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Summary
- Land Securities Group PLC, a commercial property investor announced a strategic overhaul, cutting its exposure to the hotel, leisure and retail park sectors from its portfolio
- Reduced construction outflows and slowdown in project execution activity have led to a decline in net cash flows; rent of £120 million of was due on the 29 September payment date
- Restructuring the business would help to position the business to benefit from long-term macro trends and to deliver value to all the shareholders
The prolonged impact of Covid-19 might lead to deep recession, having a deeper impact on project cash flows and execution abilities. Along with that, the ongoing credit squeeze and existing inventory overhang in the real estate sector is likely to result in significant credit pressures in the coming months. However, in the case of short-term disruption, reduced construction outflows and slowdown in project execution activity have led to a decline in net cash flows for the property investors.
Land Securities Group PLC (LON:LAND), a commercial property investor announced that as part of a strategy overhaul, it would be cutting its exposure to the hotel, leisure and retail park sectors. As per the company, its exposure to the aforesaid sectors was subscale, lacking a competitive advantage, and it would be disposing of associated assets over time.
Even though the retail space represents only 13 per cent of Landsec’s portfolio, the regional shopping centres were mostly affected by the emergence of online shopping. Landsec has good growth potential in case of its retail outlets. Since there is an opportunity for a significant reimagining of the model within its six regional shopping centres, the company would be re-strategising its retail business.
According to Mark Allen, the Chief Executive of Landsec, the company has come up with new strategic moves to strengthen the business and position for growth. He also informed that the company would be optimising its central London portfolio and would be recycling some of its assets and reinvesting the capital into new growth opportunities.
Restructuring the business would help to position the business to benefit from long-term macro trends and to deliver value to all the shareholders. Following are the four strategic priorities on which the company will be focusing:
Recent Development
On 9 October 2020, the Company had come up with details of September rent collection in response to the continued impact of Covid-19 on Landsec's operations. Rent of £120 million of was due on the 29 September payment date. The net rent due was £110 million on taking concessions, deferrals and CVAs into considerations. Out of which, 62 per cent of the net rent was paid within five working days in comparison with 95 per cent for the same in the prior year.
The company had established a fund to provide up to £80 million of rent relief in March, and £14 million of concessions have been allocated to customers. Taking these concessions, deferred payments and additional rent collection into account, 84 per cent of rent due on 25 March 2020 (up from 75 per cent at 2 July) and 81 per cent of rent due on 24 June (up from 60 per cent after day 5) has been received till date.
In a recent development, the Chief Financial Officer of Landsec, Martin Greenslade expressed his intention to step down from his position as Chief Financial Officer during 2021, after serving the company for the past 15 years. He will be continuing in the company as CFO and Executive Director until the appointment of his successor.
About Land Securities Group PLC
Established in 2002, Land Securities Group PLC is a holding company, engaged in buying, selling and managing commercial properties. Office, retail and specialist segments are the three divisions in which the company operates. Landsec has its headquarters in London, United Kingdom.
Stock Performance
LAND stocks were trading at GBX 543.90 on 20 October 2020, at 3:25 PM, up by 2.26 per cent from its previous close of GBX 531.90. It was having a market capitalisation of £3,943.90 million. The company recorded a negative return on the price of 46.49 per cent on a YTD (Year to Date) basis.
Let’s have a look at how the stocks of the other companies in the segment are performing:
British Land Co PLC (LON:BLND)
BLND stocks were trading at GBX 374.20 on 20 October 2020, at 3:32 PM, up by 2.66 per cent from its previous close of GBX 364.50. It was having a market capitalisation of £3,377.79 million. The company recorded a negative return on the price of 41.98 per cent on a YTD (Year to Date) basis.
UNITE Group PLC (LON:UTG)
UTG stocks were trading at GBX 884.50 on 20 October 2020, at 3:35 PM, up by 3.09 per cent from its previous close of GBX 858.00. It was having a market capitalisation of £3,416.06 million. The company recorded a negative return on the price of 31.74 per cent on a YTD (Year to Date) basis.
Assura PLC (LON:AGR)
AGR stocks were trading at GBX 75.70 on 20 October 2020, at 3:39 PM, up by 0.93 per cent from its previous close of GBX 75.00. It was having a market capitalisation of £1,998.04 million. The company recorded a negative return on the price of 3.47 per cent on a YTD (Year to Date) basis.
Conclusion
With the world surrounded by huge uncertainty because of the Covid-19 crisis and the second waves hitting most of the nations, one thing is clear that it is likely to last long till a vaccine or a treatment is developed. Britain’s travel and leisure sectors are some of the hardest-hit sectors which have still not recovered. Hence, the investors are scared to invest in such sectors, fearing a loss and Landsec’s decision to reduce retail and leisure exposure from its portfolio can be called a fallout of the Covid impact.
