Chairman's message

investment and disposal

Alison Carnwath

"Land Securities continues to build shareholder value despite economic uncertainty. Through a combination of astute asset management, a well-judged development programme and an advantageous refinancing, good progress has been achieved."

Having moved in the right direction in the first half of the year, growth in property values stalled in the second half. Against this backdrop, we believe we were right to keep treading the fine line between caution and enthusiasm. Rather than relying on external conditions for asset growth, progress was made by active asset management and by making good sales into a relatively liquid investment market. As a result of these actions our financial strength is enhanced and our financial flexibility was improved through the securing of a new £1.1bn revolving credit facility.

The Board believes our two total return metrics provide the clearest guide to the Company's progress in financial terms. This year, Total Shareholder Return (dividend and growth in share price) was 0.7%. This represents a solid performance in a less than ideal market and compares to a return of 4.0% for the FTSE 100 and -3.2% for the FTSE 350 Real Estate Index. Total Business Return (dividend and growth in net asset value) was 7.9%. We remain confident in our plan and our position.

Total Shareholder returns*

  Over one year to 31 March 2012 (£)
Land Securities 100.68
FTSE 100 104.04
FTSE 350 Real Estate 96.76

*Historical TSR performance for a hypothetical investment of £100.

Source: Datastream


London remains attractive to investors and occupiers and, in particular, international buyers regard London as a safe haven outside the eurozone. The partnership agreed with Canada Pension Plan Investment Board for the development of Victoria Circle, SW1, speaks volumes for our reputation and capability as a developer. Our activity in this part of the West End is helping to transform Victoria into one of London's most vibrant centres.

In Retail, we achieved a resilient performance in a sector undergoing structural change. Attractive, well-located shopping centres and retail parks continue to trade well while leisure and multi-channel retailing are increasingly important. The negative impact of economic conditions on consumer spending means that certain high streets and tertiary locations may never recover. Our high quality portfolio has adapted to retail trends and the evolving needs of occupiers. We provide detailed commentary on our businesses over the following pages.

During the year, there were significant changes to the Board and our committees. Most notably, in March 2012, after eight years as Chief Executive, Francis Salway retired. Francis was an excellent Chief Executive who led Land Securities through a remarkable period, including a serious crisis in our market in 2008/09. He remained unflappable throughout, setting a clear direction that enabled the Company to weather the storm and re-emerge in good shape. He leaves behind a robust business and a strong team. The Board thanks him for his outstanding contribution.

In appointing a successor to Francis, we retained a leading firm of executive search consultants. They approached their mandate with considerable rigour and drew up a shortlist of internal and external candidates. The Board determined that Robert Noel, who had joined Land Securities in January 2010 as Managing Director of the London Portfolio, was the right person for the job. He has the appropriate level of experience, is well respected by investors and those in the property market, and has boundless energy and enthusiasm, as well as good judgement. The Board looks forward to working with him in his new role.

At our AGM last year we said goodbye to Bo Lerenius and Sir Christopher Bland. In January 2012, Stacey Rauch joined the Board as a Non-executive Director. An American, Stacey worked at McKinsey & Company for 24 years, leading their North American Retail and Apparel practice. Her broad business experience and deep knowledge of retail from an international perspective will complement the existing skills and outlook of the Board. She will join the Audit Committee in June.

In April 2012, Kevin O'Byrne took on the role of Senior Independent Director. In October, Simon Palley will take over as Chairman of the Remuneration Committee. My thanks go to David Rough for his contribution as Senior Independent Director and for leading the Remuneration Committee so effectively over the last three years. Notwithstanding their long tenure, both David Rough and Sir Stuart Rose have agreed to remain as directors, providing important and relevant experience and support for our incoming Chief Executive.

2011/12 was the final year in our three-year Board evaluation cycle. This year, I conducted interviews with the Executive and Non-executive Directors. These provided me with important insights and enabled me to assess individual contributions and areas for improvement. The evaluation focused on Board skills and contributions, the form and content of Board papers, risk appetite and coverage, and the outlook for 2012. You will find more details on this evaluation in the Corporate Governance section. We have appointed a leading specialist independent firm to conduct our next evaluation.

The Board believes that an active approach to corporate responsibility makes Land Securities a stronger and more successful business. Our investments in key areas such as the environment and employment generate commercial and financial benefits to us over the long term. We continue to lead by example. In Leeds we are monitoring the impact of our Trinity Leeds scheme on the regional economy to demonstrate the value our investment in the city creates. In London we are working with the Mayor and others to provide apprenticeships, training and jobs in construction. We believe these initiatives not only bring benefits to the communities in which we work, but build trust, add value to our assets and make us the preferred partner on future development opportunities.

Looking ahead, conditions remain uncertain, and the sensible approach is to remain focused but flexible. Ultimately, the return of sustained growth in the commercial property market will be driven by the return of confidence in the wider economy. However, supply constraints in our markets are already generating opportunities.

Investment and Disposals (£m1)

investment and disposal

Land Securities enters into a new financial year clear as to its priorities. Under the leadership of Robert Noel, the Company will respond swiftly to change. We will press ahead with development - in the best locations, at the right time, whilst carefully managing our speculative risk.

I would like to thank our employees for their commitment and hard work during the year. We have a very strong team, which is the envy of our competitors, and the Board enjoys regular interaction with many members of staff. Our Employee Survey confirms that morale and engagement within the Company are high. Shareholders can be reassured that we are working to a consistent plan which is well matched to current conditions. I am confident our team will continue to create sustainable value for you as we move forward.


Alison Carnwath