq ft
Equivalent yield
%
20211
Costs
£ per sq ft
Low
Average
High
Low
Average
High
Low
Average2
High
Central London
West End offices
City offices
Retail and other
Total Central London
Major retail
Shopping centres
Outlets
Total Major retail
Market
value
£m
2,770
2,025
1,410
6,205
813
722
1,535
18
31
7
7
15
20
15
65
64
42
59
22
47
34
79
87
79
87
40
56
56
3.8%
4.2%
2.5%
2.5%
6.3%
6.3%
6.3%
4.7%
4.6%
4.4%
4.6%
5.0%
6.0%
5.6%
6.0%
7.6%
6.8%
7.2%
9.5%
10.8%
10.8%
Mixed-use urban
305
3
19
35
4.9%
5.7%
8.3%
Subscale sectors
Leisure
Hotels
Retail 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
–
–
–
–
–
–
–
–
–
–
–
–
–
13
30
2
16
51
113
38
113
3
–
2
–
3
–
3
2
–
–
11
–
11
–
30
–
8
30
–
–
Market value at 31 March 2021 – Group
10,025
1. Restated to reflect a change in the year to 31 March 2022 in the Group’s new reporting structure within the Central London segment.
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.
Financial statementsLandsec Annual Report 2022 166
14. Investment properties continued
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 Major retail (excluding developments)
Total Mixed-use urban (excluding developments)
Total Subscale sectors (excluding developments)
Developments: residual method
Market
value
£m
6,205
1,535
305
1,267
713
Increase
£m
247
64
12
46
38
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
2021
Decrease
£m
Decrease
£m
Increase
£m
Decrease
£m
(242)
401
(356)
(66)
(11)
(46)
(41)
56
14
49
67
(58)
(13)
(47)
(67)
Increase
£m
(23)
–
–
(1)
(23)
(47)
25
–
–
1
14
40
Market value at 31 March 2021 – Group
10,025
407
(406)
587
(541)
15. Trading properties
At 1 April 2020
Transfer from investment properties
Capital expenditure
At 31 March 2021
Transfer from investment properties
Acquisitions
Capital expenditure
Disposals
Impairment provision
At 31 March 2022
Development
land and
infrastructure
£m
Residential
£m
Total
£m
24
–
–
24
–
128
1
(25)
–
128
–
11
1
12
6
–
5
–
(6)
17
24
11
1
36
6
128
6
(25)
(6)
145
The cumulative impairment provision at 31 March 2022 in respect of Development land and infrastructure was £nil (2021: £nil) and in respect
of Residential was £6m (2021: £nil).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 167
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:
Percentage owned
& voting rights2
Business segment
Year end date3
Joint venture partner
Joint ventures1
Held at 31 March 2022
Nova, Victoria4
Southside Limited Partnership
St. David’s Limited Partnership
50%
50%
50%
Westgate Oxford Alliance Limited Partnership 50%
Harvest7,8
The Ebbsfleet Limited Partnership8
West India Quay Unit Trust8
Mayfield8,9,10
Wind Farms8,9,11
Curzon Park Limited8,9
Plus X Holdings Limited8,9
Landmark Court Partnership Limited8,9
50%
50%
50%
50%
50%
50%
50%
51%
Central London
Major retail
Major retail
Major retail,
Subscale sectors
31 March
31 March
31 March5
31 March
Suntec Real Estate Investment Trust
Invesco Real Estate European Fund
Intu Properties plc6
The Crown Estate Commissioners
Subscale sectors
31 March
J Sainsbury plc
Subscale sectors
31 March
Ebbsfleet Property Limited
Subscale sectors
31 March
Schroder UK Real Estate Fund
Mixed-use urban
31 March
LCR Limited, Manchester City Council,
Transport for Greater Manchester
Subscale sectors
31 March
Steven John Radford
Subscale sectors
31 March
Subscale sectors
31 March
Derwent Developments (Curzon)
Limited
Paul David Rostas, Matthew Edmund
Hunter
Central London
31 March
TTL Landmark Court Properties Limited
Joint operation
Held at 31 March 2022
Bluewater, Kent
Ownership interest
Business segment
Year end date3
Joint operation partners
48.75%12
Major retail
31 March
M&G Real Estate and GIC
Royal London Asset Management
Aberdeen Standard Investments
1. Refer to Additional information pages 218-222 for the full list of the Group’s related undertakings.
2. Investments under joint arrangements are not always represented by an equal percentage holding by each partner. In a number of joint ventures that are not considered
principal joint ventures and therefore not included in the table above, the Group holds a majority shareholding but has joint control and therefore the arrangement is
accounted for as a joint venture. Refer to Additional information pages 218-222 for the respective percentage holdings of all joint venture arrangements entered into
by the Group.
3. 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.
4. Nova, Victoria includes the Nova Limited Partnership, Nova Residential Limited Partnership, Nova GP Limited, Nova Business Manager Limited, Nova Residential (GP)
Limited, Nova Residential Intermediate Limited, 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 Real Estate Investment Trust, but retained an interest in Victoria Circle Developer Limited which is included in Other in subsequent tables from that date.
5. On 22 September 2021, the year end date for St. David’s Limited Partnership was changed from 31 December to 31 March.
6. 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.
7. Harvest includes Harvest 2 Limited Partnership, Harvest Development Management Limited, Harvest 2 Selly Oak Limited, Harvest 2 GP Limited and Harvest GP Limited.
8. Included within Other in subsequent tables.
9. On 14 December 2021, the Group acquired its interests in these joint venture arrangements as part of the acquisition of U+I Group PLC.
10. Mayfield includes Mayfield Development Partnership LP and Mayfield Development (General Partner) Limited.
11. Wind Farms includes DS Renewables LLP, Hendy Wind Farm Limited and Rhoscrowther Wind Farm Limited.
12. On 21 December 2021, the Group acquired an additional 25% interest in Bluewater from Lendlease Retail LP. On 31 March 2022, the Group sold a 6.25% interest in Bluewater
to M&G Real Estate and GIC.
Financial statementsLandsec Annual Report 2022 168
16. Joint arrangements continued
All of the Group’s joint arrangements listed above have their principal place of business in the United Kingdom. All of the Group’s principal
joint arrangements own and operate investment property, with the exception of The Ebbsfleet Limited Partnership which is a holding
company and Harvest which is engaged in long-term development contracts. The activities of all the Group’s principal joint arrangements
are therefore strategically important to the business activities of the Group.
All joint ventures listed above 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 2022
Nova,
Victoria
100%
£m
Southside
Limited
Partnership
100%
£m
St. David’s
Limited
Partnership
100%
£m
Westgate
Oxford
Alliance
Partnership
100%
£m
Comprehensive income statement
Revenue1
Gross rental income (after rents payable)
Net rental income
EPRA earnings before interest
Finance expense
Net finance expense
EPRA earnings
Capital and other items
Net surplus/(deficit) on revaluation of investment
properties
Profit on disposal of investment properties
Loss on disposal of trading properties
Profit/(loss) before tax
Post-tax profit/(loss)
Total comprehensive income/(loss)
Group share of profit/(loss) before tax
Group share of post-tax profit/(loss)
Group share of total comprehensive income/(loss)
45
36
29
29
(13)
(13)
16
16
–
–
32
32
32
16
16
16
11
10
11
10
(6)
(6)
4
33
25
17
15
–
–
15
37
26
25
24
–
–
24
Other
100%
£m
6
6
–
(1)
–
–
Total
100%
£m
132
103
82
77
(19)
(19)
Total
Group share
£m
64
52
41
39
(10)
(10)
(1)
58
29
(1)
(20)
(2)
–
–
3
3
3
2
2
2
–
–
(5)
(5)
(5)
(3)
(3)
(3)
–
–
22
22
22
11
11
11
–
12
(2)
9
9
9
7
7
7
(7)
12
(2)
61
61
61
33
33
33
(3)
8
(1)
33
33
33
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 2022 continuedFinancial statementsLandsec Annual Report 2022 Joint ventures
Year ended 31 March 2021
169
Comprehensive income statement
Revenue1
Gross rental income (after rents payable)
Net rental income
EPRA earnings before interest
Finance expense
Net finance expense
EPRA earnings
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
Group share of loss before tax
Group share of post-tax loss
Group share of 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
11
10
4
4
(6)
(6)
(2)
30
23
6
5
–
–
5
32
24
6
5
–
–
5
8
4
1
1
–
–
1
Total
100%
£m
134
96
49
43
(28)
(28)
15
Total
Group share
£m
67
48
24
22
(14)
(14)
8
(61)
(179)
(122)
(11)
(396)
(198)
–
–
–
(63)
(63)
(63)
(32)
(32)
(32)
–
–
–
(174)
(174)
(174)
(87)
(87)
(87)
–
–
–
(117)
(117)
(117)
(58)
(58)
(58)
(3)
(1)
2
(192)
(192)
(192)
–
–
4
(6)
(6)
(6)
(3)
(3)
(3)
(5)
(1)
4
(383)
(383)
(383)
(192)
(192)
(192)
53
35
32
28
(22)
(22)
6
(23)
(5)
(1)
–
(23)
(23)
(23)
(12)
(12)
(12)
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.
Financial statementsLandsec Annual Report 2022 170
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
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
Nova,
Victoria
100%
£m
Southside
Limited
Partnership
100%
£m
St. David’s
Limited
Partnership
100%
£m
Westgate
Oxford
Alliance
Partnership
100%
£m
815
815
27
63
90
905
(22)
(22)
(139)
(139)
(161)
744
870
27
133
133
4
7
11
144
(10)
(10)
(145)
(145)
(155)
235
235
10
13
23
258
(9)
(9)
(22)
(22)
(31)
(11)
227
133
2
226
(6)
236
236
12
14
26
262
(10)
(10)
(3)
(3)
(13)
249
247
12
31 March 2022
Total
Group share
£m
771
771
31
105
136
907
(44)
(44)
(168)
(168)
(212)
695
800
19
Other
100%
£m
132
132
10
53
63
195
(12)
(12)
(131)
(131)
(143)
Total
100%
£m
1,551
1,551
63
150
213
1,764
(63)
(63)
(440)
(440)
(503)
52
1,261
124
4
1,600
39
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
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)
235
235
8
17
25
260
(10)
(10)
–
–
(10)
250
245
8
56
56
5
7
12
68
(4)
(4)
–
–
(4)
64
57
5
31 March 2021
Total
Group share
£m
735
735
31
55
86
821
(28)
(28)
(168)
(168)
(196)
625
766
23
Total
100%
£m
1,470
1,470
62
111
173
1,643
(56)
(56)
(337)
(337)
(393)
1,250
1,531
46
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.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 171
Nova,
Victoria
Group share
£m
Southside
Limited
Partnership
Group share
£m
St. David’s
Limited
Partnership
Group share
£m
Westgate
Oxford
Alliance
Partnership
Group share
£m
Other
Group share
£m
Total
Group share
£m
365
(12)
9
(11)
351
16
–
5
–
372
372
–
25
(32)
–
–
(7)
2
–
–
–
(5)
–
(5)
211
(87)
–
–
124
(3)
–
–
(8)
113
113
–
187
(58)
–
(4)
125
11
–
–
(11)
125
125
–
36
(3)
–
(1)
32
7
54
–
(3)
90
90
–
824
(192)
9
(16)
625
33
54
5
(22)
695
700
(5)
Joint ventures
Net investment
At 1 April 2020
Total comprehensive loss
Non-cash contributions
Cash distributions
At 31 March 2021
Total comprehensive income/(loss)
Acquisitions
Non-cash contributions
Cash distributions
At 31 March 2022
Comprised of:
Non-current assets
Non-current liabilities
17. Investments in associates
Accounting policy
Associates are those entities over whose financial and operating policy decisions the Group has significant influence, established by
contractual agreement, but over which the Group does not have control or joint control over those policies. Interests in associates are
accounted for using the equity method of accounting. The equity method requires the Group’s share of the associate’s post-tax profit or
loss for the year to be presented separately in the income statement and the Group’s share of the associate’s net assets to be presented
separately in the balance sheet.
The Group’s principal interests in associates, acquired as part of the purchase of the share capital of U+I Group PLC on 14 December 2021
and held at 31 March 2022, are described below:
Associates1
Percentage owned and voting rights
Year end date
CDSR Burlington House Developments Limited
Northpoint Developments Limited
YC Shepherds Bush Limited
20%
42%
24.5%
31 December
31 December
31 December
Business segment
Subscale sectors
Subscale sectors
Subscale sectors
1. Refer to Additional information pages 218-222 for the full list of the Group’s related undertakings.
All of the Group’s associates have their principal place of business in the United Kingdom, except for CDSR Burlington House Developments
Limited which operates in Ireland. All of the Group’s associates are engaged in property development.
The investments in CDSR Burlington House Developments Limited and Northpoint Developments Limited have been fully impaired.
All associates are registered in England and Wales with the exception of CDSR Burlington House Developments Limited which is registered
in Ireland.
The Group’s share of profit or loss from its investments in associates was £nil (2021: £nil).
Associates
Net investment
At 1 April 2020
At 31 March 2021
Acquisitions
At 31 March 2022
Total
Group share
£m
–
–
4
4
Financial statementsLandsec Annual Report 2022 172
18. Capital commitments
Contracted capital commitments at the end of the year in respect of:
Investment properties
Trading properties
Joint ventures (our share)
Total capital commitments
2022
£m
289
3
1
293
2021
£m
222
–
1
223
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.
19. 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
2022
£m
82
28
(40)
70
6
(4)
2
72
6
6
6
6
6
58
88
28
(44)
72
2021
£m
225
34
(107)
152
13
(9)
4
156
13
13
13
13
13
173
238
34
(116)
156
The Group has leased out several investment properties under finance leases, which range from 20 to 40 years in duration from the inception
of the lease. During the year to 31 March 2022, a disposal of a property resulted in the derecognition of the related net investment in finance
lease of £90m.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 173
20. 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 2020
Capital expenditure
Amortisation
Impairment
At 31 March 2021
Capital expenditure
Additions
Amortisation
Impairment
At 31 March 2022
Goodwill
£m
Software
£m
Other
intangible
asset
£m
1
–
–
–
1
–
6
–
(6)
1
6
2
(3)
–
5
2
–
(2)
–
5
7
–
(1)
(4)
2
–
–
–
–
2
Total
£m
14
2
(4)
(4)
8
2
6
(2)
(6)
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 2022, the intangible asset has been impaired by £nil (2021: £4m). The recoverable amount of the intangible asset
has been based on its value in use, using a discount rate of 4.0% (2021: 4.0%).
Financial statementsLandsec Annual Report 2022 174
Notes to the financial statements
for the year ended 31 March 2022
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 21 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.
21. Capital structure
2022
2021
Property portfolio
Market value of investment properties
Trading properties and long-term contracts
Total property portfolio (a)
Net debt
Borrowings2
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 debt1
Group
£m
11,362
145
11,507
4,430
(22)
(128)
(21)
(5)
4,254
21
4,275
7,991
(21)
7,970
53.2%
53.6%
37.2%
36.4%
2.1%
Adjustment
for
non-wholly
owned
subsidiaries3
£m
Joint
ventures
£m
Combined
£m
Group
£m
Adjustment
for non-wholly
owned
subsidiaries3
£m
Joint
ventures
£m
766
–
766
8
–
(31)
–
–
(23)
–
(23)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
800
1
801
3
–
(31)
–
–
(28)
–
(28)
–
–
–
(145)
–
(145)
12,017
146
12,163
10,025
36
10,061
(73)
3
2
2
–
(66)
(2)
(68)
(74)
2
(72)
4,360
(19)
(157)
(19)
(5)
4,160
19
4,179
7,917
(19)
7,898
52.5%
52.9%
34.4%
2.4%
3,516
(10)
–
(3)
6
3,509
3
3,512
7,212
(3)
7,209
48.7%
48.7%
34.9%
32.7%
1.9%
Combined
10,791
36
10,827
3,524
(10)
(31)
(3)
6
3,486
3
3,489
7,212
(3)
7,209
48.3%
48.4%
32.2%
2.3%
1. The weighted average cost of debt is now calculated based on historical average rates for the period, rather than spot rates. The weighted average cost of debt for 31 March
2021 has been restated to reflect this change in methodology.
2. Borrowings used in the net debt and adjusted net debt calculated for gearing, adjusted gearing, Group LTV and weighted average cost of debt is now calculated for the year
ended 31 March 2022 excluding amounts payable under head leases. The respective borrowings figures at 31 March 2021 using the updated calculation methodology would
have been £3,455m for both Group and Combined.
3. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is
consolidated in the Group numbers.
Financial statementsLandsec Annual Report 2022 175
22. 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
Current borrowings
Commercial paper
Sterling
Euro
US Dollar
Unsecured Floating SONIA + margin1
Unsecured Floating SONIA + margin1
Unsecured Floating SONIA + margin1
Euro loan note
Unsecured Fixed
4.8
Syndicated and bilateral
bank debt
Syndicated and bilateral
bank debt
Total current borrowings
Secured
Floating SONIA + margin1
Secured
Floating Euribor + 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
A16 2.375% MTN due 2027
Secured
A6 5.376% 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
2.5
5.4
2.4
5.4
5.1
2.6
2.7
Syndicated and bilateral
bank debt
Syndicated and bilateral
bank debt
Amounts payable under
head leases
Secured
Floating SONIA + margin1
Secured
Floating Euribor + margin
2
Unsecured Fixed
4.1
123
2022
Book
value
£m
140
217
142
30
2
10
Nominal/
notional
value
£m
2021
Fair
value
£m
Book value
£m
84
640
182
–
–
–
84
640
182
–
–
–
84
640
182
–
–
–
140
217
142
30
2
10
140
217
142
30
2
10
541
541
541
906
906
906
10
400
17
87
350
65
300
77
50
500
500
2,356
1,546
10
399
18
93
351
74
299
107
68
491
497
2,407
1,546
2
164
10
399
17
87
348
65
299
77
50
494
495
2,341
1,546
2
123
10
400
17
87
350
65
300
77
50
500
500
2,356
209
–
61
11
410
19
100
367
80
314
107
68
524
540
2,540
209
–
105
10
399
17
86
348
65
299
77
50
494
495
2,340
209
–
61
Total non-current borrowings
4,027
4,119
4,012
2,626
2,854
2,610
Total borrowings
4,568
4,660
4,553
3,532
3,760
3,516
1. During the year ended 31 March 2022, the reference rate on UK based syndicated and bilateral bank debt transitioned from LIBOR to an equivalent SONIA + credit adjustment
spread. All relevant references to LIBOR in the terms and conditions of MTNs have also been replaced with an equivalent SONIA + credit adjustment spread.
Financial statementsLandsec Annual Report 2022 176
22. Borrowings continued
Reconciliation of the movement in borrowings
At the beginning of the year
Bank debt assumed through acquisition of subsidiaries
Proceeds from new borrowings
Repayment of bank debt
Repayment of MTNs
Redemption of MTNs
Foreign exchange movement on non-Sterling borrowings
Movement in amounts payable under head leases
Other
At 31 March
2022
£m
3,516
403
1,053
2021
£m
5,332
–
–
(489)
(1,755)
–
–
8
62
–
–
(12)
(51)
–
2
4,553
3,516
Reconciliation of movements in liabilities arising from financing activities
Non-cash changes
Borrowings
Derivative financial instruments
Borrowings
Derivative financial instruments
At the
beginning
of the
year
£m
3,516
3
3,519
Cash
flows
£m
564
(3)
561
5,332
(1,767)
(36)
(12)
5,296
(1,779)
Foreign
exchange
movements
£m
8
(8)
–
(51)
51
–
Other
changes
in fair
values
£m
–
(12)
(12)
–
–
–
2022
At the end
of the
year
£m
4,553
(26)
4,527
Other
changes
£m
465
(6)
459
2021
3,516
3
3,519
2
–
2
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 £11.2bn at 31 March 2022 (31 March 2021: £10.6bn).
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 SONIA 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 £nil (2021: £12m) of MTNs for a total premium of £nil (2021: £3m). Details of the purchases and
associated premium by series are as follows:
MTN purchases
A5 5.391% MTN due 2027
A7 5.396% MTN due 2032
Purchases
£m
2022
Premium
£m
Purchases
£m
2021
Premium
£m
–
–
–
–
–
–
8
4
12
2
1
3
At 31 March 2022, the Group’s committed facilities totalled £3,022m (31 March 2021: £2,715m).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 177
Syndicated and bilateral bank debt
Authorised
Drawn
Undrawn
Syndicated debt
Syndicated debt
Bilateral debt
Maturity as
at 31 March
2022
2022
2024-27
2026
2022
£m
12
2,785
225
3,022
2021
£m
–
2,490
225
2,715
2022
£m
12
1,393
155
1,560
2021
£m
–
209
–
209
2022
£m
–
1,392
70
1,462
2021
£m
–
2,281
225
2,506
All syndicated and bilateral facilities are committed and secured on the assets of the Security Group, with the exception of facilities
secured on the assets at MediaCity and assets acquired as part of the business combination with U+I Group PLC. During the year ended
31 March 2022, the amounts drawn under the Group’s facilities increased by £1,351m.
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, net of commercial
paper, at 31 March 2022 was £1,091m (31 March 2021: £1,600m).
23. 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
2022
£m
10
12
22
Group
2021
£m
3
7
10
Company
2021
£m
3
–
3
2022
£m
2
–
2
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
A-
BBB+
2022
£m
16
5
1
–
22
Group
2021
£m
Company
2021
£m
2022
£m
7
2
–
1
10
–
1
1
–
2
–
2
–
1
3
Financial statementsLandsec Annual Report 2022 178
24. 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
2022
£m
128
128
Group
2021
£m
–
–
2022
£m
–
–
Company
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+
A
BBB+
2022
£m
114
13
1
128
2021
£m
–
–
2021
£m
–
–
–
–
The Group’s cash and cash equivalents and bank overdrafts are subject to cash pooling arrangements. The following table provides details
of cash balances and bank overdrafts which are subject to offsetting agreements.
Gross
amounts of
financial
assets
£m
Gross
amounts of
financial
liabilities
£m
2022
Net amounts
recognised in
the balance
sheet
£m
Gross
amounts of
financial
assets
£m
Gross
amounts of
financial
liabilities
£m
2021
Net amounts
recognised in
the balance
sheet
£m
134
134
(6)
(6)
128
128
49
49
(49)
(49)
–
–
Assets
Cash and cash equivalents
25. 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
2022
£m
5
21
–
–
26
2021
£m
1
3
(7)
–
(3)
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 Notional amount
Interest-rate swaps1
Foreign exchange swaps
179
2022
£m
894
348
2021
£m
675
843
1,242
1,518
1. At 31 March 2022, the Group held forward starting pay-fixed interest-rate swaps of £275m (2021: £275m) which are included in the notional amounts above.
26. 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 58-69). 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, except where
the relevant arrangements have been put in place by an individual subsidiary or a joint venture level prior to acquisition.
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
2022
£m
588
128
–
Group
2021
£m
647
–
5
Company
2021
£m
3
–
–
2022
£m
2
–
–
(4,777)
(3,676)
(2,912)
(2,630)
26
(3)
–
–
(4,035)
(3,027)
(2,910)
(2,627)
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.
Financial statementsLandsec Annual Report 2022 180
26. Financial risk management continued
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 macroeconomic environment in which our customers operate. These assessments are made on a
customer by customer basis.
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.
2022
£m
128
2021
£m
–
(499)
(906)
1,462
1,091
24.6%
2,506
1,600
46.1%
The Group’s core financing structure is in the Security Group, although the Non-restricted Group may also secure independent funding.
Security Group
The Group’s principal financing arrangements utilise the credit support of a ring-fenced group of assets (the Security Group) that comprises
the majority of the Group’s investment property portfolio and certain investments in joint ventures. These arrangements operate in ‘tiers’
determined by LTV and interest cover ratio (ICR). This structure is most flexible at lower tiers (with a lower LTV and a higher ICR) and allows
property acquisitions, disposals and developments to occur with relative freedom. In higher tiers, the requirements become more prescriptive.
No financial covenant default is triggered until the applicable LTV exceeds 100% or the ICR is less than 1.0x.
As at 31 March 2022, the reported LTV for the Security Group was 36.4% (2021: 32.7%), 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.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 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.
181
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
Other payables
Less than
1 year
£m
623
Between 1
and
2 years
£m
512
3
–
26
42
75
73
3
–
–
–
–
–
Between 2
and
5 years
£m
2,184
10
–
–
–
–
8
Over
5 years
£m
2,096
395
–
–
–
–
–
2022
Total
£m
5,415
411
–
26
42
75
81
842
515
2,202
2,491
6,050
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
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 and at least 50% for years four and five. 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 2022, the Group (including the Group’s share of joint ventures and non-wholly owned subsidiaries) had pay-fixed interest-rate
swaps in place with a nominal value of £619m (2021: £400m) and forward starting pay-fixed interest-rate swaps of £275m (2021: £275m).
The Group’s net debt was 70.0% fixed (2021: 80.8%) and based on the Group’s debt balances at 31 March 2022, a 1% increase/(decrease)
in interest rates would increase/(decrease) the annual net finance expense in the income statement and reduce/(increase) equity by £9m
(2021: £7m). The sensitivity has been calculated by applying the interest rate change to the variable rate borrowings, net of interest-rate
swaps and cash and cash equivalents.
Financial statementsLandsec Annual Report 2022 182
26. Financial risk management continued
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 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
2022, the Group had issued €255m (2021: €752m) and $185m (2021: $250m) of commercial paper, fully hedged through foreign exchange
swaps. A 10% weakening or strengthening of Sterling would therefore have £nil (2021: £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 2022, the Group
had €6m (2021: €17m) 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 increase the profit before
tax and increase total equity by £1m (2021: £2m). A 10% strengthening in Sterling would decrease the profit before tax and reduce equity by
£1m (2021: £1m).
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
2,479
30
–
Floating
rate
£m
1,700
217
142
2022
Total
£m
Fixed
rate
£m
Floating
rate
£m
4,179
2,417
247
142
–
–
293
640
182
2021
Total
£m
2,710
640
182
2,509
2,059
4,568
2,417
1,115
3,532
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 one year but not more than two years
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
30
427
437
1,615
2,509
400
2,909
Floating
rate
£m
511
2
1,546
–
2,059
(400)
1,659
2022
Total
£m
541
429
1,983
1,615
4,568
–
4,568
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
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 183
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
More than two years but not more than five years
More than five years
Foreign
exchange
swaps
£m
360
–
–
–
360
2022
Interest-
rate
swaps
£m
–
400
494
–
894
Foreign
exchange
swaps
£m
843
–
–
–
843
2021
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 22, 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
26
–
Level 3
£m
–
–
2022
Total
£m
26
–
Level 1
£m
Level 2
£m
Level 3
£m
–
–
4
(7)
5
–
2021
Total
£m
9
(7)
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% (31 March 2021: 2.2%), is £164m
(31 March 2021: £105m). 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 4.9% (31 March 2021: 4.6%), is £66m (31 March 2021: £249m).
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.
Financial statementsLandsec Annual Report 2022 184
Section 5 – Working capital
This section focuses on our working capital balances, including trade and other receivables, trade and other payables, and provisions.
27. 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 macroeconomic 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 estimate
Impairment of trade receivables
The Group’s assessment of expected credit losses is inherently subjective due to the forward-looking nature of the assessments. 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 26 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 and associates
Other receivables
Total current trade and other receivables
Non-current amounts due from joint ventures and associates
Non-current property sales receivables
Deferred consideration
Other non-current receivables
Total trade and other receivables
2022
£m
38
212
34
11
15
58
368
147
5
18
7
545
2021
£m
74
230
24
3
7
16
354
162
8
–
–
524
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 lease term.
The non-current amounts due from joint ventures have maturity dates ranging from April 2028 to the dissolution of the joint venture.
Interest is charged at rates ranging from 4% to 5% (2021: 4% to 5%).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 Ageing of trade receivables
As at 31 March 2022
Not impaired
Impaired
Gross trade receivables
As at 31 March 2021
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
1
–
1
–
–
–
6
3
9
22
4
26
14
4
18
33
27
60
10
7
17
17
54
71
None of the Group’s other receivables are past due and therefore no ageing has been shown (2021: £nil).
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
Acquisition of properties
At 31 March
185
Total
£m
38
74
112
74
111
185
2021
£m
30
98
(1)
(16)
111
2021
£m
316
(29)
(4)
–
(11)
(42)
–
230
7
60
67
2
26
28
2022
£m
111
14
(35)
(16)
74
2022
£m
230
(18)
–
6
1
(8)
1
212
Financial statementsLandsec Annual Report 2022 186
28. 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
2022
£m
26
42
72
75
104
1
–
320
8
328
Group
2021
£m
12
42
67
38
93
–
–
252
1
253
Company
2021
£m
2022
£m
–
–
8
7
–
–
–
–
17
12
–
–
2,897
2,912
–
2,601
2,630
–
2,912
2,630
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 3.7% per annum
(2021: 3.6%).
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.
29. 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 35)
Impairment reversal/(charge)
At 31 March
2022
£m
6,101
4
117
6,222
2021
£m
6,213
4
(116)
6,101
A full list of subsidiary undertakings at 31 March 2022 is included in Additional information pages 218-222.
In the year ended 31 March 2022, there has been a reversal of prior years’ impairment on the Company’s investment in its subsidiaries
of £117m (2021: impairment of £116m) as a result of an increase 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 2022
as determined by their individual net asset values at that date, totalling £6,222m (2021: £6,101m).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 30. Other non-current assets
Other property, plant and equipment
Net pension surplus (note 34)
Derivative financial instruments (note 25)
Other investments
Total other non-current assets
31. Other current assets
Derivative financial instruments (note 25)
Other investments
Total other current assets
32. Other current liabilities
Derivative financial instruments (note 25)
Provisions
Total other current liabilities
33. Other non-current liabilities
Deferred tax liability (note 12)
Investment in joint ventures (note 16)
Total other non-current liabilities
34. Net pension surplus
Accounting policy
187
2022
£m
11
28
21
1
61
2022
£m
5
–
5
2022
£m
–
11
11
2022
£m
7
5
12
2021
£m
13
6
3
–
22
2021
£m
1
5
6
2021
£m
7
–
7
2021
£m
2
–
2
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 (2021: £3m).
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.
Financial statementsLandsec Annual Report 2022 188
34. Net pension surplus continued
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 2021 by the independent actuaries,
Hymans Robertson LLP. This valuation was updated to 31 March 2022 using, where required, assumptions prescribed by IAS 19 Employee
Benefits. The next full actuarial valuation will be performed as at 30 June 2024.
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 2023 (2022: £nil).
All death-in-service and incapacity benefits arising during employment are wholly insured. No post-retirement benefits other than pensions
are made available to employees of the Group.
Analysis of the amounts charged to the income statement
Analysis of the amount charged to operating profit
Current service costs
Past service costs
Charge to operating profit
Analysis of amount credited to net finance expense
Interest income on plan assets
Interest expense on defined benefit scheme liabilities
Net credit to finance income
Analysis of the amounts recognised in other comprehensive income
Analysis of gains and losses
Net re-measurement (losses)/gains on scheme assets
Net re-measurement gains/(losses) on scheme liabilities
Net re-measurement gains/(losses)
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
2022
£m
2021
£m
–
–
–
(5)
5
–
2022
£m
(4)
26
22
(24)
%
14
27
14
43
2
100
–
–
–
(5)
5
–
2021
£m
17
(29)
(12)
(46)
2021
£m
33
65
33
102
6
239
(233)
6
%
7
28
13
40
12
100
2022
£m
15
65
31
92
27
230
(202)
28
In the year ended 31 March 2022, £9m (2021: £9m) 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 (2021: £nil).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 189
In the most recent triennial valuation, the defined benefit scheme liabilities were split nil% (2021: 9%) in respect of active scheme
participants, 31% (2021: 24%) in respect of deferred scheme participants, and 69% (2021: 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 2022 is 14.6 years (2021: 15.8 years).
The assumptions agreed with the Trustees of the Scheme for the triennial valuation at 30 June 2021 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
2022
%
n/a
4.00
3.75
2.70
4.00
3.30
2022
years
26.6
28.9
29.6
31.7
2021
%
n/a
3.55
3.40
1.95
3.55
2.85
2021
years
27.7
29.2
30.0
31.7
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
Decrease by 0.5%
Increase by 1 year
Increase by 0.5%
Impact on Scheme liabilities
Increase by £15m
Increase by £10m
Increase by £12m
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 surplus for the Scheme of £8m at 31 March 2022,
as opposed to a surplus of £28m.
In order to reduce risk within the Scheme, 40% (2021: 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 90% (2021: 89%) of the interest rate risk and 90% (2021: 88%) 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 2022
or 31 March 2021.
Financial statementsLandsec Annual Report 2022 190
35. 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 Scheme
Sharesave Plan
Restricted Share Plan
2022
Charge
£m
Number
(millions)
Charge
£m
2021
Number
(millions)
2
–
–
1
1
4
2
–
1
1
1
5
2
–
–
1
1
4
2
–
1
1
1
5
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 108-124.
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 reopened to senior management in the current year. 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 752p
(2021: 616p). The estimated fair value of awards granted during the year under the scheme was £7m (2021: £3m).
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 one or two years and are not subject to additional performance criteria. Awards are satisfied by the transfer of existing
shares held by the EBT at nil consideration. The weighted average share price at the date of vesting during the year was 703p (2021: 567p).
The estimated fair value of awards granted during the year under the scheme was £1m (2021: £1m).
Other plans:
Executive Share Option Scheme (ESOS)
The 2005 ESOS was previously open to managers not eligible to participate in the LTIP, but was largely replaced by the new Restricted Share
Option Plan in the year ended 31 March 2020. Awards are discretionary and are granted over ordinary shares of the Company at the middle
market price on the three dealing days immediately preceding the date of grant. Awards normally vest after three years and are not
subject to performance conditions. Awards are satisfied by the transfer of shares from the EBT and lapse ten years after the date of grant.
There were no awards exercised during the year (2021: none). The estimated fair value of awards granted during the year under the scheme
was £nil (2021: £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. The weighted average share price at the date of exercise for awards exercised during the year was 764p (2021: no awards
exercised during the year). The estimated fair value of awards granted during the year under the scheme was £1m (2021: £1m).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022
191
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. The weighted average share price at the date of exercise
for awards exercised during the year was 787p (2021: no awards exercised during the year). The estimated fair value of awards granted
during the year under the scheme was £2m (2021: £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
2022
Number
(millions)
2021
Number
(millions)
2022
Number
(millions)
2021
Number
(millions)
2
1
–
(1)
2
–
Years
1
2
1
–
(1)
2
–
Years
1
2
–
–
–
2
1
Years
3
2
1
–
(1)
2
1
Years
4
Other plans
Weighted average
exercise price
2022
Pence
821
662
635
781
805
2021
Pence
873
531
–
817
821
1,367
1,343
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
–
552
725
936
1,022
1,328
Outstanding at 31 March 2022
Outstanding at 31 March 2021
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
2
–
5
4
3
–
519
728
900
1,022
1,328
3
1
–
–
1
–
1
3
1
6
5
4
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:
Long-Term Incentive Plan
Deferred Share Bonus Plan
Restricted Share Plan
Sharesave Plan
Year ended 31 March
Share price at grant date
Exercise price
Expected volatility
Expected life
2022
696p
n/a
35%
2021
616p
n/a
30%
2022
696p
n/a
35%
2021
547p
n/a
30%
3 years
2.7 years
3 years
1 year
Risk-free rate
0.29%
–0.09%
0.27%
Expected dividend yield
0%
5.87%
nil
nil
nil
2022
697p
n/a
35%
2.88
years
2021
547p
n/a
30%
3 years
0.27%
–0.13%
2022
683p
584p
35%
2021
649p
519p
30%
3 to
5 years
3 to
5 years
0.22% to
0.40%
–0.05% to
–0.07%
4%
6.36%
4%
5.36%
Financial statementsLandsec Annual Report 2022 192
35. 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
2021
30%
Expected volatility – index
of comparator companies
Correlation
– Group vs. index
2022
35%
2021
30%
2022
55%
2021
85%
Year ended 31 March
Long-Term Incentive Plan
2022
696p
2021
581p
2022
n/a
2021
n/a
2022
35%
36. 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 10 2/3p each
At the beginning of the year
Issued on the exercise of options
At 31 March
Group and Company
Allotted and fully paid
2022
£m
80
2021
£m
80
Number of shares
2022
2021
751,313,063
751,313,063
15,079
–
751,328,142
751,313,063
The number of options over ordinary shares from Executive plans that were outstanding at 31 March 2022 was 3,278,372 (2021: 2,871,389).
If all the options were exercisable at that date then 3,278,372 (2021: 2,871,389) 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 2022 was
1,768,677 (2021: 1,977,120). If all the options were exercisable at that date then 635,473 new ordinary shares (2021: 666,526) would be issued
and 1,133,204 shares would be required to be transferred from the EBT (2021: 1,310,594).
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 year ended 31 March 2022, 3,049,943 treasury shares were transferred to
the EBT (2021: none) to satisfy future awards under employee share plans. At 31 March 2022, the Group held 6,789,236 ordinary shares
(2021: 9,839,179) with a market value of £53m (2021: £68m) in treasury. The transfer of treasury shares to the EBT did not change the
Company’s total voting rights as the voting rights and dividends in respect of the transferred shares continue to be waived.
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 193
37. 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 treasury shares
Transfer of shares to employees on exercise of share options
At 31 March
Group and Company
2022
£m
11
–
21
(2)
30
2021
£m
10
3
–
(2)
11
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 35).
The number of shares held by the EBT at 31 March 2022 was 3,938,343 (2021: 1,224,468). The market value of these shares at 31 March 2022
was £31m (2021: £8m).
38. Contingencies
The Group has contingent liabilities in respect of legal claims, tax queries, guarantees and warranties arising in the ordinary course of business.
It is not anticipated that any material liabilities will arise from the contingent liabilities.
39. 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.
2022
£m
2021
£m
(193)
(99)
(131)
(87)
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
Other
Year ended and as at 31 March 2022
Year ended and as at 31 March 2021
Net
investments
into joint
ventures
£m
Amounts
owed by
joint
ventures
£m
Amounts
owed to
joint
ventures
£m
Income
£m
9
3
2
1
–
15
5
–
(8)
(11)
51
37
73
75
1
1
6
156
–
–
–
–
(1)
(1)
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
(2)
–
–
(4)
(1)
(7)
92
75
1
–
1
169
–
–
–
–
–
–
Financial statementsLandsec Annual Report 2022 194
39. Related party transactions continued
Associates
As disclosed in note 17, the Group acquired investments in a number of associates during the year as a result of the Group’s purchase
of 100% share capital of U+I Group PLC on 14 December 2021. Details of transactions and balances between the Group and its associates
are as follows:
Associates
Year ended and as at 31 March 2022
Year ended and as at 31 March 2021
Net
investments
into
associates
£m
Amounts
owed by
associates
£m
Amounts
owed to
associates
£m
4
4
6
6
–
–
Income
£m
–
–
Net
investments
into
associates
£m
–
–
Income
£m
–
–
Amounts
owed by
associates
£m
Amounts
owed to
associates
£m
–
–
–
–
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 108-124.
Short-term employee benefits
Share-based payments
40. Operating lease arrangements
Accounting policy
2022
£m
4
2
6
2021
£m
4
3
7
The Group earns rental income by leasing its properties to tenants under non-cancellable operating leases. Leases in which substantially all
risks and rewards incidental to ownership of investment properties 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 undiscounted 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
2022
£m
461
459
434
388
337
2021
£m
467
431
422
391
346
3,142
5,221
3,059
5,116
The total of contingent rents, primarily turnover based rents, recognised as income during the year was £35m (2021: £5m).
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 195
41. Acquisition of subsidiaries
Accounting policy
Refer to Note 1 for the Group’s policy on recognition of subsidiary undertakings.
Significant accounting judgement
Acquisitions of subsidiaries, and the method applied on the initial recognition of the subsidiary or group of subsidiaries, by nature can be
complex and material to the financial statements. When a subsidiary is acquired, management considers the substance of the assets and
activities of the acquired entity to determine whether the acquisition represents the acquisition of a business or an acquisition of an asset.
An acquisition is accounted for as a business combination where an integrated set of activities and assets, including property, is acquired.
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the
acquiree. When the acquisition of a subsidiary does not represent a business combination, it is accounted for as an acquisition of a group
of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values,
and no goodwill or deferred tax is recognised.
Business acquisition
The Group has accounted for the purchase of 100% of the share capital of U+I Group PLC for a cash consideration of £191m on
14 December 2021 in accordance with IFRS 3 Business Combinations. The Group incurred £8m of business combination costs in connection
with the transaction. Goodwill of £6m arose on the transaction, as a result of the difference between the fair value of the net assets
acquired and the consideration paid, which was based on a price per share recognising the access to a significant pipeline of mixed-use
development schemes gained by the acquisition, and the expected synergies and enhancement of the Group’s existing development
capabilities by adding additional skills and experience to the Group. The Group has considered whether the goodwill is recoverable, and has
concluded that it is not. The Group’s longer term plans for the developments and the potential synergies with the Group’s existing holdings
are at an early stage, making the recoverable amount uncertain at this time. £6m of goodwill has therefore been written off to the income
statement in the year.
The fair value of the assets and liabilities recognised at the date of acquisition is set out in the table below. As at 31 March 2022, the Group
remains in the measurement period for the recognition of assets and liabilities on acquisition of U+I Group PLC. The values provided in the
table below are therefore provisional and could be subject to adjustment until the measurement period ends in December 2022:
Assets
Investment property, including head leases capitalised
Investments in joint ventures and associates
Trading property
Trade receivables and other assets
Cash
Total assets
Liabilities
Borrowings
Trade payables and other liabilities
Total liabilities
Net assets
Fair value of consideration paid
Goodwill recognised
Goodwill impairment
Business combination costs
Total loss on business combination recognised in the income statement
U+I Group PLC
£m
98
58
128
62
36
382
(110)
(87)
(197)
185
191
6
(6)
(8)
(14)
Financial statementsLandsec Annual Report 2022 196
41. Acquisition of subsidiaries continued
Pro forma information
Since the date of acquisition, U+I Group PLC has contributed the following to the revenue and profit before tax of the Group for the year:
Revenue
Loss before tax
U+I Group PLC
£m
3
(14)
If the acquisition had been made on 1 April 2021, the Group’s revenue would have been higher by £9m and profit before tax would have been
lower by £32m.
The pro forma information is provided for illustrative purposes only and is not necessarily indicative of the results of the combined Group
that would have occurred had the purchases actually been made at the beginning of the financial year, or indicative of future results of
the combined Group.
Acquisition of group of assets and liabilities
The Group has accounted for the purchase of a 75% interest in Peel Holdings (Media) Limited (‘MediaCity’) for a cash consideration of £209m
on 2 November 2021 as an acquisition of a group of assets and liabilities, having met the concentration test in accordance with IFRS 3 Business
Combinations. The Group incurred £3m of acquisition costs in connection with the transaction, which were capitalised during the year.
The Group recognised the amounts attributable to non-controlling interests at acquisition based on the proportionate share of the fair
values of the net assets of MediaCity at 2 November 2021.
The fair value of the assets and liabilities recognised at the date of acquisition is set out in the table below:
Assets
Investment property
Trade and other receivables
Cash
Total assets
Liabilities
Borrowings
Trade payables and other liabilities
Total liabilities
Net assets
Repayment of loan notes
Non-controlling interest
Fair value of consideration paid
MediaCity
£m
563
4
23
590
(403)
(20)
(423)
167
110
(68)
209
Notes to the financial statementsfor the year ended 31 March 2022 continuedFinancial statementsLandsec Annual Report 2022 197
Pro forma information
Since the date of acquisition, MediaCity has contributed the following to the revenue and profit before tax of the Group, including amounts
attributable to non-controlling interest, for the year:
Revenue
Profit before tax
MediaCity
£m
13
24
If the acquisition had been made on 1 April 2021, the Group’s revenue and profit before tax, including amounts attributable to non-controlling
interest, would have been higher by £21m and £14m respectively.
The information is provided for illustrative purposes only and is not necessarily indicative of the results of the combined Group that would have
occurred had the purchases actually been made at the beginning of the financial year, or indicative of future results of the combined Group.
42. Events after the reporting period
On 11 May 2022, contracts were exchanged to sell the wholly owned subsidiary, LS City & West End Limited, which holds the Group’s
interests in 32-50 Strand, for a headline price of £195m.
Since 31 March 2022, the Group sold or exchanged contracts to sell certain interests in joint venture arrangements and trading properties,
all acquired as part of the U+I Group PLC on 14 December 2021.
The Building Safety Act 2022 was enacted on 28 April 2022, for which work is underway to assess the potential impact on the Group.
Financial statementsLandsec Annual Report 2022 198
Business analysis – EPRA disclosures
EPRA net asset measures
Net assets attributable to shareholders
Shortfall of fair value over net investment in finance lease book value
Deferred tax liability on intangible asset
Goodwill on deferred tax liability
Other intangible asset
Fair value of interest-rate swaps
Excess of fair value of debt over book value (note 22)
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
Other intangible asset
Fair value of interest-rate swaps
Excess of fair value of debt over book value (note 22)
Purchasers’ costs1
Net assets used in per share calculation
Diluted net assets per share
Table 61
31 March 2022
EPRA
NRV
£m
EPRA
NTA
£m
EPRA
NDV
£m
7,917
7,917
7,917
(6)
1
(1)
–
(21)
–
698
8,588
(6)
1
(1)
(2)
(21)
–
–
(6)
–
(1)
–
–
(107)
–
7,888
7,803
EPRA
NRV
EPRA
NTA
EPRA
NDV
1,157p
1,063p
1,052p
EPRA
NRV
£m
31 March 2021
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
1. EPRA NTA and EPRA NDV reflect IFRS values which are net of purchasers’ costs. Purchasers’ costs are added back when calculating EPRA NRV.
Additional informationLandsec Annual Report 2022 EPRA performance measures
Measure
EPRA earnings
Definition for EPRA measure
Notes
Recurring earnings from core operational activity
EPRA earnings per share
EPRA earnings per weighted number of ordinary shares
EPRA diluted earnings per share
EPRA 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
Cost ratio2
ERV of vacant space as a % of ERV of Combined Portfolio excluding the
development programme1
Total costs as a percentage of gross rental income (including direct
vacancy costs)2
Total costs as a percentage of gross rental income (excluding direct
vacancy costs)2
199
Table 62
31 March 2022
EPRA
measure
£355m
48.0p
47.8p
Landsec
measure
£355m
48.0p
47.8p
£7,888m
£7,888m
1,063p
1,063p
£7,803m
£7,803m
1,052p
1,052p
5.1%
5.1%
27.8%
26.4%
n/a
22.1%
5
5
5
5
5
5
5
Table
63
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. 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 £7m, 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 63
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
Major retail
Subscale sectors
31 March
2022
£m
29
568
5.1
Table 64
Change
%
2
111
95
32
2022
£m
245
133
74
452
2021
£m
241
63
38
342
£m
4
70
36
110
Additional informationLandsec Annual Report 2022 200
Business analysis – EPRA disclosures
continued
Acquisitions, disposals and capital expenditure
Investment properties
Net book value at the beginning of the year
Acquisitions
Capital expenditure
Capitalised interest
Net movement in head leases capitalised
Disposals
Net surplus/(deficit) on revaluation of investment properties
Transfer to trading properties
Net book value at the end of the year
Profit on disposal of investment properties
Trading properties
Net book value at the beginning of the year
Acquisitions
Transfer from investment properties
Capital expenditure
Disposals
Movement in impairment
Net book value at the end of the year
Profit/(loss) on disposal of trading properties
Table 65
Year ended
Year ended
31 March 2022
31 March 2021
Adjustment for
non-wholly
owned
subsidiaries1
£m
Combined
Portfolio
£m
–
10,342
(141)
–
–
–
–
(4)
–
757
350
17
62
(98)
409
(6)
(145)
11,833
–
£m
–
–
–
–
–
–
–
–
115
£m
36
145
6
6
(41)
(6)
146
1
Joint
ventures
£m
735
32
7
–
–
–
(3)
–
771
8
£m
–
17
–
–
(16)
–
1
(1)
Combined
Portfolio
£m
12,243
115
223
11
1
(594)
(1,646)
(11)
10,342
5
£m
27
–
11
1
(3)
–
36
(1)
Group
(excl. joint
ventures)
£m
9,607
866
343
17
62
(98)
416
(6)
11,207
107
£m
36
128
6
6
(25)
(6)
145
2
1. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is
consolidated in the Group numbers.
Investment
properties1
Trading
properties
Combined
Portfolio
Combined
Portfolio
Acquisitions, development and other capital expenditure
Acquisitions2
Development capital expenditure3
Other capital expenditure
Capitalised interest
£m
757
305
45
17
£m
145
5
1
–
£m
902
310
46
17
Acquisitions, development and other capital expenditure
1,124
151
1,275
Disposals
Net book value – investment property disposals
Net book value – trading property disposals
Net book value – other net assets
Profit on disposal – investment properties
Profit/(loss) on disposal – trading properties
Total disposal proceeds
£m
98
41
8
115
1
263
1. See EPRA analysis of capital expenditure table 66 for further details.
2. Properties acquired in the year.
3. Development capital expenditure for investment properties comprises expenditure on the future development pipeline and completed developments
£m
115
183
41
11
350
£m
594
3
43
5
(1)
644
Additional informationLandsec Annual Report 2022 EPRA analysis of capital expenditure
Other capital expenditure
201
Table 66
31 March 2022
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
Adjustment
for
non-wholly
owned
subsidiaries4
£m
Total capital
expenditure
– Group
£m
Central
London
West End
offices
City offices
Retail and
other
Developments
Total Central
London
Major retail
Shopping
centres
Outlets
Total Major
retail
Mixed-use
urban
Completed
investment
Developments
Total
Mixed-use
urban
Subscale
sectors
Leisure
Hotels
Retail parks
Total
Subscale
sectors
–
–
–
70
70
175
–
175
399
100
499
13
–
–
13
–
–
–
290
290
–
–
–
–
15
15
–
–
–
–
Total capital
expenditure
757
305
(1)
–
(1)
–
(2)
(1)
–
(1)
–
–
–
3
–
–
3
–
4
15
1
–
20
7
8
15
2
–
2
3
1
2
6
–
–
–
–
–
1
–
1
–
–
–
1
–
–
1
3
15
–
–
18
7
8
15
2
–
2
7
1
2
10
–
–
–
17
17
–
–
–
–
–
–
–
–
–
–
3
15
–
377
395
182
8
190
401
115
516
20
1
2
23
–
–
–
–
–
5
–
5
–
22
22
12
–
–
12
–
–
–
–
–
–
–
–
(132)
(9)
(141)
–
–
–
–
3
17
–
375
395
177
8
185
533
102
635
8
1
2
11
43
2
45
17
1,124
39
(141)
1,226
Timing difference between accrual and cash basis
Total capital expenditure on a cash basis5
(627)
497
(33)
6
141
–
(735)
491
1. Investment properties acquired in the year.
2. Expenditure on the future development pipeline and completed developments.
3. Capital expenditure where the lettable area increases by at least 10%.
4. The Group acquired a 75% interest in MediaCity on 2 November 2021. This represents the 25% interest in MediaCity which is not owned by the Group, but which is
consolidated in the Group numbers.
5. Includes interest paid of £17m.
Additional informationLandsec Annual Report 2022 202
Business analysis – Group
Top 12 occupiers at 31 March 2022
Central Government
Deloitte
Accor
Cineworld
Boots
Taylor Wessing
Peel
BBC
Sainsbury’s
M&S
H&M
Next
1. On a proportionate basis.
Property Income Distribution (PID) calculation
Profit/(loss) before tax per income statement
Accounting profit on residual operations
Prior year adjustment
Profit/(loss) attributable to tax-exempt operations
Adjustments
Capital allowances
Capitalised interest
Revaluation (gain)/deficit
Tax exempt disposals
Capital expenditure
Other tax adjustments
Goodwill amortisation and impairment
Estimated tax-exempt income for the year
PID thereon (90%)
Table 67
% of Group rent1
5.8%
5.4%
2.8%
1.9%
1.7%
1.4%
1.3%
1.3%
1.1%
1.1%
1.1%
1.0%
25.9%
Table 68
Year ended
Year ended
31 March 2022
£m
31 March 2021
£m
875
(62)
–
813
(36)
(15)
(409)
(117)
4
(28)
9
221
199
(1,393)
(47)
28
(1,412)
(45)
(7)
1,646
(6)
9
(3)
5
187
168
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. This year, there was no net tax charge (2021: £nil).
The table above provides a reconciliation of the Group’s profit or 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.
Additional informationLandsec Annual Report 2022 203
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 2022 and
31 March 2021:
Dividends paid in year to 31 March 2021
Dividends paid in year to 31 March 2022
Minimum PID to be paid by 31 March 2023
Total PID required
PID allocation
Ordinary
dividend
Total
dividend
Table 69
Year ended
Year ended
31 March 2022
£m
31 March 2021
£m
Pre-
31 March 2021
£m
–
67
132
199
54
114
–
168
79
–
n/a
£m
–
–
n/a
£m
133
181
n/a
The Group has met all the REIT requirements, including the payment by 31 March 2022 of the minimum Property Income Distribution (PID)
for the year ended 31 March 2021. The forecast minimum PID for the year ended 31 March 2022 is £199m, which must be paid by 31 March
2023. The Group has already made PID dividends relating to 31 March 2022 of £67m, leaving £132m 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 £154m (2021: £69m),
of which £57m (2021: £25m) 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.
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:
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.
Annual net rent breakdown
by occupier business sector (%)
Table 70
Year ended 31 March 2022
Year ended 31 March 2021
Tax-
exempt
business
265
96.4%
12,230
94.8%
Residual
business
Adjusted
results
10
3.6%
275
Tax-
exempt
business
194
100%
671
12,901
10,520
Residual
business
Adjusted
results
(7)
187
0%
493
11,013
5.2%
95.5%
4.5%
Chart 71
Floorspace (million sq ft)1
Chart 72
■ Services
■ Retail trade
■ Financial services
■ Public administration
■ Transport, communications
■ Manufacturing
■ Wholesale trade
■ Other
38%
31%
12%
7%
4%
3%
2%
3%
■ Central London
■ Major retail
■ Mixed-use urban
■ Subscale sectors
Total
5.8
8.1
3.0
7.1
24.0
1. Joint ventures are reflected at 100% values, not Group share.
Additional informationLandsec Annual Report 2022
204
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 22 sustainability targets, within our Build well, Live well, Act well framework. This section includes a summary of our
performance against those commitments and our key disclosures.
For more information please visit landsec.com/sustainability
Build well
We will design, develop and manage places to tackle climate change, enhancing the health of the environment by achieving net zero and
going beyond.
Theme
Targets and Metrics
FY21/22 performance
Decarbonising our portfolio
transitioning to net zero
Reduce operational carbon emissions (tCO2e) by 70%
by 2030, for property under our management for at
least two years (compared with a 2013/14 baseline).
52% operational carbon reduction.
Reduce average embodied carbon by 50% compared
with a typical building by 2030 by prioritising asset
retention where possible, smart design and using
sustainable materials.
New target – performance to be reported next year.
Reduce energy intensity by 45% by 2030 (compared
with a 2013/14 baseline).
34% energy intensity reduction.
Source 85% of total energy (electricity, gas, heating
and cooling) consumption from renewable sources
by 2030.
66%
Ensure 100% of assets located in areas highly exposed
to climate risks have adaptation measures in place.
For assets located in areas highly exposed to physical
risks we continue to ensure adequate protection
and mitigation plans are in place, including Business
Continuity and Emergency Response Plans.
Enhancing nature and
green spaces
Achieve a 25% biodiversity net gain by 2030 across our
operational sites currently offering the greatest
potential (2016/17 baseline).
13% biodiversity net gain.
Achieve a 15% uplift in biodiversity for all new
developments by 2030.
New target – performance to be reported next year.
Using resources efficiently
For every development, source 100% of core
construction materials from ethical and sustainable
sources, extending this across our full supply chain in
due course.
100% of core construction materials with a
responsible sourcing certification.
Promote reuse and circular economy principles and
achieve at least 75% annual recycling rate across our
portfolio and new developments.
Recycling across operations: 71%
Recycling across new developments: 99.5%
Undertake water management assessment across
assets under our operational control and set water
targets by 2023.
New target – performance to be reported next year.
Additional informationLandsec Annual Report 2022 205
Live well
We will create opportunities and inclusive places to change lives, supporting communities to thrive.
Theme
Targets and Metrics
FY21/22 performance
Creating opportunities and
tackling local issues
From a 2020 baseline, empower 30,000 people facing
barriers into employment with the skills and
opportunities to enter the world of work by 2030.
From a 2020 baseline, deliver £200 million of social
value in our local communities by 2030, addressing
social issues relevant to each area.
Inclusive places
We will design, develop and manage our assets and
new developments to be accessible ensuring everyone
feels like they belong.
Accelerate diverse representation across all levels at
Landsec:
→ 2025 target for female representation: 50% whole
organisation; 50% Board, Exec and Senior Leaders;
40% Leader.
→ 2025 target BAME representation: >14% whole
organisation; 14% Board, Exec and Senior Leaders;
14% Senior leaders.
→ 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.
1,802 people empowered towards the world of work
including:
→ Total number of people supported into employment
or received employability support: 1,040
→ Total number of young people engaged through our
education programmes and careers sessions: 762
Please note: this doesn’t include people supported
through our development activities as this is a new
target and will be included next year.
£5.1m of social value delivered including:
→ Social value created through supporting people into
employment: £2.4m
→ Social value created through volunteering: £195,000
→ Total value of support for charitable partnerships:
£2.5m
Please note: this doesn’t include social value created
through our development activities as this is a new
target and will be included next year.
This year we achieved Disability Confident
certification at a number of our assets, with five sites
receiving Disability Confident Leader certification.
Received a Stonewall Bronze Employer Award and
introduced a ‘transitioning at work’ policy.
51% of our employees are female and ethnic minority
representation is 17%. Our female representation is
35% at leader level and 30% at senior leader level.
Our ethnic minority representation is 10% at leader
and 3% at senior leader level.
Improving wellbeing
Promote a culture which enhances Landsec colleagues’
wellbeing, having relevant policies and delivering
impactful campaigns.
Achieve WELL portfolio programme annually for our
directly managed office portfolio and new
developments setting a baseline score against which
we will aim for continual improvement.
This year we launched an information hub to provide
access to all wellbeing support including our employee
assistance programme, our virtual GP, documents
and apps. We continue to encourage individuals to
focus on their physical and mental health and provide
ongoing training to our 18 mental-health first aiders.
In 2021 we became the first UK REIT to sign up to the
WELL Portfolio Programme.
Additional informationLandsec Annual Report 2022 206
Sustainability performance
continued
Act well
We will be a fair and responsible business in everything we do.
Theme
Targets and Metrics
FY21/22 performance
Embedding ESG
All Landsec colleagues to have individual objectives to
support the delivery of Build well, Live well, Act well
with a proportion of remuneration linked to our energy
and carbon targets.
This is the first year that we have linked a proportion
of all colleagues’ remuneration to the delivery of
our energy and carbon targets. In 22/23, we’re
encouraging all Landsec colleagues to set individual
objectives to support achieving our vision.
Build relationships with our customer base (office and
brand partners), establishing partnerships to drive
improved sustainability performance for mutual gain.
Doing the basics brilliantly
Build relationships with our strategic suppliers ensuring
compliance to our Supplier Code of Conduct and
enhancing sustainable practices throughout our
supply chain.
This year we have engaged over 80 of our office
customers on their sustainability plans and
investigated opportunities for collaboration.
Additionally, we have conducted ‘energy deep dives’
with 15 occupiers to identify opportunities for energy
reduction.
All strategic suppliers are asked to comply with our
Supplier Code of Conduct which sets out our minimum
expectations on how we expect our suppliers to act
in relation to fairness, wages, diversity, equality and
inclusivity. Additionally, all strategic suppliers are
expected to operate our sites with respect to Landsec’s
policies on health and safety, anti-harassment and
bullying, diversity and inclusion.
Provide safe, healthy and secure environments
for those who work, visit, live and relax across our
managed portfolio, maintaining ISO 45001 and
BS 9997 certifications, as well as continually going
beyond compliance delivering data-led and risk-
prioritised improvement actions and leading the
industry on fire safety.
All our properties operate within a safety-
management system certified to ISO 45001, and
we continue to conform to it. This year we achieved
certification to BS 9997 for our fire risk management
system, and produced clear requirements for our
development projects in anticipation of the Building
Safety Act.
Ensure all colleagues have read, understood and are
following our Code of Conduct and underlying policies
and standards which set out how we do things building
on the foundations of our purpose and values.
Pay our colleagues the Real Living Wage and work with
our suppliers to do the same.
No. of grievances raised: 2
No. of whistleblowing incidents: 0
During the year, we have refreshed our employee
Code of Conduct which provides guidance on how
to do the right thing and behave in the right way
and highlights the key policies that all our employees
must follow.
We continue to pay all our direct employees the Real
Living Wage and will keep our accreditation with the
Living Wage Foundation under regular review over the
coming year as the UK economy continues to emerge
from the pandemic.
Additional informationLandsec Annual Report 2022 207
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.
Sustainability leadership
Demonstrated by our performance across all key ESG benchmarks.
BENCHMARK LATEST PERFORMANCE
BENCHMARK LATEST PERFORMANCE
GRESB 2021
Real Estate Sector leader – 5-star rated entity
Standing Investments: Regional Listed
Sector leader for Europe within Diversified –
Office/Retail (score 91%)
Developments: Score 93%
CDP 2021
A-list (top 1.5%) for the fifth consecutive year
Inclusion on the 2021 Supplier engagement
Leaderboard (top 8%)
DJSI 2021
Score 85/top 99th percentile
European Real Estate leader, ranking 3rd
globally (2020: 4th)
Bronze Class distinction in the S&P Global
Sustainability Awards
Ecoact 2021
Ranked 1st amongst FTSE 100 companies
(2020: 3rd) for our sustainability reporting and
climate-related strategy and 3rd across global
indices analysed (FTSE 100, Euro STOXX 50 and
DOW 30)
EPRA 2021
Received our 8th Gold Award for best practice
sustainability reporting
FTSE4Good 2021
87th percentile. We continue to retain our
established position in the FTSE4Good Index
ISS ESG 2021
Prime status. Rating B-
Decile rank 1/transparency level: very high
MSCI ESG Rating 2021
AA rating
Sustainalytics ESG Risk Rating 2021
8.5 (negligible risk)/ranking 13 out of 1,044
companies in the real estate industry
Stonewall Workplace Equality Index 2022
Bronze award for our 1st submission,
acknowledging our efforts to advance
LGBT+ equality
Additional informationLandsec Annual Report 2022 208
Sustainability performance
continued
Streamlined Energy and Carbon Reporting (SECR)
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 74
Market-based emissions
Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Scope 1 and 2 tCO2e
Intensity
2019/20
2020/21
2021/22
9,158
3,719
12,878
7,554
2,079
9,633
7,151
2,054
9,205
GHG emissions are broken down into three scopes: scope 1, 2 and 3.
Scope 1 and 2 kgCO2e/m2
6.11
5.27
5.10
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 2021’. 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.
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
Table 73
Location-based emissions
Emissions
Scope 1 tCO2e
Scope 2 tCO2e
Scope 1 and 2 tCO2e
Intensity
2019/20
9,158
25,382
34,540
2020/21
2021/22
7,554
18,434
25,988
7,151
18,338
25,489
Scope 1 and 2 kgCO2e/m2
18.56
14.23
114.12
Scope 1 and 2 GHG emissions using location-based emission factors
have decreased by 2% compared with the previous reporting year.
Despite an increase energy consumption driven by higher occupancy
levels and the ease of Covid-19 restrictions, there has been marginal
decrease in location-based emissions. The decrease has been largely
due to changes in emissions factors and actions taken to drive
energy efficiency across our assets. The detailed breakdown of main
factors driving the change in our Scope 1 and Scope 2 can be seen
in Chart 75. In terms of market-based emissions, we have seen a
decrease of 4% which is largely due to changes in emissions factors.
Chart 75
25,489
Landsec Scope 1 and 2 emissions –
year on year driving factors
25,998
530
5
1,302
785
(1,434)
(1,687)
30,000
25,000
e
2
O
C
t
15,000
10,000
5,000
0
1
2
/
0
2
0
2
o
i
l
o
f
t
r
o
P
s
e
g
n
a
h
c
l
a
n
r
e
t
x
E
e
r
u
t
a
r
e
p
m
e
t
y
c
n
a
p
u
c
c
O
s
e
g
n
a
h
c
y
g
r
e
n
E
i
s
e
c
n
e
c
ffi
e
i
t
n
a
P
l
n
o
i
s
n
e
t
x
e
n
o
i
s
s
i
m
E
r
o
t
c
a
f
2
2
/
1
2
0
2
Table 76 shows the absolute energy consumption with a breakdown
by landlord and tenant consumption. This year, absolute energy
intensity has increased by 14% compared with the previous year,
largely as a result of the increase in occupancy alongside easing
of Covid-19 related restrictions.
Despite an increase in energy intensity from higher occupancy and
footfall rates, we were able to avoid an even larger increase due to
energy efficiencies achieved from our active energy management
programme. This year we have been able to implement various
initiatives, including lighting upgrades and further software
modifications in our building management systems (BMS) to
optimise the operation of our central plant services.
Additional informationLandsec Annual Report 2022 209
Furthermore, this year we identified and committed to implement energy efficiency projects across our portfolio that is expected to lead to
over 8,600 MWh of savings per annum. More information on our energy programme can be found on pages 49-51 (within Build well section).
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
District Heating and Cooling
kWh
For landlord shared services
(Sub)metered to tenants
Total Electricity consumption
(Sub)metered to tenants
Total Heating and Cooling consumption
2019/20
2020/21
43,015,309
28,576,514
71,591,823
95,890,524
68,977,474
27,504,757
12,686,608
40,191,365
74,375,665
46,107,177
Table 76
2021/22
34,618,470
17,627,638
52,246,108
81,468,457
48,120,743
164,867,998
120,482,841
129,589,200
5,312,441
7,356,140
12,668,581
5,472,813
3,589,825
9,062,638
5,551,710
4,170,874
9,722,584
Total Energy Consumption
kWh
For landlord shared services
144,218,274
107,353,234
121,638,636
Energy intensity
kWh/m2
(Sub)metered to tenants
Total Energy consumption
104,910,128
62,383,610
69,919,255
249,128,402
169,736,845
191,557,892
134
93
106
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 our
2022 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)
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
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
Emissions
(tCO2e)
7,151
18,338
195,875
21,623
76,397
7,765
Grouped
under PG&S
516
40
159
Excluded
Excluded
Excluded
Excluded
Excluded
89,374
Excluded
Excluded
221,363
Table 77
2021/22
% of total
value chain
3.2
8.3
88.5
9.8
34.5
3.5
0.0
0.2
0.0
0.1
0.0
0.0
0.0
0.0
0.0
40.4
0.0
0.0
Additional informationLandsec Annual Report 2022 210
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 2021/22
Chart 78
■ Downstream leased assets 46.0%
■ Capital goods
39.0%
■ Purchased goods
and services (PG&S)
■ Fuel- and energy-related
activities
11.0%
4.0%
The two largest scope 3 categories are Capital goods and
Downstream leased assets, making up 75% 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 emissions from Capital goods has slightly reduced due to the
fact that 21 Moorfields, EC2 had much less carbon-intensive material
arriving on site compared to 2020-21 as it nears completion,
whilst our other developments entered a more intensive phase
of construction, during which material deliveries to site intensify.
In the table below, we provide the amount of embodied carbon
emissions reported for each development in 2021-22.
In relation to Downstream leased assets, we continue to increase the
share of primary data relating to tenant energy usage (now at 57%,
an increase from 44% last year), thereby increasing data accuracy,
and this category’s increase in emissions (from 35.2% to 40.4% of our
total value chain) can be explained by occupancy increases following
the lifting of Covid-19 related restrictions and the accompanying
increase in tenant energy usage.
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
life-cycle 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 and
track these through to the completion of our buildings. The table
below shows that we’ll avoid over 50,000 tCO2e by targeting an
overall reduction of 22.1% in the embodied carbon across five
developments compared with design stage baseline (RIBA stage 3).
We also carefully design our buildings to minimise the energy
demand of our operations and meet the remaining demand
through renewable electricity contracts.
This year, we have reviewed our embodied carbon targets for new
developments. In next year’s report, we will focus on the overall
embodied carbon intensity rather than the percentage reduction
from design stage as a way of ensuring that we encourage
structural retention and material reuse as much as possible on
our new schemes.
Embodied carbon – development pipeline
Development
21 Moorfields, EC2
Lucent, W1
n2, SW1
The Forge, SE1
Portland House1, SW1
Timber Square2, SE1
Landsec development pipeline
Total embodied carbon
baseline tCO2
120,871
Forecasted total
embodied carbon tCO2
91,120
Forecasted embodied
carbon intensity kgCO2/m2
1,217
27,120
24,780
24,741
Scope change – no data available
32,390
229,902
21,411
20,517
18,414
27,676
179,138
1,113
996
1,026
535
Embodied carbon
reduction %
-24.6
-21.1
-17.2
-25.6
-14.6
-22.1
Table 79
Embodied carbon
emissions reported in
2021/22 tCO2
15,364
8,283
6,575
5,365
543
36,130
1. Portland House project has been paused during the year whilst a new design is being devised with no embodied carbon to be reported in the year.
2. Total embodied carbon baseline for Timber Square project has been reviewed to exclude sequestration in accordance with industry guidelines and the RICS guidance
document on whole life carbon. If sequestration is taken into account, the forecasted embodied carbon intensity is 448kgCO2/m2 (GIA).
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 Our people and culture, Our approach to sustainability and Build well,
Live well, Act well sections of the Strategic Report on pages 38-57; the TCFD disclosures on pages 66-69; the sustainability content in the
‘Additional Information’ section of the Landsec 2022 Annual Report on pages 204-210; and the online Landsec Performance Data Report
2022, which can be found at landsec.com/sustainability/reports-benchmarking. The full assurance statement is available at
landsec.com/sustainability/governance-policies.
Additional informationLandsec Annual Report 2022 211
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 and where the reconciliations of these measures can be found.
The definitions of APMs are included in the Glossary.
Alternative performance measure
EPRA earnings
EPRA earnings per share
EPRA diluted earnings per share
EPRA Net Tangible Assets
EPRA Net Tangible Assets per share
Total accounting return
Nearest IFRS measure
Profit/loss before tax
Basic earnings/loss per share
Diluted earnings/loss per share
Net assets attributable to shareholders
Net assets attributable per share
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 80
Reconciliation
Note 4
Note 5
Note 5
Note 5
Note 5
Note 5
Note 13
Note 14
Note 21
Note 21
Additional informationLandsec Annual Report 2022 Market value1
Valuation movement1
Rental income1
Annualised
rental income2
Net estimated
rental value3
31 March
2022
£m
31 March
2021
£m
Surplus/
(deficit)
£m
Surplus/
(deficit)
%
31 March
2022
£m
31 March
2021
£m
31 March
2022
£m
31 March
2021
£m
31 March
2022
£m
31 March
2021
£m
Total portfolio analysis continued
Table 81
Notes
1. Refer to Glossary for definition.
212
Combined Portfolio analysis
Total portfolio analysis
Central London
West End offices
City offices
Retail and other
Developments6
Total Central London
Major retail
Shopping centres
Outlets
Total Major retail
Mixed-use urban
Completed investment
Developments6
Mixed-use urban
Subscale sectors
Leisure
Hotels
Retail parks
1,141
1,041
(15)
-1.3%
743
722
1,884
1,763
12
(3)
1.6%
-0.1%
409
486
895
569
422
466
–
372
372
506
406
397
8
(33)
(25)
41
14
115
170
409
2.0%
-6.5%
-2.8%
7.4%
3.5%
31.9%
12.9%
3.6%
Total Subscale sectors
Combined Portfolio
1,457
1,309
12,017
10,791
Properties treated as finance leases
Combined Portfolio
12,017
10,791
409
3.6%
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
11,217
10,025
412
3.9%
800
766
(3)
-0.4%
12,017
10,791
409
3.6%
3,013
1,928
1,131
1,709
7,781
2,932
1,821
1,290
1,304
7,347
86
100
16
65
267
3.0%
5.6%
1.5%
4.0%
3.7%
138
139
135
137
75
70
10
95
64
11
76
47
10
76
58
15
293
309
268
286
147
101
54
112
414
101
61
162
24
32
56
51
25
29
105
737
108
56
164
24
29
53
49
16
29
94
98
39
137
–
25
25
41
4
33
78
579
526
111
56
167
10
33
43
46
16
29
91
594
(8)
586
534
52
586
115
47
162
–
26
26
43
4
34
81
578
(9)
569
519
50
569
531
48
579
481
45
526
687
50
737
141
101
61
94
397
95
61
156
–
27
27
42
25
32
99
679
629
50
679
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. Net estimated rental value is gross estimated rental value, as defined
in the Glossary, after deducting expected rent payable.
4. Net initial yield – refer to Glossary for definition. This calculation
includes all properties including those sites with no income.
5. Equivalent yield – refer to Glossary for definition. Future developments
are excluded from the calculation of equivalent yield on the
Combined Portfolio.
6. Comprises the development pipeline – refer to Glossary for definition.
7. The like-for-like portfolio – refer to Glossary for definition.
Central London
West End offices
City offices
Retail and other
Developments6
Total Central London
Major retail
Shopping centres
Outlets
Total Major retail
Mixed-use urban
Completed investment
Development6
Total Mixed-use urban
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Net initial yield4
Equivalent yield5
Movement
31 March
in
31 March
2022
%
like-for-like7
bps
2022
%
Movement
like-for-like7
in
bps
4.2%
3.6%
4.4%
0.5%
3.3%
7.7%
5.8%
7.0%
5.1%
5.5%
5.3%
6.7%
4.2%
5.7%
5.6%
4.3%
4.2%
5.1%
4.3%
(47)
(34)
72
n/a
(21)
34
49
38
n/a
n/a
n/a
(11)
85
(176)
(23)
(10)
n/a
n/a
n/a
4.6%
4.6%
4.7%
4.3%
4.5%
7.4%
6.7%
7.1%
5.7%
5.3%
5.5%
7.1%
5.5%
5.7%
6.2%
5.2%
5.2%
5.6%
5.2%
(2)
(8)
15
n/a
(1)
3
(10)
(3)
n/a
n/a
n/a
(40)
(1)
(187)
(70)
(11)
n/a
n/a
n/a
Additional informationLandsec Annual Report 2022
213
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. Net estimated rental value is gross estimated rental value, as defined
in the Glossary, after deducting expected rent payable.
4. Net initial yield – refer to Glossary for definition. This calculation
includes all properties including those sites with no income.
5. Equivalent yield – refer to Glossary for definition. Future developments
are excluded from the calculation of equivalent yield on the
Combined Portfolio.
6. Comprises the development pipeline – refer to Glossary for definition.
7. The like-for-like portfolio – refer to Glossary for definition.
Total portfolio analysis
Total portfolio analysis continued
Table 81
Central London
West End offices
City offices
Retail and other
Developments6
Total Central London
Major retail
Shopping centres
Outlets
Total Major retail
Mixed-use urban
Completed investment
Development6
Total Mixed-use urban
Subscale sectors
Leisure
Hotels
Retail parks
Total Subscale sectors
Combined Portfolio
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Net initial yield4
Movement
in
like-for-like7
bps
31 March
2022
%
Equivalent yield5
Movement
in
like-for-like7
bps
31 March
2022
%
4.2%
3.6%
4.4%
0.5%
3.3%
7.7%
5.8%
7.0%
5.1%
5.5%
5.3%
6.7%
4.2%
5.7%
5.6%
4.3%
4.2%
5.1%
4.3%
(47)
(34)
72
n/a
(21)
34
49
38
n/a
n/a
n/a
(11)
85
(176)
(23)
(10)
n/a
n/a
n/a
4.6%
4.6%
4.7%
4.3%
4.5%
7.4%
6.7%
7.1%
5.7%
5.3%
5.5%
7.1%
5.5%
5.7%
6.2%
5.2%
5.2%
5.6%
5.2%
(2)
(8)
15
n/a
(1)
3
(10)
(3)
n/a
n/a
n/a
(40)
(1)
(187)
(70)
(11)
n/a
n/a
n/a
Market value1
Valuation movement1
Rental income1
Annualised
rental income2
Net estimated
rental value3
31 March
31 March
2022
£m
2021
£m
Surplus/
(deficit)
£m
Surplus/
(deficit)
%
2022
£m
2021
£m
2022
£m
2021
£m
31 March
31 March
31 March
31 March
31 March
31 March
3,013
1,928
1,131
1,709
7,781
2,932
1,821
1,290
1,304
7,347
86
100
16
65
267
3.0%
5.6%
1.5%
4.0%
3.7%
1,141
1,041
(15)
-1.3%
743
722
1,884
1,763
12
(3)
1.6%
-0.1%
409
486
895
569
422
466
–
372
372
506
406
397
8
(33)
(25)
41
14
115
170
409
2.0%
-6.5%
-2.8%
7.4%
3.5%
31.9%
12.9%
3.6%
138
139
135
137
293
309
268
286
2022
£m
147
101
54
112
414
101
61
162
24
32
56
51
25
29
105
737
76
47
10
108
56
164
24
29
53
49
16
29
94
76
58
15
98
39
137
–
25
25
41
4
33
78
579
526
75
70
10
111
56
167
10
33
43
46
16
29
91
594
(8)
586
534
52
586
95
64
11
115
47
162
–
26
26
43
4
34
81
578
(9)
569
519
50
569
2021
£m
141
101
61
94
397
95
61
156
–
27
27
42
25
32
99
679
629
50
679
11,217
10,025
412
3.9%
800
766
(3)
-0.4%
12,017
10,791
409
3.6%
531
48
579
481
45
526
687
50
737
Central London
West End offices
City offices
Retail and other
Developments6
Total Central London
Major retail
Shopping centres
Outlets
Total Major retail
Mixed-use urban
Completed investment
Developments6
Mixed-use urban
Subscale sectors
Leisure
Hotels
Retail parks
Represented by:
Investment portfolio
Share of joint ventures
Combined Portfolio
Total Subscale sectors
Combined Portfolio
1,457
1,309
12,017
10,791
Properties treated as finance leases
Combined Portfolio
12,017
10,791
409
3.6%
Additional informationLandsec Annual Report 2022
214
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).
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
Movement in bad and doubtful debt provisions
Segment net rental income
Other income
Administrative expenses
Depreciation
EPRA earnings before interest3
Share of post-tax profit from joint ventures
Net surplus/(deficit) on revaluation of investment properties
Profit on disposal of investment properties
Profit on disposal of joint ventures
Profit/(loss) on disposal of trading properties
Gain on modification of finance lease
Movement in impairment charge on trading properties
Impairment of goodwill
Business combination costs
Operating profit/(loss)
Finance income
Finance expense
Profit before tax
Taxation
Profit for the year
Group
income
statement
£m
Joint
ventures1
£m
Adjustment
for
non-wholly
owned
subsidiaries2
£m
537
8
545
(6)
539
78
(90)
(12)
25
(94)
13
471
3
(80)
(5)
389
33
416
107
2
2
6
(6)
(6)
(8)
935
25
(85)
875
–
875
52
–
52
(2)
50
9
(10)
(1)
3
(10)
(1)
41
–
(2)
–
39
(33)
(3)
8
–
(1)
–
–
–
–
10
–
(10)
–
–
–
(3)
–
(3)
–
(3)
(1)
2
1
–
–
–
(2)
–
–
–
(2)
–
(4)
–
–
–
–
–
–
–
(6)
–
–
(6)
–
(6)
Year ended 31 March 2022
EPRA
earnings
£m
Capital
and other
items
£m
Total
£m
586
8
594
(8)
586
86
(98)
(12)
28
586
8
594
(8)
586
86
(98)
(12)
28
(104)
(104)
12
510
3
(82)
(5)
426
–
–
–
–
–
–
–
–
–
426
9
(80)
355
12
510
3
(82)
(5)
426
–
409
115
2
1
6
(6)
(6)
(8)
939
25
(95)
869
–
869
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
409
115
2
1
6
(6)
(6)
(8)
513
16
(15)
514
1. Reallocation of the share of post-tax profit 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 EPRA earnings reported in the segmental information note.
3. The non-owned element of non-wholly owned subsidiaries is presented in the ‘Capital and other items’ column in the income statement. To reconcile EPRA earnings before
interest in the income statement to the above table, EPRA earnings before interest in the Group income statement and Adjustment for non-wholly owned subsidiaries
columns should be combined.
Additional informationLandsec Annual Report 2022 Reconciliation of segmental information note to statutory reporting continued
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
Movement in bad and doubtful debt provisions
Segment net rental income
Other income
Administrative expenses
Depreciation
EPRA earnings 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 for the year
Group
income
statement
£m
Joint
ventures1
£m
Adjustment
for
owned
subsidiaries2
£m
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)
50
–
50
(2)
48
9
(9)
–
1
(8)
(17)
24
–
(2)
–
22
192
(198)
(3)
(1)
–
2
14
–
(14)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
£m
569
9
578
(9)
569
79
(84)
(5)
32
(64)
(127)
405
2
(77)
(5)
325
–
(1,646)
5
(1)
(4)
5
(1,316)
16
(93)
(1,393)
–
(1,393)
215
Table 82
Year ended 31 March 2021
EPRA
earnings
£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)
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 EPRA earnings reported in the segmental information note.
Additional informationLandsec Annual Report 2022 216
Ten year summary
Income statement
Revenue
Costs
Share of post-tax profit/(loss)
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 surplus/(deficit) on
revaluation of investment
properties
Gain on modification of finance
lease
Operating profit/(loss)
Net finance expense
Net gain on business combination
Table 83
Year ended and as at 31 March
2022
£m
679
(308)
371
33
107
2
–
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
(271)
(321)
(260)
(404)
(329)
(244)
(281)
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
416
(1,448)
(1,000)
(441)
(98)
(186)
739
1,771
607
197
6
–
–
–
–
–
–
–
–
–
935
(60)
–
(1,330)
(63)
–
(690)
(147)
–
(40)
(83)
–
Profit/(loss) before tax
875
(1,393)
(837)
(123)
Taxation
–
–
5
4
Profit/(loss) for the year
875
(1,393)
(832)
(119)
505
(548)
–
(43)
(1)
(44)
434
(268)
–
166
1
167
1,545
2,643
1,289
(185)
(207)
(165)
–
2
5
1,360
2,438
1,129
2
–
8
1,362
2,438
1,137
Net surplus/(deficit) on
revaluation of investment
properties1:
Investment portfolio
Share of joint ventures
Adjustment for non-wholly owned
subsidiaries2
416
(1,448)
(3)
(4)
(198)
–
(998)
(181)
–
(440)
(117)
–
(98)
(187)
7
–
40
–
736
171
–
1,768
269
–
Total
409
(1,646)
(1,179)
(557)
(91)
(147)
907
2,037
609
155
–
764
707
(157)
1
551
–
551
197
21
–
218
EPRA earnings
355
251
414
442
406
382
362
329
320
291
Results per share
Total dividend payable in respect
of the financial year
37.0p
27.0p
23.2p
45.55p
44.2p
38.55p
35.0p
31.85p
30.7p
29.8p
Basic earnings/(loss) per share
117.4p (188.2)p (112.4)p
(16.1)p
Diluted earnings/(loss) per share
117.1p (188.2)p (112.4)p
(16.1)p
EPRA earnings per share
EPRA diluted earnings per share
Net assets per share
Diluted net assets per share
EPRA net tangible assets per share
48.0p
47.8p
1,070p
1,067p
1,063p
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
1. Includes our non-wholly owned subsidiaries on a proportionate basis.
2. This represents the interest in MediaCity which we do not own but consolidate in the Group numbers.
Additional informationLandsec Annual Report 2022 217
Table 84
As at 31 March
2022
£m
2021
£m
2020
£m
2019
£m
2018
£m
2017
£m
2016
£m
2015
£m
2014
£m
2013
£m
11,207
9,607
11,297
12,094
12,336
12,144
12,358
12,158
9,848
9,652
8
70
–
700
4
177
61
8
152
–
625
–
170
22
14
156
–
20
159
–
34
162
–
36
165
–
38
183
–
35
185
50
–
187
50
–
188
50
824
1,031
1,151
1,734
1,668
1,434
1,443
1,301
–
178
32
–
176
30
–
165
49
–
123
51
–
86
44
–
53
29
–
35
14
–
11
14
Balance sheet
Investment properties
Intangible assets
Net investment in finance leases
Loan investments
Investment in joint ventures
Investment in associates
Trade and other receivables
Other non-current assets
Total non-current assets
12,227
10,584
12,501
13,510
13,897
14,253
14,377
13,944
11,577
11,216
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
145
368
22
128
5
668
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
Non-current assets held for sale
–
–
–
–
–
–
–
283
–
–
Borrowings
Trade and other payables
Other current liabilities
Total current liabilities
(541)
(320)
(11)
(906)
(252)
(7)
(977)
(270)
(2)
(934)
(273)
(18)
(872)
(294)
(14)
(404)
(302)
(7)
(872)
(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)
Borrowings
(4,012)
(2,610)
(4,355)
(2,847)
(2,858)
(2,859)
(3,222)
(3,985)
(3,262)
(3,748)
Trade and other payables
Other non-current liabilities
Redemption liability
(8)
(12)
–
(1)
(2)
–
(1)
(5)
–
(1)
(5)
(36)
–
(8)
(37)
(25)
(9)
(36)
(28)
(47)
(35)
(30)
(45)
(35)
(23)
(4)
(33)
(18)
(11)
(118)
Total non-current liabilities
(4,032)
(2,613)
(4,361)
(2,889)
(2,903)
(2,929)
(3,332)
(4,095)
(3,322)
(3,895)
Net assets
Net debt 1
7,991
7,212
8,750
9,920
10,386
11,202
11,331
10,214
8,005
7,054
(4,254)
(3,509)
(3,942)
(3,747)
(3,654)
(3,219)
(3,229)
(4,193)
(3,744)
(4,132)
Market value of the Combined
Portfolio
12,017
10,791
12,781
13,750
14,103
14,439
14,471
14,031
11,859
11,446
Adjusted net debt1
(4,179)
(3,489)
(3,926)
(3,737)
(3,652)
(3,261)
(3,239)
(4,172)
(3,948)
(4,290)
1. Net debt and adjusted net debt exclude amounts payable under head leases for reporting periods from, and including, the year ended 31 March 2022. Net debt and adjusted
net debt for prior periods included in the table above have not been restated, but would have excluded amounts payable under head leases of £61m (2021), £30m (2020, 2019
and 2014), £31m (2018 and 2017), £14m (2016), £17m (2015) and £29m (2013).
Additional informationLandsec Annual Report 2022 218
Subsidiaries, joint ventures and associates
As at 31 March 2022, 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
Bluewater Outer Area Limited
Castleford (UK) Limited
Crossways 2000 Limited
Crossways 3065 Limited
Crossways 7055 Limited
Dashwood House Limited
Gunwharf Quays Limited
L.& P. Estates Limited
L.S.I.T.(Management) Limited
Land Securities (Finance) Limited
Land Securities Buchanan Street
Developments Limited
Land Securities Capital Markets PLC
Land Securities Consulting Limited
Land Securities Development Limited
Land Securities Ebbsfleet (No.2) Limited
Land Securities Ebbsfleet Limited
Land Securities Group PLC
Land Securities Intermediate Limited1
Land Securities Lakeside Limited
Land Securities Management Limited
Land Securities Management Services
Limited
Land Securities Partnerships Limited
Company name
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
LS 21 Moorfields 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
Land Securities Pensions Trustee Limited
LS Buchanan Limited
Land Securities PLC
LS Canterbury Limited
Land Securities Portfolio Management
Limited
Land Securities Properties Limited
Land Securities Property Holdings
Limited1
Land Securities SPV’S Limited
Land Securities Trading Limited
Land Securities Trinity Limited
Landsec Limited
LC25 Limited
Leisure II (West India Quay LP)
Shareholder 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 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
LS Chesterfield Limited
LS City & West End Limited
LS City Gate House Limited
LS Company 2 Limited
LS Company 3 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
Additional informationLandsec Annual Report 2022 219
Company name
Company name
LS MYO 123 Victoria Street Limited
LS Xscape Milton Keynes Limited
LS MYO Dashwood House Limited
LS Zig Zag Limited
Nova Developer Limited
Oriana GP Limited
Oriana LP Limited
Oxford Castle Apartments Limited
Ravenseft Properties Limited
Retail Property Holdings Trust Limited
Rosefarm Leisure Limited
Sevington Properties Limited
The City of London Real Property
Company Limited
The Imperial Hotel Hull Limited
The X-Leisure (General Partner) Limited
Tops Shop Estates Limited
Westminster Trust Limited(The)
Whitecliff Developments Limited
Willett Developments Limited
X-Leisure (Bentley Bridge) Limited
X-Leisure (Boldon) Limited
X-Leisure (Brighton Cinema) Limited
X-Leisure (Brighton Cinema II) 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
1. Subsidiary directly held by the Company, Land
Securities Group PLC.
LS Myo Limited
LS MYO New Street Square Limited
LS New Street Square Investments
Limited
LS Nominees Holdings Limited
LS Nova Development Management
Limited
LS Nova GP Investments Limited
LS Nova LP1 Limited
LS Nova LP2 Limited
LS Nova Place Limited
LS n2 Limited
LS Occupier Limited
LS Old Broad Street Developer Limited
LS Old Broad Street Limited
LS One New Change Limited
LS One New Change Developments
Limited
LS Oval Limited
LS Park House Development
Management Limited
LS Poole Retail Limited
LS Portfolio Investments Limited
LS Portland House Developer Limited
LS Project 92 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
LS Victoria Properties Limited
LS Voyager Limited
LS West India Quay Limited
LS Westminster Limited
LS White Rose Limited
LS Workington Limited
LS Xscape Castleford Limited
Company name
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 3 Limited
LS Development Holdings Limited
LS Director Limited
LS Dundas Square Limited
LS Eastbourne Terrace Limited
LS Easton Park Development Limited
LS Easton Park Investments Limited
LS Entertainment Venues Limited
LS Ewer Street 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 Harrogate Limited
LS Harrow Properties Limited
LS Harvest (GP) Investments Limited
LS Harvest Limited
LS Harvest 2 Limited
LS Hill House Limited
LS Hotels Limited
LS Kings Gate Residential Limited
LS Kingsmead Limited
LS Lavington Street Limited
LS Leisure Parks Investments Limited
LS Lewisham Limited
LS Liberty of Southwark Limited
LS London Holdings One Limited
LS London Holdings Three Limited
LS Ludgate Development Limited
LS Moorgate Limited
Additional informationLandsec Annual Report 2022 220
Subsidiaries, joint ventures and associates
continued
As at 31 March 2022, 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 indicating their
country of registration and address. Where the Group share of
ordinary share capital is between 75% and 100%, these entities are
subsidiaries of the Company. Where the share of ordinary share
capital is between 50% and 75%, these entities are joint venture
interests. All other holdings are associate interests.
Company name
Bluewater Ground Lease Limited6
Bluewater Two Limited
Ebbsfleet Investment (GP) Limited
Ebbsfleet Nominee No.1 Limited
Greenhithe Holdings Limited1
Greenhithe Investments Limited1
Harvest 2 GP Limited
Harvest 2 Limited Partnership
Harvest 2 Selly Oak Limited
Harvest Development Management Limited
Harvest GP Limited
Kent Retail Investments Limited2
Land Securities Insurance Limited3
Leisure II (North Finchley) Limited2
Leisure II (North Finchley Two) Limited2
Leisure II (West India Quay) Limited2
Leisure II (West India Quay Two) Limited2
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
Peel Holdings (Media) Limited5
Peel Media Canalside Limited5
Peel Media Development (Holdings) Limited5
Peel Media Development Limited5
Peel Media Development Residential (Holdings) Limited5
Peel Media Development (Residential 1) Limited5
Peel Media Development (Residential 2) Limited5
Peel Media (Holdings) Limited5
Group
share %
75%
75%
50%
50%
100%
100%
50%
50%
50%
50%
50%
100%
100%
100%
100%
100%
100%
50%
64%
50%
50%
50%
50%
50%
50%
50%
75%
75%
75%
75%
75%
75%
75%
75%
Company name
Peel Media Limited5
Peel Media (Orange) Limited5
Southside General Partner Limited
Southside Limited Partnership4
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 Bund Limited5
The Ebbsfleet Limited Partnership
Victoria Circle Developer Limited
West India Quay Limited
West India Quay Management Company Limited
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 Limited2
Xscape Castleford No.2 Limited2
Xscape Milton Keynes (Jersey) No.2 Limited2
Xscape Milton Keynes Limited2
Unit Trusts
The X-Leisure Unit Trust2
Xscape Castleford Property Unit Trust2
Xscape Milton Keynes Property Unit Trust2
West India Quay Unit Trust2
Limited by guarantee
Lightbox (MediaCityUK) Management Company Limited5
St David’s Dewi Sant Merchant’s Association Limited
Group
share %
75%
75%
50%
50%
50%
50%
50%
50%
50%
50%
50%
75%
50%
50%
50%
63%
50%
50%
50%
50%
100%
100%
100%
100%
Group
share %
100%
100%
100%
50%
Group
share %
N/A
N/A
1. 44 Esplanade, St Helier, JE4 9WG, Jersey.
2. IFC 5, St Helier, JE1 1ST, Jersey.
3. Suite 1, North First Floor, Albert House, South Esplanade, St Peter Port, GY1 1AJ,
Guernsey.
4. 26 New Street, St Helier, JE2 3RA, Jersey.
5. Venus Building, 1 Old Park Lane, Traffordcity, Manchester, M41 7HA, UK.
6. The name of this company was changed to Bluewater REIT Limited on 1 April 2022.
Additional informationLandsec Annual Report 2022 As at 31 March 2022, the Company, via the acquisition of U and I
Group PLC on 14 December 2021, 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 7a Howick Place, London,
SW1P 1DZ, except for entities with a footnote indicating 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
Barrack Close Limited
Beyond Green Developments (Broadland) Limited
Birmingham International Park Limited
BLEL Limited
BLIL Limited
Bruform Limited
Burghfield Bolt Limited
Burlington House Developments Limited5
Cathedral (Brighton) Limited
Cathedral (Bromley 2) Limited
Cathedral (Bromley Esco) Limited
Cathedral (Bromley) Limited
Cathedral (Greenwich Beach) Limited
Cathedral (Movement Greenwich) LLP
Cathedral (Preston Barracks) Limited
Cathedral (Sittingbourne) Limited
Cathedral Special Projects (H) Limited
CDSR Burlington House Developments Limited5
Central Research Laboratory (Hayes) Ltd
Circus Street Developments Limited
Curzon Park Limited
Deadhare Limited
Development Securities (Armagh) Limited
Development Securities (Curzon Park) Limited
Development Securities (Edgware Road No.1) Limited
Development Securities (Furlong) Limited
Development Securities (Greenwich) Limited
Development Securities (Hammersmith) Limited
Development Securities (HDD) Limited
Development Securities (Ilford) Limited
Development Securities (Investment Ventures) Limited
Development Securities (Investments) PLC
Development Securities (Launceston) Limited
Development Securities (Maidstone) Limited
Development Securities (Nailsea) Limited
Development Securities (No.18) Limited4
Development Securities (No.19) Limited
Group
share %
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
100%
100%
20%
50%
50%
50%
50%
100%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
221
Group
share %
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
100%
33%
50%
100%
100%
100%
100%
100%
50%
100%
100%
63%
100%
50%
100%
100%
100%
100%
100%
100%
100%
67%
50%
100%
50%
Company name
Development Securities (No.22) Limited
Development Securities (No.9) Limited
Development Securities (Romford) Limited
Development Securities (Sevenoaks) Limited3
Development Securities (Slough) Limited
Development Securities Estates Limited
Drake Bideford Limited6
DS (Ringwood) Limited6
DS (Thatcham) Limited6
DS (Wick Lane Luxembourg) Sarl9
DS Investment Properties LLP
DS Jersey (No 1) Limited6
DS Jersey (No 10) Limited6
DS Jersey (No 2) Limited6
DS Jersey (No 3) Limited6
DS Jersey (No.5) Limited6
DS Jersey (Notting Hill) Limited6
DS Jersey (Renewables) Limited6
DS Jersey (Capital Partners) Limited6
DS Jersey Corporate Services Limited6
DS Renewables LLP
DS Robswall Ireland (Residential) Limited5
DSP Investment Piano BV7
DSP Tirol Limited
ECC Investments Limited
Elystan Developments Limited
EPD Buckshaw Village Limited
Executive Communication Centres (Birmingham) Limited
Executive Communication Centres Limited
Extreme Cool Limited
Furlong Shopping Centre Limited
Future High Streets Limited
Glowrace Limited
Greenwitch Limited
Griffe Grange Wind Farm Limited
HDD Burghfield Common Limited
HDD Didcot Limited
HDD Lawley Village Limited
HDD Llanelli Limited
HDD Newcastle Under Lyme Limited
HDD Newton Leys Limited
HDD RAF Watton Limited
Heart of Slough Management Company Limited2
Hendy Wind Farm Limited
I AM PRS Limited
Kensington & Edinburgh Estates (South Woodham Ferrers)
Limited
Additional informationLandsec Annual Report 2022 222
Subsidiaries, joint ventures and associates
continued
Company name
Kingsland Shopping Centre Limited
Landmark Court Partnership Limited
Luneside East Limited
Mayfield Development (General Partner) Limited
Mayfield Development Partnership LP
Minevote Public Limited Company
Njord Wind Developments Limited
Northpoint (No.4) Limited
Northpoint CH Limited
Northpoint Developments Ltd
Northpoint KC Limited
Opportunities for Sittingbourne Limited
OSB (Holdco 1) Limited
OSB (Holdco 2) Limited
Percy Place DS (Ireland) Limited5
Plus X Brighton Ltd
Plus X Unity Place Limited
Plus X Holdings Limited
Public Private Partnership (H) Limited
Purplexed LLP
Purplexed Powerhouse Energy Limited
Purplexed Powerhouse Limited
RHD (Dartmouth) Limited
Rhoscrowther Wind Farm Limited
Rivella Properties Bicester Limited
Spirit of Sittingbourne LLP
STRD Holding Company Limited6
Tarmac Clayform Limited
The Deptford Project 2 Limited
The Deptford Project Limited
The Telegraph Works Limited
TLD (Landmark Court) Limited
Triangle Developments Limited
Triangle London Developments LLP
Triangle London Limited
U and I (8AE) Limited
U and I (Ashford) Limited
U and I (Bromley Commercial) Limited
U and I (Cambridge) Limited
U and I (Development and Trading) Limited
U and I (Golf) Limited
U and I (GVP) Limited
U and I (Harwell) Limited
U and I (Innovation Hubs) Limited
Group
share %
Company name
100%
U and I (PB) Commercial Limited
U and I (Pincents Lane) Limited
U and I (White Heather) Limited5
U and I (WIE) Limited
U and I (Broombridge) Ind Limited5
U and I Exit Limited
U and I Finance PLC
U and I Group Limited
U and I Investment Portfolio Limited
U and I IPA Limited
U and I IPA SC Limited
U and I IPB Limited
U and I IPC Limited
U and I (Management) Ireland Limited5
U and I Netherlands BV8
U and I Plus X TC Limited
U and I Powerhouse Limited
U and I PPP Limited
U and I Retail Limited6
UAIP Drum BV8
UAIP Drum Holdco BV8
UAIH Yorkshire Limited
Wallis Court Buckshaw Limited
Wassand Wind Farm Limited
YC Shepherds Bush Limited1
YC Shepherds Bush (Market) Limited1
Unit Trusts
DS Cardiff Unit Trust6
Nailsea Unit Trust6
Limited by guarantee
399 Edgware Road Management Company Limited
Connaught Place (Hale Barns) Management Company
Limited
Preston Barracks Management Company Limited
Group
share %
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
20%
20%
50%
100%
50%
25%
25%
Group
share %
100%
25%
Group
share %
N/A
N/A
N/A
1. 2 Bentinck Street, London, W1U 2FA, UK.
2. C/O Ashby Capital, 1 St Vincent Street, London, W1U 4DA, UK.
3. C/O James Cowper Kreston The White Building, 1-4 Cumberland Place,
Southampton, SO15 2NP, UK.
4. C/O Opus Restructuring Llp 4th Floor Euston House, 24 Eversholt Street, London,
NW1 1DB, UK.
5. C/O William Fry, 2 Grand Canal Square, Dublin 2, D02 A342, Ireland.
6. Fifth Floor, 37 Esplanade, St. Helier, JE1 2TR, Jersey.
7. PO Box 990, 1000AZ, Amsterdam, Netherlands.
8. Prins Bernhardplein 200, 1097 JB Amsterdam, PO Box 990, 1000 AZ Amsterdam,
Netherlands.
9. 7, rue Robert Stümper, L-2557, Luxembourg.
51%
100%
50%
50%
100%
100%
42%
42%
42%
42%
50%
100%
100%
100%
50%
50%
50%
100%
100%
100%
100%
100%
50%
100%
65%
100%
50%
100%
100%
100%
99%
100%
50%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Additional informationLandsec Annual Report 2022 Shareholder information
Financial calendar
Annual General Meeting1
Final dividend2
2022/23 Half-yearly results announcement
2022/23 Financial year end
2022/23 Annual results announcement3
223
Table 85
2022
7 July
22 July
15 November
2023
31 March
16 May
1. The Annual General Meeting is scheduled to be held at 10.00 am on Thursday, 7 July 2022 at 80 Victoria Street, London SW1E 5JL. We will once again hold this meeting as
a hybrid meeting with shareholders having the option to attend the meeting virtually, ask questions and cast their votes online, or in person. 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: landsec.com/agm.
2. The Board has recommended a final dividend of 13.0 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 2022
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 2022
Held by:
Private shareholders
Nominee and institutional investors1
Total
1. Including 6,789,236 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:
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 amalgamation of accounts. You can contact
Equiniti as follows:
Number of
holders
6,649
2,056
307
375
136
217
195
66.9
20.7
3.1
3.8
1.4
2.2
1.9
9,935
100.00
%
Number of ordinary shares
2,461,101
4,173,720
2,169,309
9,219,562
9,722,549
48,826,253
674,755,648
751,328,142
Number of
holders
7,909
2,026
9,935
%
Number of ordinary shares
79.6
20.4
100.0
8,622,544
742,705,598
751,328,142
Table 86
%
0.3
0.6
0.3
1.2
1.3
6.5
89.8
100.0
Table 87
%
1.1
98.9
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:
landsec.com/investors/shareholders-equity-investors or
Equiniti at: shareview.co.uk.
Telephone:
Your shareholder account number will be required when calling.
Telephone: 0371 384 2128¹
International dialling: +44 (0)121 415 7049¹
Post:
Equiniti
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA,
United Kingdom
Additional informationLandsec Annual Report 2022 224
Shareholder information
continued
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: landsec.com/investors or 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: landsec.com/
investorsshareholders-equity-investors/uk-reit-regime-and-dividends
Payment of dividends to UK resident shareholders
Dividend payments by cheque ceased from October 2020 and all
shareholders are now required to have their dividends paid directly
into their personal bank or building society account or alternatively
sign up to our Dividend Reinvestment Plan (see below). Under this
arrangement, dividend confirmations are still sent to your
registered address.
Receiving dividends directly into a nominated account has a
number of advantages, including the crediting of cleared funds
on the actual dividend payment date.
Shareholders who have not already done so should contact the
Registrar (Equiniti) or complete a mandate instruction available on
our website landsec.com/investorsshareholders-equity-investors/
dividend-information and return it to the Registrar. Alternatively,
these details can be sent via their Equiniti Shareview online
account, which is available on our website landsec.com/investors/
shareholders-equity-investors or directly at Equiniti: shareview.co.uk.
Payment of dividends to non-UK resident shareholders
As applicable to UK resident shareholders, dividend payments by
cheque ceased from October 2020 and all shareholders are now
required to have their dividends paid directly into their personal
bank or building society account. Payments to overseas accounts
are made a few days after the Company’s dividend payment date.
Shareholders who have not already done so are encouraged to
contact the Registrar (Equiniti) on +44 (0) 121 415 70491 or
download an application form online at shareview.co.uk or provide
these details via their Equiniti Shareview online account.
This service is available in over 90 countries worldwide.
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. 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:
landsec.com/investorsshareholders-equity-investors/dividend-
reinvestment-plan-drip
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
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 7037 between 8.00am and
4.30pm, Monday to Friday (excluding public holidays in England
and Wales). Calls are charged at the standard geographic rate and
will vary by provider. Calls outside the UK will be charged at the
applicable international rate. For online dealing, access is available
at Equiniti’s website: 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.
Additional informationLandsec Annual Report 2022 225
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 Home (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:
shareholderenquiries@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.
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:
sharegift.org
help@sharegift.org
Telephone: +44 (0)20 7930 3737
ShareGift, PO Box 72253, London SW1P 9LQ
Corporate Individual Savings Account (ISA)
The Company has arrangements in place to provide a Corporate
ISA which is managed by:
Equiniti Financial Services Limited
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
Telephone: 0371 384 2244¹
Capital Gains Tax
For the purpose of Capital Gains Tax, the price of a Landsec 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. Further details
on UK tax on gains on a sale of Landsec shares can be found on our
website landsec.com/investorsshareholders-equity-investors/uk-tax-
gains-sale-landsec-shares
Unclaimed funds
During the year, an asset reunification project was conducted in
respect of unclaimed monies relating to dividends over 12 years old,
2009 Rights Issue Monies and 2003-2004 B Shares. The project
successfully reunited a number of shareholders with unclaimed funds.
Data protection
A copy of the Shareholder Privacy Notice can be found on our
website: 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.
For further information, contact:
uar.co.uk
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 visiting mpsonline.org.uk,
or by telephone on: +44 (0)20 7291 3310.
Additional informationLandsec Annual Report 2022 226
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
landsec.com
Telephone: +44 (0)20 7413 9000
Company secretary
Liz Miles
Company Secretary
shareholderenquiries@landsec.com
Investor relations
Edward Thacker
Head of Investor Relations
enquiries@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
shareview.co.uk
Auditor
Ernst & Young LLP
1 More London Place
London SE1 2AF
Telephone: +44 (0)20 7951 2000
ey.com
External advisers
Principal valuer: CBRE
Financial adviser: UBS
Solicitors: Slaughter and May
Brokers: UBS
Additional informationLandsec Annual Report 2022 227
EPRA Net Reinstatement Value (NRV) 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
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 and add
back purchasers’ costs.
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 21.
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
EPRA earnings 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.
Like-for-like portfolio
The like-for-like portfolio includes all properties which
have been in the portfolio since 1 April 2020 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).
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.
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.
Glossary
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 2020.
Development pipeline
The development programme together with future
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 earnings
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.
EPRA earnings per share
Earnings per share based on EPRA earnings after
related tax.
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.
Additional informationLandsec Annual Report 2022 228
Glossary
continued
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.
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.
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.
Vacancy rates
Vacancy rates are expressed as a percentage of ERV
and represent all unlet space, including vacant
properties where refurbishment work is being carried
out and vacancy in respect of pre-development
properties, unless the scale of refurbishment is such
that the property is not deemed lettable. The screen at
Piccadilly Lights, W1 is excluded from the vacancy rate
calculation as it will always carry advertising although
the number and duration of our agreements with
advertisers will vary.
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 (WAULT)
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.
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.
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.
SONIA
The Sterling Overnight Index Average reflects the
average overnight interest rate paid by banks for
unsecured sterling transactions with a range of
institutional investors. It is calculated based on actual
transactions and is often used as a reference rate in
bank facilities.
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 accounting 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. This measure was previously referred to as total
business return. There has been no change to the
calculation of the measure other than the change of
name during the year to 31 March 2022.
Total cost ratio
Total cost ratio represents all costs included within
EPRA earnings, 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.
Additional informationLandsec Annual Report 2022 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
Copyright and trade mark notices.
All rights reserved.
© Copyright 2022 Land Securities Group PLC
Landsec, Land Securities, the Cornerstone
logo and the ‘L’ logo are trade marks of
the Land Securities Group of companies.
Landsec is the trading name of Land
Securities Group PLC.
All other trade marks and registered
trade marks are the property of their
respective owners.
This report is printed on paper certified in
accordance with the FSC® (Forest Stewardship
Council®) and is recyclable and acid-free.
Pureprint Ltd is FSC certified and ISO 14001
certified showing that it is committed to
all round excellence and improving
environmental performance is an important
part of this strategy.
Pureprint Ltd aims to reduce at source
the effect its operations have on the
environment and is committed to continual
improvement, prevention of pollution
and compliance with any legislation or
industry standards.
Pureprint Ltd is a Carbon/Neutral®
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Words:
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