Landsec, a property giant in the UK, has reported a loss for the first half of the year but remains optimistic about its business operations. Despite facing difficulties in the market, the company declares it has robust strategic and operational momentum. In the six months leading up to September 30th, Landsec recorded a pre-tax loss of £192 million, compared to a profit of £275 million in the same period the previous year. This was primarily due to a deficit on investments and increased costs outweighing revenue growth. However, revenue still saw a significant increase of 25% to £394 million.
One of the contributing factors to the loss was a net deficit on the revaluation of investment properties, totaling £331 million. While retail valuations experienced a slight increase of 0.4%, a 4.4% drop in London offset this, and as London represents 61% of Landsec’s overall portfolio by value, it had a notable impact. It is important to note that 63% of the company’s properties are located in the West End of London.
Landsec acknowledges that the rise in interest rates has significantly slowed down transaction volumes in global and UK property markets. However, the company emphasizes its positive position due to the strategy it implemented two years ago. This strategy focuses on resources where Landsec has a genuine competitive advantage and relies on its strong balance sheet. The company had record leasing last year and continues to experience strong leasing activity. On average, it secures £10 million in lettings, which is 1% above valuers’ assumptions. Additionally, an extra £31 million is currently in solicitors’ hands, surpassing valuers’ assumptions by 3%. Landsec’s current occupancy rate remains stable at 95.1%, significantly lower than the vacancy rate in the London market.
Mark Allen, CEO of Landsec, highlights the successful execution of the company’s strategy. Landsec benefited from selling mature, low-yielding assets worth nearly £2 billion when interest rates and property yields were low. This allowed the company to focus on new investments that offered clear value or long-term potential. Allen states that this strategy positions Landsec well for challenging market conditions and provides flexibility to capitalize on emerging opportunities in the property market.
Despite anticipated global economic uncertainty, Landsec expresses confidence in London as a top global city that continues to attract new businesses and talent. The company also believes that the future of major retail destinations is more positive than initially expected. Overall, Landsec remains resilient in the face of a challenging market and is well-prepared to navigate future uncertainties and seize new opportunities in the property sector.
Useful links:
1. Landsec Official Website
2. Financial Times Article on Landsec
