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Introduction
Company overview
A decade ago Land Securities were long regarded as a dull and conservative concentrating on retaining capital, rather then actively trying to gain wealth. This has all changed partly due to a reshuffle at the top in the late nineties with the appointment of Ian Henderson as Chief Executive and Peter Birch as Non-executive Chairmen. Gone are the days when Land Securities accumulated assets and waited for inflationary price rises, as in these days of low inflation the company has discovered the need to work hard for its profits.
Share Performance
Price (pence) 747 5 Week High .5
Volume (millions) 1.0 5 Week Low 6.71
5 Year share price
Financial Summary
Six months ending 0th September 00 Land securities total revenue increased 4% to 581.8M. Net income for the period decreased 7% to 11.1M. "Total revenue reflects significant increases in property outsourcing income from the group and from interests in a joint venue. Net income was offset by an increase in operating expenses and gretaer interest payable, and by a 8. M deficit from converted bonds." (Multex Investor 00)
The performance of Land Securities (Land.L) can be seen below plotted against the FTSE 100. It is possible to see that Land Securities has under-performed the FTSE consistently from Q 18 up until Q 00, however since this turning point Land securities has out performed the FTSE 100.
The two graphs below show Land Securities performance against British Land and Canary Wharf Group over the past Five years.
The comparison with British Land (BLND.L) shows that the share price of the two companies is very closely correlated, for example both have troughs in Q4 18 and Q1 000, and both show a peak in Q 00. However the stark contrast between the two companies is not so much the trends, as the actual performance. Land Securities has outperformed British Land constantly throughout the 5 year period.
The comparison to Canary Wharf Group (CWG.L) is quite different. Since its float in 1 it has generally out performed land Securities although it is more volatile, and its share price until Q4 00 was at some points substantially above Land Securities. This has changed in the last quarter as its share price has taken a big hit whereas land Securities has managed to maintain its share price.
Company History
Set up in 144 by Lord Samuel of Wych Cross, Land securities Investment trust as it was known grew rapidly through acquisition and takeover. These included the take-over of Associated London Properties in 151, Ravenseft properties in 155 (who incidentally had contracts to rebuild many of the War destroyed cities of Britain) and City Centre Properties in 168. (The biggest deal of the era purchasing the company for £64.5 Million, which had property holdings worth more then, twice this amount). In 155 it even had a tilt at the Savoy group however this failed although it did leave Land securities with a profit of £100,000 due to the special share issue to counter the bid. In 16 the takeover of City of London Real Property company which owned and managed 104 office buildings made land securities the biggest quoted property company a title which it retains to this day, although it was briefly denied this title by Canary Wharf Group.
Recent Activity and Restructuring
The most significant change for the company came in November 000 with the £40 million acquisition of Trillium from Goldman Sach's its main contract being a £ million agreement to own and manage property for the DSS. At the time property outsourcing was regarding a passing fad by the industry, however Land Securities had the foresight to see past the negative press. One year later trillium landed tow high-profile contracts. One an agreement to own and manage BT's £.8 billion property portfolio a 5050 joint venture with William Pears Group and the second was to manage 4 million sq. ft of properties in London and Scotland for the BBC.
Land Securities Trillium now contributes 5% of the overall companies' ----------- and manages about 7,400 properties with a turnover of £650 million. Negotiations with the BBC and the Department for Work and pensions are under way to expand existing outsourcing and if successful could see Trillium contributing and even grater share of the companies' profits.
Land Securities is now split into three "Manageable units" as described by Henderson, and his aim with a divisional departmental head over each, will be to squeeze even more out of the companies properties.
The three units are development, portfolio management and Land securities trillium. Portfolio management has long been the companies key focus, however Henderson's plan is for the other two units to provide 50% of the companies operating income.
Progress is being made in this direction as Land Securities development is embarking on its largest development programme since the company began, with about .8 million sq ft currently under construction, and 6 million sq ft in the pipeline. The development division also has the largest speculative development project in the city (March 00) and is just starting on another speculative development near Victoria.
The investment branch of Land securities which is within the portfolio division has been streamlining its activity with a reduction in the number of properties in its £7.74 billion portfolio from 700 to about 60. The rationale for this investment decision is to remove the smaller non-performing buildings and concentrate on the larger properties.
Land Securities was criticised in a report by Alex Catalano (000) in which he cited a quote of a fund manager that "The problem for Land securities is that the properties in its portfolio have gone dead". He explained how it had held onto too many of the smaller properties for too long and that 45% of its property portfolio were worth under £10m. It seems that that appointment of Francis Salway from Standard Life to the post of head of portfolio management has paid off, as more recent reports of the companies' portfolio have not been as critical as in the past. Salway's efforts did not go unnoticed with his recent appointment to Chief Operating Director.
Land Securities has for many years received criticism and was branded the Marks & Spencer of the property world, being big diversified and generally well run yet too conservative. Like M&S Land Securities struggled to adjust to the changing economic climate and challenges from new and more specialised players like Canary Wharf and Capital shopping centres. It was often perceived as just a rent collector.
The Boardroom
Traditionally Land securities prided itself on growing their own people. However a recent restructuring and the drafting of new blood has allowed the company to shake off the shackles of the past and re-invent itself.
One of the most influential persons in giving Land securities a new direction and strategy was Peter Walicknowski who joined the company in May 000 as director of strategy and business development and was given a seat on the main board. Described by one city analyst as a driven, entrepreneurial deal-maker he was poached from Lend Lease an Australian company where he had successfully fulfilled his role of bringing Lend Lease to Europe and developing the Bluewater shopping centre. Although he was only with the company 1 months resigning in December 001, he had a major impact on the corporate strategy and breathed a new vitality into a company perceived by many to be dull. A did away with the civil service style culture that once dominated working practice.
Ian Henderson was appointed to the board in December 17 after the sudden and death of the Peter Hunt. Henderson now 5 bears some characteristics of traditional land securities, however he has broken the mould in that very flexible and open to new ideas. The initial stages of the change at Land Securities before the arrival of Peter Walicknowski are attributed to Henderson, who is described by colleagues as "a modest straightforward bloke".
The Non Executive Chairmen Peter Birch was appointed in 18, and brings with him expertise gained from his former role as chief executive of Abbey National, where he was involved with the status change to Bank from Building Society. He sits of the board of a number of companies' including Sainsbury's Bank, Travelex, NM Rothschild, Trinity Mirror and is also Non executive chairmen of Kensington Group.
Francis Salway is Chief operating officer and is the suspected to succeed Henderson as Chief Executive within the next two years. Previously an investment director at Standard life he brings investment expertise, which is crucial for Land securities if they are to once again thrive.
Mark Collins the more recent member of the board to be appointed is chief executive of the company's portfolio management division and joined in May 00 from GE Capitals real estate division.
Ian Ellis another recent appointee to the board joined in February 00 and was appointed chief executive of Land securities Trillium.
Andrew MacFarlane a former director of Ernst & Young joined the board as Finance director in October 001. His previous position was as chief financial officer of Six Continents hotels and resorts division.
The non executive directors are fronted by Sir Win Bischoff. His other roles include chairmen of Citigroup Europe, deputy Chairman of Cable & Wireless and director of McGraw-Hill companies.
Other non-executive directors include David Rough also a director of Legal and General Select Investment trust, BBA, Emap and Xstrata; Peter Freeman, Chairman of Argent, and non executive director of Freeman publishing
Directors dealing Previous 1 months
Mark Simms
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