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Lahore University of Management Sciences, Lahore *

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AMC100

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Finance

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Nov 24, 2024

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Introduction Land Securities Group PLC is a real estate investment trust engaged in buying, selling, developing, and managing commercial property in the United Kingdom. The company's real estate portfolio is made up of the office, retail, and leisure spaces in the London and Greater London regions. Office locations in London's West End, offices in the City of London, and shopping centers comprise the majority of the value of Land Securities' total assets. The company derives nearly all of its revenue in the form of rental income from medium- to long-term leases with tenants. Land Securities' overall net rental income is fairly evenly split between revenue from its London office properties and its retail properties in Greater London. Balance Score card Balance Score card is the matrix designed by Robert Kaplan and David Norton of HBS, during early 90s. The model assumes that bottom-line and profit is not the only criteria to measure success of any organisation. Every organisation must endeavor to balance various other things in its mission to earn profit and become sustainable business entity. It focuses on 4 things which will balance the focus of the management to equally other area of the organisation. Since business entities would like to remain sustainable and competitive over the period of time focusing on these 4 aspects will make them become and remain so. I will briefly touch upon each of the 4 areas before I add few more of mine: Financial Goals: Predominant objective of every for-profit organization is to make profit. It can be measured in terms of ROI or ROCE or whatever suits the company. In order to achieve the same companies plan cost

reduction, sales boost, asset utilization, branding and positioning etc. Companies design strategies to achieve the same. However as mentioned above it has to be in sync with many other balancing factors. Revenue profit for the year to 31 March 2020 was £414m, down 6.3% from £442m primarily due to the impact of Covid-19 on the likelihood of us being able to collect a portion of Landsec contracted rents for the first quarter of 2020/21. Adjusted diluted earnings per share were down 6.4% at 55.9p due to the reduction in revenue profit. Over the year, Landsec assets declined in value by 8.8% or £1,179m (including Landsec proportionate share of subsidiaries and joint ventures) compared with a £557m decline in the prior year. This decline in the value of Landsec assets is behind Landsec loss before tax of £837m (2019: £123m) and the reduction in Landsec EPRA net tangible assets per share in the year, down 11.6% to 1,192p Customer Perspective: Every organisation has to consider this very critical perspective in their business strategy. Customer is the key for every business. Customers who pay for the product and therefore cause of profit of the shareholders and salary of the people of the company. No financial targets can be achieved if customer perspectives are ignored by the company. Therefore every company must have strategy for customer experience and on fulfillment of customer expectations. Internal Perspectives: In order to achieve stated financial and customer perspectives companies have to align its internal processes and policies to enable the organization to achieve financial and customer perspective. It can work towards better customer experience, speeding up the critical processes , educating customers , concerns for environment etc. Internal changes that will be required to achieve the two perspectives stated above. Apart from focusing on conventional performance metrics, such as improvements in costs, quality and schedules, Landsec tends to derive internal processes from the demands and expectations of external stakeholders. The company integrated innovation and diversification as critical components in this perspective Learning & Growth Perspectives: Organisation must learn and change in order to achieve the strategies outlined above. It also requires talent induction, training, retaining policies, knowledge management, new competency, out sLandsecced partners etc. These strategies will be in alignment with overall financial, customer and internal perspective strategies and objectives defined by the management. Landsec value chain highly relies on its support from its administration and human resource departments. One of the reasons why Landsec is so successful is because they continue to strive in

developing new, attractive and innovative tools for their users and partners to use. As you can see in the value chain figure above, Landsec holds its Product R&D, Technology, and Systems Development at their highest importance. Landsec equips their human resources department with unique skills and tools to continue bringing in the brightest most talented employees in order to achieve their mission of continuing innovation. Landsec equips their 17 administration department with similar tools in order to keep these key employees they worked so hard to find and mold them into Landsec value chain KPI A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, support and others. 1. Payback Period – The payback period KPI is one of the most important real estate investment metrics that exists. This KPI determines the number of years it will take for a property to pay back the initial investment amount. This is one of the first back of the napkin calculations you should do when screening potential properties.Payback Period = Initial Capital Cost for Project / Annual Savings or Earnings from Project 2. Return on Investment (ROI) – If you are making an investment in anything, you would want to know how well your investment has performed. Or maybe you want to see how the investment would have performed previously. This real estate investment metric does just that.ROI = (Net Profit / Total Investment) * 100% 3. Tenant Turnover – This real estate investment KPI is very important if you own multiple properties. It tells you the rate at which your tenants are leaving. A low turnover rate is desirable as it means that your property is occupied and making you money. A lot of money can be lost in the time between a tenant leaves and when a new one moves in. This is a high-level real estate KPI and is best utilized when calculated on an annual basis.Turnover Rate = (# of Tenants Moved Out / Total # of Tenants) * 100% 4. Average Rent Price Per Property – How much are your units renting for? How does this compare to last quarter? Or last year? This real estate metric determines the average monthly rental price to help compare quarterly or annual changes.Average Rent Price Per Property = Total Monthly Revenue / Total # of Properties 5. Operating Expense Ratio – How much does it cost you to manage all your properties and maintain them? Is it worth your time? This real estate performance metric can help you make that decision by comparing the operational costs to the rental income. Ideally, this ratio is below 80%.Operating Expense Ratio = ((Total Operating Expenses – Depreciation) / Gross Revenue) * 100% 6. Loan to Value (LTV) Ratio – EThis is a key performance indicator that is often used by lenders when determining how much they require as down payment on a mortgage application. As a real estate investor, you want to put as little down as possible while obtaining the best interest

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rate possible. In most cases, the lowest rate can be obtained with an LTV ratio of 80% or lower.LTV Ratio = Mortgage Amount / Appraised Property Value 7. Average Mortgage Rate – As a real estate investor, it is important to keep track of the average mortgage rate across all your properties. This figure can be compared to the current index mortgage rate to help assess if properties should be refinanced or not.Average Mortgage Rate = Sum of Mortgage Rates / # of Mortgages 8. Equity to Value Ratio – This real estate metric is probably more commonly known by its more generic name – the equity ratio, which can be applied to any kind of leveraged investment. The equity ratio is used to determine how leveraged a business is. In real estate, it compares the amount of equity you have in a property to its assessed value. Typically, a ratio less than 0.5 indicates that a business is heavily leveraged.Equity to Value Ratio = Total Property Equity / Total Property Value Triple Bottom Line The triple bottom line (TBL) is a business and accounting framework that believes companies should care about social and environmental concerns just as they do their profits. The bottom line has always been a reference to financial statements ending with a company’s profit or losses. The triple bottom line definition brings people and the planet into the equation. 1. People The measurement of social responsibility that a company shows. In this case, people are not only a company’s employees, but they are also the wider community in which a company operates its business. 2. Profit Profit is the traditional measurement of a company’s success. TBL companies recognize that their impact on people and the planet are just as important as their profit. In fact, caring about society and the environment isn’t in opposition to being profitable. In many instances, the companies that care about more than just their bottom line end up being more profitable because people like supporting companies that care! 3. Planet The measurement of how environmentally friendly a company is in their operations and production. To depict, TBL businesses often invest in renewable energy, focus on improving logistics to reduce waste, and leverage natural resources efficiently. Landsec addresses social aspect of the triple bottom line by offering good health care to its employees, providing a healthy and safe working environment and giving employees an opportunity to advance their education. Additionally, Landsec does not exploit their labor force by either employing children or paying sweatshop wages. This company promotes the health living of the community by providing health checkups and health education to rural communities. It also conducts blood donation camps in some countries and supports emergency services for children which are accessible 24 hours. Landsec take pains to conserve the environment by conserving water through projects such as, watershed protection, rainwater harvesting project and investment in a reverse filter system. The company also invests in

energy conservation by reducing its consumption and emission of greenhouse gasses as well as making their equipment efficient. This company also packages their products in recyclable materials. Economic bottom line measures the flow of Money. Landsec measures its economic aspect through profit which is obtained by deducting the cost of inputs and cost of capital tied from the revenues obtained. Apart from the normal profit Landsec uses the economic framework of the triple bottom line to measure and understand the real economic benefit that is enjoyed by the society. Landsec economic bottom line is evaluated by personal income earned by employees, taxes paid to the government, employment created and job growth. Ratio Analysis Liquidity/Financial Health 2018- 03 2019- 03 2020- 03 Current Ratio 0.48 0.43 1.49 Quick Ratio 0.45 0.38 1.41 Explain in 100 words Profitability 2018-03 2019-03 2020-03 Net Margin % -29.65 -15.78 -112.58 Return on Equity % -2.29 -1.17 -8.91 Explain in 100 words Competitor Analysis British Land British Landcreate and manage places that reflect the changing needs of the people who work, visit or live in & around them – Places People Prefer. These are outstanding places that meet the needs of our customers and respond to their evolving lifestyles. British Landfocus on creating great environments both inside and outside our buildings. British Land properties, worth around £17 billion, are home to over 1,200 different organisations, ranging from international brands to local start-ups. 65,000 people work across our office portfolio, while our retail sites receive 310 million visits a year, with potential to reach 60% of the population. Derwent London plc Details Derwent London plc owns 82 buildings in a commercial real estate portfolio predominantly in central London valued at £5.5 billion (including joint ventures) as at 31 December 2019, making it the largest London-focused real estate investment trust (REIT). As part of Derwent commitment to lead the industry in mitigating climate change, in October 2019, Derwent London became the first UK REIT to sign a Green Revolving Credit Facility. At the same time, Derwent also launched our Green Finance Framework and signed the Better Buildings Partnership's climate change commitment. The Group is a member of the ‘RE100' which recognises Derwent London as an influential company, committed to 100% renewable power by purchasing renewable energy, a key step in becoming a net zero carbon business.

The Crown Estate The Crown Estate is a unique business with a distinct heritage and a portfolio unlike any other. It includes some of central London's best places to work, shop and spend time, retail and leisure destinations across the country, and a substantial rural portfolio. As manager of the seabed and half the foreshore around England, Wales and Northern Ireland, we play a role in the UK's world-leading offshore wind sector as well as marine aggregates, cables and pipelines. We are also responsible for the Windsor Estate, including the world-renowned Windsor Great Park. Over the last ten years The Crown have generated £2.9 billion for the benefit of the nation's finances, The Crown Estate is a provider of real estate property development and investment services. Carroll’s CSR pyramid Carroll’s model consists of four levels: economic, legal, ethical and philanthropic. LAND SECURITIES highly focus on the philanthropic and ethical responsibilities keeping in mind that all the activities it performs are legally done without any allegation on the brand that it carries. LAND SECURITIES have taken a step forward in saving the society by providing energy – efficient appliances, they have dual benefit with this kind of an activity, as they are performing philanthropic responsibilities and are also increasing the sales. Economic responsibility essentially includes shareholders and employees as shareholders are interested in the return on investment and employees will get good job security, paid well only if the company is doing well. Legal responsibilities are mainly for the government and other regulating bodies which look after the legal issues that are undertaken and as a result LAND SECURITIES carries out all its activities legally. Ethical activities are essentially administered at environment and welfare groups. LAND SECURITIES makes an effort to help the suppliers cut cost, increase efficiency, and do things ethically. Community welfare including proper utilization of food products which are donated to the people in need, cash donations, and programs for donation of clothes are also practiced by the company. In Carroll’s (1979) model of four philosophies of social responsiveness, LAND SECURITIES falls in the Proactive category which signifies that it is enthusiastic about the actions that it performs and as a result LAND SECURITIES gets by undertaking the CSR activities toward the welfare of the people and the society. This is demonstrated by their commitment to become Carbon neutral and eliminating all landfill waste by 2012. No other retailer has gone to that extent. Conclusion In conclusion, with the strategic analysis of Apple Inc., it is clear that the company needs to implement information technology strategic plan that will enable it to produces services that will enhance its customer loyalty and consumer satisfaction. The company is generally doing well in the global market but there is need to develop various business and marketing strategies that will enable it to gain a competitive advantage over its competitors.

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