Land Securities’ London operations will stand alone.

The UK’s biggest property group has completed its review of the structure of the business and has concluded that over the long-term the Group’s component businesses, and shareholders, will benefit from separation.
It proposes to demerge the Group into three specialist separately quoted entities – Retail, London and Property Outsourcing.

The company said that while the three divisions had performed well under the current structure: “the business models are distinctive and have different financial characteristics,” and that they would benefit from separation.

“They operate in market segments with different characteristics and they will be able to adopt a capital structure best suited to their respective sectors’ outlook,” the company continued.

As separate companies, the management of the retail and London operations would be able to allocate capital without taking into account the cycle of the other business. Access to external capital, which prefers specialist companies would also be easier. At the same time, the new entities would retain customer relations and stable cash flows. For shareholders, the advantages would be having a choice of property allocations and reduced transaction costs.

The property outsourcing business Trillium has grown strongly since it was acquired by Land Securities in 2002, with a return on capital of 28%. With capital employed of over £2.1 billion and first-half underlying operating profit of almost £58 million, Trillium is now seen as having the critical mass necessary to go it alone.

Land Securities also reported its first-half results on 14 November, the first results since the company transferred to Real Estate Investment Trust status. Basic net asset value per share rose 2.3% to £23.56. Revenue profit, which measures underlying pre-tax profit, fell 10.5% to £173m, largely due to changes in accounting practice.

Land Securities’ share price rose 6p to £15.74 in early London trading.

For more information, visit: www.landsecurities.com