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With England now in a second nationwide lockdown and all non-essential shops once again shuttered, it is hardly surprising that commercial property landlord Land Securities Group (LAND) had already decided it needed to radically rethink its strategy.
After the end of the first lockdown, the property group, which owns the Bluewater shopping centre in Kent and One New Change in the City of London, said it had seen “encouraging” levels of footfall since its centres were reopened in mid-June. Back then like-for-like sales came in at about 80% of the same period last year. Such was its confidence that it also said it could resume dividend payments in November. According to data from financial administration company Link Group, it was the first FTSE 100 company to announce the restoration of payouts following a previous suspension.
Having cancelled its April payout as the effects of the pandemic took hold, the move to restart payments was described as “a sign of confidence relating to the reopening of the economy”, according to John Cahill, an analyst at Stifel, in a note.
That could have all changed though, yet again, when the company posts its half-year results this coming Tuesday - six days into the second national lockdown.
Things had indeed been showing signs of picking up after months of closure. In England, during the first two weeks of reopening after the Spring/Summer lockdown when non-essential retail opened on 15 June, footfall in its centres was 60% of the level achieved on-year and like-for-like store sales were 80% of the level achieved last year. Over the same two-week period, average transaction values were up 22%. The company also said it had a collected about 60% of rent due on 24 June.
In its office estate, the company had seen 'early signs' of growing occupancy as customers returned to work. Construction, meanwhile, continued at its committed development scheme at 21 Moorfields, EC2, it added. As at 30 June, 79% of the retail units were trading and 16 of their 18 leisure parks were open. Its Accor managed hotels remained closed to the general public, but would phase the opening of the hotels over the next three months.
Things were indeed looking encouraging. But that was then. The latest decision - to sell off almost a third of its £12.8 billion property portfolio as it reduces its exposure to the struggling retail, hotel and leisure sectors - probably has not come soon enough.
Landsec's plan is to “reimagine'” its retail business. Part of that will be a “significant reimagining of the model” within its six regional shopping centres. Its regional shopping centres have been most impacted by the emergence of online shopping, although these do only represent around 13% of its portfolio.
The property group has announced it will be selling around £4 billion of assets, 60% of them in London, in the next four to five years, with the plan being to reinvest the proceeds elsewhere in the market.
Chief executive Mark Allan said the company's new strategy would make the most of its strengths and position the business for growth. “It will build on existing areas of competitive advantage,” he said. "It will position the business to benefit from long-term macro trends. And it will be built around a clear, authentic purpose so that it delivers value not just for shareholders but for all stakeholders."
Whether something a little more radical is now in the offing remains to be seen, but Mr Allan, who joined in April from St Modwen and who has a good track record there, will probably need to pull something extra out of the bag on Tuesday, if he is to convince shareholders.
These plans are potentially a little too long term for the current climate and a more nimble and indeed altogether more radical approach is likely to be needed to transform Landsec into the sort of property company it needs to become in order to thrive or possibly even just survive the rapidly evolving situation.
Brokers have remained cautiously confident in their views so far and their share price targets all now fall within the 610p-688p range. Morgan Stanley has downgraded its investment rating to equal weight, from overweight, and cut its price target to 610p from 740p. Goldman Sachs remains a buyer but has cut its price target from 728p to 688p. Deutsche Bank maintains its hold rating and has cut its price target to 680p from 760p, while Jefferies International says the shares are still a buy as it raised its price target from 640p to 670p.
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