Half Year 2018 Land Securities Group PLC Earnings Call
Nov 14, 2017 AM EST
LAND.L - Land Securities Group PLC
Half Year 2018 Land Securities Group PLC Earnings Call
Nov 14, 2017 / 09:00AM GMT
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Corporate Participants
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* Colette O'Shea
Land Securities Group plc - MD of London Portfolio
* Martin Frederick Greenslade
Land Securities Group plc - CFO & Executive Director
* Robert M. Noel
Land Securities Group plc - CEO & Executive Director
* Scott Parsons
Land Securities Group plc - MD of Retail Portfolio
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Conference Call Participants
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* Benjamin Richford
Crédit Suisse AG, Research Division - Research Analyst
* Christopher Richard Fremantle
Morgan Stanley, Research Division - Executive Director
* David Thomas Brockton
Liberum Capital Limited, Research Division - Research Analyst
* Hemant Kumar Kotak
Green Street Advisors, LLC, Research Division - MD
* Marc Louis Baptiste Mozzi
Societe Generale Cross Asset Research - Senior Analyst
* Marcus Phayre-Mudge
* Michael James Burt
Exane BNP Paribas, Research Division - Stock Analyst & Analyst of Real Estate
* Osmaan Malik
UBS Investment Bank, Research Division - Head of Pan European Property Research and Executive Director
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Presentation
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [1]
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Well, good morning, everyone, and a very warm welcome to our interim results presentation. We've the usual format for you. After my introduction, Martin will run through the numbers, and then Colette and Scott will talk about operations in London and retail.
Are you hearing me clearly? It's reverberating around my ears quite loudly. We've talked previously about how and why we worked to reduce business over -- reduce risk in the business over the last couple of years. And in May, we said we were happy to be patient when it comes to buying. We were worried about Brexit headwinds, but we had plenty to be getting on with. And we had an exceptionally busy 6 months. And there are 4 things that stand out for me.
First, it's been our best 6 months of leasing activity since the financial crisis, over 50 million, that's our share, of deals covering nearly 1 million square feet of development lettings, investment lettings and conditional prelettings. This leasing success shows that we are clearly delivering the right product. You'll hear about the pre-let of Deutsche Bank, progress at Nova, progress at Westgate Oxford and our activity within the portfolio from Colette and Scott later.
Second, we've talked about being in a position to take advantage of opportunities when they arise. Our purchase of the outlet is a good example of readiness and competitive advantage. We moved quickly and decisively when we saw the right opportunity. Importantly, we weren't the top bidder, rather, we were the best counterparty for the vendor, a combination of execution track record, single buyer and immediate cash resources, no third-party approvals required. This is a competitive advantage. The outlet metrics look good, as you'll hear from Scott.
Third, we did more work on the balance sheet, continuing to bring our cost of debt down, being prepared to take some upfront cost for locking into lower cost and longer duration, and in particular, taking advantage of the very long end. Martin will talk about this in a moment.
Fourth, the sale of the Walkie Talkie. We always say no asset is sacrosanct and it isn't. This was a textbook development and the disposal and use of proceeds was accretive on every measure, selling at a 12% premium to the March valuation and returning capital to shareholders at a time when shares are trading a wide discount. By accompanying this with a share consolidation, this was equivalent to buying back just over 6% of the company and achieving it quickly and efficiently, treating all shareholders the same, giving them a clear timetable and transparency to enable them to choose whether they do something else with the capital or reinvest.
The political and economic outlook remains uncertain. You've seen rental values easing, financial institutions taking space elsewhere in Europe and caution over the consumer economy. But this isn't news anymore. We've talked about this, and we've done the heavy lifting already, and the business is in great shape as you'll hear today. Although the valuation is flat, earnings per share are up, NAV per share is up, cost of debt is down, duration of debt is longer and undrawn committed facilities are up. So we're in a position to push on when we buy.
Colette and Scott will talk about our operations in a few minutes, but before that, let me hand over to Martin to take you through the financial numbers in more detail. Martin?
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [2]
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Thank you, Rob. Good morning, everyone. Now as Rob said, our business is in great shape and our results reflect the recent acquisitions we've taken, the recent -- sorry, reflect the recent actions we've taken in terms of both opportunistic acquisitions and profitable disposals. And we've also managed our balance sheet carefully, returning capital and extending the duration of our debt whilst maintaining firepower.
So let's go through the headline numbers. So over the last 6 months, revenue profit was GBP 203 million. That is up 5.2% on the same period last year. We had a small valuation deficit of GBP 19 million shown here. But we also realized GBP 84 million of profits on disposals, predominantly from the sale of 20 Fenchurch Street. And the other major item in our loss before tax of GBP 33 million was GBP 292 million of costs associated with the redemption of bonds in May and September.
Adjusted diluted earnings per share were up 5.8% to 25.7p. That was on the back of our revenue profit growth. And our adjusted diluted NAV per share was GBP 14.32. That is up 1.1% or 15p since March and I'll come back to the movement later.
And finally, our dividend was 19.7p for the 6 months, up 10.1%. And just in case you need reminding, the percentage increase in the first half dividend is simply a reflection of last year's 10.1% increase in the total dividend. It is not a forecast growth rate for this year. We will continue with our aim of growing the dividend in a sustainable manner.
So turning now to more detail on revenue profit, revenue profit increased by GBP 10 million to GBP 203 million. And this was driven by a GBP 5 million increase in net rental income, more on that in a moment, and an GBP 8 million reduction in net finance expense, and that was partly offset by GBP 3 million of higher indirect expenses. Now that GBP 3 million increase in indirect costs and unallocated expenses was mainly due to higher staff-related costs, depreciation and admin expenses.
Net finance expense decreased by GBP 8 million, and this was primarily due to GBP 19 million of interest saving following the repurchase of medium-term notes at the end of last financial year and a redemption of the Queen Anne's Gate bonds at the start of this financial year. Now, these savings were partly offset by GBP 11 million of lower capitalized interest following the completion of developments.
So turning now to net rental income. And here, we have the changes in net rental income split between London and retail. Overall, net rental income increased by GBP 5 million, with all of that increase coming from our London portfolio. Net rental income from the Retail Portfolio was unchanged.
Like-for-like net rental income was down GBP 5 million with the majority of the decrease in London. And the decrease was largely due to a reduction in income from Piccadilly Lights during the refurbishment of the screen, and more from Colette on that in a minute.
The development program saw net rental income increase by GBP 3 million with Nova being the major contributor. Rent from completed developments was up GBP 7 million following the completion of 1 New Street Square and 20 Eastbourne Terrace last year.
The 3 outlets acquired in May contributed GBP 9 million of rental income in the period. This was offset by a reduction in the net rental income of GBP 9 million due to disposals. And those disposals included 20 Fenchurch Street and The Junction Centre, Clapham, both sold during this period; and The Printworks in Manchester and The Cornerhouse in Nottingham, both sold in the prior year. The impact of the sale of 20 Fenchurch Street will be greater in the second half as we recognized GBP 8 million of net rental income from that building during this period.
So turning now to the valuation. The value of our combined portfolio at 30th of September was GBP 14.2 billion. We reported a valuation deficit of GBP 19 million, representing an overall reduction of 0.1%. And within this, retail was down 0.3%, while London was flat overall.
And in the like-for-like portfolio, which was down 0.5%, London and retail saw similar declines. Within retail, shopping center values fell by 0.7% as gains on most assets were pulled down by valuation declines at 2 of our largest centers. Retail parks, however, were up slightly as sentiment improved for these types of assets.
In the London like-for-like portfolio, overall office values were down 0.8% with city assets up slightly and West End assets down 1.5%, but that was largely due to Portland House.
Outside the like-for-like portfolio, our preletting to Deutsche Bank at 21 Moorfields was behind the increase in value in proposed developments, while Nova was the main reason for the 3.4% increase in the value of our development program.
Our completed developments were up in value by 0.4%, and acquisitions were down 2.2%. That's due to purchases costs, partly offset by rental growth.
So now onto adjusted net assets. Given the level of activity in the period, I thought it would be helpful to explain the movement in adjusted net assets. And we started the period with adjusted diluted net assets of GBP 11.2 billion or GBP 14.17 per share. Revenue profit was GBP 203 million or 26p per share. Then follows the valuation deficit of GBP 19 million, which was comfortably exceeded by disposal profits of GBP 84 million. Dividends reduced adjusted net assets by GBP 163 million, and we paid GBP 235 million in relation to the redemption of medium-term notes and the Queen Anne's Gate bond.
During the period, our shareholders approved the capital return of GBP 475 million or 60p a share. And so this is reflected in the reduced net assets, even though the payment was made in early October. We also completed the 15 for 16 share consolidation, which doesn't impact net assets but it adds 91p to adjusted NAV per share by reducing the number of shares in issue by 50 million. The net enhancement of 31p to adjusted NAP (sic) [NAV] per share from the capital distribution and associated share consolidation, that is precisely the same effect as if we had bought back GBP 475 million of our own shares at GBP 9.60 per share.
So turning now to our net debt. On this slide, last year's adjusted net debt is in purple with the year-to-date in blue. And you can see the effect of the outlets acquisition in May this year and the greater impact in August of the sale of 20 Fenchurch Street. At 30th of September, adjusted net debt was GBP 3.15 billion, but since that date, we have made the GBP 475 million capital payment to shareholders. So on a pro forma basis, the position looks like this.
So now, let's turn to financing. With values little changed over the period, the GBP 111 million reduction in our adjusted net debt is behind the 0.4 percentage point reduction in our LTV to 21.8% at 30th of September. Pro forma for the capital distribution in October, the group LTV was 25.1%.
As part of our desire to term out some of the short term debt and take advantage of low long-term interest rates, we launched a tender offer for 2 of our medium-term notes and issued GBP 1 billion of new debt. That was split evenly between a 20- and a 40-year issue. Now as a result of that, the weighted maturity of our debt is now over 15 years. Its cost is 3.8% and 3.4% on a pro forma basis. We've got GBP 1.8 billion of firepower or GBP 1.4 billion on a pro forma basis, and we've got the proven ability to raise additional bond debt at very short notice should the need arise.
So let me summarize. While valuations are little changed over the period, our earnings per share are up 5.8%. We've engaged in considerable balance sheet management activity with opportunistic acquisitions and sales, the return of capital to shareholders and some major debt refinancing. Adjusted NAV per share is up. Cost of debt is down, and gearing is modest, and that's a great place to be.
So now for news of the London portfolio, let me hand you over to Colette.
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Colette O'Shea, Land Securities Group plc - MD of London Portfolio [3]
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Thank you, Martin.
We've had some great achievements in the last 6 months. We've set a U.K. record price for an office building. We've agreed a significant office pre-let in the city of London. And as you may have seen, we switched the lights back on, the largest outdoor advertising screen in Europe. All of this while delivering what we set out to achieve: letting remainder of our development program, crystallizing reversion within the portfolio and progressing our future development pipeline. As ever, everything is underpinned with a mindset of anticipating both future market conditions and future customer needs. So it seems logical to start with our view of the market.
The investment market has remained strong, largely due to the weaker pound attracting overseas buyers, generating record pricing for trophy assets. As you know, 20 Fenchurch Street has proved to be the greatest trophy in the city. Turnover for the last 9 months since January reached GBP 13 billion, which is the equivalent to the whole of last year with yields remaining firm despite the rental values weakening. But since the summer, there's been a significant uptick in the buildings offered for sale, which will test valuations. It remains to be seen how many will reach their pricing aspirations.
We've also seen strong leasing activity since March, which has paused the rising vacancy rate. However, it's important to note that 16% of take-up was by the serviced office sector. To put that in context, in the last 12 months, serviced offices have taken 1.7 million square feet versus the long-term average of 0.5 million square feet. This is distorting takeup because the space still needs to be let. In addition, the effect of this rapid expansion on the future balance of supply and demand is not yet clear. That said, we continue to see encouraging demand from a breadth of customers for quality space, which is good news for our portfolio.
Whether it's Deloitte, Egon Zehnder or Intuit, our customers are telling us they want quality, efficiency, flexibility, resilience and a workplace environment that will attract talent, which bodes well for the continued renewal of building stock. As always, it will be about ensuring we provide the right product at the right time in the right locations.
Little has changed to our view on supply. The aggregate supply landscape to 2020 remains pretty much as we talked about in May, with schemes that have been delayed, largely offset by new commitments and refurbishments. We've included our usual detailed market slides in the appendices to your pack.
So what about our performance? Martin has talked about our valuation, so I'll focus on our operational activities. First, development lettings, where I'm really pleased with progress. In addition to 21 Moorfields, which I'll come onto in a minute, we've now let or have in solicitors' hands over half the space we had available in March.
We continue to attract great businesses. Nova meets their demanding technical needs and has a growing reputation and an inspiring place to work, helping our customers to attract the best talent.
We also made steady progress with our residential sales with only 2 apartments left at Kings Gate and 18 at the Nova building. In our investment portfolio, we completed 18 million of rent reviews at 20% above passing rent. And our voids are broadly flat at 3%, excluding Piccadilly Lights, which I'll come onto in a minute.
More specifically, we've completed significant rent reviews at Moorgate Hall, Westminster City Hall and continue our momentum at Cardinal Place and One New Change. At Cardinal, we've now reviewed GBP 14 million of the GBP 15 million due for review, increasing the office rents by 13% and the retail by 18%. At One New Change, we've reviewed pretty much all [of the GBP 22 million] due for review, increasing the office rent by 3% and the retail by 10%.
In addition, we see opportunities to reconfigure unit and drive value. We split a former Banana Republic unit into 3, adding Molton Brown, Nespresso and Body Shop to the lineup. We've also let the old Superdry unit to Whatever It Takes Fitness. These 4 transactions have increased passing rents by 61%.
I talked in detail about our plans for Piccadilly Lights in May. Well, the lights are back on, on time, on budget and with great brands. L'Oreal, Hunter, Stella McCartney and eBay joined Coke, Samsung and Hyundai. The new entrants are looking for greater flexibility through shorter leases, which gives us great opportunity to drive value but it does carry an associated letting risk. Also, as planned, we freed up a landmark site behind the lights at 1 Sherwood Street for future redevelopment.
Key deals. First, 20 Fenchurch Street. This was a case of the right product in the right place at the right time. Martin has talked about the use of proceeds, so I'll talk about the deal. We completed the 38 storey tower in 2014, taking advantage of low construction costs, limited competition and strong demand, particularly from the insurance sector. This enabled us to let most of the buildings during construction on long leases at strong headline rents to a great lineup of occupiers. 20 Fenchurch Street or the Walkie Talkie, as we now know it, is an integral part of the cityscape and a trophy asset.
Working closely with our partners, we agreed a sale of 100% at a net initial yield 3.4% with gross proceeds of almost GBP 1.3 billion. This gave us a 12% premium to a March book value, a profit on cost of 170% and an internal rate of return of 25.9% from start of development in 2010.
It was a busy summer as a week later, we exchanged an agreement for lease with Deutsche Bank at 21 Moorfields. To remind you, we bought the site in 2012 as a 79-year leasehold interest from an administrator. Since then, we settled the CPO claim with Crossrail, agreed a new 250-year leases with TfL, demolished the old Lazard headquarters and started piling around a live railway. As you know, we always envisage the development would be grounded on a pre-let.
We started talking to Deutsche Bank in 2015 after their wealth and asset management business took 90,000 square feet from us at Zig Zag. Their experience of partnering with us built a good relationship and was an important factor in them selecting us to deliver their new headquarters. Last month, we submitted a planning application for 564,000 square foot state-of-the-art building, which meets all their technical requirements, and of course, their aspirations for an enviable workspace experience. We've designed a highly efficient building, which means they'll come out of 5 buildings totaling 650,000 square feet into 1 building taking a minimum of 469,000 square feet.
As the deal remains conditional and planning, it's difficult to give you detailed guidance on costs and returns at the moment. But as a guide, we expect development costs to be in the region of GBP 500 million to GBP 600 million, with a development yield of around 6%. Our focus now is on mitigating outstanding risks by securing planning and completing piling, detailed design and procurement.
21 Moorfields is a great partnership between us, an existing customer and other stakeholders, which unlocks a significant site in the city, which has stood idle since Lazard has vacated 14 years ago.
As well as 21 Moorfields, we're progressing the rest of the future pipeline and are tracking a large range of assets we'd like to own ready for opportunities as they emerge.
So in summary, we've certainly been busy. We've let more space than in any other 6-month period since the financial crisis, the portfolio team of all of our assets seizing opportunities to drive value. We achieved record pricing at the Walkie Talkie. We secured the Deutsche pre-let and we're ready for future opportunities.
I'll now hand over to Scott.
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Scott Parsons, Land Securities Group plc - MD of Retail Portfolio [4]
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Thanks, Colette, and good morning, everyone.
Now, it's easy at the moment with the squeeze on consumer spending to be negative about retail. Yes, the wider retail market is challenging, but it's all about experience, and occupiers are continuing to choose our vibrant destinations. This morning, I'll give you a quick run through our regular reporting stats, so I can spend a little bit more time on the outlets following our recent acquisition and Westgate Oxford opened just 3 weeks ago.
Let's start with a look at our portfolio mix. Now as you know, we've sold a heck of a lot of assets over the past few years, assets that we felt would be less resilient. On the acquisition side, we've been very selective, and the 3 outlet centers we just bought from Hermes are our only significant acquisition since Bluewater. Our portfolio mix reflects a good balance of resilience and growth potential, with vibrant London retail, as Colette spoke about, resilience and fully let hotels, leisure and retail parks and destination retail in the form of regional shopping centers and outlets. Now, I'll talk about each of our subsectors in a moment, but let's start with some portfolio-level stats.
Lettings in the first 6 months of the year totaled GBP 6.6 million, with a further GBP 4.9 million in solicitors' hands, encompassing over 120 deals. And despite the sentiment and headlines, our voids and administrations remain low and are slightly improved over the first 6 months of the year. Like-for-like voids are down 20 basis points at 2.6% and administrations are down 10 basis points to 0.3%. Net rental income at GBP 159 million is in line with last year. Rental income from the 3 outlets we acquired has good growth potential and offsets the less resilient income from assets we sold last year.
Now you'll find more detail in the appendices, but our sales and footfall figures continue to outperform the benchmarks. Footfall was down but by less than the market. Like-for-like same-store sales were up 1.1%, beating the BRC benchmark for physical sales by 270 basis points. And again, we've even outperformed figures, including online, beating the benchmark for all sales by 40 basis points.
Same center sales were positive, also growing by 1.1%, and outperformed the benchmark by 220 basis points. Now our figures were impacted by a couple of strategic asset management initiatives: for example, at Bluewater, where Apple is closed while we're upsizing their store.
And speaking of Bluewater, let me give you an update on our shopping centers. As always, we've been busy with various asset management plays, making our vibrant destinations even better for our customers. At Bluewater, I've already mentioned the Apple upsize, but there's a lot more going on. In September, we've started working on a 62,000 square foot unit for Primark, and welcomed 11 new brands to the center, as well as Missguided's second U.K. store and their first outside London. The leisure offer continues to grow with the expanded cinema and trampoline park opening before Christmas. Elsewhere, Next are up and trading in their upsized unit at White Rose and we opened the fully let leisure extension in the summer.
In Lewisham, H&M are in solicitors' hands to upsize into a new flagship unit we're creating with the adjacent property that we acquired last May. Southside extension is almost fully let. Its trading figures are strong and Cineworld completed the GBP 6.5 million refurbishment and upgrade of their high-performing 14-screen cinema, including new 4DX technology.
So we're working hard to ensure our centers continue to offer consumers a great day out with a fantastic mix of retail, catering and leisure. And as you know, a new gem has been added to the mix. On October 24, the gate opened at Westgate Oxford, much to the delight of the Oxford community. Trading has had a flying start with about 1.5 million people coming through the doors since we opened. The center is now 93% let or in solicitors' hands, and I'm looking forward to welcoming you all to Westgate at our investor day in February.
Moving on to leisure. Now leisure spend is discretionary spend, but the affordable experience on offer at our destinations has always proved very resilient, and this was a big driver for our investment into leisure long before our peers. Our key operators, the cinemas, trampolines, indoor skiing and bowling, they're all reporting strong results and positive outlooks. And we're working with them to make sure that continues.
We recently regeared 4 Cineworld leases, securing 25-year leases with the operator committing to cinema upgrades and adding 4DX or IMAX screens. The F&B sector is coming under pressure from cost headwinds in a market where supply has increased rapidly. Our rents are sustainable, on average just GBP 30 per square foot, and so our units are affordable for our customers.
Let's move on to our hotels. Hotel trade has been boosted by increased tourism as a result of a weaker sterling. But while tourism spend is up, wider uncertainty has seen business travel reduce. Overall, however, the trading environment for our hotels has been positive and turnover across our hotels in the first half is up. Now, you'll remember at our last results that we sold 7 regional hotels where Accor had served break notices, and the remaining portfolio has a term certain of 15 years and only comprises profitable hotels.
On 1st November, our ibis hotel in Euston was acquired by HS2 through their compulsory purchase powers. Their initial offer is, unsurprisingly, less than our March 2017 valuation and is reflected in our September figures, so we're now negotiating a final settlement figure. Now this was the driver for our September hotels valuation being flat because excluding Euston, they would've been marginally up.
Moving on to our retail parks. Our strategy to reposition our portfolio to focus on the convenience and home ware sectors and away from larger shopping and bulky goods parks continues to pay off. The portfolio remains fully let and valuations are marginally up, driven by investor appetite for high-quality retail park assets. We completed our pre-let extension at Chadwell Heath on time and on the budget, and the new Aldi unit at Blackpool Retail Park recently opened. Rents across the portfolio remain affordable at an average rent of under GBP 20 per square foot.
On the development side, in August, in joint venture with Sainsbury's, we commenced construction at Selly Oak. The scheme includes the Sainsbury supermarket alongside a retail and leisure tariff with pre-lets including M&S, next and JD Sports. The development, which is due to complete in late 2018, comprises 190,000 square feet of retail and leisure space, along with a student accommodation block, which we've presold to Unite. The site is in a strong strategic location and is 93% let or in solicitors' hands.
Now, let me take you to our outlets. We're now established as the largest owner manager of outlet destinations in the U.K. and all our outlets have performed well in the first half of the year with positive sales figures across the portfolio. The best outlet destinations are getting stronger.
Now remember, outlets typically have leases that allow us to carefully curate a brand mix that is always relevant and appealing to consumers. At Gunwharf Quays, to meet customer demand, we've introduced and upsized a number of major brands. The latest deals we've exchanged are for a new Timberland store, Tommy Hilfiger nearly doubling the size of their existing unit, and Levi's expanding into an adjacent unit.
We've recently started work on a longer-term master plan for Gunwharf with a vision of creating a day-out destination with the feel of a resort. And architects are also working on plans to enhance the experience at The Galleria in Hatfield and specifically on the 3 outlets we acquired from Hermes. All 3 are performing well with strong sales growth in the first half.
We're implementing our plans to create fantastic destinations that offer a great day-out experience for consumers. At Braintree, we begun taking the scheme up the hierarchy of U.K. outlets by adding more premium brands. We've added 2 new brands at Castleford and at Clarks Village, Hotel Chocolat, Original Penguin and Barbour have joined the lineup, and we've agreed a new lease and a revamped store with Timberland. We're confident in their prospects for future growth and performance.
And now to summarize. We've delivered a solid performance in the first half of the financial year. These results are backed by a portfolio of assets that are resilient in stormy weather. Our vibrant destinations continue to attract occupiers and our voids remain low. Our sales growth has outperformed the benchmarks, even if you include online sales. And we've added 4 fantastic new destinations to the mix with Westgate and 3 more outlets.
Looking ahead, expect to see continued polarization between the best destinations and the rest. And under our management that everything is experienced, our focus will remain on rigorous asset management, selective CapEx, a well-curated brand mix, a great leisure and catering offer to keep making our top-notch destinations even better.
Thanks very much, and I'll hand you back to Rob.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [5]
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Well, thanks very much, Scott. So as you've heard, we've had an exceptionally busy 6 months with strong leasing right across the business, opportunistic buying of the outlets, profitable disposals, lowering the costs and lengthening the duration of our debt, a quick and efficient capital return, and of course, the successful completion of Westgate Oxford.
Looking forward then, while the short-term news flow will undoubtedly be dominated by Brexit and possibly domestic politics, we're getting on with life, calm, disciplined, and as ever, alert to change. Technology is rapidly changing the world as we know, the way we communicate, the way we work, the way we shop, the way we play, the way we travel, the way we live, even the way we age. You'll remember back in 2010, we were ahead of the curve, redesigning our development pipeline to ensure it had technical resilience at much greater occupational densities.
You'll remember also back in 2012, we talked about how we would transform our Retail Portfolio under our themes of dominance, convenience and experience, and we got on and did it. In 2014, we set out our ambition to be leader in sustainability in our listed sector. Now, we are the highest ranked U.K. real estate business in the Dow Jones Sustainability Index and one of only 5% of companies from all sectors graded A by CDP. And we recently supported the 1,000th person from a disadvantaged background into employment through our Community Employment Programme.
We are spending a lot of time looking into how these influences will continue to affect both customer requirements and what local communities and society at large will expect from business, and in turn, what this means for our product and for Landsec.
But today, we are exactly where we planned to be and we're ready, prepared and equipped to push on when the time is right. And that's probably a great time now to hand over to you for questions.
So for those of you in the room, I'd be grateful if you could please raise your hand and wait until the microphone gets to you. Please give your name and company so we've got a record for the playback. (Operator Instructions) If you have more than one question, I'd be really grateful if you could ask them all at the same time because then we can answer them more efficiently and allow more time for others. Thank you.
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Questions and Answers
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [1]
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[
Hemant?
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Hemant Kumar Kotak, Green Street Advisors, LLC, Research Division - MD [2]
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Hemant Kotak from Green Street Advisors. Let me just ask all my questions in one g, as requested. So firstly, you talk about the fact that you're not planning to start any developments in London on a speculative basis. That seems very appropriate. When you think about the development pipeline through to 2020, do you think that others will follow in a similar fashion? And do you think that, that development pipeline will readjust downwards because of that to some extent and also because of more delays as well? So that's the first question.
The second question, which is again office, which is related to demand is, on the one hand, I think what we've seen is you had your strongest half year on record, or certainly for the last few years, which is surprising given the environment that we've been in. How do you, on a look-forward basis, think about the impact that Brexit will have on financial services and then weigh that up with the news that we're hearing on Facebook, which they're planning to take 700 -- up to 700,000 more square feet?
And then just lastly, on retail, please. So just thinking about your outlook for office, you say that there's pressure or values will be tested, I think that's how you put it. Do you think that the same will apply for retail as well, please, even high-quality retail?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [3]
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Great. Thanks, Hemant. So while I will allow -- if I can slightly change the order. If Colette can address the developments and the supply through to 2020 and Scott talk about valuation tested on retail and let me just, while they're gathering their thoughts, let me talk about Brexit. So your second question, which is about -- you are surprised about the level of activity and how do you see the look forward. I mean, quite frankly, we don't have a clue as to what's happening in the short term. We're much more interested in long-term trends than short-term trends. We're happy not to be developing now, as we've said, because we simply do not know how long the negotiations are going to take with Brexit. Whether Prime Minister May will be in government or not in government, who knows, no one can answer any of those questions. So it's quite difficult. We have to navigate our balance sheet through the short term. We've done that. If you remember, when the Cameron government came in, in 2015, raised the specter of Brexit, we decided to take risk outside -- inside the business down as risk outside the business is going up. If you remember, in the second half of '15 and '16, we sold GBP 1 billion worth of property, mostly properties that we thought would be affected adversely where the markets weakened. Took all debt down and decided that we would end our development pipeline at December '16. Eventually, we ended in April '17 because we overrun by a few months. I'm very happy to be sitting in the holding pattern at the moment. What we're doing now is glancing right down to the future as to how people are going to be occupying buildings because you're absolutely right. Banks may leave, other occupiers may come in. London will be a global center for a long time to come. The next 3 years are slightly less visible, so we're just taking less risk, as simple as that. Supply out there, Colette?
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Colette O'Shea, Land Securities Group plc - MD of London Portfolio [4]
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Yes. So on the supply, if I can tell you what we're sort of seeing at the moment and then sort of take it from there. I mean, what we're seeing is a continuing of the dynamic that we talked -- actually started talking about it at the investor conference last year, and that is that schemes are being pushed out. But they're actually also being replaced then by new schemes coming in and particularly refurbishments. So if you think about 21 Moorfields, and I described the space they are coming out of, what's happening is that, that type of space needs to come back in to actually then be refurbished. So that is why we're seeing a fairly static supply at the moment. But it is fair to say that schemes are moving out. And what we're actually doing now is watching how much gets pushed out, but equally also what are people's view on things. Are they forced into having to do refurbishment a bit like the sort of dynamic I described? Or are they people that actually can sit on sites and wait? So it's very much a sort of watch and wait for us at the moment.
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Scott Parsons, Land Securities Group plc - MD of Retail Portfolio [5]
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Haven't -- it's hard to say what's going to happen with retail valuations. But I think we've been pretty clear with our strategy and that we think that there's going to be increased polarization between the best destinations and the rest. There's been so little transactional evidence out there that it's difficult to point to a direction. But if I look at our portfolio and our destinations, and I see Primark, Apple, Missguided, 11 new brands at Bluewater, I see the portfolio voids going down, it gives me a lot of comfort that we've done the right thing and we've got the best kit.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [6]
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So before the microphone is on -- if we can have a microphone down here, I've got 2 questions from Steve Bramley-Jackson on the web. One, what were the reasons for underperforming IPD in Central London shops and London offices? Two, which were the 2 largest shopping centers you referred to that fell in value and why? I can quickly answer those. The performance in Central London shops is absolutely driven by Piccadilly Lights. If you remember that the -- that we lost all income in the first half of the year, and so that will be the main reason for underperformance against London shops. London offices, it's mostly because we are let on long leases and not much action going in the portfolio in terms of the like-for-like lettings because we're pretty well full. That the main action comes through, of course, when we start building on with the Deutsche Bank building and start reinvesting. The 2 larger shopping centers that fell in value and why, the -- we -- they are Bluewater and St. David's, Cardiff. Bluewater broadly fell in value by around 5%. Bluewater and not by the values to the trade of the minority stake that Hermes sold in the center, and Cardiff because we've had -- we haven't been able to let some voids and the value of the market down because of that.
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Christopher Richard Fremantle, Morgan Stanley, Research Division - Executive Director [7]
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Chris Fremantle from Morgan Stanley. Just had one question about which I think you touched on actually just there, which is about like-for-like rental growth. I mean, you talked with some fanfare about the lettings that you've done. You talk about crystallizing reversion and you gave us some examples. And you have been telling us for some time that there is auto-reversion in the portfolio, certainly that your valuation stats would suggest that, and yet your like-for-like rental growth is down 2%. So when does that -- when do we start to get some like-for-like rental growth in the portfolio aside from simply leasing up development?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [8]
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Well, I'm glad you asked the question because there is a lot of activity going on in the portfolio. If -- and Scott can talk about the Retail Portfolio and Colette, the London. But like-for-like rent in London has been mostly affected, again, by Piccadilly Lights, which remained in like-for-like while it came out. So that's the thing. But underlying in the portfolio, a bit about the activity?
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Colette O'Shea, Land Securities Group plc - MD of London Portfolio [9]
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I mean, the -- I mean, for us, yes, I mean, we've been affected by Piccadilly Lights. I mean, our headline rents have remained pretty static. We've had good performance at new changes I described and at Cardinal Place. So we will continue in that activity.
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Christopher Richard Fremantle, Morgan Stanley, Research Division - Executive Director [10]
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Can we just break out what the Piccadilly Lights impact is, so we can understand where the -- what the underlying like-for-like number is in the portfolio, just roughly?
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [11]
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It's about GBP 4 million. It is the element that you can see that's the down. And if you're looking at where the reversion comes through, they're in the slides in the appendices. So you can see how we see the net reversionary element of London come through. You have had rental growth and this is in previous periods. But we have a list going out for the next 5 years as to where the reversion is, both at rent review and at break or expiry, and that's shown in the appendix.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [12]
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Piccadilly Lights is a great example of when you take something out of activity. When you're doing the Primark deal at Bluewater, when you're doing the Apple deal, your wall stat is out. You lose your rent in its entirety and then it kicks back in later. So all the time, you've got quite a lot of activity going on, which is hidden within this like-for-like number. All we're doing is strengthening the portfolio all the time. We can't break out everything into the minutest detail. We'll be here all day.
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [13]
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I mean, what -- I mean, there's just a couple of other things that I can add to it. You're talking about a 6-month period, so you're talking about a very short period when you've got an activity like Piccadilly Lights. It's going to have a material impact on that. But we had a bad debt in the London portfolio. We haven't had that in the previous -- in the comparative period. GBP 1.2 million goes on that. So you can see that you can get, in a short period of time, individual events can have a material impact. But as I say, looking forward, you can see the reversionary element in the appendices.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [14]
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Marc in front.
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Marc Louis Baptiste Mozzi, Societe Generale Cross Asset Research - Senior Analyst [15]
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Marc Mozzi from SocGen. Just a follow-up on this like-for-like growth question, just making sure that I understand things correctly. So you're losing GBP 5 million of income like-for-like H1, out of which GBP 4 million is Piccadilly and GBP 1 million is bad debt. If we were to exclude that number, what is the like-for-like rental growth -- or let's put it differently. What sort of like-for-like rental growth should we expect for the full year?
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [16]
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Well, it's not going to recover the GBP 4 million from Piccadilly Lights that's down. But as I say, if you turn to the appendices, you can see the amount and -- but it's going to be down to individual transactions. If people don't renew, then you're going to have a void space there. So it is about curating the space and driving it. But looking over a 6-month period is too short and we've set out for you and Colette has given you some examples of how we're trying to capture the reversion that's in the portfolio. It gets harder, it gets harder as the economy becomes less certain. But the team are fully engaged on it. And we have the reversion in the back for you.
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Marc Louis Baptiste Mozzi, Societe Generale Cross Asset Research - Senior Analyst [17]
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Okay, I'll have a look at it. So let me ask you a question differently. If we had to see ERV full of 10%, what will be the impact on your like-for-like rental growth?
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [18]
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Well, I mean, unless I had the brain, the size of a computer and could compute every single lease in the London Portfolio and when the lease breaks, I can't give you that answer. But broadly, there's a delayed effect coming through because, as we know, the -- almost all of our leases are upward only. So a fall in ERV doesn't particularly hit. It doesn't hit at all on rent review and it's only at expiry. So again, if you go to the back, we show you the element of income that's coming up for expiry in every year and you can compute what level of reduction that would be. But it would not be a significant reduction in the next 12 months, for example.
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Marc Louis Baptiste Mozzi, Societe Generale Cross Asset Research - Senior Analyst [19]
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Okay. Last one, had we seen any change in investor behavior in term of pricing or in terms of appetite following the Bank of England rising interest rates?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [20]
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There's been very little evidence over the last 4 weeks, 3 weeks, so the answer is no. And the curve hasn't really changed, as you know. So it's just very short term that's affected it. Sorry.
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Michael James Burt, Exane BNP Paribas, Research Division - Stock Analyst & Analyst of Real Estate [21]
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Michael Burt, Exane BNP Paribas. Two questions for me, please. The first is on potential acquisitions. You talked about supply of investment opportunities increasing in the London market. I was just wondering if any of those interest you in terms of type. And also in terms of pricing, is the pricing at the right level even if the type of opportunity is there? And then the second question is on flexibility around leasing. I mean, you've made very clear in the Retail Portfolio you want to build in flexibility, whether that's outlets or shorter leases or Westgate. Flexibility is also a big theme in the London office market, and I was just wondering, you alluded to flexible offices arguably over trading in terms of take-up in the first half. How do you see that market? You haven't launched your own flexible office brand, which may be slightly unique for a REITs in Europe, but maybe you could just comment on the space.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [22]
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So let me -- Colette can talk about the serviced office sector in a second, if I can just answer your question about acquisitions. So we are constantly tracking acquisitions, potential targets. We would have done year in, year out. What I said in May was I thought it was unlikely that we'll be making any major acquisitions this financial year and I still think that's the case. We are pretty calm. We're getting on with the day job. Very difficult to buy in a market that is, as we all know, at its high point or at a high point or a high water point. Whether the trees will grow into the sky, who knows, but they never have in my lifetime. I think it's unlikely that we'll be making major acquisitions at a time when our shares are trading at a discount. And so I don't expect any opportunistic buys. Retail outlets, when they came up, we saw them and we thought they were great. We snapped onto it immediately and will do the same again if we see something that we want to buy.
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Colette O'Shea, Land Securities Group plc - MD of London Portfolio [23]
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So over to our flexible offices. So we've taken the view that we're going to engage in this market but through a partnership approach. So we've got about 140,000 in square feet in the portfolio let in the sector, and recently, both LEO and TOG have taken 70,000 square feet of Eastbourne Terrace and Nova. And what we are -- I mean, we are very much talking to your customers to understand how they see this sector fitting into their business model. And what we're finding is that the big businesses see it very much as short-term flexible sort of project space. We've got other range of customers who see it as an opportunity for them to take less space within a building because they can then put their office, their meeting room space in the serviced office element. And then, obviously, you've got the much smaller sort of one-man band. So we see it as very complementary to the type of businesses that we have in our portfolio, but it's clearly a sector that we're watching very, very closely at the moment.
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Unidentified Analyst, [24]
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Sorry. I'll have a mic first. Just in the appendices 24, 26 and 27, following on from Chris' question. You talked about the extent of the potential reversion in the portfolio, but actually, these numbers are all pretty low. You may have reversion because of a lot of over-renting as well. And if I just quick look at 26 and 27, the only real bit of upside you've got comes in fiscal '20 in your offices on basically lease break, and that's GBP 5.9 million. These are pretty small numbers in the context of your overall GRI. I'm just wondering what the source of that for total return is going to be because it's not going to be an underlying rental -- or sorry, growth in the cash rents. We've talked about the market. ERV is not really going on, I think, is the view you've stated. Yields aren't going anywhere. Possibly they could correct that. So actually, you've not been, thinking about it, I'm missing the right view, been very clear on your strategy around that. So I'm just was wondering, effectively I'm thinking about the underperformance versus the benchmark. Whether that's a relevant benchmark or not, it is benchmark of sorts. I'm just wondering, the total return outlook is pretty weak and you're not the only company exposed to that trend, to be fair. But it just -- without that sort of appetite to take on further risk, this is just a very low return business. Is that fair or am I completely wrong?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [25]
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So I think we -- I just need to -- I mean, it's an observation. Whether it's fair or not is not for me to decide. The -- where we've positioned the business, as we have stated over the last couple of years, is to get to the end of 2016 with no developments on site, which were not let with a long weighted average on expired lease term in London with best-in-class retail assets and with financial gearing at the lower end of our range. And we've done that because we think in the short term, risk outside the business is slightly higher than normal, and the risk on the downside in our market is probably greater than the risk on the upside.
With that activity, I -- getting our portfolio into that position means that we do not own so much reversionary property. And the time that we will kick on our earnings is the time when we go back into the market. We absolutely have the balance sheet and the firepower to do that. We don't think the timing is right at the moment. So we're not going to do that for the moment. But when we do, earnings will move on, can move on quite quickly. And we've erred on that side of caution because we think it's the right thing to do for the moment.
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David Thomas Brockton, Liberum Capital Limited, Research Division - Research Analyst [26]
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It's David Brockton from Liberum. And my question is actually partly related to Robbie's. Given the level of inherent market uncertainty that is out there, your lower level of development activity and expected acquisition spend, do you think you've got the right indirect cost level for the business? Or would you intend to review that? That's the first question.
And the second question relates to the early redemption of debt within the business. You historically shied away from doing it unless it was NPV positive. Has your view with respect to that changed? Or were there some losses you were able to offset against -- were the losses -- were you able to use the losses to offset some tax in the business?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [27]
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So I'm going to ask Martin to answer both of those questions, if I may. (Operator Instructions) There are no questions there at the moment so I'm assuming there are none. (Operator Instructions)
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [28]
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Costs, it's a fair question and we always review our cost base. What you don't see coming through the numbers there is the amount of flex that already goes on within the business. So as you're developing, we use a lot of outside contractors that are easier to flex as the development work comes off, and that is capitalized into the scheme so you don't quite see the degree to which we are already flexing our cost base as it comes through.
But yes, it's regularly under review and it's important to keep it like that. I think if you look back over the last 5 years as to what our cost progression has been, it's been very, very low. If not -- I mean, initially, it came down and then we've held it as tightly as we can at low levels. But we're all aware of the inflationary pressures that are around. When it comes to debt, I understand your point, and we absolutely look at the value that how much is going to cost us to do any debt management. But also, what are we also trying to achieve?
So for example, moving our weighted average life of our debt out so significantly. As you go up the interest rate curve, it is always going to be NPV negative. But we took the view that 40-year debt at 2.75%, that was something we couldn't pass up. It's a bit like a great acquisition opportunity. So we took that and there is an impact on that. So what we'll do is we'll look at it. We're absolutely conscious of value for shareholders in this process, and we'll see what opportunities there are, and what the benefit is that the business would get from doing that debt management.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [29]
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Os?
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Osmaan Malik, UBS Investment Bank, Research Division - Head of Pan European Property Research and Executive Director [30]
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Osmaan Malik from UBS. Two questions. One is picking up on an answer you gave on the acquisition question, I may have misheard. But did you say that you wouldn't acquire assets with your shares at discount? If so, could you just expand on that?
And secondly, we talked a lot about political uncertainty, both the Brexit and domestic politics, and yet, there's a lot of unknowns there. But perhaps you can just paint out for us, what would you most like to see? What would be the ideal scenario for you? What would hurt you the most?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [31]
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So the politics is an easier question. All businesses won is a stable environment where you know what the rules are going to be and you know what your terms of trading are going to be and you know what government policy is going to be. At the moment, we don't know that. So it just makes it -- it just makes sort of immediate environment a bit cloudy. That's all. I'm not a politician, so I can't tell you what I want. In terms of acquisitions, when we're trading at discounts, it's great question. I probably -- I hope I didn't mislead you. The -- what we said to shareholders very consistently is we're very mindful of shares when they're trading at a discount. And shareholders do ask us from time to time, why you're not handing money back to shareholders -- why are you not handing money back to shareholders when your shares are trading at a discount? And our reason is we don't want to take gearing up. Gearing, we're happy with the level. The money we handed back after the sale of 20 Fenchurch Street was in a proportion to keep our gearing roughly the same.
I think the question around the discount really comes into play at the point at which we wish to reinvest in the market at scale. We will have to persuade shareholders, if we are trading at discount at that point, why we want to do it and convince them it's the right thing to do. I think that's really the point that I wanted to make. But I don't see any compelling reason to buy real estate at the moment in the environment that we have today. What I do see is that I'm delighted that we've got the balance sheet where it is. I'm delighted with the portfolio that we've got. We're in the risk game. We don't know what the future is, we just have to sort of play it out as we see the landscape. At the moment, the landscape is a bit cloudy. But long term, we've got a great portfolio and a great business and a great balance sheet and that's a good platform.
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Benjamin Richford, Crédit Suisse AG, Research Division - Research Analyst [32]
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Ben Richford from Credit Suisse. Just following on the acquisitions side of things. First question, do you need values to fall before you're a buyer again in London office? Or do you need certainty to increase? And then second question, have you changed your approach to F&B as they've rolled out across U.K. retail? And then finally, does Apple impact your tenant sales growth as well?
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [33]
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If Scott can sort out F&B and Apple in a moment, let me just talk about -- I'm just going to remind you what we said before. A big buying opportunity comes usually when markets are -- people are a little bit less positive than the markets than they might ordinarily be, and you have to think about which are the assets that go -- get most impacted when those circumstances arise. As we've explained over the last couple of years, we believe that the assets that get impacted more when markets become more risk of are land, short-let buildings and operationally highly geared assets. This is why we wanted to get the portfolio at this stage of the market batten down, great quality assets, long leases. And so our hunting ground, Ben, is going to be much more around restocking the development pipeline, probably more in the capital than outside the capital. And that is where you should expect us to move. But now is not the right time to do that.
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Scott Parsons, Land Securities Group plc - MD of Retail Portfolio [34]
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F&B strategy, I'd say our strategy hasn't changed. It's all about great destinations. I think there has been a huge growth in the supply of F&B provision out there. But if the supply-demand gets out of balance, it's going to be the secondary and the tertiary locations that suffer, not the prime destinations. So business as usual.
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Benjamin Richford, Crédit Suisse AG, Research Division - Research Analyst [35]
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Could you explain the Apple. Did they fall into your (inaudible)
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Scott Parsons, Land Securities Group plc - MD of Retail Portfolio [36]
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Yes. So when you're doing an asset management play that takes a trader out of the equation, it does impact your same-center sales.
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Benjamin Richford, Crédit Suisse AG, Research Division - Research Analyst [37]
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Yes, that data...
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Scott Parsons, Land Securities Group plc - MD of Retail Portfolio [38]
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Depends on the retailer and the center, but we're trying to get as much data as we can.
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Benjamin Richford, Crédit Suisse AG, Research Division - Research Analyst [39]
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What happens to retailers and customers...
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Scott Parsons, Land Securities Group plc - MD of Retail Portfolio [40]
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I can't tell you specifics about which retailers and customers we get data on, I'm afraid.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [41]
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We have a call waiting on the line. If you can identify yourself, please.
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Operator [42]
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We have a question on the line of from Marcus Phayre-Mudge from BMO Global Asset Management.
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Marcus Phayre-Mudge, [43]
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Just wanted to come back and ask a further question on Martin's point about why he considers 40-year debt to be so good. I mean, we just spent the last, I don't know, 10 minutes of my life listening to how unsure you are and how there's a need to batten down the hatches and I happen to have a lot of sympathy with that. What I don't understand is why, in that environment, you consider that you have any idea as to what the price of 40-year debt is going to be in a year's time? Things are -- you are predicting that things, collectively, as a management team, you're expecting things to get worse, which will then give you the opportunity to buy the opportunity that will then give us the earnings, which are thin gruel elsewhere. And yet somehow there was a -- the free money was not to go and buy 40-year debt now at this price, but allow some more floating rate debt to enhance your earnings in the short run and give us enfeebled shareholders something to grin about at Christmas. But without being facetious, I just want to understand why you think that the curve is -- you're so determined to know where the curve is going to be at the long end?
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Martin Frederick Greenslade, Land Securities Group plc - CFO & Executive Director [44]
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Marcus, this is Martin. 40-year debt represents GBP 500 million. I think what we look at is we look at what's our core debt and what's going to be flexible. At the time we come to reinvest, we're going to be using much more short-term facilities. That's where you'll get the real earnings growth. We're not running this business for 6 months of earnings growth through lower interest rates. We're looking at this over the long term. How do we want to put together our liability side to match the asset side? We will have significant amount of assets. We don't necessarily know in 40 years' time what that will be invested in, but having GBP 500 million of long-term debt is part of our core debt and I'm very comfortable with the rate that we've got for that debt. In fact, that 40-year debt, the curve actually inverts. So you get -- if you've got a AA rating, [my gosh], you actually get a great benefit from it. So it's only marginally more expensive than 20-year debt and it gives us an opportunity, as I say, to put together part of our core debt. And I think we'll get the earnings growth coming through at that time we buy with shorter-term debt.
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Marcus Phayre-Mudge, [45]
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But the bigger question then is the need for this long-term fixed debt given the liabilities on your balance sheet. And realization that you've got -- we've all got to kind of grin and bear it for the short run. But it's a more esoteric question as to why -- at what point in the cycle would you prepare to have more floating rate debt unless fixed and you're saying no, no, we want to fix it out now. We don't know what's coming. And therefore, that's the rationale -- rationalization for it. But I can't -- we still got to live through a period where we're asking the question to each other, why are these share prices standing? Why is no one interested in your asset value? It's because they're interested in your earnings. Real estate. It's all about total return. The only total return is going to come from earnings. There's no capital growth, we can all see that. So whilst I applaud you for looking in the long run, you still have to keep an eye on what's going on in terms of your earnings growth and the ability for the market to want your own shares in the short run. So what you're saying is this debt is going to be not available in a year's time. It's going to be more expensive, whereas I just -- whereas everything else you've told me doesn't point to that at all. I just don't see why this had to be done here and now. But anyway, thank you for the answer. I've got something from that, so thank you.
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Robert M. Noel, Land Securities Group plc - CEO & Executive Director [46]
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Thank you. So we've got no more questions on the web and no more questions in the room. Thank you very much. Happy Christmas. Good luck with MiFID II. See you in May.
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