17-05-2025
Land Securities Group PLC (LDSCY) (FY 2025) Earnings Call Highlights: Strong Operational ...
EPS Growth: Expected 20% growth in EPS over the next five years, with a 2% to 4% increase anticipated for the current year.
Like-for-Like Income Growth: Overall growth of 5% for the year, with retail and London sectors rising to 8%.
Occupancy Rate: Increased by 100 basis points to 97.2%.
Net Debt-to-EBITDA: 7.7 times, with a target of less than 8 times.
Loan to Value (LTV): Just over 38%, with a target to reduce to the mid-30s.
Dividend Growth: Increased by 2%, in line with guidance.
Return on Equity: Positive at 6.4%.
Net Tangible Asset (NTA) per Share: Up 1.7%.
ERV Growth: 4.2% growth driven by strong leasing activity.
Capital Investment: Over GBP600 million invested in retail destinations, with GBP655 million in asset sales.
Overhead Cost Reduction: Down 5% for the year, with a further reduction target of 10% over the next two years.
Warning! GuruFocus has detected 6 Warning Signs with LDSCY.
Release Date: May 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Land Securities Group PLC (LDSCY) reported strong operational performance with high like-for-like income growth across both London and retail, which make up 83% of their business.
The company expects to drive around 20% growth in EPS over the next five years, despite a 10% EPS headwind from rising interest costs.
Occupancy rates increased by 100 basis points to 97.2%, indicating strong demand for their properties.
Land Securities Group PLC (LDSCY) invested over GBP600 million into prime retail destinations, Liverpool One and Bluewater, at highly accretive yields.
The company has a clear strategy to deliver sustainable income and EPS growth, with a focus on high-quality assets and efficiency savings.
Rising interest costs and a finance lease expiry at Quam are expected to create a 10% EPS headwind.
Net debt increased due to acquisitions, with LTV now just over 38%, which is higher than their target of mid-30s.
The company faces challenges in maintaining EPS growth due to the time required to shift their portfolio mix.
There is a risk of cost overruns and slippage in completion dates for under-construction developments.
The mixed-use assets segment saw a 5% decrease in value, partly due to predevelopment CapEx not yet reflected in valuation uplifts.
Q: What are the key factors needed to achieve the 2030 EPS growth target, and what risks could prevent reaching it? A: Mark Allan, CEO, explained that most growth will come from the current portfolio, focusing on capturing reversion in the office portfolio and rental growth in retail. Cost efficiencies, largely technology-driven, are also crucial. Towards the end of the period, capital recycling will play a role, assuming a recovery in investor demand for office assets.
Q: What are the expected returns on residential developments, and how do they compare to stabilized yields in the market? A: Mark Allan noted that residential projects are expected to yield a net return in the low 5% range, depending on location. Stabilized yields currently range from 4.25% to 4.75%. The strong correlation of rental growth to inflation and political support for housing development are key factors supporting these projects.
Q: Has there been any change in the expected completion dates for under-construction developments? A: Mark Allan confirmed that the projects are expected to complete around the end of the financial year, with some slippage from initial timelines. Timber Square is likely to see pre-let demand sooner, while 30 high will attract interest closer to completion.
Q: How is the retail investment market evolving, and what are the plans for the GBP1 billion investment in retail over the next three years? A: Mark Allan stated that GBP200 million will be invested in expanding existing retail spaces, with the remaining GBP800 million likely involving two acquisitions. The focus is on top-tier shopping centers, with limited new supply supporting investment prospects.
Q: What impact do potential disposals have on overheads, and how does the market respond to Landsec's strategic intentions? A: Mark Allan indicated that overheads are not significantly impacted by disposals, as cost reductions are driven by technology investments. The market has shown positive interest in Landsec's strategic plans, with various options for participation, including joint ventures and direct investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
