Landsec returns to profit amid retail recovery

The landlord’s retail portfolio bounced back in H2 as it experienced 1.7% capital growth

Landsec has announced it has returned to profit in FY22 boosted by record office leasing and a return to growth in its major retail destinations.

For the year ended 31 March 2022, Landsec delivered pre-tax profits of £875m up from a loss of £1.3bn the year prior.

The group said the performance was driven by strong London office leasing, positive operational performance and valuation growth in retail and marked growth in mixed-use urban pipeline, underpinned by “successful capital recycling and strong balance sheet”.

In retail, Landsec said its “restructured and strengthened retail team” focused on strengthening brand and guest relationships and building on “opportunity to create best-in-class portfolio of major UK retail destinations”.

The new operating model saw occupancy up 170bps to 93.2%, LFL retail sales 1.1% ahead of 2019/20 levels and £29m of lettings signed or in solicitors’ hands, on average 2% ahead of ERV, resulting in 1.7% capital value growth in the second half of the year (FY: -0.1%).

During the period, it also acquired an additional 18.75% stake in Bluewater for £126m, “capitalising on the opportunity to invest in one of the UK’s leading retail destinations at an attractive 8.15% initial yield”.

Mark Allan, chief executive of Landsec, said: “Landsec has delivered strong operational and financial results despite the turbulence within the UK economy. The actions we have taken, driven by our strategic focus on three distinct areas have resulted in record leasing in our London office portfolio, a return to growth in our major retail destinations and clear, substantive progress in growing our mixed-use urban neighbourhood portfolio.

“We continue to recycle capital out of mature assets, whilst our pipeline now offers the opportunity to invest £3bn in sustainable London offices and mixed-use development over the next five years at attractive returns.”

He added: “Landsec is in a strong position, financially and operationally, and we expect delivering on our strategy to drive material growth in income and, on average, a mid to high single digit annual return on equity over time.

“…With the expertise we have within the business and the momentum built, I am confident that we are on the right path and will be able to navigate the wider macro uncertainties facing the economy today.”

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