TIDMLMP
RNS Number : 9636Z
LondonMetric Property PLC
27 May 2021
LONDONMETRIC PROPERTY PLC
("LondonMetric" or the "Group" or the "Company")
ANNUAL RESULTS FOR THE YEARED 31 MARCH 2021
SECTOR ALIGNMENT AND ASSET SELECTION DELIVER
RELIABLE AND GROWING INCOME WITH STRONG PORTFOLIO
OUTPERFORMANCE
LondonMetric today announces its annual results for the year
ended 31 March 2021.
EPRA (1,2) IFRS
---------------- ---------------
Income Statement 2021 2020 2021 2020
------- ------- ------- ------
Net rental income (GBPm) 123.3 115.9 119.7 111.1
------- ------- ------- ------
Earnings/Reported Profit
(Loss)(GBPm) 85.6 74.5 257.3 (5.7)
------- ------- ------- ------
Earnings per share (p) 9.52 9.26 28.6 (0.7)
------- ------- ------- ------
Dividend per share (p) 8.65 8.30 8.65 8.30
------- ------- ------- ------
EPRA (1,2) IFRS
---------------- ---------------
Balance Sheet 2021 2020 2021 2020
------- ------- ------- ------
NTA(3) / NAV (GBPm) 1,731.9 1,437.2 1,731.3 1431.8
------- ------- ------- ------
NTA(3) / NAV per share (p) 190.3 170.3 191.3 171.0
------- ------- ------- ------
LTV (%) 32.3 35.9 32.3 35.9
------- ------- ------- ------
1. Including share of joint ventures, excluding non-controlling interest
2. Further details on alternative performance measures can be
found in the Financial Review and definitions can be found in the
Glossary
3. EPRA net tangible assets (NTA) is a new reporting measure
that replaces EPRA net asset value this year. Discussed further in
the Financial review and note 8 to the financial statements
Continued focus on reliable, repetitive and growing income
increases earnings and dividend
-- Net rental income up 6% to GBP123.3m, on an IFRS basis increased by 8%
-- Rent collection strong with less than 1% forgiven or outstanding for the year
-- EPRA earnings up 15% to GBP85.6m, +3% on a per share basis
-- IFRS reported profit up 400% to GBP257.3m, after adjusting prior year for exceptional costs
-- Dividend progression of 4.2% to 8.65p, 110% covered, including Q4 dividend declared today of 2.35p
-- Continued progression expected with Q1 22 dividend guidance of 2.2p, a 4.8% progression on Q1 21
Sector alignment and asset selection delivering strong portfolio
valuation uplift
-- Total Property Return of 13.4%, outperforming IPD All Property which delivered 1.2%
-- Capital return of 8.0% (IPD All Property: -3.2%), urban logistics assets delivered a capital return of 15.5%
-- EPRA NTA per share increased by 11.7% to 190.3p, driven by 19.3p valuation gain, on an IFRS basis increased by
11.9%
-- Total Accounting Return of 16.7%
Distribution weighting at 71%, including urban logistics at 39%
and grocery/roadside at 11%
-- GBP245m of acquisitions let to strong credits with a WAULT of 17 years and 87% of rent subject to contractual
uplifts
-- GBP159m of disposals, largely shorter let urban logistics and long income assets, with a WAULT of nine years
-- Post year end, GBP68m acquired, increasing urban logistics portfolio to GBP1.1 billion, representing 41% of the
portfolio
173 asset management initiatives completed and strong progress
on developments
-- GBP5.3m pa income uplift and 3.1% like for like income growth, with open market rent reviews +18%
-- Lettings signed with WAULT of 13 years, including a pre-let of 120,000 sq ft to Amazon at Tyseley
-- Under offer on 172,000 sq ft at Bedford Link development and in discussions on letting of the last unit
Resilient GBP2.6bn portfolio focused on operationally light
assets with strong income characteristics
-- Occupancy of 98.7% with long income portfolio 100% let
-- WAULT of 11.4 years with only 8% of income expiring in next three years
-- Gross to net income ratio of 98.6% and contractual rental uplifts on 56.8% of income
Balance sheet strengthened
-- GBP120m equity raise in year and GBP780m of refinancing with green framework post year end
-- LTV of 32.3% with weighted average debt maturity increased to 8.2 years (2020: 4.7 years) and cost of debt at
2.5%
-- EPRA cost ratio reduced further to 13.6% (-60bps)
Andrew Jones, Chief Executive of LondonMetric, commented :
"Whilst we have all experienced a truly unprecedented last 12
months, in many ways Covid-19 has merely accelerated longer term
trends that were already being driven by technological advancement
and changing consumer behaviour. Logistics, healthcare and grocery
real estate have been significant beneficiaries of this
acceleration delivering standout performances and enjoying an
ever-wider margin of victory over other real estate sectors.
"The performance of our portfolio during the year reflects our
alignment to the winning sectors and increasingly wanting to own
the best assets. Our GBP2.6 billion portfolio has weathered the
storm in fine shape evidenced by very strong rent collection,
continued earnings growth and significant valuation uplift, all of
which are as a result of longer term decisions to align to the
winning macro trends. The urban logistics sector in particular,
where we have now amassed over GBP1 billion of assets, has been our
main conviction call for a number of years and is enjoying truly
exceptional demand/supply dynamics resulting in material jumps in
rents.
"Our strong shareholder alignment, disciplined approach and
focus on quality assets that deliver a reliable, repetitive and
growing income has positioned us well for the future as we progress
towards our ambition of becoming a dividend aristocrat. After all,
income compounding is the bedrock for attractive returns."
For further information, please contact:
LondonMetric Property Plc: +44 (0)20 7484 9000
Andrew Jones (Chief Executive)
Martin McGann (Finance Director)
Gareth Price (Investor Relations)
FTI Consulting: +44 (0)20 3727 1000
Dido Laurimore Londonmetric@fticonsulting.com
Richard Gotla
Andrew Davis
Meeting and audio webcast
A live audio webcast and conference call will be held at 8.30 am
today.
The conference call dial-in for the meeting is: +44 (0) 330 336
9434 (Participant Passcode: 5638111).
For the live webcast see:
https://webcasting.brrmedia.co.uk/broadcast/6065d079560fbf10fcc50f21
An on demand recording will be available shortly after the
meeting from the same link and from:
https://www.londonmetric.com/investors/report-presentation/year/2021
Notes to editors
LondonMetric is a FTSE 250 REIT that owns one of the UK's
leading listed logistics platforms alongside a diversified long
income portfolio, with 15 million sq ft under management. It owns
and manages desirable real estate that meets occupiers' demands,
delivers reliable, repetitive and growing income-led returns and
outperforms over the long term. Further information is available at
www.londonmetric.com
Neither the content of LondonMetric's website nor any other
website accessible by hyperlinks from its website are incorporated
in, or form part of this announcement nor, unless previously
published by means of a recognised information service, should any
such content be relied upon in reaching a decision to acquire,
continue to hold, or dispose of shares in LondonMetric. This
announcement may contain certain forward-looking statements with
respect to LondonMetric's expectations and plans, strategy,
management objectives, future developments and performance, costs,
revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to
future events and circumstances. There are a number of factors
which could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements and forecasts. Certain statements have been made with
reference to forecast price changes, economic conditions and the
current regulatory environment. Any forward-looking statements made
by or on behalf of LondonMetric speak only as of the date they are
made. LondonMetric does not undertake to update forward-looking
statements to reflect any changes in LondonMetric's expectations
with regard thereto or any changes in events, conditions or
circumstances on which any such statement is based. Nothing in this
announcement should be construed as a profit forecast. Past share
price performance cannot be relied on as a guide to future
performance.
Alternative performance measures: The Group financial statements
are prepared in accordance with IFRS where the Group's interests in
joint ventures and non-controlling interests are shown as single
line items on the income statement and balance sheet. Management
reviews the performance of the business principally on a
proportionately consolidated basis, which includes the Group's
share of joint ventures and excludes non-controlling interests on a
line by line basis. Alternative performance measures are financial
measures which are not specified under IFRS but are used by
management as they highlight the underlying performance of the
Group's property rental business and are based on the EPRA Best
Practice Recommendations (BPR) reporting framework which is widely
recognised and used by public real estate companies.
Chair's statement
Due to the pandemic, we have had to work from home for most of
the last financial year. Thanks to the incredible efforts of all of
the team they have managed that difficulty, and delivered record
results in testing conditions. I cannot thank them enough.
When we reported last year, I hoped that the world would be able
to recover in the calendar year 2020. The coming of the variants
put paid to that hope. Thankfully, the speed and effectiveness of
the UK vaccine rollout, alongside extensive Government support
schemes have allowed us to start to return to normal. We must offer
our heartfelt thanks to the brilliant people who devised, mass
produced and delivered vast numbers of high grade vaccines.
There are some parts of our lives that won't return to being as
they were before. Covid-19 continues to challenge many long
established practices and accelerated existing structural change.
There is no doubt that some of the changes, such as routine
internet shopping and working from home part time will continue to
impact the way we live, work and socialise.
The enormous impact that the pandemic has had on commercial
property is clear to see. No amount of economic stimulus and
medical brilliance will undo some of the changes that Covid-19 has
accelerated. As shopping and working patterns have shifted, a new
economic reality has polarised sub-sector performance. Logistics
and long income property continue to see highly supportive
dynamics. There will be some shift back to physical shopping to
animate our high streets and bring fun back to going out, but the
shift to online shopping that was underway before Covid-19 has been
accelerated by lockdowns and only part of that move will return to
traditional shopping. It is unclear yet how office demand will
evolve given the now proven ability of many to work successfully
from home.
Notwithstanding potential inflationary pressures, Covid-19 has
also prolonged the likely time horizon of very low interest rates.
Well managed real estate is an asset class which we believe offers
an outstanding ability to provide exceptional, compounding returns
over the longer term.
The year also saw the finalisation of Brexit. The pandemic has
rather taken the spotlight away from this major event, so its
effects are still under reported. It will lead to demand for
logistics space as firms rely less on 'just in time' and more on
'just in case'. The UK needs to be more self-reliant, which will be
a very good thing. On the way to that state, there will be issues
to overcome. I believe we are well placed to do so.
Our long term, disciplined approach, aligned to the winning
sectors, has delivered a particularly strong performance in the
year. Our total property return was 13.4% which significantly
outperformed the IPD All Property index by 1,220 bps. Our total
accounting return was 16.7%, rent collection levels exceeded 98%,
EPRA earnings per share increased by 2.8% and EPRA net tangible
assets per share rose by 11.7%. This performance and our confident
outlook have allowed us to increase our dividend per share for the
sixth year in a row, rising 4.2% and 110% covered by EPRA earnings.
I am pleased to know that our team can go forward positively,
without being distracted trying to collect unpaid rent.
Over the eight years since our merger, we have delivered a total
shareholder return of 196%, significantly outperforming the FTSE
350 Real Estate Super Sector average of 59% as well as increasing
our earnings by 144% to 9.52p per share.
During the year, our equity fundraising attracted overwhelming
support from shareholders, for which I thank you. It has allowed us
to execute on some high quality investment opportunities and
enhance our portfolio further. We were also very well supported in
the debt market, where post year end we managed to extend our debt
maturity by 4.0 years to 8.2 years, which gives durability and
diversity to our debt structure, at highly attractive borrowing
rates.
Despite the pandemic, we have also maintained our strong
stakeholder relationships. We recognise that the success of the
Company depends on our people and I would again like to warmly
thank the Board and all of our employees for their hard work in
very difficult circumstances. We have also strengthened our Board
during the year with the appointment of Kitty Patmore, who I would
like to welcome on your behalf.
Looking forward, we believe the portfolio is stronger than ever.
That will allow us to grow our income and asset value over the
longer term. This, combined with the long experience of our team
and our balance sheet discipline leaves the Company very well
placed to deliver a sustainable and progressive dividend
policy.
Patrick Vaughan
Chair
27 May 2021
Chief Executive's review
Overview
We continue to live in a world of ongoing disruption and social
change
The last year has been truly extraordinary with a global
pandemic, a global recession and bold, unprecedented central
Government intervention.
Technology and changing consumer behaviour were already having a
profound impact, but Covid-19 has accelerated these shifts with
trends that were expected to take years, occurring in just months
and in some cases weeks. The behavioural changes that surged during
lockdown have been well-mapped; working from home, online
retailing, gaming, video on demand, online banking etc. These
shifts were only possible due to an exponential increase in
technological capability.
At long last, society has reopened and lives are returning to
near normality. However, whilst humans need real interaction with
each other to thrive, the world continues to evolve and digitise at
a rapid rate and Covid-19 has added to the seismic shift in the
tectonic plates. The scale of these changes can be discussed, but
certain conclusions are uncontroversial.
Firstly, online retailing took a quantum and permanent leap.
Previously high barriers of entry were toppled in a matter of weeks
and consumers quickly realised the convenience, safety and security
of online shopping. Consequently, online retail sales grew by over
40% in 2020, accounting for 28% of total sales and peaking at 36%
during the start of 2021, a level higher than the first lockdown.
The change in online grocery has been most apparent, accounting for
over 15% of food shopping at its peak after doubling from
pre-pandemic levels.
Secondly, an unusually large number of retailers have failed or
are seriously wounded. Many will blame the pandemic, but the truth
is that too many failed to embrace change with an excessive
physical estate and they failed to pivot. The pandemic has
exacerbated their difficulties and accelerated their demise.
Supporting business models that work and starving those that do not
is how economies adapt and evolve.
Thirdly, Covid-19 has materially changed the way we work and has
accelerated ongoing trends towards home working. Each day, it is
becoming more apparent that a substantially higher percentage of
office workers will spend some of their week working from home. The
pandemic has certainly not generated any new demand for
offices.
Unsurprisingly, real estate performances have polarised further.
Logistics, healthcare and grocery remain the standout performers,
enjoying an ever-wider margin of victory. Conversely, the
acceleration of secular declines in physical retail has seen
downward repricing of high streets and shopping centres to levels
that may now start to encourage alternative use or demolition. For
offices, less space is needed and this new reality is yet to be
reflected in their yields.
After years of denial, many companies are now experiencing the
full force of these structural changes. They are realising that
it's not just cyclical, it's permanent, and they aren't quite what
they were and are now worrying what they might become.
We continue to focus on the mega trends and disciplined
investing
Most of our real estate decisions are influenced by trends that
originate outside the property sector but that are fundamentally
shaping its future. We believe the secular trends affecting the
sector are as big a deal today as they were before the vaccines
arrived.
Our eyes are wide open to the changing landscape and so, whilst
we have had to react to the pandemic, our overriding focus has been
to regularly position the portfolio to benefit from the medium and
long term drivers of return. After all, mega trends are generally
not affected by short term or sporadic shocks, however
profound.
At 95%, our portfolio's alignment to logistics and long income
assets puts us on the right side of change and is delivering an
incredibly resilient performance as demonstrated by our strong
financials in the year.
We continue to pride ourselves on our process, discipline and
rationality. Over the year, we acquired GBP245 million of assets
and completed further developments in strong geographies, let to
good occupiers on long leases with strong income growth prospects.
Whilst we could have acquired much more, our rigorous approach
tempered our activity, ensuring that we remain well positioned for
the long term. We would prefer to engage in the pursuit of
excellent returns than the pursuit of assets under management.
We are obsessive about owning the best assets and have always
focused on 'winning the losers game' - selling the laggards and
running the winners. Whilst this sometimes involves unattractive
transaction costs and income interruption, we will always do the
right thing for long term performance. In the year, we disposed of
nearly GBP160 million of assets that have made their contribution
but are unlikely to excel in the future.
We are well positioned with a structurally supported portfolio
that will deliver on our 'collect, compound and compress' income
approach.
Own desirable real estate
Logistics continues to experience strong tailwinds and benefit
from a weight of money
Investment volumes for UK logistics in 2020 totalled GBP9
billion, reflecting a resilient Covid-19 performance, strong sector
dynamics and a rotation of capital out of legacy real estate. The
sector has benefitted from significant overseas money, partly
driven by an improved outlook for the UK following Brexit and a
stronger than expected economy. Therefore, unsurprisingly, yields
have compressed further and evidence suggests that prime yields
could fall further.
Occupational activity for logistics in 2020 saw another record
year, with 43 million sq ft taken up. Whilst a recent report
estimated that new warehouse supply could double this year to 40
million sq ft, much of this is pre-let and being immediately
absorbed by pent up and new demand, as evidenced by vacancy rates
which remain low at just ten months' supply. At the end of March
2021, a record 16 million sq ft of logistics was under offer,
representing a 40% uplift on a year ago, and this year is set to be
another very strong year. For the first time on record, supply for
both second hand and speculatively built units have fallen below 12
months of demand.
It is clear that short term occupier requirements experienced
during Covid-19 have turned into longer term needs as online
penetration continues its inexorable upward trajectory.
Furthermore, 'just in case' logistics infrastructures rather than
'just in time' strategies are adding an extra layer of demand.
Whilst Brexit concerns may have eased, supply chains are having to
deal with new issues, primarily border related, which are
increasing the need for localised inventory. A recent survey
suggested that the UK was one of the top European markets for
manufacturers looking to expand their occupational space.
With this almost perfect storm, logistics continues to generate
attractive rental growth. Whilst pockets of rent affordability
concerns have been raised, rents remain largely affordable and
still represent a very small proportion of a company's overall
operational costs.
Rental growth remains particularly strong in urban logistics and
we saw open market rent reviews on our urban assets of 17%.
Warehouse demand continues to grow to meet ever rising consumer
expectations of quicker and more accurate deliveries in an
environment where the supply response is challenged due to
competition from higher value alternative uses. A recent survey of
online retailers reported that nearly two thirds have expansion in
urban locations as a high priority.
The combination of further yield compression and strong rental
growth is reflected in our total distribution property returns for
the year of 18.3%, with urban assets again delivering another
strong performance. Urban is our largest sub sector exposure with
c.GBP1.0 billion of assets and remains our strongest conviction
call. Here, our ambitions remain undiminished despite fierce
investment competition.
Reflecting this competition, we undertook GBP67 million of
strategic urban disposals in the year which will position the
portfolio for better longer term success. These decisions are
driven by a belief that, even in logistics, not all assets will
outperform.
The sale proceeds were rotated into GBP124 million of high
quality and fairly priced urban investments leveraging our occupier
insights and sector contacts. Our experiences have shown that we
are more likely to benefit from positive surprises from high
quality assets in strong geographies where returns can be levered
by time and compounding.
Long income property is benefitting from zero interest rates and
negligible bond yields
The long income sector has had a strong year reflecting its
defensive, long dated, growing and collateral backed cash flow
characteristics. Long income assets with low operational
requirements and let to high quality occupiers at yields 400bps
higher than Government bonds are an attractive proposition and
increasingly sought after in a yield starved world.
Our investment in this sector is a simple one that we take
seriously. In contrast to the scoring system used in diving
competitions, you are not awarded bonus points in business for
'degree of difficulty'. We believe this 'alternative' sector is and
will continue to be less alternative and will be a stronger and
larger component of many real estate investors' portfolios.
As proponents of the sector, we were pleased to see our 'all
weather' long income assets prove highly resilient to the pandemic,
reflecting their essential or non discretionary attributes and a
low susceptibility to the migration of spend online. Their focus on
grocery and convenience food, roadside services, discount, trade
and DIY means that they will continue to benefit from the ongoing
changes in the way people work, shop and live.
During the year, our long income properties achieved very high
rent collection levels and a total property return of 8.3%.
We acquired GBP122 million of long income assets let on average
for 18 years to strong credits such as Waitrose, BP and Co-op and
benefitting from guaranteed rental growth. Growing investor demand
and improved liquidity for long income saw us sell GBP75 million of
long income properties where the rental growth outlook was less
certain.
Despite the yield compression that this sector has experienced,
we believe there is more to come as investors increasingly
appreciate the simplicities of collecting rent and compounding
returns.
Physical retail continues to reprice but remains largely a value
trap
The pandemic has acted as a catalyst for better integration of
online and physical shopping and, like many of our customers, we do
believe that some stores have a role to play in the retail supply
chain as showrooms, click and collect, returns or fulfilment
facilities.
However, many of the rents that retailers have committed to pay
are completely inappropriate for the role that their shops are now
performing. Therefore, we will continue to see retail rents
resetting as leases expire, tenants operate break clauses or the
premises are relet following the demise of the previous occupier.
This is no longer a prediction, it is happening.
Therefore, whilst many will talk of repositioning opportunities
or the offer of highly attractive yields, we remain of the opinion
that the majority of UK retail is 'over-shopped' and
'under-demolished'. The simple truth is that retail stores remain
at a fundamental and irreversible disadvantage to online
competition. Savills estimates that 142 million sq ft of retail
space in the UK, or 13% of all retail units, currently lie empty
and that without intervention, as much as 25% of retail space could
be redundant by the end of the decade. Furthermore, 40% of vacant
units have been empty for three or more years.
The sector appears to be in a vicious circle as the longer the
disruption continues, the less of the underlying cash flows will be
reinvested into the assets to make them 'fit for purpose'. We see
this creating a ticking capex timebomb as the assets that do
survive will need investment and those that fail to invest will see
value erosion accelerate.
This disruption has a lot further to go and we are living in a
truly unprecedented world which makes it difficult to have a strong
conviction on where it all lands. When something is too difficult
to assess with a strong conviction, then we prefer to just move on
to another opportunity. After all, these assets are often cheap for
a reason and the correlation between price and value is far from
perfect.
Generate income
The search for income continues to intensify
We believe that income will be the defining characteristic of
this decade's investing environment and that income-led total
return strategies will continue to outperform.
The pandemic and a temporary recession have lowered interest
rates further and ensured that they will inevitably stay lower for
longer as governments and central banks are unlikely to take their
foot off the quantitative easing accelerator.
A world of zero interest rates, negligible bond rates and lower
dividends is intensifying the demand for alternative assets that
can deliver a reliable, repetitive and growing income. The wide
availability of low cost debt, partially correlated to the
'lower-for-longer' promise, along with the re-emergence of
inflationary pressures, continues to push demand towards real
assets as capital seeks the combination of recurring cash flow and
inflation protection.
Real assets typically benefit from strong collateral backed cash
flows and these are highly attractive assets in today's backdrop.
Consequently, there has been a migration from low yielding
securities towards alternatives, which have become less alternative
and are now a larger percentage of money managers' portfolios.
Amidst a bearish treasury market and a volatile equity market,
there are green economic shoots taking hold. We believe that real
estate will benefit disproportionately given its capacity to tap
into both sides of the fixed income and equity spectrum. But smart
investing will focus on structurally supported assets, credit
strength as well as the reliability, sustainability and trajectory
of income.
The strength and resilience of our own strategy is evidenced by
our earnings and excellent rent collection. Collecting income is
the bedrock of successful long term investing and, whilst many will
focus on short term riches with higher risk strategies, we
appreciate the true benefit of compounding lower risk and longer
term returns. Everything worthwhile in investing comes from
compounding and underestimation of persistent growth is a huge
benefit to the patient investor.
Manage and enhance
We continue to strengthen our income and the quality of our
assets
As I have said previously, each quarter of 2020/21 has felt like
a year. As the pandemic ensued, we focused on ensuring that our
balance sheet and cash flow were robust, maintaining our strong
portfolio metrics and conservatively progressing developments.
Our assets have performed in line with or ahead of expectations.
Rent collection was strong at 98% and this performance reflects the
portfolio's resilience, the reliability of our income and the
strength of our occupier relationships. Recognising the impact that
the pandemic had on a few occupiers, we did offer rent free
concessions in exchange for value enhancing asset management
initiatives on 1% of our rent and forgave a further 0.4%. We also
agreed some short term rental deferrals, all of which continue to
be honoured.
Occupancy remains high at 98.7%, our gross to net income ratio
of 98.6% continues to reflect our low operational costs and we
continue to benefit from a high degree of contractual rental
uplifts. During the year, we concluded 173 occupier initiatives,
adding GBP5.3 million per annum of rent and delivering like for
like income growth of 3.1%. Lettings were signed with a WAULT of
13.2 years, helping to increase the portfolio's WAULT from 11.2
years to 11.4 years.
We are pleased with progress at our developments. At Bedford,
after successfully letting and completing phase one, we commenced
the speculative build out of another 0.5 million sq ft and are in
legals on letting 172,000 sq ft and in discussions on letting the
last unit. At Tyseley, we also pre-let 120,000 sq ft to Amazon
which will provide a state of the art last mile facility when it
completes in the summer.
We continue to embed sustainability and high ESG standards
across our activities driven by our own aspirations as well as
those of our customers and occupiers. We maintained our GRESB green
star over the year, formalised our Net Zero Carbon approach,
installed further solar capacity at our properties and increased
the proportion of the portfolio that is built to a BREEAM Very Good
or Excellent standard.
Expertise and relationships
We continue to benefit from our strong team and their
relationships
Our team's strong economic alignment to shareholders ensures a
strong conviction to make the right property and financial
decisions.
We maintain a highly rational and disciplined property approach,
selling assets that don't meet our strict investment criteria and
waiting patiently for attractive opportunities, even where this
causes a short term disruption to our income. As a result, we
continue to benefit from our decisions, as well as from some
excellent execution and hard work across our investment and asset
management teams.
Similarly, our finance team has performed strongly, delivering
on our equity and debt strategy, as well as working closely with
the property teams. GBP120 million of equity was raised through a
significantly oversubscribed placing which enabled us to tap new
and attractive investments that would seldom otherwise be available
in a normalised market. Furthermore, we significantly refinanced
GBP780 million of debt facilities which extended the maturity of
our debt at attractive margins, further diversified our lending
base and added a green financing framework to our borrowings.
Our response to the Covid-19 pandemic has focused on keeping our
people safe and working closely with our occupiers and
stakeholders. Our experienced team of 31 successfully and
seamlessly transitioned to remote working and operated highly
effectively in an intense period. It has been an amazing effort by
all and reflects the strength of our team. Our recent employee
survey again demonstrated our high levels of staff satisfaction,
with all employees agreeing that they enjoy working at
LondonMetric.
It was also pleasing to see that, despite the pandemic, we
scored highly in our recent occupier survey, with an average score
of 9.0 out of 10.0 for whether occupiers would recommend
LondonMetric as a landlord. We will continue to put our occupiers
at the forefront of our decision making.
Outlook
Despite a truly unprecedented year, lingering uncertainty and a
fast changing environment, we believe that the macro backdrop is
ideal for real estate, underpinned by almost zero interest rates,
negligible bond yields and an ageing population.
It is clear that structural trends that have been accelerated by
the pandemic are having a profound impact on future values across
the sector with strategies that assume the world returns to its
previous equilibrium severely disrupted. Therefore, in our view,
continued access to reliable, repetitive and growing income
requires investing in the winning sectors and the best credits.
This appreciation continues to frame our thoughts. Our pivot
over the last eight years to logistics and long income has put us
on the right side of change and getting the 'big' decisions right
is fundamental to our strategy. But, in order to achieve sector
leading returns, we are also conscious of making smart asset
decisions and so, whilst many are motivated by 'fee driven' buying,
we pride ourselves on process, discipline and rationality, opting
to pass on supposedly 'unique' opportunities and instead focusing
on quality.
Today, our GBP2.6 billion portfolio comprises a collection of
excellent assets that offer reliable, predictable and growing
income streams. Despite the recent strength in our capital values,
we believe this is for all the right reasons; high occupancy,
resilient cash flows and future rental growth.
For the time being, we think that pricing has further to travel
and therefore, together with its strong income characteristics, we
are optimistic about the portfolio's future performance. After all,
when you own quality, time creates wealth.
We believe that a focus on quality, a strong personal alignment
and an intense belief in the power of compounding will allow us to
generate the best possible returns for the longest period of time
and achieve our ambition to becoming a 'dividend aristocrat'.
Property Review
Overview
We invest in real estate that can deliver repetitive, reliable
and growing income returns. Our actions aim to continuously improve
the portfolio's quality, sustainability and income.
Delivering strong total property returns, driven by
distribution
Over the year, the portfolio delivered a strong total property
return of 13.4%, significantly outperforming the IPD All Property
index of 1.2%:
-- Distribution delivered 18.3% with urban and regional seeing
the strongest performance;
-- Long income delivered 8.3%; and
-- Offices delivered 0.3% and retail parks delivered 3.8%.
Outperformance was driven by both management actions and through
capturing rental reversion which helped to deliver strong capital
growth of 8.0%:
-- Distribution delivered a 13.7% capital return; and
-- Long income delivered a 2.6% capital return.
The investment portfolio's EPRA topped up net initial yield is
4.6% and the equivalent yield is 5.1% with a like for like
valuation yield compression of 27 bps over the year.
ERV growth of 1.6% for the portfolio was driven by distribution
which saw a 3.2% increase; urban logistics and regional
distribution saw growth of 3.5% and 5.0% respectively, whilst mega
was flat.
Very strong rent collection despite Covid-19
Despite the uncertainty caused by the Covid-19 pandemic, our
assets have performed in line with or ahead of expectations which
reflects their alignment to structurally supported sectors.
Our rent collection during the year was strong, with 98.1% of
rent demanded in the year collected. We did, however, recognise the
negative impact that the pandemic has had on a few of our occupiers
and offered rent free concessions in exchange for value enhancing
asset management initiatives on 1.1% of our rent. In addition, we
forgave a further 0.4% leaving just 0.4% of rent unpaid.
Our collection rates for the first quarter of the new financial
year are equally strong and we have collected 99% of March
quarterly and monthly rents due.
Most of the rent that remains unpaid relates to companies in
administration, some of which is associated with a property where
we are obtaining vacant possession for a new letting to Lidl.
Of the total rent demanded in the year, GBP1.5 million is
subject to deferred payment arrangements, all of which are being
honoured.
Our portfolio metrics continue to reflect our focus on
income
The portfolio's WAULT increased from 11.2 years to 11.4 years,
continuing to provide good income security with only 8.4% of income
expiring within three years.
Occupancy remains high at 98.7% and our gross to net income
ratio of 98.6% continues to reflect the portfolio's very low
operational requirements.
In the year, we undertook 173 occupier initiatives adding GBP5.3
million per annum of rent and helping to deliver like for like
income growth of 3.1%. These consisted of:
-- Contractual rental uplifts which apply to 57% of our income,
where 46 fixed and RPI linked reviews were settled delivering
GBP0.5 million of increased rent at an average of 8% above passing
on a five yearly equivalent basis;
-- Open market rent reviews, where 26 reviews were settled
delivering GBP1.0 million of increased rent at an average of 18%
above passing on a five yearly equivalent basis; and
-- Leasing activity, where we signed 101 new leases and regears,
mostly on urban logistics, delivering GBP3.8 million of increased
rent with a WAULT of 13.2 years.
Post year end, we are in legals and discussions on lettings
which represent an additional GBP4.4 million per annum of rent,
mainly relating to our Bedford Link development.
Investment activity continues to improve the portfolio's quality
and resilience
In the year, we acquired GBP245 million of assets. Over half
were urban logistics with the remainder primarily grocery-led
convenience and roadside properties.
These properties are let to strong credits for an average of
17.1 years and acquired at a NIY of 4.6% and a reversionary yield
of 5.1%, with 87% of income subject to contractual rental uplifts.
Reflecting our geographical focus, 53% of acquisitions were in
London and the South East and a further 21% were in the
Midlands.
Post year end, we have acquired a further GBP68 million of urban
warehousing and long income properties.
Disposals in the year totalled GBP159 million and were at a NIY
of 5.7%. The assets had a WAULT of nine years and offered less
certainty of income and rental growth.
Long income assets accounted for just under half of total
disposals, whilst urban logistics accounted for c.40% of total
disposals. Whilst we continue to build our urban portfolio, we are
prepared to sell where the market's future return expectation
exceeds ours.
The balance of our disposals related to non core assets and
consisted of:
-- Two offices in Bristol and Birmingham let to Regus and
Highways England which were let for a further nine years;
-- Two retail assets in Kings Heath, Birmingham and the Isle of
Man; and
-- Four residential flats.
Post year end, we have sold a further GBP22 million of
properties consisting of:
-- Two long income assets for GBP12 million; and
-- An office for GBP10 million let to Beiersdorf in Birmingham
which completes in September.
We have now sold 12 former Mucklow assets for GBP62 million,
including nearly half of the Mucklow office portfolio. These
properties delivered a total annualised return of 10.6% since
acquisition.
Acquisitions in the year
(1)
-------------------------------- ---------
Urban Logistics GBP123.5m
-------------------------------- ---------
Long Income - Grocery & Roadside GBP107.6m
-------------------------------- ---------
Long Income - Other GBP14.2m
-------------------------------- ---------
Disposals in the year (2)
-------------------------------- --------
Urban Logistics GBP66.6m
-------------------------------- --------
Long Income - Grocery & Roadside GBP19.5m
-------------------------------- --------
Long Income - Other GBP55.0m
-------------------------------- --------
Office & Residential GBP12.4m
-------------------------------- --------
Retail Parks GBP5.4m
-------------------------------- --------
1 Includes GBP35.7 million of acquisitions, predominantly urban,
that exchanged in the year but that complete post year end
2 Excludes GBP64.4 million of disposals, predominantly larger
box distribution, that exchanged in the previous year but completed
in the year. Includes GBP15.2 million of disposals that exchanged
in the year but completed post year end
Continued alignment to structurally supported distribution and
long income
Assisted by a strong capital performance and further net
investment into the sector, our distribution platform increased in
value to GBP1,829 million, representing 70.8% of the portfolio and
up from 69.8% last year.
The urban logistics sector is our key conviction call and is our
largest weighting, representing 38.5% of the portfolio. Over the
year, our weighting to mega distribution fell further to 13.6%, due
to the completion of a mega warehouse sale that exchanged in the
prior year.
Long income increased slightly to represent 24.5% of the
portfolio, following the significant net investment into grocery
and roadside assets, with this sub-sector now dominating our long
income exposure.
The remaining 4.7% of the portfolio is deemed non core and split
between eight offices, five retail parks and four London
residential flats.
Urban Logistics 38.5%
---------------------- -----
Regional Distribution 18.7%
---------------------- -----
Mega Distribution 13.6%
---------------------- -----
Long Income 24.5%
---------------------- -----
Retail Parks 2.9%
---------------------- -----
Offices & Residential 1.8%
---------------------- -----
Including post year end activity, distribution now represents
72% of the portfolio, long income represents 24% and the remaining
non core assets account for 4%.
We continue to focus on income diversification and occupier
credit
Our investment and asset management actions over a number of
years have increased the resilience of our portfolio by not only
investing in structurally supported sectors but also by improving
our income's diversification, granularity and security. We are very
mindful of the credit strength of our occupiers and this focus has
been reflected in our strong rent collection.
We have a diverse occupier base by type of activity:
-- Third Party & Retail Logistics accounts for 37% of
income;
-- Business Services & Trade accounts for 32%, spread across
a broad range of sectors;
-- Grocery & Roadside accounts for 12%;
-- Electrical, Home & Discount Stores account for 12%;
and
-- Leisure & Other sectors account for 3% and 4%
respectively.
Our top ten occupiers represent 36% of contracted income,
compared to 36% in 2020 and 51% in 2019. In the year, we
significantly increased our exposure to Amazon and Waitrose who are
two of our ten largest occupiers.
Contracted rent increased over the year from GBP123.3 million to
GBP124.3 million which, together with post year end investment
activity, rises to GBP126.5 million.
Our occupier survey was carried out in March 2021 and we
received very good feedback despite the difficult economic
backdrop.
Our top occupiers numbering 89 and representing over 80% by
income were contacted and responses were received from occupiers
representing 55% of income.
We scored an average of 9.0 out of 10.0 in terms of whether
occupiers would recommend us as a landlord, with our top 15
occupiers scoring us higher at 9.3.
In terms of how well our properties meet our occupiers' needs,
we scored 8.3 out of 10.0 which shows an increase on our 2019 and
2018 survey scores.
Distribution review
Our warehouses provide critical infrastructure to our occupiers
and continue to benefit from attractive supply/demand dynamics.
Overview
Our distribution assets are spread across the urban, regional
and mega sub-sectors. Including developments, we increased our
exposure to distribution over the year from GBP1,638 million to
GBP1,829 million. As at 31 March 2021, this sector accounted for
70.8% of our overall portfolio with urban logistics the largest
sub-sector weighting.
The average WAULT on these assets is 11 years, which is
unchanged over the year. Occupancy remains high at 98.1%, also
unchanged from the previous year, with all of our regional and mega
assets now fully let and just 3.3% vacancy on our urban assets.
Our distribution assets performed well over the year, delivering
a total property return of 18.3% and driven by strong yield
compression, rental growth and further gains on development
activity.
Urban and regional delivered strong returns of 20.1% and 17.3%
respectively, whilst mega distribution delivered a return of
14.8%.
With stronger organic rental growth in urban logistics, we
continue to prefer inflation linked/fixed rental uplifts on our
larger box assets and open market rent review on our urban
assets.
Increased alignment to urban logistics
In urban logistics, rental growth remains strongest, driven by
severely restricted supply and strong occupier demand. Urban
logistics has been our strongest conviction call and one that
prompted our acquisition of Mucklow in 2019, which materially
increased our urban platform.
Over the year, the value of our urban assets increased from
GBP831 million to GBP994 million, accounting for 54% of
distribution assets and totalling c.100 properties. At eight years,
the WAULT on our urban assets is significantly lower than mega or
regional, but these assets benefit from higher alternative use
values and better income growth prospects, with average ERVs 9%
higher than average passing rents of GBP6.90 psf.
All of our distribution investment activity in the year related
to urban warehousing. Whilst strong investor appetite continues to
reduce the number of compelling investment opportunities, we did
acquire GBP124 million of long-let assets. Strong market pricing
did, however, prompt us to sell GBP67 million of shorter let
buildings in poorer geographies.
Including post year end activity, over 50% of our urban
portfolio is now located in London and the South East with a
further 34% in the Midlands.
Distribution Portfolio
As at 31 March 2021 Urban Regional Mega
------------------------------ ------------------- ------------------------ --------------------------
Typical warehouse size Up to 100,000 sq ft 100,000 to 500,000 sq ft In excess of 500,000 sq ft
------------------------------ ------------------- ------------------------ --------------------------
Value(1) GBP993.7m GBP483.5m GBP351.9m
------------------------------ ------------------- ------------------------ --------------------------
WAULT 7.9 yrs 13.1 yrs 15.2 yrs
------------------------------ ------------------- ------------------------ --------------------------
Average rent (psf) GBP6.90 GBP6.40 GBP5.70
------------------------------ ------------------- ------------------------ --------------------------
ERV (psf) GBP7.50 GBP7.30 GBP5.60
------------------------------ ------------------- ------------------------ --------------------------
Topped up NIY 4.4% 4.0% 3.8%
------------------------------ ------------------- ------------------------ --------------------------
Contractual uplifts 37% 76% 100%
------------------------------ ------------------- ------------------------ --------------------------
Total property return in 2021 20.1% 17.3% 14.8%
------------------------------ ------------------- ------------------------ --------------------------
1 including developments
Distribution investment activity
Acquisitions
GBP124 million of urban logistics was acquired across 12 assets
with a WAULT of 16 years:
-- 137,000 sq ft new urban warehouse acquired for GBP20.5
million and let for 15 years to LSE Group Holdings, the UK's
largest pure online retailer of home lighting. It has a low site
density and is well located in Irlam, Manchester, between the M60
and M6. Built to a BREEAM Very Good standard;
-- 122,000 sq ft new urban warehouse acquired for GBP18.1
million and let for 15 years to ERIKS, with whom LondonMetric has a
strong existing relationship. It is well located in Oldbury close
to J2 of the M5. Built to a BREEAM Very Good standard;
-- 73,000 sq ft of warehousing acquired for GBP10.4 million and
let mainly to IKEA for 6 years in Warrington;
-- 66,000 sq ft warehouse acquired for GBP23.9 million and let
to TalkTalk for 26 years in Milton Keynes, near the city
centre;
-- 46,000 sq ft new warehouse acquired for GBP5.5 million and
let to Heartbeat Manufacturing for 16 years in Redditch; built to
BREEAM Very Good standard;
-- 42,000 sq ft warehouse acquired for GBP7.3 million and let to
Speedy Hire for 10 years in Milton Keynes;
-- 37,000 sq ft of vacant warehousing acquired for GBP13.5
million in Streatham and Brent Cross, London, with c.75% pre-let
for 20 years to Jacuna Kitchens, a dark kitchens operator;
-- 32,000 sq ft warehouse acquired for GBP10.9 million and let
at a rent of GBP13.40 psf to Ocado for 8 years in Walthamstow;
-- 20,000 sq ft warehouse acquired for GBP7.7 million and let to
Ford for 15 years in Alperton, London near Park Royal;
-- 14,000 sq ft highly reversionary warehouse acquired for
GBP3.2 million and let to Royal Mail in Epsom for 5 years; and
-- 7,000 sq ft highly reversionary warehouse acquired for GBP2.5
million and let for 15 years in Colliers Wood, London.
Post year end GBP53.1 million of urban logistics was acquired,
including:
-- 115,000 sq ft for GBP43.8 million, let to Reynolds for 23
years in Waltham Cross;
-- 28,000 sq ft for GBP5.3 million, let to HTC Group for four
years in Croydon; and
-- 19,000 sq ft for GBP3.0 million, let to Deralam Laminates for
four years in Dunstable.
Disposals
GBP67m of urban logistics was disposed across nine shorter let
assets with a WAULT of 8 years:
-- 500,000 sq ft portfolio disposal of six distribution
warehouses sold for GBP57.3 million in various locations including
Worcester, Leamington Spa, Royston, and Huyton. The assets are let
to Hamleys, CEVA, ITAB, Transmec and Grupo Antolin (an automotive
supplier to JLR), and have a WAULT to first break of 7.5 years;
-- 25,000 sq ft warehouse sold for GBP3.4 million in Edinburgh
with three years left to break;
-- 21,000 sq ft warehouse sold for GBP3.5 million let to Fenton
Packaging in Hemel Hempstead with a WAULT of less than a year,
and
-- 12,000 sq ft warehouse sold for GBP2.4 million in Birmingham
with a WAULT of less than a year.
Distribution asset management activity
Distribution lettings and regears
Distribution lettings and regears in the year were signed on 1.1
million sq ft. These deals added GBP4.2 million per annum of
income, with a WAULT of 9.8 years and incentives equivalent to four
months' rent free.
New lettings were signed on 0.5 million sq ft adding GBP4.0
million per annum of rent with a WAULT of 9.6 years. All deals
apart from one were on urban warehouses and included:
-- 141,000 sq ft to Pets at Home at our previously vacant
regional warehouse in Stoke;
-- 120,000 sq ft to Amazon at our Tyseley development where they
have signed a 15 year pre-let;
-- 38,000 sq ft to Network Rail at Star Gate in Birmingham;
-- 34,000 sq ft to online pharmacy Echo at a recently
refurbished property in Greenford;
-- 30,000 sq ft to National Grid at Nexus Point in Birmingham,
where we have relet a vacant and recently refurbished warehouse on
a ten year lease; and
-- 16,000 sq ft to Nicoman at our completed development at
Tyseley.
Regears were signed across 0.6 million sq ft generating
additional income of GBP0.2 million per annum and increasing the
WAULT from six years to ten years. These regears included:
-- 78,000 sq ft in Thorne;
-- 70,000 sq ft in Barton;
-- 51,000 sq ft in Ashby-de-la Zouch;
-- 49,000 sq ft at Star Gate in Birmingham;
-- 48,000 sq ft in Fareham, where we also settled a rent
review;
-- 41,000 sq ft in Milton Keynes; and
-- 35,000 sq ft in Wednesbury.
Distribution rent reviews
Distribution rent reviews in the year were settled across 3.0
million sq ft, adding GBP1.2 million per annum of income at 12%
above previous passing rent*. These consisted of:
-- 23 urban reviews settled at 15% above passing rent*, with
open market reviews achieving 17% uplifts on average;
-- Three regional reviews settled at 19% above passing rent*,
with two open market reviews settled with DHL and Royal Mail
achieving 27% uplifts; and
-- Two mega reviews, both contractual uplifts, settled at 8%
above passing rent*.
Unsurprisingly, open market rent review increases in urban
logistics were strongest in London and the South East at an average
uplift of 28% and as high as 39%.
* on a five yearly equivalent basis
Long income review
Our long income assets offer long dated income with income
growth aligned to grocery, roadside, trade and essential/discount
shopping.
Our long income assets are typically single tenant assets with
low operational requirements that are benefitting from the changes
in the way people live and shop. They are insulated from structural
dislocation, predominantly focused on grocery, wholesale, roadside
services, discount and essential retail, trade and DIY.
The value of our long income assets is GBP635 million,
representing 24.5% of our portfolio. They are 100% let to strong
occupiers with a WAULT of 14.2 years, average rents of GBP15.60 psf
and a topped up NIY of 5.4%. Average asset size is c.GBP5 million
with 63% of income subject to contractual rental uplifts.
Long Income portfolio breakdown
As at 31 March 2021 Grocery & Roadside NNN Retail Trade, DIY & Other Leisure(2)
------------------------------ ------------------ ---------- ------------------ ----------
Value(1) GBP285.4m GBP175.7m GBP122.0m GBP52.1m
------------------------------ ------------------ ---------- ------------------ ----------
WAULT 16.5 years 9.8 years 14.1 years 20.8 years
------------------------------ ------------------ ---------- ------------------ ----------
Average Rent (psf) GBP18.40 GBP20.70 GBP8.50 GBP17.10
------------------------------ ------------------ ---------- ------------------ ----------
Topped up NIY 4.7% 6.5% 5.0% 6.2%
------------------------------- ------------------ ---------- ------------------ ----------
Contractual uplifts 89% 29% 52% 100%
------------------------------- ------------------ ---------- ------------------ ----------
Total property return in 2021 7.9% 10.0% 14.1% -13.8%
------------------------------- ------------------ ---------- ------------------ ----------
1 Including developments
2 Leisure consists of five out of town cinemas let to Odeon and
one Premier Inn hotel
Grocery & Roadside
Grocery-led convenience forms c.70% of this segment with the
remainder made up of convenience stores with attached petrol
filling stations, drive through coffee outlets and automated car
washes, all located in high density urban areas. We have been
significant net acquirers in this segment.
Key occupiers
------------- ------------
Aldi Euro Garages
------------- ------------
BP Lidl
------------- ------------
Co-op M&S
------------- ------------
Costco Waitrose
------------- ------------
NNN Retail
These are primarily single or cluster assets let to discount,
essential, electrical and home retail occupiers. 49% of the assets
are located in London and the South East, with the largest located
in New Malden, London. These assets typically benefit from high
alternative use values.
Key occupiers
------------- -------------
B&M Halfords
------------- -------------
Currys PC
World Home Bargains
------------- -------------
DFS Pets at Home
------------- -------------
Dunelm The Range
------------- -------------
Trade, DIY & Other
A significant proportion of this segment consists of assets that
are trade/DIY focused. A recent addition to this sub-sector has
been prominent roadside service centres concentrated around the
South East, let at low rents to Kwik Fit, with high alternative use
values.
Key occupiers
------------- -----------
Howdens Safestore
------------- -----------
Jewson Selco
------------- -----------
Kwik Fit Topps Tiles
------------- -----------
MKM Wickes
------------- -----------
Long Income investment activity
Acquisitions
GBP121.8 million of long income assets were purchased at a NIY
of 4.9% and a reversionary yield of 5.3%. They were mainly grocery
and roadside assets, had a WAULT of 18.3 years and mostly
benefitted from contractual rental uplifts. They have strong
residual value supported by alternative use, principally
residential and, in some cases, the vacant possession value is
above the purchase price.
Grocery acquisitions consisted of:
-- GBP62.0 million sale and leaseback portfolio let to Waitrose
in Keynsham, Malmesbury, Paddock Wood, Towcester and Yateley. The
assets are also used for online fulfilment; and
-- GBP5.9 million M&S Food Hall development in Derby.
Convenience service station acquisitions consisted of:
-- GBP12.5 million portfolio of four Co-op assets in
Basingstoke, Dagenham and South Wales;
-- GBP10.8 million portfolio of BP/M&S assets in Brentwood,
Pevensey and Lewes;
-- GBP5.4 million sale and leaseback of two London assets let to
TG Convenience;
-- GBP5.0 million Co-op asset in Lymington;
-- GBP4.0 million asset let to MFG in Worcester; and
-- GBP2.0 million asset in Rushden let to Euro Garages with a
drive through Starbucks.
Other acquisitions included:
-- GBP9.6 million sale and leaseback portfolio of five London
service centres let to Kwik Fit; and
-- GBP4.6 million Wickes store in Wigston.
Disposals
GBP74.5 million was sold at a NIY of 5.6% and with a WAULT of
10.9 years, consisting of:
-- An asset in Leicester predominantly let to B&Q, sold for
GBP26.3 million;
-- M&S food stores in Haslemere and Ferndown, sold for
GBP14.7 million at a NIY of 4.0%;
-- 13 Kwik Fit service centres, sold for GBP10.8 million at
yields c.100bps better than paid at purchase;
-- Two Wickes stores in Derby and Halesowen, sold for GBP9.9
million;
-- A NNN retail asset in Llanelli, sold for GBP9.2 million
(LondonMetric share: GBP4.6 million);
-- An Aldi store in Hull, sold for GBP4.1 million;
-- A Matalan unit in Leicester, sold for GBP3.4 million; and
-- An IMO car wash, sold for GBP0.7 million.
The properties in Leicester, Halesowen and Hull, along with
three of the Kwik Fits were sold as a GBP40.9 million portfolio to
Realty Income. Combined, they delivered an ungeared IRR of 8% pa
and were sold at a 7% premium to book value.
Post year end, GBP14.9 million of assets were acquired at a NIY
of 6.0% and with a WAULT of 11 years. They consist of a Range store
in Truro for GBP6.6 million, a portfolio of Halfords Autocentres
for GBP5.8 million and a trade park in Bognor Regis for GBP2.5
million. We have also disposed of GBP12.2 million with a WAULT of 9
years, consisting of an M&S Foodhall in Derby and a NNN Retail
asset in North Shields.
Long income asset management activity
In the year, we signed 11 deals with an overall WAULT of 21.1
years.
Ten of the deals were regears where leases were extended by five
years to 21 years:
-- On our five Odeon cinemas, in response to the pandemic, we
agreed to extend leases by four years in return for a rent free
period;
-- On our NNN retail portfolio, we signed ten year lease
extensions on three of our six DFS stores in exchange for a rebase
of the rent. These assets were historically over rented and the new
19 year term certain significantly extends our security of income;
and
-- On two Co-op stores, we signed a nine year lease extension
which lengthens the leases on those properties to 20 years.
We signed one new lease with Lidl for 25 years at our
repositioned asset in Orpington.
Rent reviews were settled on 39 assets in the year generating an
uplift of GBP0.3 million at 9% above previous passing on a five
yearly equivalent basis. Nearly all of these reviews were RPI or
fixed uplifts, mostly relating to our Grocery and Roadside
assets.
Development review
In the year, we completed 445,000 sq ft of developments
representing GBP3.2 million of additional rent per annum at a yield
on cost of 5.9%. A further 470,000 sq ft is under development that
is expected to generate GBP4.1 million of additional rent per
annum, reflecting a yield on cost of 7.3%.
Yield
Income on cost
Completed in the year Area sq ft '000 GBPm %
------------------------------- --------------- ------ --------
Croda, Goole (funding) 232 1.3 5.2
------------------------------- --------------- ------ --------
Bedford (Unit 2)(1) 172 1.3 7.3
------------------------------- --------------- ------ --------
Wallingford (funding) 22 0.3 5.0
------------------------------- --------------- ------ --------
Weymouth (Aldi) 19 0.3 5.7
------------------------------- --------------- ------ --------
Total 445 3.2 5.9
------------------------------- --------------- ------ --------
Under construction at year end
------------------------------- --------------- ------ --------
Bedford (Unit 1)(1) 350 2.5 8.5
------------------------------- --------------- ------ --------
Tyseley (Phase 2) 120 1.6 6.0
------------------------------- --------------- ------ --------
Total 470 4.1 7.3
------------------------------- --------------- ------ --------
1 Anticipated yield on cost and rents
Croda funding
Completed development in the year of a 232,000 sq ft
distribution warehouse pre-let to Croda for 20 years which was
forward funded. The building is BREEAM Very Good.
Bedford - Unit 1
We are in discussions on a pre-let of the unit. The building is
expected to complete in Q4 2021 and be BREEAM Excellent, with a
500kW solar PV scheme envisaged.
Bedford - Unit 2
Construction completed of a 172,000 sq ft distribution
warehouse. We are under offer on a pre-let with an ecommerce
packaging company on a long lease. The building is BREEAM
Excellent, with a 250kW solar PV scheme envisaged.
Tyseley
Construction underway of a 120,000 sq ft distribution warehouse.
The warehouse has been pre-let to Amazon on a new 15 year lease
with inflation linked rent reviews. The building is expected to be
BREEAM Excellent and a solar PV scheme is envisaged. Completion of
the building is expected in summer 2021. The warehouse has a low
site cover of 24% and forms part of a wider scheme which extends to
over 250,000 sq ft.
Weymouth
A 19,000 sq ft convenience store let to Aldi completed in July
2020. The building is BREEAM Very Good and a 11kW solar PV system
was installed. There is further development potential at the site
of up to 70,000 sq ft.
Wallingford funding
We completed the forward funding development of a 22,000 sq ft
trade counter in Wallingford let to MKM and Howdens with a WAULT of
18 years. The building is BREEAM Good.
Other smaller redevelopment opportunities
Many of our long income assets are well located in suburban
locations with strong alternative use, such as residential, and
have the potential to be repurposed over time. We continually look
to upgrade existing long income assets and exploit potential
opportunities.
Near term developments include reconfiguration of:
-- A 51,000 sq ft long income NNN retail asset in New Malden,
London, which is predominantly let to Dixons and where planning has
been received to accommodate an additional convenience food
store;
-- A 48,000 sq ft asset in Orpington, London, previously let to
Carpetright, where we have agreed a new 25 year lease with Lidl to
accommodate them alongside a smaller Carpetright unit. Planning has
been received and works have commenced; and
-- A 32,000 sq ft long income trade asset in Ashford, Surrey,
where we are securing vacant possession and where planning is in
progress to accommodate an additional store let to Lidl on a 25
year lease.
ESG
We continue to improve our ESG focus, particularly on
environmental matters
Our aim is to minimise the environmental impact of our business,
maximise energy efficiency and improve the resilience of our
properties. We recognise the importance of a comprehensive ESG
focus and each year set specific corporate targets.
As part of our environmental focus, during the year, we:
-- Extended ESG related personal objectives for all
employees;
-- Established a Net Zero Carbon framework; and
-- Put in place GBP450 million of debt facilities with a green
financing framework that specifically targets building
improvements.
Over the year, we maintained our Green Star status in the Global
Real Estate Sustainability Benchmark ('GRESB') survey. Our score of
65% continues to compare favourably against the peer score of 61%
and is significantly up from the 34% achieved in 2014.
We also maintained our:
-- BBB rating by MSCI;
-- Gold Award by EPRA sBPR; and
-- Inclusion in the FTSE4Good Index.
Our Net Zero Carbon ('NZC') framework
We set three specific NZC ambitions as part of our longer term
target of becoming NZC well before the UK's target date of 2050.
These ambitions will be refined regularly to meet latest industry
guidance:
1. Our operations will be net zero by 2023
Operationally, we continue to make good progress and have
achieved an 88% reduction in our absolute landlord energy
consumption since 2015 with significant like for like energy
reductions also achieved.
We will continue to implement further reductions where possible
and ensure that our energy supplies are all from renewable sources,
aligned to industry procurement best practice. Furthermore, by
2023, we have committed to offset residual carbon to ensure our
operations are NZC.
2. We will continue to reduce emissions from development
activity and new developments will be NZC by 2030
Our development activity continues to focus on building highly
efficient buildings. All of our large completed developments in the
year were certified as BREEAM Very Good or Excellent and our major
developments on site at Bedford Link and Tyseley are also expected
to be BREEAM Excellent.
As part of our efforts to reduce carbon on developments, we are
measuring embodied carbon and challenging our supply chains to
minimise waste and select low carbon materials.
At Bedford Link, we have reduced embodied carbon over the
different phases of development. We have looked to learn from the
build out of phase one and this learning is expected to generate a
c.25% reduction in embodied carbon from on site carbon reduction
measures and amendments to material specification. 750 kW of solar
PV capacity is envisaged under tenant incentive arrangements.
From 2022, we will introduce shadow carbon pricing on select
flagship developments such that carbon is either offset or an
equivalent value is reinvested into green initiatives.
3. We will assist occupiers to help them meet their NZC targets
and, from 2035, we will offset any of their residual carbon
As part of our drive to upgrade the quality of our assets, we
continue to explore and progress energy efficiency initiatives
including solar PV, LED lighting upgrades, roof works and electric
vehicle charging.
In our recent occupier survey, 73% of occupiers have now
upgraded LED lighting installed. This level is higher than our own
data suggested and reflects the quick payback achievable from LEDs,
where in some cases energy consumption has been reduced by up to
40%.
Our activity in the year has increased the proportion of assets
built to a BREEAM Very Good or Excellent standard from 20% to 26%.
We have also increased the proportion of our assets with an EPC 'A
- C' rating from 71% to 74%. Furthermore, 1.5 MW of solar PV was
added with further solar opportunities identified.
As part of progressing our NZC targets, we are increasingly
focused on understanding how we can increase the number of NZC
ready buildings we own. An important part of this focus is
measuring emissions from all occupiers and, in the year, we
increased occupier energy data coverage to over 40%.
From 2035, we will aim to offset any occupier residual carbon at
our buildings.
Financial review
The Covid-19 pandemic has dominated every aspect of our business
and personal lives this past year. Our employees, tenants and other
stakeholders have all faced unprecedented challenges with enforced
lockdown restrictions impacting the way we live and work. Despite
this backdrop, we are reporting another very strong set of results
reflecting both earnings and NAV progression, which is testament to
our resilient portfolio, considered investment decisions and
proactive asset management actions. We were delighted with the
support of investors, as both our GBP120 million equity placing and
GBP380 million private placement were significantly oversubscribed.
Our banking relationships have helped us agree new debt facilities
and refinance existing short dated unsecured loans.
EPRA earnings per share increased by 2.8% to 9.52p, driven by a
6.4% increase in net rental income and a 13.8% reduction in net
finance costs. Earnings growth includes a full year's contribution
from the A&J Mucklow Group, which we acquired in June 2019.
Rent collection has been a key priority and our collection rates
have been exceptionally good, with 98.1% of rent due in the year
collected. We have continued to pay a dividend throughout the
pandemic and to grow the total dividend. Our dividend for the year
of 8.65p is 1.1 times covered by EPRA earnings and represents a
4.2% increase over last year.
IFRS reported profit is GBP257.3 million compared to a loss of
GBP5.7 million last year and is predicated on a very strong
portfolio performance and revaluation uplift of GBP173.7 million.
The reported loss last year included one-off costs relating to the
Mucklow acquisition of GBP57.2 million and a revaluation loss of
GBP12.0 million. IFRS net assets have increased by 20.9% to
GBP1,731.3 million. Our portfolio continues to be well positioned
to weather any ongoing disruption, with 95.3% of our assets in the
structurally supported logistics and long income sectors.
EPRA has introduced new reporting metrics for net asset value
this year and we have adopted EPRA net tangible assets ('NTA') as
our primary measure and key performance indicator to replace EPRA
net asset value. EPRA NTA per share is on a fully diluted basis and
prior year comparatives have been presented for the new measure
accordingly. EPRA NTA per share increased 11.7% this year to 190.3p
(2020: 170.3p per share).
Our financial position was strengthened by the GBP120 million
equity placing in May 2020, which alongside asset disposals and the
portfolio revaluation gain, has helped to reduce LTV to 32.3%
(2020: 35.9%). This level of gearing provides flexibility to take
advantage of investment opportunities whilst maintaining
significant headroom under banking covenants.
Post year end in April, we entered into a new GBP380 million
private debt placement with a number of institutional investors in
North America and the UK. The placement, which was upsized from an
initial GBP150 million due to demand, has a blended maturity of
11.1 years, coupon of 2.27% and a GBP50 million tranche that is
subject to a green use of proceeds framework. Also in April, we
entered into two new revolving credit facilities with three and
five year terms for GBP225 million and GBP175 million respectively,
both of which incorporate a green framework.
Taken together with the placement, we have completed GBP780
million of new debt, replacing the existing revolving credit
facilities and other existing debt facilities that are approaching
maturity. Our debt maturity has lengthened from 4.2 years at the
year end to 8.2 years and our hedging has increased from 45% at
year end to 83%. Following the refinancing, we have substantial
headroom of GBP338 million (2020: GBP220 million) and our average
debt cost is low at 2.6% (2020: 2.9%).
Presentation of financial information
The Group financial statements have been prepared in accordance
with IFRS. Management monitors the performance of the business
principally on a proportionately consolidated basis, which includes
the Group's share of joint ventures ('JV') and excludes any
non-controlling interest ('NCI') on a line by line basis. The
figures and commentary in this review are presented on a
proportionately consolidated basis, consistent with our management
approach, as we believe this provides a meaningful analysis of
overall performance. These measures are alternative performance
measures, as they are not defined under IFRS.
The Group uses alternative performance measures based on the
European Public Real Estate Association ('EPRA') Best Practice
Recommendations ('BPR') to supplement IFRS, in line with best
practice in our sector, as they highlight the underlying
performance of the Group's property rental business and exclude
property and derivative valuation movements, profits and losses on
disposal of properties, financing break costs, goodwill and
acquisition costs, all of which may fluctuate considerably from
year to year. These are adopted throughout this report and are key
business metrics supporting the level of dividend payments.
EPRA has introduced three new measures of net asset value as
disclosed in note 8 to the financial statements. EPRA NTA is
considered to be the most relevant measure for the Group and
replaces EPRA NAV as the primary measure of net asset value. EPRA
NTA per share is on a fully diluted basis and prior year
comparatives have been presented for the new measure
accordingly.
Further details, definitions and reconciliations between EPRA
measures and the IFRS financial statements can be found in note 8
to the financial statements, Supplementary notes i to vii and in
the Glossary.
Income statement
EPRA earnings for the Group and its share of joint ventures are
detailed as follows:
100% 100%
owned JV NCI 2021 owned JV NCI 2020
For the year to 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Gross rental income 121.3 5.3 (1.5) 125.1 112.3 6.3 (1.3) 117.3
Property costs (1.6) (0.2) - (1.8) (1.2) (0.2) - (1.4)
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Net rental income 119.7 5.1 (1.5) 123.3 111.1 6.1 (1.3) 115.9
Management fees 0.9 (0.4) - 0.5 1.1 (0.5) - 0.6
Administrative costs (15.8) - - (15.8) (15.8) (0.1) - (15.9)
Net finance costs (21.5) (1.2) 0.2 (22.5) (24.9) (1.5) 0.3 (26.1)
Other (0.1) - 0.2 0.1 (0.2) - 0.2 -
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
EPRA earnings 83.2 3.5 (1.1) 85.6 71.3 4.0 (0.8) 74.5
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Net rental income
Growing our earnings and delivering dividend progression for our
shareholders continues to be a strategic priority. Supporting this
is the growth in underlying net rental income which increased 6.4%
to GBP123.3 million this year, largely due to the Mucklow portfolio
contributing fully and delivering gross rental income of GBP26.2
million compared with GBP20.5 million for nine months last year.
Other movements in net rental income are reflected in the table
below.
GBPm GBPm
-------------------------------------------- ----- -----
Net rental income 2020 115.9
Additional rent from existing properties(1) 1.4
Additional rent from developments(1) 1.9
Additional rent from acquisitions(1) 13.4
Rent lost through disposals(1) (8.1)
Additional rent from net acquisitions 5.3
Increase in rent provision(2) (0.8)
Increase in property costs (0.4)
-------------------------------------------- ----- -----
Net rental income 2021 123.3
-------------------------------------------- ----- -----
1 Properties held, developments completed and acquisitions and
disposals since 1 April 2019
2 Represents increases in provisions against Group trade debtors
of GBP0.5 million (as reflected in note 11 to the financial
statements) and against MIPP JV rent debtors of GBP0.3 million
Additional income from lettings, rent reviews and regears of
existing properties and developments generated additional rent of
GBP3.3 million this year, which included GBP1.2 million additional
surrender premium receipts. Income from net acquisitions of GBP5.3
million included the additional Mucklow contribution of GBP5.7
million and the impact of other net disposals which reduced income
by GBP0.4 million compared to the previous year.
Property costs have increased by GBP0.4 million reflecting
additional transactional charges for rent reviews and lettings
compared to last year. However, our property cost leakage remains
low at 1.4% (2020: 1.2%).
Rent collection
March June September Total for March
2020 2020 2020 December 2020 2021 2021
Quarter commencing % % % % % %
----------------------------- ------ ------ --------- ------------- --------- -----
Rent received 94.0 99.3 99.3 99.6 98.1 99.0
Asset management initiatives 4.7 - - - 1.1 -
Rent forgiven (rent free) 0.9 0.4 0.3 - 0.4 -
Outstanding arrears 0.4 0.3 0.4 0.4 0.4 1.0
----------------------------- ------ ------ --------- ------------- --------- -----
Total 100.0 100.0 100.0 100.0 100.0 100.0
----------------------------- ------ ------ --------- ------------- --------- -----
Rent collection levels across the real estate sector have been
significantly impacted by the Covid-19 pandemic. Our collection
rates have been exceptionally strong and reflect the tireless
efforts of our dedicated team who have worked closely with
customers to proactively support those who have been most affected
by lockdown restrictions implemented in the year.
We have agreed deferred payment plans and initiatives on a case
by case basis, which offer short term rental concessions in
exchange for value enhancing asset management initiatives and have
permitted monthly rental payments for some tenants.
The table above shows our rent collection statistics by quarter.
In respect of the full year to March 2021, we have collected 98.1%
of rents due and just 0.8% remains unpaid or has been forgiven,
some of which relates to a property where we are securing vacant
possession for a new letting to Lidl. The remaining 1.1% has been
subject to asset management initiatives. Of the total rent demanded
in the year, GBP1.5 million is subject to deferred payment
arrangements, all of which are being honoured.
However, we have assessed the recoverability of our year end
trade debtor and lease incentive balances in accordance with IFRS 9
and have increased our rent provision by GBP0.8 million to GBP1.4
million. This reflects a Group provision against trade debtors at
31 March 2021 of GBP0.9 million, comprising an allowance for
specific trade debtors of GBP0.1 million and an expected credit
loss charge of GBP0.8 million, and also a provision of GBP0.5
million against joint venture debtors. This level of provisioning
takes into account the ongoing disruption and challenges our
tenants face as lockdown restrictions ease and the continued
uncertainty caused by the global pandemic anticipated over the next
12 months.
Administrative costs
Administrative costs have reduced marginally by GBP0.1 million
to GBP15.8 million this year and are stated after capitalising
staff costs of GBP2.2 million (2020: GBP2.1 million) in respect of
time spent on development projects.
EPRA cost ratio
We continue to use the EPRA cost ratio to measure our effective
management of operational costs. Having fallen 60 bps over the year
to 13.6%, it remains one of the lowest in our sector.
2021 2020
% %
----------------------------------------------- ---- ----
EPRA cost ratio including direct vacancy costs 13.6 14.2
EPRA cost ratio excluding direct vacancy costs 13.0 13.3
----------------------------------------------- ---- ----
The ratio reflects total operating costs as a percentage of
gross rental income. The full calculation is shown in Supplementary
note iv.
Net finance costs
Net finance costs, excluding the costs associated with repaying
debt and terminating hedging arrangements on sales and refinancing
in the year were GBP22.5 million, a decrease of GBP3.6 million over
last year. This reflected lower interest charges as the average
interest rate payable over the year was lower than in the previous
year, due primarily to the cancellation in April 2020 of GBP350
million interest rate swaps that hedged our unsecured facilities at
a cost of GBP4.9 million. This reduced the proportion of our drawn
debt hedged and our average cost of debt, which at the year end
were 45% (2020: 77%) and 2.5% (2020: 2.9%) respectively. Further
detail is provided in notes 5 and 10 to the financial
statements.
Share of joint ventures
EPRA earnings from joint venture investments were GBP3.5
million, a decrease of GBP0.5 million over the comparative period
as reflected in the table below.
2021 2020
For the year to 31 March GBPm GBPm
------------------------------------------------- ----- -----
Metric Income Plus Partnership (MIPP) 3.6 4.0
LMP Retail Warehouse JV (DFS) - 0.1
LSP London Residential Investments (Moore House) (0.1) (0.1)
------------------------------------------------- ----- -----
EPRA earnings 3.5 4.0
------------------------------------------------- ----- -----
As reported last year, our interest in DFS is now consolidated
in the Group accounts and our partner's 18% share reflected as a
non-controlling interest.
Income from our MIPP joint venture fell by GBP0.4 million due to
an increase in the rent provision for one property where we are
securing vacant possession for a new letting to Lidl, and the
development of a property in Orpington, where we have agreed a new
25 year lease with Lidl alongside a smaller Carpetright unit.
The Group received net management fees of GBP0.5 million for
acting as property advisor to each of its joint ventures, which
have fallen by GBP0.1 million as a result of movements in property
valuations and sales.
IFRS reported profit/(loss)
100% 100%
owned JV NCI 2021 owned JV NCI 2020
For the year to 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------------- ------ ----- ----- ----- ------ ------ ----- ------
EPRA earnings 83.2 3.5 (1.1) 85.6 71.3 4.0 (0.8) 74.5
Revaluation of property 169.9 3.4 0.4 173.7 (3.8) (10.2) 2.0 (12.0)
Fair value of derivatives 4.7 0.1 - 4.8 (3.2) (0.4) - (3.6)
Profit/(loss) on disposal 0.8 (0.1) - 0.7 (4.9) (2.3) - (7.2)
Debt/hedging break costs (7.5) - - (7.5) (0.2) - - (0.2)
---------------------------- ------ ----- ----- ----- ------ ------ ----- ------
IFRS reported profit before
exceptional costs 251.1 6.9 (0.7) 257.3 59.2 (8.9) 1.2 51.5
Impairment of goodwill - - - - (48.3) - - (48.3)
Acquisition costs - - - - (8.9) - - (8.9)
---------------------------- ------ ----- ----- ----- ------ ------ ----- ------
IFRS reported profit/(loss) 251.1 6.9 (0.7) 257.3 2.0 (8.9) 1.2 (5.7)
---------------------------- ------ ----- ----- ----- ------ ------ ----- ------
A full reconciliation between EPRA earnings and IFRS reported
profit is provided in the table above and also in note 8(a) to the
financial statements.
The Group's reported profit for the year was GBP257.3 million
compared with GBP51.5 million in the previous year before
exceptional goodwill and acquisition costs. The GBP205.8 million
increase was primarily due to the property revaluation being
GBP185.7 million higher, profit on disposals being GBP7.9 million
higher and increased EPRA earnings of GBP11.1 million.
Property sales in the year generated a GBP0.7 million profit
over book value compared with a loss of GBP7.2 million last year.
The total profit over original cost was GBP29.3 million,
representing a return of 16.4%. Disposals are discussed in detail
in the Property review.
The favourable movement in the fair value of derivatives of
GBP4.8 million is offset by the swap break cost of GBP4.9 million
and prepaid finance costs written off of GBP2.6 million, resulting
in a charge of GBP2.7 million in the year compared to a total
charge of GBP3.8 million last year.
Taxation
As the Group is a UK REIT, any income and capital gains from our
qualifying property rental business are exempt from UK corporation
tax. Any UK income that does not qualify as property income within
the REIT regulations is subject to UK tax in the normal way.
The Group's tax strategy is compliance oriented: to account for
tax on an accurate and timely basis and meet all REIT compliance
and reporting obligations. We seek to minimise the level of tax
risk and to structure our affairs based on sound commercial
principles. We strive to maintain an open dialogue with HMRC with a
view to identifying and solving issues as they arise. There were no
issues raised in the year.
We continue to monitor and comfortably comply with the REIT
balance of business tests and distribute as a Property Income
Distribution ('PID') 90% of REIT relevant earnings to ensure our
REIT status is maintained. The Group paid the required PID for the
year to 31 March 2020 ahead of the deadline of 31 March 2021 and
has already paid a large part of its expected PID for the year to
31 March 2021. The balance is expected to be paid in July 2021 as
part of the fourth quarterly dividend. In accordance with REIT
regulations, GBP6.7 million was withheld from distributions and
paid directly to HMRC in the year.
Our tax strategy was updated and approved by the Board in the
year and can be found on our website at www.londonmetric.com.
Dividend
The Company has continued to declare quarterly dividends and has
offered shareholders a scrip alternative to cash payments.
In the year to 31 March 2021, the Company paid the third and
fourth quarterly dividends for 2020 and the first two quarterly
dividends for 2021 at a total cost of GBP75.6 million or 8.5p per
share as reflected in note 7 to the financial statements.
The Company issued 1.5 million ordinary shares under the terms
of the Scrip Dividend Scheme, which reduced the cash dividend
payment by GBP3.2 million to GBP72.4 million. The first two
quarterly payments for the current year of 2.1p per share were paid
as Property Income Distributions ('PIDs') in the year. The third
quarterly dividend was paid as a PID in April 2021 and the Company
has approved a fourth quarterly payment of 2.35p in July 2021, of
which 2.25p will be a PID. The total dividend payable for 2021 of
8.65p represents a 0.35p or 4.2% increase over the previous
year.
The Board took the following into account when considering its
dividend payments:
-- Its REIT obligations to distribute 90% of property rental
business profits;
-- Its desire to pay a sustainable, covered and progressive
return to shareholders;
-- Its EPRA earnings for 2021; and
-- The outlook for 2022.
At the year end the Company had distributable reserves of
GBP1,006.7 million, providing substantial cover for the dividend
payable for the year. When required and at least six monthly, the
Company receives dividends from its subsidiaries which increase
distributable reserves.
Balance sheet
100% 100%
owned JV NCI 2021 owned JV NCI 2020
As at 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ------ ------ ------- ------- ------ ------ -------
Investment property 2,504.6 94.4 (11.4) 2,587.6 2,273.6 92.4 (14.9) 2,351.1
Trading property 1.1 - - 1.1 1.1 - - 1.1
---------------------- ------- ------ ------ ------- ------- ------ ------ -------
2,505.7 94.4 (11.4) 2,588.7 2,274.7 92.4 (14.9) 2,352.2
Gross debt (839.5) (37.5) - (877.0) (932.7) (42.1) - (974.8)
Cash 51.4 3.4 (0.2) 54.6 81.8 5.1 (0.8) 86.1
Other net liabilities (39.1) (0.5) 5.2 (34.4) (34.3) (0.6) 8.6 (26.3)
---------------------- ------- ------ ------ ------- ------- ------ ------ -------
EPRA NTA 1,678.5 59.8 (6.4) 1,731.9 1,389.5 54.8 (7.1) 1,437.2
---------------------- ------- ------ ------ ------- ------- ------ ------ -------
Derivatives - (0.6) - (0.6) (4.7) (0.7) - (5.4)
---------------------- ------- ------ ------ ------- ------- ------ ------ -------
IFRS net assets 1,678.5 59.2 (6.4) 1,731.3 1,384.8 54.1 (7.1) 1,431.8
---------------------- ------- ------ ------ ------- ------- ------ ------ -------
EPRA net tangible assets ('NTA') replaces EPRA net assets this
year as a key performance indicator that reflects both income and
capital returns. It excludes the fair valuation of derivative
instruments that are reported in IFRS net assets. A reconciliation
between IFRS and EPRA NTA is detailed in the table above and in
note 8(c) to the financial statements. EPRA NTA per share is on a
fully diluted basis and prior year comparatives have been presented
for the new measure accordingly.
IFRS reported net assets have increased 20.9% in the year to
GBP1,731.3 million, largely as a result of the revaluation gain of
GBP173.7 million and equity raise proceeds of GBP116.6 million.
Both IFRS NAV per share and EPRA NTA per share have increased by
11.9% and 11.7% in the year to 191.3p and 190.3p per share
respectively. The movement in EPRA NTA and EPRA NTA per share is
reflected in the table below.
EPRA EPRA NTA
NTA per share
GBPm p
------------------------- ------- ----------
EPRA NTA at 1 April 2020 1,437.2 170.3
EPRA earnings 85.6 9.5
Dividends(2) (75.6) (8.4)
Property revaluation 173.7 19.3
Equity raise 116.6 -
Other movements(1) (5.6) (0.4)
------------------------- ------- ----------
At 31 March 2021 1,731.9 190.3
------------------------- ------- ----------
1 Other movements include debt break costs (GBP7.5 million) and
share based awards (GBP2.0 million), offset by scrip share issue
savings (GBP3.2 million) and profit on sales (GBP0.7 million)
2 Dividend per share is based on the weighted average number of
shares in the year. The actual dividend paid in the year was 8.5p
as reflected in note 7 to the financial statements
The increase in EPRA NTA per share was principally due to the
property revaluation gain of 19.3p per share, as EPRA earnings per
share covered the dividend paid in the year. The movement in EPRA
NTA per share, together with the dividend paid in the period,
results in a total accounting return of 28.5p per share or
16.7%.
Total accounting return is a key performance indicator and
component of the variable element of Directors' remuneration
arrangements. The strong growth this year is significantly ahead of
last year and over a three year period places us in the top
quartile of the FTSE 350 Real Estate Super Sector. The full
calculation can be found in supplementary note viii.
Equity raise
In May 2020, we successfully raised gross proceeds of GBP120
million through an equity placing that was substantially
oversubscribed. A total of 66.7 million new ordinary shares were
issued at a price of 180.0p per share, representing a discount of
1.5% to the previous day's closing share price. The net proceeds
after issue costs of GBP116.6 million were used to acquire income
producing assets as set out in the Property review.
Group cash flow
During the year, the Group's cash balances decreased by GBP30.4
million as reflected in the table below.
2021 2020
For the year to 31 March GBPm GBPm
----------------------------------------------------- ------ -------
Net cash from operating activities 99.6 63.2
Net cash used in investing activities (46.4) (193.7)
Net cash (used in)/from financing activities (83.6) 191.7
----------------------------------------------------- ------ -------
Net (decrease)/increase in cash and cash equivalents (30.4) 61.2
----------------------------------------------------- ------ -------
The net cash inflow from operating activities of GBP99.6 million
reflects an increase of GBP20.8 million compared to last year,
after adjusting for exceptional acquisition costs paid last year of
GBP15.6 million. This was primarily due to changes in working
capital of GBP18.6 million.
The Group spent GBP229.0 million acquiring property in the year
and received net cash proceeds of GBP210.2 million from property
disposals and joint ventures. Capital expenditure on asset
management and development activities cost the Group GBP27.7
million and interest received was GBP0.1 million.
Cash outflows from financing activities reflect net loan
repayments of GBP93.0 million, dividend and distribution payments
of GBP73.8 million, financing costs of GBP27.6 million and share
purchases and awards of GBP5.8 million, offset by the net proceeds
from the equity raise of GBP116.6 million. Further detail is
provided in the Group cash flow statement.
Portfolio valuation
Our property portfolio including share of joint ventures grew by
GBP237.1 million or 10.1% in the year to GBP2.58 billion as
reflected in the table below. The Group invested GBP212.4 million
in the year in our preferred sectors, acquiring GBP94.6 million
distribution and GBP117.8 million long income assets.
Portfolio movement in the year
100%
owned JV NCI 2021 2020
GBPm GBPm GBPm GBPm GBPm
-------------------------- ------- ----- ------ ------- -------
Opening valuation 2,269.0 92.4 (14.9) 2,346.5 1,846.2
Acquisitions(1) 212.4 - - 212.4 577.1
Developments(2) 37.9 - - 37.9 43.1
Capital expenditure(3) 4.9 0.3 (0.1) 5.1 10.3
Disposals (200.8) (1.8) 3.3 (199.3) (128.2)
Revaluation 169.9 3.4 0.4 173.7 (12.0)
Lease incentives(4) 7.3 0.1 (0.1) 7.3 10.0
-------------------------- ------- ----- ------ ------- -------
Property portfolio value 2,500.6 94.4 (11.4) 2,583.6 2,346.5
-------------------------- ------- ----- ------ ------- -------
Head lease and ROU assets 5.1 - - 5.1 5.7
-------------------------- ------- ----- ------ ------- -------
Closing valuation 2,505.7 94.4 (11.4) 2,588.7 2,352.2
-------------------------- ------- ----- ------ ------- -------
1 Group acquisitions include purchase costs and represent
completed investment properties as shown in note 9 to the financial
statements
2 Group developments include acquisitions and capital
expenditure on properties under development as reflected in note 9
to the financial statements
3 Capital expenditure on completed properties
4 Comprises incentives and rent frees of GBP13.4 million (2020:
GBP15.4 million) less amounts written off on disposal of GBP6.1
million (2020: GBP5.4 million)
We completed 35 commercial property disposals and four
residential flat sales generating net proceeds of GBP206.1 million
at share and reducing the book value of property by GBP205.4
million (including the cost of lease incentives written off of
GBP6.1 million). During the year, we also exchanged to sell four
assets for GBP15.2 million and to acquire three assets for GBP35.7
million, all of which will be accounted for on completion next
year. Further information is provided in the Property review.
Property values have increased by GBP173.7 million in the year,
driven by both management actions and through capturing rental
reversion, representing 43% and 57% of the uplift respectively. The
portfolio has delivered a strong total property return of 13.4%,
significantly outperforming the IPD All Property Index of 1.2%,
with distribution assets delivering the largest increase of 18.3%.
A breakdown of the property portfolio by sector is reflected in the
table below.
Property portfolio by sector
2021 2021 2020 2020
As at 31 March GBPm % GBPm %
------------------------- ------- ----- ------- -----
Distribution 1,777.3 68.8 1,593.7 67.9
Long income 629.4 24.3 552.5 23.5
Retail Parks 73.9 2.9 83.3 3.6
Offices 41.1 1.6 55.1 2.4
------------------------- ------- ----- ------- -----
Investment portfolio 2,521.7 97.6 2,284.6 97.4
Development(1) 59.8 2.3 57.0 2.4
Residential 2.1 0.1 4.9 0.2
------------------------- ------- ----- ------- -----
Property portfolio value 2,583.6 100.0 2,346.5 100.0
------------------------- ------- ----- ------- -----
Head lease and right
of use assets 5.1 5.7
------------------------- ------- ----- ------- -----
2,588.7 2,352.2
------------------------- ------- ----- ------- -----
1 Represents urban logistics GBP51.8 million (2.0%), long income
GBP5.8 million (0.2%), office and other land GBP2.2 million (0.1%)
at 31 March 2021. Split of prior year comparatives was regional
distribution GBP38.1 million (1.6%), urban logistics GBP6.2 million
(0.3%), long income GBP10.5 million (0.5%), office and other land
GBP2.2 million.
Investment in our preferred sectors of distribution and long
income has increased to 95.3%, from 93.8% in March 2020. Our
development exposure remains modest at 2.3% of the portfolio and
includes the last remaining 350,000 sq ft unit at Bedford and our
120,000 sq ft Tyseley development site acquired as part of the
Mucklow portfolio.
Our forward funded pre-let developments in Goole and
Wallingford, our convenience store in Weymouth pre-let to Aldi and
one of our distribution units in Bedford completed in the year and
have been transferred to investment properties.
The Group had capital commitments of GBP93.3 million as reported
in note 9 to the financial statements, relating primarily to
remaining expenditure at Bedford and Tyseley. Further detail on
property acquisitions, sales, asset management and development can
be found in the Property review.
Financing
The key performance indicators used to monitor the Group's debt
and liquidity position are shown in the table below. The Group and
joint venture split is shown in Supplementary note iii.
Proforma post refinancing 2021 2020
As at 31 March GBPm GBPm GBPm
---------------------- ------------------------- --------- ---------
Gross debt 877.0 877.0 974.8
Cash 54.6 54.6 86.1
Net debt 822.4 822.4 888.7
Loan to value(1) 32.3% 32.3% 35.9%
Cost of debt(2) 2.6% 2.5% 2.9%
Undrawn facilities 283.0 170.5 133.8
Average debt maturity 8.2 years 4.2 years 4.7 years
Hedging(3) 83% 45% 77%
---------------------- ------------------------- --------- ---------
1 LTV at 31 March 2021 includes the impact of sales and
acquisitions that exchanged in the year of GBP15.2 million and
GBP35.7 million respectively (2020: sales of GBP64.4 million), and
excludes the fair value debt adjustment of GBP2.5 million (2020:
GBP2.7 million)
2 Cost of debt is based on gross debt and includes amortised
costs but excludes commitment fees
3 Based on the notional amount of existing hedges and total debt
drawn
Net debt has decreased by GBP66.3 million in the year, as
proceeds from disposals and the equity raise exceeded property
acquisitions in the year. Loan to value has fallen to 32.3% (2020:
35.9%) and our average debt cost at the year end remained low at
2.5% (2020: 2.9%).
Post year end, we entered into a new GBP380 million private debt
placement with a number of institutional investors in North America
and the UK. The placement, which was upsized from an initial GBP150
million due to demand, has a blended maturity of 11.1 years, coupon
of 2.27% and a GBP50 million tranche that is subject to a green use
of proceeds framework.
The additional funds raised will be used to repay our GBP130
million secured facility with Helaba, extending the maturity by
eight years on an unsecured basis and at a lower all in cost of
debt. Alongside this, we entered into two new revolving credit
facilities for GBP400 million, which also incorporates a green
framework.
Taken together with the placement, we have completed GBP780
million of new debt, replacing the existing revolving credit
facilities and other existing debt facilities that are approaching
maturity. These new facilities demonstrate the strength of our
banking relationships and have lengthened our debt maturity from
4.2 years at the year end to 8.2 years and increased our hedging
from 45% to 83%. Following this refinancing, we have substantial
headroom of GBP338 million (2020: GBP220 million), providing
operational optionality and flexibility and ample cover for our
contracted capital commitments of GBP93.3 million, and our average
debt cost remains low at 2.6%. The new facilities have the same
financial covenants as existing unsecured and private placement
loans.
As at the date of this report, we have total debt facilities of
GBP1.2 billion, including 35% or GBP0.4 billion unsecured revolving
credit facilities, providing operational flexibility at low average
costs.
The Group has comfortably complied throughout the year with the
financial covenants contained in its debt funding arrangements and
has substantial levels of headroom. Covenant compliance is
regularly stress tested for changes in capital values and income.
The Group's unsecured facilities and private placement loan notes
together account for 92% of our total debt facilities as at the
date of this report and following the refinancing, and contain
gearing and interest cover financial covenants. At 31 March 2021,
the Group's gearing ratio as defined within these funding
arrangements was 46% which is significantly lower than the maximum
limit of 125%, and its interest cover ratio was 5.5 times,
comfortably higher than the minimum level of 1.5 times. Property
values would have to fall by 43% and rents by 65% before banking
covenants are breached.
The Group's policy is to de-risk the impact of movements in
interest rates by entering into hedging and fixed rate
arrangements. However, in April this year we took advantage of the
low interest environment and cancelled GBP350 million interest rate
swaps that hedged our unsecured facilities and were due to expire
in 2022. This reduced the proportion of our drawn debt hedged to
45% at the year end, mainly through our fixed coupon private
placement and Scottish Widows' debt and has contributed to interest
cost savings in the year and a lower average cost of debt of 2.5%
at the year end. Following the refinancing post year end, the
proportion of debt hedged by fixed coupon private placement
facilities and existing fixed rate debt has increased to 83%. We
are advised by Chatham Financial and continue to monitor our
hedging profile in light of interest rate projections.
Risk management
Effective risk management reduces the negative impact of risk on
the business and is critical to our strategy of investing in real
estate that provides reliable, repetitive and growing income-led
total returns and long term outperformance.
The Board's risk management responsibility
The Board has overall responsibility for establishing and
maintaining a risk management framework critical to its decision
making process and key to the long term success of the business.
This framework gives the Board confidence that risks inherent in
running the business are successfully being identified and
mitigated to the extent possible to safeguard stakeholders'
interests and achievement of the Company's strategic goals. The
Board has a low risk appetite in respect of these objectives but
acknowledges that no system can entirely eliminate risk.
The Board considers risk in all the decisions it makes and uses
a high-level dashboard at each of its meetings to monitor material
issues and new and emerging risks. The Board also receives an
informative market overview from the Chief Executive at its
meetings, which highlights overarching or longer term themes and
evolving trends within the sector, wider economy and the risk
environment that provide context for responsive strategic decision
making.
The Audit Committee's oversight role
The Audit Committee assists the Board by providing a key
oversight and assurance role. It does so by appraising the risk
management framework in detail and seeking comfort that there is a
robust system in place for the identification, assessment and
mitigation of the principal risks faced by the Company. The
Committee annually reviews the Company's risk register and systems
of internal controls, considers their effectiveness and reports its
findings to the Board. The Committee also undertakes thematic deep
dives into significant or areas of increasing risk.
At its March 2021 meeting, the Committee scrutinised the risk
register, which had recently been comprehensively updated, and an
internal controls evaluation report from the Finance Director.
The Committee also received updated reports and presentations on
the ESG agenda, corporate governance, cyber security and tenant
covenant monitoring at that meeting. Based on its review and
assessment, the Audit Committee is satisfied that no significant
weaknesses have been identified in the Group's internal control
structure and that an effective risk management system is in place.
These findings were reported to the Board.
The Senior Leadership Team, identifies, implements and
monitors
The Senior Leadership Team is responsible for ongoing risk
identification and the design, implementation and maintenance of
the system of internal controls in light of the risks identified.
The team comprises individuals with a breadth of skills and
experience from across the Company. Short reporting lines, low
staff numbers and an embedded risk awareness culture within the
organisation facilitate the early identification of risks and the
development of appropriate mitigation strategies based on an
assessment of the impact and likelihood of a risk occurring.
Our risk register
The risk register is reviewed and updated at least annually by
the Company Secretary assisted by members of the Senior Leadership
Team. Within the risk register, specific risks are identified and
their probability rated by management as having either a high,
medium or low impact. A greater weighting is applied the higher the
significance and probability of a risk. These weightings are then
mathematically combined to produce an overall gross risk rating
which is colour coded using a traffic light system. Risk specific
safeguards are identified, detailed in the register and rated as
strong, medium or weak. The stronger the safeguard, the greater the
weighting applied. The gross risk rating and strength of the
safeguards against that risk are then combined to produce a
resultant overall net risk. Consideration is given to the
implementation of further action to reduce risk where necessary.
Finally, every risk is allocated an owner and details of how the
safeguards are evidenced are noted. Owners and timelines are
included for any action points arising out of the register's
review.
Principal risks
Our principal risks and uncertainties are identified and
reported on below. They refer to those risks with the potential to
cause material harm to our operations and stakeholders and could
affect our ability to execute our strategic priorities or exceed
the Board's risk appetite.
Identifying emerging risk
Senior Leadership Team members are closely involved in day to
day matters and have a breadth of experience across corporate and
regulatory, property, banking, finance and risk management matters.
Each member, within their field of expertise, considers emerging
risk with the potential to adversely affect the business and
stakeholders. Such risks are evaluated and monitored through Senior
Leadership Team meetings, with appropriate mitigation measures
implemented as required. Significant emerging risks are raised and
discussed at Board level.
From a property perspective, strong occupier relationships
inform management and help us to understand our tenant needs and
contentment and gain insights into their businesses. These
relationships are one of the key tools used to assist us, not only
in sourcing potential off market opportunities but also in
identifying emerging risks and trends which has been particularly
useful throughout the Covid-19 pandemic when many businesses have
undergone some form of restructuring.
Management also have strong banking relationships and, more
broadly, regularly meet industry representatives, shareholders and
analysts. These relationships are also used to identify emerging
risks. In addition, reports are commissioned and briefings arranged
on wide ranging pertinent topics to understand changes within the
real estate sector and the wider economic outlook.
No new or emerging principal risks have been identified this
year, but the pandemic has heightened the likelihood of some risks
occurring.
Changes in risk factors
Covid-19
Last year we introduced Covid-19 as a new and emerging principal
risk. We recognised that the disruption and risk of a prolonged and
severe economic downturn would present unprecedented challenges to
the business and its stakeholders, but also potentially
opportunities. As identified then, Covid-19 has accelerated a
number of structural changes that are having a profound and
permanent impact on real estate. Combined with a continuation of a
lower for longer interest rate environment, negligible bond rates
and suppressed corporate dividends, it has intensified demand for
the right real estate that can deliver reliable, repetitive and
growing income and endorses our strategy to position the portfolio
on the right side of these structural trends. As reported in the
Chief Executive's review, logistics and long income, which comprise
95% of our portfolio, have been clear beneficiaries of the pandemic
as businesses have sought to future proof their operations in
response to the rise of ecommerce and respond to changes in the way
we live and shop. Furthermore, sustained logistics demand is
expected from Brexit uncertainties as 'just in time' strategies are
replaced with 'just in case' as companies adapt to how the UK
operates under its new arrangements with the EU and other trading
partners raising new border related issues, which are increasing
the need for more localised inventory.
We expect a period of prolonged uncertainty and continuing
disruption as a result of Covid-19, notwithstanding the efficacy of
the vaccine roll out. With strong performing assets, closely
aligned to the structural tailwinds, we remain well placed, though
not immune, to weather this disruption and navigate these uncertain
times and believe our risk has reduced since this time last year.
We continue to focus on improving the quality of our portfolio,
keeping our people safe, working closely with occupiers, suppliers
and other stakeholders, maintaining a strong financial position and
helping local communities.
This year we have incorporated the risk posed by Covid-19 within
other principal risk categories where they are inextricably
interlinked.
Investment opportunities
In identifying investment opportunities, we assess potential
returns and weigh them against the risks involved. Therefore,
whilst the market presents many opportunities, as significant
shareholders ourselves, we prefer to focus on quality investments
that offer long term income, capital growth and downside protection
from strong intrinsic value, priding ourselves on our process,
discipline and rationality as we look to acquire the best assets,
at the right price. This rigorous approach invariably tempers
investment activity. We are mindful that investor demand and
tightening yields for our preferred sectors make further investment
difficult whilst tightening yields on non core and weaker assets
encourage sales for the right property reasons but where
redeployment of proceeds is difficult. We will aim to continue to
maintain a fine balance and defer sales receipts where possible, to
allow time for reinvestment and reduce the negative impact on
earnings.
Responsible Business practices and climate change
Stakeholder focus on responsible business practices has
continued to increase with particular attention on climate change
and the Net Zero Carbon agenda from an environmental perspective.
If we fail to keep pace, this could have a profound negative impact
on our earnings, asset and share liquidity. More information can be
found on our Responsible Business objectives, initiatives
undertaken and progress against targets in our Responsible Business
and ESG review.
Financial position
In May last year we successfully raised gross proceeds of GBP120
million through a substantially oversubscribed equity placing in
order to take advantage of high quality investment opportunities we
were seeing early on in the pandemic. Just before the year end we
then priced a GBP380 million debt placement with a number of
institutional investors in North America and the UK. This placement
was upsized due to exceptional demand and has a blended maturity of
11.1 years and a blended coupon of 2.27%. The placement completed
at the end of April. Alongside this, we refinanced existing
revolving credit facilities with a three year syndicated facility
of GBP225 million and a five year facility of GBP175 million. Both
facilities are unsecured, revolving and have two, one year
extension options. More information on the equity placing, debt
placement and the refinancing, which have improved our financial
position, can be found in the Financial review.
Viability Statement
Based on the results of their assessment which is detailed
below, the Directors have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as
they fall due over the three year period to 31 March 2024.
In accordance with the 2018 UK Corporate Governance Code, the
Board has assessed the prospects of the Group over a period longer
than the 12 months required by the 'Going Concern' provision. The
Directors conducted this review taking account of the Group's
financial position, business strategy, principal risks and
outlook.
Assessment of viability review period
The Board review and challenge the period over which to assess
viability on an annual basis and have determined that the three
year period to 31 March 2024 remains an appropriate period over
which to assess the Group's viability, as in previous years, for
the following reasons:
-- The Group's financial business plan and detailed budgets
cover a rolling three year period;
-- It is a reasonable approximation of the typical time it takes
from obtaining planning permission for a development project to
practical completion of the property. The average length of the
Group's developments that completed in the year at Goole,
Wallingford, Weymouth and Bedford was 14 months; and
-- Three years is considered to be the optimum balance between
long term property investment and the difficulty in accurately
forecasting ahead given the cyclical nature of property
investment.
Although the Board's review focused on the three year viability
assessment period, it also considered a number of other factors
when assessing the Group's longer term assessment, including:
-- The weighted average unexpired lease length of 11.4
years;
-- The weighted average debt maturity after completion of the
refinancing in April 2021 of 8.2 years; and
-- The longer term investment horizon and nature of the property
cycle.
Assessment of prospects
The Group's strategy is reviewed by the Board at each meeting.
The business plan is structured around the Group's strategy and
consists of a rolling three year profit forecast, which factors in
deals under offer, committed developments and reinvestment plans.
It considers capital commitments, dividend cover, loan covenants
and REIT compliance metrics.
The Senior Leadership Team provides regular strategic input to
the financial forecasts covering investment, divestment and
development plans and capital allocation. They also consider the
impact to earnings and liquidity when assessing potential
investment and development proposals.
Forecasts are reviewed against actual performance and reported
quarterly to the Board. Short term cash flow forecasts and rent
collection rates are closely monitored by the Senior Leadership
Team on a weekly basis.
When assessing longer term prospects, the Board is mindful of
the following:
-- Income certainty, with 57% of the Group's rental income
benefitting from contractual uplifts, and diversity, with 36% of
rent due from our top ten occupiers;
-- A proven track record of executing transactions, making good
sector choices and growing income;
-- Strong rent collection rates throughout the Covid-19 pandemic
with 98% of rents due in the year collected;
-- Strong relationships with debt providers, evidenced by the
new GBP780 million debt arrangements; and
-- Substantial liquidity with undrawn debt facilities and cash
of GBP338 million after the refinancing.
Assessment of viability
The business plan was stress tested to ensure it remained
resilient to adverse movements in its principal risks
including:
-- Changes to macro-economic conditions, reducing rent and
property values;
-- Changes in the retail environment including tenant failures
impacting occupancy levels and lettings;
-- Changes in the availability of funds and interest rates;
and
-- Changes in property market conditions impacting investment
and development opportunities.
In response to the pandemic, our scenario testing considered the
longer term impact of the disruption caused to our occupiers,
including potential rent defaults, increased vacancy costs and
letting voids. Key assumptions included reducing rent and property
values by 15%, removing uncommitted capital expenditure and
increasing interest rates by 1%. Throughout the scenario testing,
the Group had sufficient reserves to continue in operation and
remain compliant with its banking covenants.
Reverse stress testing was also undertaken. Property values
would need to fall by approximately 43% and rental income fall by
65% to breach the gearing and interest cover covenants under the
Group's unsecured and private placement debt facilities, that
together account for 92% of the Group's borrowing including its
share of joint ventures as at the date of this report.
This scenario testing, when combined with the Group's strong
financial position, rent collection evidence, and mitigation
actions available including deferring non committed capital
expenditure and selling assets, supports the Group's ability to
weather unexpected and adverse economic and property market
conditions including the Covid-19 pandemic over the longer term
viability period.
Principal risks
Corporate risks
1. Strategy
Risk Impact Mitigation Commentary Appetite Change in the
year
Strategic objectives may be: The Board Decreased risk
* Inappropriate for the current economic climate or * Suboptimal returns for shareholders * Strategy and objectives are regularly reviewed by the * Investor demand for distribution assets has increased, continues to We have focused
market cycle Board to adapt to an ever-changing market and trends attracted by limited new supply and growing occupier view the investment and
demand fuelling rental growth Company's asset
* Missed opportunities strategic management
* Not achieved due to Covid-19 or Brexit related * Deep occupier relationships and experience within our priorities activity on
disruption or poor implementation sectors shape portfolio decisions * Investor demand for income has also intensified in a as improving the
* Ineffective threat management zero interest rate economy. Our long income assets fundamental quality of our
have defensive and income growth characteristics to its 'all
* Commissioned research assists our strategic decision business weather'
* Wrong balance of skills and resources for ongoing making and portfolio which
success * During the year we deployed GBP231 million across reputation. provides
logistics, grocery and roadside and increased our Its appetite reliable,
* We have a UK based, predominantly logistics portfolio urban logistic weighting where supply is restricted for this repetitive and
in a world leading ecommerce market and rental growth strongest, to 38.5% and long-let risk is low. growing income
grocery and roadside exposure with high quality whilst
counterparties to 11.0% providing
* Regular and rigorous portfolio reviews take into strong
consideration sector weightings, tenant and intrinsic value
geographical concentrations, perceived threats and * GBP159 million of disposals were predominantly of and capital
market changes, the balance of income to non income shorter let and poorer located logistics assets and protection.
producing assets and asset management opportunities non core office retail and residential assets. We anticipate
Receipts on the majority of sales were deferred to no significant
allow time to reinvest proceeds change in this
* The three year forecast is regularly flexed and risk over the
reported next 12 months.
* Our dividend has increased and cover is strong at 1.1
times EPRA earnings
* The Senior Leadership Team comprises departmental
heads from all key business functions with diverse
skills and experience * Our property cost leakage at 1.4% is low within the
sector as assets are operationally light
* Our organisational structure is relatively flat
making it easier to identify market changes and
monitor operations
* The Board and senior management team's strong
economic alignment to shareholders ensures a strong
conviction to make the right property and financial
decisions
2. Economic and political factors
Risk Impact Mitigation Commentary Appetite Change in the
year
Market downturn or specific sector turbulence resulting The Board Decreased risk
from: * Suboptimal returns for shareholders * We remain focused on what we can control within the * Our fit for purpose distribution (70.8% portfolio monitors the The majority of
* The severe adverse economic impact from Covid-19 business and the medium and long term drivers of weighting) has benefitted from accelerated demand as impact of our assets are
returns a result of Covid-19 and Brexit as businesses seek to the pandemic in structurally
* Occupier demand and solvency may be impacted future proof their operations in response to the rise and supported
* New trade arrangements with the EU and other of ecommerce and how the UK operates with its trading political sectors and
economies following Brexit * We commission economic and market research to better partners and economic performing in
* Asset liquidity may reduce understand the potential impact of economic factors developments line with
on our tenants and preferred asset classes which or ahead of
* Other economic and political factors * The majority of our long income assets (24.5% are outside expectations.
* Debt markets may be impacted portfolio weighting) are considered non discretionary, of its We remain alert
* Our strong occupier relationships provide market less susceptible to the migration of spend online and control. to the few
intelligence and help us better understand our are benefitting from changes in how we live and shop. Focus underperforming
tenants needs and emerging trends Most were open for trade prior to the last Covid-19 remains on in the extreme
lockdown measures lifting with strong underlying maintaining conditions.
trading performance as reflected in our high rent a robust We anticipate
* We regularly monitor tenant and contractor covenant collection rates 'all no significant
strength weather' change in this
portfolio, risk over the
* 2% of our portfolio is exposed to out-of-town leisure and keeping next 12 months.
* We limit development, particularly speculative and hotels in good geographies which trade strongly this risk to
development exposure and letting risk in more normal times. Adversely impacted by the a minimum.
severity of lockdowns, these have delivered a
property return of -13.8% in the year
* We maintain a high WAULT reducing reletting risk
* We have a low vacancy rate
* Income granularity reduces the impact of single
tenant risk
* We have flexible funding arrangements with
significant headroom in covenant levels
3. Human resources
Risk Impact Mitigation Commentary Appetite Change in
the year
The business may lack the skill set to The Board No
* There may be an inability to attract, motivate and establish and deliver strategy and maintain a * Our staffing plan focuses on experience and expertise * An external Board evaluation was undertaken, its believes it significant
retain high calibre employees competitive necessary to deliver strategy findings extremely positive is vitally change
advantage. important There was
that the no
* Covid-19 may be detrimental to the long term health * Our organisational structure has clear * The Senior Leadership Team introduced last year Company has significant
of key individuals responsibilities and reporting lines promotes talent development below Board level the change in
appropriate perceived
level of risk during
* Executive Directors and senior managers are * The appointment of Kitty Patmore to the Board and leadership, the year.
incentivised in a similar manner. Both have Audit Committee brings significant property and expertise We
significant unvested share awards in the Company. capital markets experience to enhance the existing and anticipate
These incentivise long term performance and retention skill set of the Board and supports succession experience no
, planning for Non Executive Directors which remains to deliver significant
providing stability in the management structure high on the Board's agenda its change in
objectives this risk
and adapt over the
* Annual appraisals identify training requirements and * Staff survey responses were highly positive with 100% to change. next 12
assess performance of respondents proud and happy to be working for Its months.
LondonMetric and confident in the decisions made by appetite
senior management for this
* Specialist support is contracted where appropriate risk is
low.
* Our workforce engagement Non Executive Director
* Staff satisfaction surveys are undertaken and staff hosted a call with a cross section of employees in
turnover levels are low the year to hear their views and concerns
* There is a phased Non Executive refreshment plan * No staff were furloughed and turnover is low at 6% on
average since merger
* Key man insurance is in place for the Chief Executive
* 68% of employees participate in the LTIP
4. Systems, processes and financial management
Risk Impact Mitigation Commentary Appetite Change in
the year
Controls for safeguarding assets and supporting strategy The Board's No
may be weak. * Compromised asset security * The Company has a strong controls culture * Our IT systems have allowed us to remain fully appetite significant
operational over the Covid-19 lockdowns for such change
risk is low There was
* Suboptimal returns for shareholders * We have IT security systems in place with back up and no
supported and tested by a specialist advisor * During the year we upgraded our operating system and management significant
completed the integration of Mucklow onto the continually change in
* Decisions made on inaccurate information LondonMetric IT platform and systems strive to perceived
* Our business continuity plan is regularly updated monitor and risk during
improve the year.
* Further improvements were made to our integrated processes. We
* Our property assets are safeguarded by appropriate sales ledger invoicing and reporting system to enable anticipate
insurance more billing to be brought in-house and away from no
managing agents and to improve the quality of credit significant
control reports change in
* We have safety and security arrangements in place on this risk
our developments, multi-let and vacant properties over the
* Increased remote working as a consequence of next 12
lockdowns has exposed the Company to a range of cyber months.
* Appropriate data capture procedures ensure the attacks. The Company's cyber security measures have
accuracy of the property database and financial provided a strong level of protection
reporting systems
* We maintain appropriate segregation of duties with
controls over financial systems
* Management receive timely financial information for
approval and decision making
* Cost control procedures ensure expenditure is valid,
properly authorised and monitored
5. Responsible Business approach
Risk Impact Mitigation Commentary Appetite Change in
the year
Non-compliance The Board has Increased
with * Reputational damage * We monitor changes in law, stakeholder sentiment and * We continue to hold meetings with large numbers of a low risk
Responsible best practice in relation to Responsible Business shareholders, analysts and potential investors, tolerance for ESG
Business practices such as sustainability, environmental meeting 173 in the year non-compliance significance
practices. * Suboptimal returns for shareholders matters and our societal impact and receive advice with risks continues to
and support from specialist consultants that adversely increase for
* We continue to score well in ESG benchmarks impact stakeholders
* Asset liquidity may be impacted reputation, ,
* We consider the impact of changes on strategy stakeholder particularly
* 26% of our portfolio by area is rated BREEAM Very sentiment in relation
* Reduced access to debt and capital markets Good or Excellent, an increase from 20% in 2020 towards the to climate
* We give proper consideration to the needs of our Company and change.
occupiers and shareholders by maintaining a high asset We
* Poor relationships with stakeholders degree of engagement. We also consider our impact on * c.74% of our portfolio has an EPC rating of A-C and liquidity. anticipate
the environment and local communities we are targeting a minimum C rating on all assets this risk
will
continue to
* Responsibility for specific obligations is allocated * Our Net Zero Carbon framework published in May sets increase
to Senior Leadership Team members out our ambitions to become a zero carbon business over the
next 12
months.
* A Responsible Business Working Group meets at least * Our new revolving credit facilities incorporate a
three times a year and reports to the Board green framework
* Staff training is provided * We issued a GBP50 million green private placement
tranche, the first UK REIT to do so
* EPC rating benchmarks are set to ensure compliance
with Minimum Energy Efficiency Standards ('MEES') * We have scored highly in stakeholder surveys, with
that could otherwise impact the quality and 9.0 out of 10.0 occupiers recommending us as a
desirability of our assets leading to higher voids, landlord in our latest occupier survey, despite the
lost income and reduced liquidity challenging Covid-19 backdrop
* We consider environmental and climate change risk * Our Communities and Charity Committee, created in
relating to our assets and commission reports response to the pandemic, has spent or committed most
of the GBP127,000 funded mainly through the Board and
senior managers waiving 20% of their salary and fees
* We work with our occupiers to improve the resilience for three months.
of our assets to climate change and a low carbon
economy
* ESG targets have been introduced into the wider staff
performance criteria
* Sustainability targets are set, monitored and
reported
* Contractors are required to conform to our
responsible development requirements
6. Regulatory framework
Risk Impact Mitigation Commentary Appetite Change in
the year
Non-compliance The Board has No
with legal or * Compromised asset security * We monitor regulatory changes that impact our * There have been no new significant regulatory changes no appetite significant
regulatory business assisted by specialist support providers which impact the Company this year where change
obligations. non-compliance There was no
* Suboptimal returns for shareholders risks injury significant
* We consider the impact of legislative changes on * We continued to undertake health and safety site or damage to change in
strategy audits on our developments through an external its broad perceived
* Decisions made on inaccurate information specialist consultancy. These included our smaller range of risk during
development at Carlisle this year and Tyseley post stakeholders, the year.
* We have allocated responsibility for specific year end. Feedback has been positive and no assets and New
obligations to individuals within the Senior significant issues were identified reputation. regulations
Leadership Team and evolving
best
* Health and Safety Policy updated in the year practice
* Our health and safety handbook is regularly updated will
and audits are carried out on developments to monitor continue to
compliance impact the
business.
We
* Our procurement and supply chain policy sets anticipate
standards for areas such as labour, human rights, no
pollution risk and community significant
change in
this risk
* Staff training is provided on wide ranging issues over the
next 12
months.
* External tax specialists provide advice and REIT
compliance is monitored
Property risks
7. Investment
Risk Impact Mitigation Commentary Appetite Change in
the year
We may be unable to source affordable investment Ability to implement strategy and The Board Increased
opportunities. deploy capital into value and earnings * Management's extensive experience and their strong * We continue to build on our strong occupier, continues to risk
accretive investments network of relationships provide insight into the developer and industry relationships and attract off focus on Increased
is at risk. property market and opportunities market opportunities through these having the investor
right people demand and
and funding tightening
* We acquired GBP245 million of investment property in place to yields in
over the year, remaining disciplined and selective. take the
This included sourcing a number of opportunistic advantage Company's
deals of high quality assets as a result of Covid-19 of favoured
which wouldn't ordinarily be available in a opportunities sectors make
normalised market as they further
arise. The investment
Board's aim difficult
* Post year end, we have acquired a further GBP68 is to whilst
million of urban warehousing and long income minimise this tightening
properties. risk to the yields on
extent non core or
possible. weaker
assets
encourage
sales
where the
redeployment
of proceeds
is
difficult.
We
anticipate
no
significant
change in
this risk
over the
next 12
months.
8. Development
Risk Impact Mitigation Commentary Appetite Change in
the year
The Board No
* Excessive capital may be allocated to activities with * Poorer than expected performance * As an income focused REIT, development exposure as a * Our current development exposure is 2.3% of the takes on significant
development risk percentage of our total portfolio is limited, portfolio. limited change
typically well below 5% speculative There was no
* Reputational damage development, significant
* Developments may fail to deliver expected returns due * Our 120,000 sq ft urban logistics development at although its change in
to inconsistent timing with the economic and market * We only undertake short cycle and relatively Tyseley is pre-let to Amazon overall perceived
cycle, adverse letting conditions, increased costs, uncomplicated developments on a pre-let basis or tolerance for risk during
planning or construction delays resulting from where there is high occupier demand this the year.
contractor failure or supply chain interruption * We are under offer on the letting of the completed risk is low. Supply chain
Unit 2 at Bedford Link (172,000 sq ft) and in disruption
* Development sites are acquired with planning consent discussions on a pre-let of Unit 1 may increase
whenever possible as a result
of demand,
* We work with a limited number of contractors which Covid-19 and
* Management have significant experience of complex helps us to stay close to their operations. All are Brexit over
development managing their cash flows and Covid-19 risks well the next
12 months.
Our
* We use standardised appraisals and cost budgets and * We have not experienced any material construction development
monitor expenditure against budget to highlight delays as a result of the pandemic and reopened sites exposure
potential overruns early as soon as it was possible and safe to do so remains
limited.
* External project managers are appointed * The average length of the Group's developments that
completed in the year from obtaining planning
permission to practical completion was 14 months
* Our procurement process includes tendering and the
use of highly regarded firms with proven track
records
* We review and monitor contractor covenant strength
9. Valuation
Risk Impact Mitigation Commentary Appetite Change in the
year
Investments may fall in value. Pressure on There is no Decreased
NAV growth * Our portfolio is predominantly in structurally * The resilience of our portfolio is demonstrated by certainty risk
and supported sectors the GBP173.7 million valuation increase in the year, that property The majority
potentially with distribution providing the strongest valuation values will of our
loan contribution be realised. portfolio
covenants. * Our focus is on sustainable income with lettings to This is an remains
high quality tenants within a diversified portfolio inherent risk strategically
of well located assets with a high weighted average * 57% of our income has contractual uplifts, 39% of in the aligned to
unexpired lease term. This reduces the risk of which are inflation linked industry. The structurally
negative movements in a downturn Board's aim supported
is to keep sectors
* Our portfolio metrics continue to be strong: WAULT this risk to where the
* The property cycle is continually monitored with 11.4 years, with only 8.4% of rent expiring within 3 a minimum prospects for
investment and divestment decisions made years through its value
strategically in anticipation of changing conditions asset preservation
selection and and growth
* Portfolio occupancy 98.7% management are
* Property portfolio performance is regularly reviewed initiatives. significant
and benchmarked on an asset by asset basis and investor
* 173 occupier initiatives added GBP5.3 million to demand
contracted rent with an average WAULT on new lettings high.
* The majority of our assets are single let and of 13.2 years We anticipate
operationally light with little or no cost leakage no
and defensive capital expenditure significant
* We are repurposing a number of historic triple net change in
assets into convenience led grocery this risk
* We monitor tenant covenants and trading performance over the next
12 months.
10. Transactions and tenants
Risk Impact Mitigation Commentary Appetite Change in the
year
Pressure on The Board has Decreased
* Property purchases and asset management initiatives NAV, * Thorough due diligence is undertaken on all * For the year to March 2021, 98.1% of the rent no appetite risk
may be inconsistent with strategy earnings acquisitions including legal and property, tenant demanded has been or is being collected with deferred for risk Portfolio
and covenant strength and trading performance payment arrangements over GBP1.5 million. 1.1% of arising out resilience
potentially rent has been subject to asset management initiatives of poor due has been
* Due diligence may be flawed loan and 0.4% forgiven. Only 0.4% remains unpaid, some of diligence demonstrated
covenants. * We screen all prospective tenants and undertake which relates to a property where we are obtaining processes on through our
regular reviews thereafter vacant possession for a new letting to Lidl acquisitions, rent
* Tenant failure risk disposals and collection
lettings. A statistics.
* Portfolio tenant concentration is considered for all * The Company has limited exposure to poorly degree of We anticipate
acquisitions and leasing transactions capitalised tenants most adversely impacted by tenant no
pandemic disruption covenant risk significant
and lower change in
* We have a diversified tenant base and limited unexpired this risk
exposure to occupiers in bespoke properties * Dependency on our top ten occupiers is 36% and no lease terms over the next
single tenant accounts for more than 8.2% of income. are 12 months
accepted on although
* Asset management initiatives undergo cost benefit urban further,
analysis prior to implementation logistics extended
assets where Covid-19
there is high lockdowns may
* External advisors benchmark lease transactions and occupational change this.
advise on acquisition due diligence demand,
redevelopment
potential or
* Our experienced asset management team work closely alternative
with tenants to offer them real estate solutions that site use.
meet their business objectives. This proactive
management approach helps to reduce vacancy risk
* We monitor rent collection closely to identify
potential issues
Financing risks
11. Capital and finance risk
Risk Impact Mitigation Commentary Appetite Change in
the year
The Company Strategy The Board Decreased
has implementation * We maintain a disciplined investment approach with * We raised GBP120 million through an equity placing has no risk
insufficient is at risk. competition for capital. Assets are considered for last May to fund a pipeline of investment appetite Our
funds and sale when they have achieved target returns and opportunities for significant
available strategic asset plans imprudently refinancing
credit. low levels activity
* We priced a GBP380 million private placement in March, of has
* Cash flow forecasts are closely monitored upsized following significant demand, which available extended
diversified our existing investor base. The headroom in debt
additional amount raised will enable us to repay our its maturity
* Relationships with a diversified range of lenders are secured Helaba facility, eliminating future reserves whilst
nurtured refinancing risk and extending maturity on the GBP130 or credit maintaining
million by eight years lines. The a broadly
Board has similar
* The availability of debt and the terms on which it is some cost of
available is considered as part of the Company's long * Post year end we completed the refinancing of appetite debt.
term strategy revolving credit facilities with a three year for We
syndicated facility of GBP225 million and a five year interest anticipate
facility of GBP175 million. Both have two one year rate risk. no
* Loan facilities incorporate covenant headroom, extension options Loans are significant
appropriate cure provisions and flexibility not fully change in
hedged. this risk
* We have substantial headroom under our loan This over the
* Headroom and non financial covenants are monitored covenants. Loan to value is 32.3%. Interest cover on follows next 12
unsecured facilities is 5.5 times cost months.
benefit
* A modest level of gearing is maintained assessment
and takes
into
* The impact of disposals on secured loan facilities account
covering multiple assets is considered as part of the that not
decision making process all loans
are fully
drawn
* Interest rate derivatives are used to fix or cap all the
exposure to rising rates as deemed prudent following time.
specialist hedging advice
Directors' Responsibilities Statement
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards ('IFRSs') as adopted pursuant to
Regulation (EC) No. 1606/2002 as it applies in the European Union.
The Directors have elected to prepare the Company financial
statements in accordance with Financial Reporting Standard 101
('FRS101') 'Reduced Disclosure Framework'. Under Company law the
Directors must not approve the accounts unless they are satisfied
that they give a true and fair view of the state of affairs of the
Company and of the profit or loss of the Company for that
period.
In preparing the Company financial statements, the Directors are
required to:
-- Select suitable accounting policies and then apply them
consistently;
-- Make judgements and accounting estimates that are reasonable
and prudent;
-- State whether applicable FRS101 'Reduced Disclosure
Framework' has been followed, subject to any material departures
disclosed and explained in the financial statements; and
-- Prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
In preparing the Group financial statements, International
Accounting Standard 1 requires that Directors:
-- Properly select and apply accounting policies;
-- Present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;
-- Provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and
conditions on the entity's financial position and financial
performance; and
-- Make an assessment of the Company's ability to continue as a
going concern.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website. Legislation in the UK governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
-- The financial statements, prepared in accordance with the
relevant financial reporting framework, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company and the undertakings included in the consolidation
taken as a whole;
-- The Strategic report includes a fair review of the
development and performance of the business and the position of the
Company and the undertakings included in the consolidation taken as
a whole, together with a description of the principal risks and
uncertainties that they face; and
-- The Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company's performance,
business model and strategy.
By order of the Board
Martin McGann
Finance Director
27 May 2021
Andrew Jones
Chief Executive
27 May 2021
Group income statement
For the year ended 31 March
2021 2020
Note GBPm GBPm
---------------------------------------------------------- ---- ------ ------
Revenue 3 122.2 113.4
Cost of sales (1.6) (1.2)
---------------------------------------------------------- ---- ------ ------
Net income 120.6 112.2
Administrative costs 4 (15.8) (15.8)
Impairment of goodwill on acquisition of subsidiaries - (48.3)
Acquisition costs - (8.9)
Profit/(loss) on revaluation of investment properties 9 169.9 (3.8)
Profit/(loss) on sale of investment properties 0.8 (4.9)
Share of profits/(losses) of joint ventures 10 6.9 (8.9)
---------------------------------------------------------- ---- ------ ------
Operating profit 282.4 21.6
Finance income 0.6 0.7
Finance costs 5 (24.9) (29.0)
---------------------------------------------------------- ---- ------ ------
Profit/(loss) before tax 258.1 (6.7)
Taxation 6 (0.1) (0.2)
---------------------------------------------------------- ---- ------ ------
Profit/(loss) for the year and total comprehensive income 258.0 (6.9)
Attributable to:
Equity shareholders 257.3 (5.7)
Non-controlling interest 19 0.7 (1.2)
---------------------------------------------------------- ---- ------ ------
Earnings per share
---------------------------------------------------------- ---- ------ ------
Basic 8 28.6p (0.7)p
Diluted 8 28.5p (0.7)p
---------------------------------------------------------- ---- ------ ------
All amounts relate to continuing activities.
Group balance sheet
As at 31 March
2021 2020
Note GBPm GBPm
---------------------------------------------- ---- ------- -------
Non current assets
Investment properties 9 2,504.6 2,273.6
Investment in equity accounted joint ventures 10 59.2 54.1
Other tangible assets 0.3 0.4
---------------------------------------------- ---- ------- -------
2,564.1 2,328.1
Current assets
Trading properties 1.1 1.1
Trade and other receivables 11 9.8 7.8
Cash and cash equivalents 12 51.4 81.8
---------------------------------------------- ---- ------- -------
62.3 90.7
---------------------------------------------- ---- ------- -------
Total assets 2,626.4 2,418.8
---------------------------------------------- ---- ------- -------
Current liabilities
Trade and other payables 13 46.0 42.6
---------------------------------------------- ---- ------- -------
Non current liabilities
Borrowings 14 837.5 926.7
Derivative financial instruments 14 - 4.7
Lease liabilities 15 5.2 5.9
---------------------------------------------- ---- ------- -------
842.7 937.3
---------------------------------------------- ---- ------- -------
Total liabilities 888.7 979.9
---------------------------------------------- ---- ------- -------
Net assets 1,737.7 1,438.9
---------------------------------------------- ---- ------- -------
Equity
Called up share capital 16 91.0 84.2
Share premium 17 219.3 106.3
Capital redemption reserve 17 9.6 9.6
Other reserve 17 487.7 488.4
Retained earnings 17 923.7 743.3
---------------------------------------------- ---- ------- -------
Equity shareholders' funds 1,731.3 1,431.8
Non-controlling interest 6.4 7.1
---------------------------------------------- ---- ------- -------
Total equity 1,737.7 1,438.9
---------------------------------------------- ---- ------- -------
IFRS net asset value per share 8 191.3p 171.0p
---------------------------------------------- ---- ------- -------
The financial statements were approved and authorised for issue
by the Board of Directors on 27 May 2021 and were signed on its
behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
Group statement of changes in equity
For the year ended 31 March
Capital Equity
Share Share redemption Other Retained shareholders' Non-controlling Total
capital premium reserve reserve earnings funds interest Equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- --------- --------- ---------- --------- -------- ------------- --------------- -------
At 1 April 2020 84.2 106.3 9.6 488.4 743.3 1,431.8 7.1 1,438.9
Profit for the
year and total
comprehensive
income - - - - 257.3 257.3 0.7 258.0
Equity placing 6.6 110.0 - - - 116.6 - 116.6
Purchase of
shares held in
Employee
Benefit Trust - - - (5.5) - (5.5) - (5.5)
Vesting of
shares held in
Employee
Benefit Trust - - - 4.8 (5.1) (0.3) - (0.3)
Share based
awards - - - - 3.8 3.8 - 3.8
Distribution to
non-controlling
interest - - - - - - (1.4) (1.4)
Dividends 7 0.2 3.0 - - (75.6) (72.4) - (72.4)
---------------- ---- --------- --------- ---------- --------- -------- ------------- --------------- -------
At 31 March 2021 91.0 219.3 9.6 487.7 923.7 1,731.3 6.4 1,737.7
---------------- ---- --------- --------- ---------- --------- -------- ------------- --------------- -------
Equity
Capital shareholders'
Share Share redemption Other Retained Non-controlling Total
capital premium reserve reserve earnings funds interest Equity
Note GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ---- --------- --------- ---------- --------- -------- ------------- --------------- -------
At 1 April 2019 70.0 100.8 9.6 221.7 814.7 1,216.8 - 1,216.8
Loss for the
year and total
comprehensive
income - - - - (5.7) (5.7) (1.2) (6.9)
Share issue on
acquisition 13.9 - - 269.5 - 283.4 - 283.4
Purchase of
shares held in
Employee
Benefit Trust - - - (7.2) - (7.2) - (7.2)
Vesting of
shares held in
Employee
Benefit Trust - - - 4.4 (4.4) - - -
Share based
awards - - - - 2.9 2.9 - 2.9
Investment from
non-controlling
interest - - - - - - 8.7 8.7
Distribution to
non-controlling
interest - - - - - - (0.4) (0.4)
Dividends 7 0.3 5.5 - - (64.2) (58.4) - (58.4)
---------------- ---- --------- --------- ---------- --------- -------- ------------- --------------- -------
At 31 March 2020 84.2 106.3 9.6 488.4 743.3 1,431.8 7.1 1,438.9
---------------- ---- --------- --------- ---------- --------- -------- ------------- --------------- -------
Group cash flow statement
For the year ended 31 March
2021 2020
Note GBPm GBPm
------------------------------------------------------------- ---- ------- -------
Cash flows from operating activities
Profit/(loss) before tax 258.1 (6.7)
Adjustments for non cash items:
(Profit)/loss on revaluation of investment properties (169.9) 3.8
(Profit)/loss on sale of investment properties (0.8) 4.9
Share of post tax (profit)/loss of joint ventures (6.9) 8.9
Movement in lease incentives (11.3) (11.0)
Impairment of goodwill on acquisition - 48.3
Share based payment 3.8 2.9
Net finance costs 24.3 28.3
------------------------------------------------------------- ---- ------- -------
Cash flows from operations before changes in working capital 97.3 79.4
Change in trade and other receivables (1.9) (3.0)
Change in trade and other payables 4.5 (13.0)
------------------------------------------------------------- ---- ------- -------
Cash flows from operations 99.9 63.4
Tax paid (0.3) (0.2)
------------------------------------------------------------- ---- ------- -------
Cash flows from operating activities 99.6 63.2
------------------------------------------------------------- ---- ------- -------
Investing activities
Purchase of subsidiary undertakings - (119.6)
Purchase of investment properties (229.0) (185.2)
Capital expenditure on investment properties (25.6) (18.1)
Lease incentives paid (2.1) (3.9)
Sale of investment properties 208.4 117.5
Investments in joint ventures (4.7) (0.3)
Distributions from joint ventures 6.5 15.7
Interest received 0.1 0.2
------------------------------------------------------------- ---- ------- -------
Net cash used in investing activities (46.4) (193.7)
------------------------------------------------------------- ---- ------- -------
Financing activities
Dividends paid (72.4) (58.4)
Distribution to non-controlling interest (1.4) (0.4)
Proceeds from issue of ordinary shares 116.6 -
Purchase of shares held in Employee Benefit Trust (5.5) (7.2)
Vesting of shares held in Employee Benefit Trust (0.3) -
New borrowings and amounts drawn down 18 316.0 304.9
Repayment of loan facilities 18 (409.0) (21.1)
Financial arrangement fees and break costs (7.5) (2.1)
Interest paid (20.1) (24.0)
------------------------------------------------------------- ---- ------- -------
Net cash (used in)/from financing activities (83.6) 191.7
------------------------------------------------------------- ---- ------- -------
Net (decrease)/increase in cash and cash equivalents 18 (30.4) 61.2
Opening cash and cash equivalents 81.8 20.6
------------------------------------------------------------- ---- ------- -------
Closing cash and cash equivalents 51.4 81.8
------------------------------------------------------------- ---- ------- -------
Notes forming part of the Group financial statements
For the year ended 31 March 2021
1 Significant accounting policies
The financial information set out herein does not constitute the
Company's statutory accounts for the years ended 31 March 2021 or
31 March 2020 but is derived from those accounts. Statutory
accounts for the years ended 31 March 2021 and 31 March 2020 have
been reported on by the independent auditor. The independent
auditor's reports on the Annual Report and financial statements for
2021 and 2020 were unqualified, did not draw attention to any
matters by way of emphasis and did not contain a statement under
498(2) or 498(3) of the Companies Act 2006. Statutory accounts for
the year ended 31 March 2020 have been filed with the Registrar of
Companies. The statutory accounts for the year ended 31 March 2021
will be delivered to the Registrar following the Company's Annual
General Meeting. The financial information set out in this results
announcement has been prepared using the recognition and
measurement principles of International Accounting Standards,
International Financial Reporting Standards and Interpretations
adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in
the European Union. The accounting policies adopted in this results
announcement are consistent with those used in preparing the
financial statements for the year ended 31 March 2021, which are
the same as those used in the financial statements for the year
ended 31 March 2020.
a) General information
LondonMetric Property Plc is a company incorporated in the
United Kingdom under the Companies Act. The address of the
registered office is One Curzon Street, London, W1J 5HB. The
principal activities of the Company and its subsidiaries ('the
Group') and the nature of the Group's operations are set out in the
Strategic report.
b) Statement of compliance
The consolidated financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards ('IFRS') as adopted pursuant to
Regulation (EC) No. 1606/2002 as it applies in the European
Union.
c) Going concern
Given the backdrop of the Covid-19 pandemic and lockdown
restrictions under which the Group is operating, the Board has
continued to pay particular attention to the appropriateness of the
going concern basis in preparing these financial statements.
The going concern assessment considers the principal risks and
uncertainties facing the Group's activities, future development and
performance, including those arising from the pandemic and are
discussed in detail in the Strategic report. A key consideration is
the Group's financial position, cash flows and liquidity, including
its continued access to debt facilities and its headroom under
financial loan covenants.
As reported in the Financial review, the Group refinanced its
unsecured debt facilities in April 2021 and entered into two new
revolving credit facilities and a new Private Placement totalling
GBP780 million. These new facilities contain the same gearing and
interest cover covenants as the existing unsecured and private
placement loans.
The Group's unsecured revolving credit facilities and private
placement loan notes, which together represent 92% of the Group's
total borrowing as at the date of this report, contain gearing and
interest cover covenants. At 31 March 2021, the Group had
substantial headroom within these covenants. Gearing was 46%,
substantially lower than the maximum limit of 125% and its interest
cover ratio was 5.5 times, comfortably higher than the minimum
level of 1.5 times. Property values would have to fall by 43% and
rents by 65% before banking covenants are breached. Group
borrowings, undrawn facilities and hedging are described in note 14
and in the Financial review.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about future
trading performance including the impact of Covid-19. They were
mindful of the Group's income certainty and diversity, strong rent
collection rates and long lease lengths when assessing the Group's
going concern position.
In response to the pandemic, scenario testing considered the
potential longer term impact of the disruption caused to occupiers,
including rent defaults, increased vacancy costs and letting voids.
Key assumptions included in the scenario testing were as
follows:
-- Rents decline by 15% across the portfolio
-- Property values fall by 15% across the portfolio
-- There are no new developments or uncommitted capital
expenditure
-- Interest rates increase by 1% on all floating rate loans
Throughout the scenario testing, the Group had sufficient
reserves to continue in operation and remain compliant with its
banking covenants.
On the basis of this review, together with available market
information and the Directors' experience and knowledge of the
portfolio, they have a reasonable expectation that the Company and
the Group can meet its liabilities as they fall due and has
adequate resources to continue in operational existence for at
least 12 months from the date of signing these financial
statements. Accordingly, they continue to adopt the going concern
basis in preparing the financial statements for the year to 31
March 2021.
d) Basis of preparation
The financial statements are prepared on a going concern basis,
as explained above. The functional and presentational currency of
the Group is sterling. The financial statements are prepared on the
historical cost basis except that investment and development
properties and derivative financial instruments are stated at fair
value.
The directors have changed the way in which the Group's
performance is presented on the face of the income statement. The
underlying results have not been amended and this modified
presentation has had no effect on operating profit or profit for
the year.
The accounting policies have been applied consistently in all
material respects except for the adoption of new and revised
standards as noted below.
i) Significant accounting estimates and judgements
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and
other factors that are considered to be relevant. Actual results
may differ from these estimates. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if
the revision affects only that period. If the revision affects both
current and future periods, the change is recognised over those
periods.
The accounting policies subject to significant judgements and
estimates are considered by the Audit Committee and are as
follows:
Significant areas of estimation uncertainty
Property valuations
The valuation of the property portfolio is a critical part of
the Group's performance. The Group carries the property portfolio
at fair value in the balance sheet and engages professionally
qualified external valuers to undertake six monthly valuations.
The determination of the fair value of each property requires,
to the extent applicable, the use of estimates and assumptions in
relation to factors such as estimated rental value and current
market rental yields. In addition, to the extent possible, the
valuers make reference to market evidence of transaction prices for
similar properties.
The fair value of a development property is determined by using
the 'residual method', which deducts all estimated costs necessary
to complete the development, together with an allowance for
development risk, profit and purchasers' costs, from the fair
valuation of the completed property.
Note 9(b) to the financial statements includes further
information on the valuation techniques and inputs used to
determine the fair value of the property portfolio.
The Covid-19 pandemic has led to a heightened degree of
uncertainty surrounding property valuations and some real estate
markets have experienced lower transactional activity. In March
2020, our three external valuers included material uncertainty
clauses in their valuation reports. However, at the valuation date
of 31 March 2021, all of our valuers consider that there is
adequate market evidence upon which to base opinions of value and
have not included material uncertainty clauses in their valuation
reports.
Significant transactions
Some property transactions are large or complex and require
management to make judgements when considering the appropriate
accounting treatment. These include acquisitions of property
through corporate vehicles, which could represent either asset
acquisitions or business combinations under IFRS 3. Other
complexities include conditionality inherent in transactions, and
other unusual terms and conditions. There is a risk that an
inappropriate approach could lead to a misstatement in the
financial statements.
Management applied judgement to those property acquisitions made
during the year to 31 March 2021 and determined that they were
asset acquisitions rather than business combinations as disclosed
in note 9 to the financial statements.
ii) Adoption of new and revised standards
Standards and interpretations effective in the current
period
During the year, the following new and revised Standards and
interpretations have been adopted and have not had a material
impact on the amounts reported in these financial statements.
Name Description
---------------------------------------------------------- ----------------------------------------------------------
IFRS 3 (amendments) Definition of a Business
---------------------------------------------------------- ----------------------------------------------------------
IAS 1 and IAS 8 (amendments) Definition of Material
---------------------------------------------------------- ----------------------------------------------------------
IFRS 7, IFRS 9 and IAS 39 (amendments) Interest Rate Benchmark Reform
---------------------------------------------------------- ----------------------------------------------------------
Amendments to references to the Conceptual Framework in Amendments to IFRS 2, IFRS 3, IFRS 6, IFRS 14, IAS 1, IAS
IFRS Standards 8, IAS 34, IAS 37, IAS 38, IFRIC
12, IFRIC 19, IFRIC 20, IFRIC 22 and SIC 32
---------------------------------------------------------- ----------------------------------------------------------
iii) Standards and interpretations in issue not yet adopted
The IASB and the International Financial Reporting
Interpretations Committee have issued the following standards and
interpretations that are mandatory for later accounting periods and
which have not been adopted early.
Name Description
------------------------------------------------------- -------------------------------------------------------------
IFRS 17 Insurance contracts
------------------------------------------------------- -------------------------------------------------------------
IFRS 16 Covid-related rent concessions
------------------------------------------------------- -------------------------------------------------------------
IFRS 3 References to the conceptual framework
------------------------------------------------------- -------------------------------------------------------------
IAS 16 Property, plant and equipment - proceeds before intended use
------------------------------------------------------- -------------------------------------------------------------
IAS 37 Onerous contracts
------------------------------------------------------- -------------------------------------------------------------
IFRS 7, IFRS 9, IAS 39, IFRS 4 and IFRS 16 (amendments) Interest Rate Benchmark Reform - phase 2
------------------------------------------------------- -------------------------------------------------------------
IAS 1 (amendments) Classification of Liabilities as Current or Non Current
Disclosure of Accounting Policies
------------------------------------------------------- -------------------------------------------------------------
IAS 8 Definition of accounting estimates
------------------------------------------------------- -------------------------------------------------------------
IAS 12 Deferred tax related to assets and liabilities arising from a
single transaction
------------------------------------------------------- -------------------------------------------------------------
IFRS 4 Applying IFRS 9 'Financial Instruments' with IFRS 4
'Insurance Contracts'
Extension of the Temporary Exemption from Applying IFRS 9
------------------------------------------------------- -------------------------------------------------------------
Annual improvements to IFRSs: 2018 -2020 cycle Amendments to IFRS 1, IFRS 9, IFRS 16, and IAS 41
------------------------------------------------------- -------------------------------------------------------------
e) Basis of consolidation
i) Subsidiaries
The consolidated financial statements include the accounts of
the Company and its subsidiaries. Subsidiaries are those entities
controlled by the Group. Control is assumed when the Group:
-- Has the power over the investee
-- Is exposed, or has rights, to variable returns from its
involvement with the investee
-- Has the ability to use its power to affect its returns
In the consolidated balance sheet, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair value at the acquisition date.
The results of subsidiaries are included in the consolidated
financial statements from the date that control commences until the
date that control ceases.
Where properties are acquired through corporate acquisitions and
there are no significant assets or liabilities other than property,
the acquisition is treated as an asset acquisition and in other
cases the acquisition accounting method is used.
Under the acquisition accounting method, the identifiable
assets, liabilities and contingent liabilities acquired are
measured at fair value at the acquisition date. The consideration
transferred is measured at fair value and includes the fair value
of any contingent consideration.
ii) Joint ventures
Joint ventures are those entities over whose activities the
Group has joint control. Joint ventures are accounted for under the
equity method, whereby the consolidated balance sheet incorporates
the Group's share of the net assets of its joint ventures and the
consolidated income statement incorporates the Group's share of
joint venture profits after tax. The Group's joint ventures adopt
the accounting policies of the Group for inclusion in the Group
financial statements.
Joint venture management fees are recognised as income in the
accounting period in which the service is rendered.
iii) Non-controlling interest
The Group's non-controlling interest ('NCI') represents an 18%
shareholding in LMP Retail Warehouse JV Holdings Limited, which
owns a portfolio of DFS assets.
The Group consolidates the results and net assets of its
subsidiary in these financial statements and reflects the
non-controlling interests' share within equity in the consolidated
balance sheet and allocates to the non-controlling interest their
share of profit or loss for the period within the consolidated
income statement.
iv) Alternative performance measures
Our portfolio is a combination of properties that are wholly
owned by the Group and part owned through joint venture
arrangements or where a third party holds a non-controlling
interest. Management reviews the performance of the Group's
proportionate share of assets and returns, and considers the
presentation of information on this basis helpful to stakeholders
as it aggregates the results of all the Group's property interests
which under IFRS are required to be presented across a number of
line items in the financial statements.
v) Business combinations
The acquisition of subsidiaries is accounted for using the
acquisition method. The cost of the acquisition is measured at the
aggregate of the fair values of assets and liabilities acquired and
equity instruments issued by the Group in exchange for control of
the acquiree. Acquisition costs are recognised in the income
statement as incurred.
Any excess of the purchase price of business combinations over
the fair value of the assets, liabilities and contingent
liabilities acquired is recognised as goodwill. This is recognised
as an asset and is reviewed for impairment at least annually. Any
impairment is recognised immediately in the income statement.
f) Property portfolio
i) Investment properties
Investment properties are properties owned or leased by the
Group which are held for long term rental income and for capital
appreciation. Investment property includes property that is being
constructed, developed or redeveloped for future use as an
investment property. Investment property is initially recognised at
cost, including related transaction costs. It is subsequently
carried at each published balance sheet date at fair value on an
open market basis as determined by professionally qualified
independent external valuers. Changes in fair value are included in
the income statement. Where a property held for investment is
appropriated to development property, it is transferred at fair
value. A property ceases to be treated as a development property on
practical completion. In accordance with IAS 40 Investment
Properties, no depreciation is provided in respect of investment
properties.
Investment property is recognised as an asset when:
-- It is probable that the future economic benefits that are
associated with the investment property will flow to the Group
-- The cost of the investment property can be measured
reliably
All costs directly associated with the purchase and construction
of a development property are capitalised. Capital expenditure that
is directly attributable to the redevelopment or refurbishment of
investment property, up to the point of it being completed for its
intended use, is included in the carrying value of the
property.
ii) Non current assets held for sale
An asset is classified as held for sale if its carrying amount
is expected to be recovered through a sale transaction rather than
through continuing use. This condition is regarded as met only when
the sale is highly probable, the asset is available for sale in its
present condition and management are committed to the sale and
expect it to complete within one year from the date of
classification.
Non-current assets classified as held for sale are measured at
the lower of carrying amount and the fair value less costs to
sell.
iii) Tenant leases
Leases - the Group as a lessor
Rent receivable is recognised in the income statement on a
straight-line basis over the term of the lease. In the event that a
lease incentive is granted to a lessee, such incentives are
recognised as an asset, with the aggregate cost of the incentive
recognised as a reduction in rental income on a straight-line basis
over the term of the lease or to the first break option if earlier.
When the Group is an intermediate lessor, it accounts for the head
lease and the sub-lease as two separate contracts.
Leases - the Group as lessee
Where the Group is a lessee, a right of use asset and lease
liability are recognised at the outset of the lease. The lease
liability is initially measured at the present value of the lease
payments based on the Group's expectations of the likelihood of the
lease term. The lease liability is subsequently adjusted to reflect
an imputed finance charge, payments made to the lessor and any
lease modifications. The right of use asset is initially measured
at cost, which comprises the amount of the lease liability, direct
costs incurred, less any lease incentives received by the Group.
The Group has two categories of right of use assets: those in
respect of head leases related to a small number of leasehold
properties and an occupational lease for its head office. Both
right of use assets are classified as investment property and added
to the carrying value of the leasehold investment property. The
right of use asset in respect of its occupational lease is
subsequently depreciated over the length of the lease.
iv) Net rental income
Rental income from investment property leased out under an
operating lease is recognised in the profit or loss on a straight
line basis over the lease term.
Contingent rents, such as turnover rents, rent reviews and
indexation, are recorded as income in the periods in which they are
earned. Rent reviews are recognised when such reviews have been
agreed with tenants.
Surrender premiums receivable are recognised on completion of
the surrender.
Where a rent free period is included in a lease, the rental
income foregone is allocated evenly over the period from the date
of lease commencement to the earlier of the first break option or
the lease termination date. Lease incentives and costs associated
with entering into tenant leases are amortised over the period from
the date of lease commencement to the earlier of the first break
option or the lease termination date.
Property operating expenses are expensed as incurred and any
property operating expenditure not recovered from tenants through
service charges is charged to the income statement.
v) Profit and loss on sale of investment properties
Profits and losses on sales of investment properties are
recognised at the date of legal completion rather than exchange of
contracts and calculated by reference to the carrying value at the
previous year end valuation date, adjusted for subsequent capital
expenditure.
g) Financial assets and financial liabilities
Financial assets and financial liabilities are recognised in the
balance sheet when the Group becomes a party to the contractual
terms of the instrument.
Financial instruments under IFRS 9
i) Trade receivables
Trade receivables are initially recognised at their transaction
price and subsequently measured at amortised cost as the Group's
business model is to collect the contractual cash flows due from
tenants. An impairment provision is created based on lifetime
expected credit losses, which reflect the Group's historical credit
loss experience and an assessment of current and forecast economic
conditions at the reporting date. The impact of Covid-19 has given
rise to higher estimated probabilities of default for some
occupiers.
ii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at
call with banks and other short term highly liquid investments with
original maturities of three months or less, measured at amortised
cost.
iii) Trade and other payables
Trade payables and other payables are initially measured at fair
value, net of transaction costs and subsequently measured at
amortised cost using the effective interest method.
iv) Borrowings
Borrowings are recognised initially at fair value less
attributable transaction costs. Subsequently, borrowings are
measured at amortised cost with any difference between the proceeds
and redemption value being recognised in the income statement over
the term of the borrowings using the effective interest method.
v) Derivative financial instruments
The Group uses derivative financial instruments to hedge its
exposure to interest rate risks. Derivative financial instruments
are recognised initially at fair value, which equates to cost and
subsequently remeasured at fair value, with changes in fair value
being included in the income statement.
The Group does not apply hedge accounting under IFRS 9.
h) Finance costs and income
Net finance costs include interest payable on borrowings, net of
interest capitalised and finance costs amortised.
Interest is capitalised if it is directly attributable to the
acquisition, construction or redevelopment of development
properties from the start of the development work until practical
completion of the property. Capitalised interest is calculated with
reference to the actual interest rate payable on specific
borrowings for the purposes of development or, for that part of the
borrowings financed out of general funds, with reference to the
Group's weighted average cost of borrowings.
Finance income includes interest receivable on funds invested at
the effective rate and notional interest receivable on forward
funded developments at the contractual rate.
Finance costs and income are presented in the cash flow
statement within financing and investing activities, respectively.
For consistency, the prior year comparative presentation of these
balances, together with the comparative presentation of movements
in lease incentives, was amended within the cash flow
statement.
i) Tax
Tax is included in profit or loss except to the extent that it
relates to items recognised directly in equity, in which case the
related tax is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date, together with any adjustment in respect of
previous years.
Deferred tax is provided using the balance sheet liability
method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes
and their tax bases. The amount of deferred tax provided is based
on the expected manner or realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
As the Group is a UK REIT there is no provision for deferred tax
arising on the revaluation of properties or other temporary
differences. The Group must comply with the UK REIT regulation to
benefit from the favourable tax regime.
j) Share based payments
The fair value of equity-settled share based payments to
employees is determined at the date of grant and is expensed on a
straight line basis over the vesting period based on the Group's
estimate of shares that will eventually vest.
k) Shares held in Trust
The cost of the Company's shares held by the Employee Benefit
Trust is deducted from equity in the Group balance sheet. Any
shares held by the Trust are not included in the calculation of
earnings or net tangible assets per share.
l) Dividends
Dividends on equity shares are recognised when they become
legally payable. In the case of interim dividends, this is when
paid. In the case of final dividends, this is when approved by the
shareholders at the Annual General Meeting.
2 Segmental information
As at 31 March 2021 2020
----------------------------------- -------------------------------- --------------------------------
100% Share 100% Share
owned of JV NCI Total owned of JV NCI Total
Property value GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------- ------ ------ ------- ------- ------ ------ -------
Distribution 1,777.3 - - 1,777.3 1,597.0 - (3.3) 1,593.7
Long income 547.6 93.2 (11.4) 629.4 475.2 88.9 (11.6) 552.5
Retail parks 73.9 - - 73.9 83.3 - - 83.3
Office 41.1 - - 41.1 55.1 - - 55.1
Residential 0.9 1.2 - 2.1 1.4 3.5 - 4.9
Development(1) 59.8 - - 59.8 57.0 - - 57.0
----------------------------------- ------- ------ ------ ------- ------- ------ ------ -------
2,500.6 94.4 (11.4) 2,583.6 2,269.0 92.4 (14.9) 2,346.5
----------------------------------- ------- ------ ------ ------- ------- ------ ------ -------
Head lease and right of use assets 5.1 5.7
----------------------------------- ------- ------ ------ ------- ------- ------ ------ -------
2,588.7 2,352.2
----------------------------------- ------- ------ ------ ------- ------- ------ ------ -------
1 Includes trading property of GBP1.1 million
For the year to 31 March 2021 2020
------------------------- ---------------------------- ----------------------------
100% Share 100% Share
owned of JV NCI Total owned of JV NCI Total
Gross rental income GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ------ ----- ----- ------ ------ ----- -----
Distribution 78.1 - (0.1) 78.0 76.3 - (0.2) 76.1
Long income 34.7 5.3 (1.4) 38.6 25.7 6.1 (1.1) 30.7
Retail parks 4.7 - - 4.7 7.1 - - 7.1
Office 3.5 - - 3.5 3.2 - - 3.2
Residential 0.1 - - 0.1 - 0.2 - 0.2
Development 0.2 - - 0.2 - - - -
------------------------- ------ ------ ----- ----- ------ ------ ----- -----
121.3 5.3 (1.5) 125.1 112.3 6.3 (1.3) 117.3
------------------------- ------ ------ ----- ----- ------ ------ ----- -----
For the year to 31 March 2021 2020
------------------------- ---------------------------- ----------------------------
100% Share 100% Share
owned of JV NCI Total owned of JV NCI Total
Net rental income GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ------ ----- ----- ------ ------ ----- -----
Distribution 77.2 - (0.1) 77.1 75.5 - (0.2) 75.3
Long income 34.5 5.2 (1.4) 38.3 25.7 6.1 (1.1) 30.7
Retail parks 4.3 - - 4.3 6.7 - - 6.7
Office 3.4 - - 3.4 3.2 - - 3.2
Residential 0.1 (0.1) - - - - - -
Development 0.2 - - 0.2 - - - -
------------------------- ------ ------ ----- ----- ------ ------ ----- -----
119.7 5.1 (1.5) 123.3 111.1 6.1 (1.3) 115.9
------------------------- ------ ------ ----- ----- ------ ------ ----- -----
An operating segment is a distinguishable component of the Group
that engages in business activities, earns revenue and incurs
expenses, whose results are reviewed by the Group's Chief Operating
Decision Makers ('CODMs') and for which discrete financial
information is available. Gross rental income represents the
Group's revenues from its tenants and net rental income is the
principal profit measure used to determine the performance of each
sector. Total assets and liabilities are not monitored by segment.
However, property assets are reviewed on an ongoing basis. The
Group operates entirely in the UK and no geographical split is
provided in information reported to the Board.
Included within the distribution operating segment are the
sub-categories of urban logistics, regional distribution and mega
distribution as reported throughout the Strategic report, however
the sub-category results are not separately reviewed by the CODMs
as they are not considered separate operating segments. Instead,
the CODMs review the distribution sector as a whole as its own
operating segment.
3 Revenue
2021 2020
For the year to 31 March GBPm GBPm
-------------------------------------------- ----- -----
Gross rental income 121.3 112.3
Property advisory fee income 0.9 1.1
-------------------------------------------- ----- -----
122.2 113.4
-------------------------------------------- ----- -----
2021 2020
For the year to 31 March GBPm GBPm
-------------------------------------------- ----- -----
Gross rental income 121.3 112.3
Cost of sales - property operating expenses (1.6) (1.2)
-------------------------------------------- ----- -----
Net rental income 119.7 111.1
-------------------------------------------- ----- -----
No individual tenant contributed more than 10% of gross rental
income in the current or previous year. The contracted rental
income of the Group's top ten occupiers is shown in Supplementary
note xvii.
4 Administrative costs
a) Total administrative costs
2021 2020
For the year to 31 March GBPm GBPm
--------------------------- ----- -----
Staff costs 12.4 12.1
Auditor's remuneration 0.2 0.2
Depreciation 0.7 0.7
Other administrative costs 2.5 2.8
--------------------------- ----- -----
15.8 15.8
--------------------------- ----- -----
b) Staff costs
2021 2020
For the year to 31 March GBPm GBPm
---------------------------------------------------------------------- ----- -----
Employee costs, including those of Directors, comprise the following:
Wages and salaries 9.8 10.3
Less staff costs capitalised in respect of development projects (2.2) (2.1)
---------------------------------------------------------------------- ----- -----
7.6 8.2
Social security costs 0.8 0.8
Pension costs 0.2 0.2
Share based payment 3.8 2.9
---------------------------------------------------------------------- ----- -----
12.4 12.1
---------------------------------------------------------------------- ----- -----
The long term share incentive plan ('LTIP') that was created in
2013 allows Executive Directors and eligible employees to receive
an award of shares, held in trust, dependent on performance
conditions based on the earnings per share, total shareholder
return and total accounting return of the Group over a three year
vesting period. The Group expenses the estimated number of shares
likely to vest over the three year period based on the market price
at the date of grant. In the current year the charge was GBP3.8
million (2020: GBP2.9 million). The cost of acquiring the shares
expected to vest under the LTIP of GBP5.5 million has been charged
to reserves this year (2020: GBP7.2 million).
Directors' emoluments are reflected in the table below. Details
of the Directors' remuneration awards under the LTIP are given in
the Remuneration Committee report.
2021 2020
GBPm GBPm
-------------------------------------------- ----- -----
Remuneration for management services 2.8 2.9
Entitlement to pension scheme contributions 0.1 0.1
-------------------------------------------- ----- -----
2.9 3.0
-------------------------------------------- ----- -----
The emoluments and benefits of the key management personnel of
the Company, which comprise the Directors and certain members of
the Senior Leadership Team, are set out in aggregate in the table
below.
2021 2020
GBPm GBPm
----------------------------- ----- -----
Short term employee benefits 8.7 7.8
Share based payments 2.5 2.3
----------------------------- ----- -----
11.2 10.1
----------------------------- ----- -----
No disclosures have been made in accordance with IFRS 2 for
share based payments to employees other than those in the
Remuneration Committee report on the basis of materiality.
c) Staff numbers
The average number of employees including Executive Directors
during the year was:
2021 2020
Number Number
---------------------------- ------- -------
Property and administration 32 34
---------------------------- ------- -------
d) Auditor's remuneration
2021 2020
For the year to 31 March GBP000 GBP000
----------------------------------------------------------------------------- ------- -------
Audit services:
Audit of the Group and Company financial statements, pursuant to legislation 201 179
Audit of subsidiary financial statements, pursuant to legislation - 5
Other fees:
Audit related assurance services 35 30
----------------------------------------------------------------------------- ------- -------
Total fees for audit and other services 236 214
----------------------------------------------------------------------------- ------- -------
In addition to the above audit fees, GBP24,200 (2020: GBP35,600)
was due to the Group's auditor in respect of its joint venture
operations. BDO LLP is responsible for the audit of other
subsidiary entities at a cost to the Group of GBP36,500 (2020:
GBP10,400).
5 Finance costs
2021 2020
For the year to 31 March GBPm GBPm
----------------------------------------------------------- ----- -----
Interest payable on bank loans and related derivatives 19.4 22.8
Debt and hedging early close out costs 7.5 0.2
Amortisation of loan issue costs 1.8 1.5
Interest on lease liabilities 0.1 0.1
Commitment fees and other finance costs 1.9 2.1
----------------------------------------------------------- ----- -----
Total borrowing costs 30.7 26.7
Less amounts capitalised on developments (1.1) (0.9)
----------------------------------------------------------- ----- -----
Net borrowing costs 29.6 25.8
Fair value (gain)/loss on derivative financial instruments (4.7) 3.2
----------------------------------------------------------- ----- -----
Total finance costs 24.9 29.0
----------------------------------------------------------- ----- -----
Net finance costs deducted from EPRA earnings as disclosed in
Supplementary note ii exclude the fair value gain on derivative
financial instruments of GBP4.7 million (2020: loss of GBP3.2
million) and early close out costs of GBP7.5 million (2020: GBP0.2
million), and include interest receivable of GBP0.6 million (2020:
GBP0.7 million) as reflected in the income statement.
6 Taxation
2021 2020
For the year to 31 March GBPm GBPm
------------------------- ----- -----
Current tax
UK tax charge on profit 0.1 0.2
------------------------- ----- -----
The tax assessed for the year varies from the standard rate of
corporation tax in the UK. The differences are explained below:
2021 2020
For the year to 31 March GBPm GBPm
----------------------------------------------------------------------------------------- ------ -----
Profit/(loss) before tax 258.0 (6.7)
Tax charge/(credit) at the standard rate of corporation tax in the UK of 19% (2020: 19%) 49.0 (1.3)
Effects of:
Tax effect of income not subject to tax (47.6) (0.2)
Share of post tax (profits)/losses of joint ventures (1.3) 1.7
----------------------------------------------------------------------------------------- ------ -----
UK tax charge on profit 0.1 0.2
----------------------------------------------------------------------------------------- ------ -----
The current tax charge relates to tax arising on income
attributable to the Group's non-controlling interest and other
income that does not qualify as property income within the REIT
regulations. As the Group is a UK REIT there is no provision for
deferred tax arising on the revaluation of properties or other
temporary differences.
7 Dividends
2021 2020
For the year to 31 March GBPm GBPm
-------------------------------------------------------- ----- -----
Ordinary dividends paid
-------------------------------------------------------- ----- -----
2019 Third quarterly interim dividend: 1.9p per share - 13.3
2019 Fourth quarterly interim dividend: 2.5p per share - 17.4
2020 First quarterly interim dividend: 2.0p per share - 16.7
2020 Second quarterly interim dividend: 2.0p per share - 16.8
2020 Third quarterly interim dividend: 2.0p per share 16.7 -
2020 Fourth quarterly interim dividend: 2.3p per share 20.8 -
2021 First quarterly interim dividend: 2.1p per share 19.0 -
2021 Second quarterly interim dividend: 2.1p per share 19.1 -
-------------------------------------------------------- ----- -----
75.6 64.2
-------------------------------------------------------- ----- -----
Quarterly dividend payable
2021 Third quarterly interim dividend: 2.1p per share 19.0
2021 Fourth quarterly interim dividend: 2.35p per share 21.3
-------------------------------------------------------- ----- -----
The Company paid its third quarterly interim dividend in respect
of the financial year to 31 March 2021 of 2.1p per share, wholly as
a Property Income Distribution ('PID'), on 15 April 2021 to
ordinary shareholders on the register at the close of business on
12 March 2021.
The fourth quarterly interim dividend for 2021 of 2.35p per
share, of which 2.25p is payable as a PID, will be payable on 13
July 2021 to shareholders on the register at the close of business
on 11 June 2021. A scrip dividend alternative will be offered to
shareholders as it was for the first three quarterly dividend
payments.
Neither dividend has been included as a liability in these
accounts. Both dividends will be recognised as an appropriation of
retained earnings in the year to 31 March 2022.
During the year the Company issued 1.5 million ordinary shares
under the terms of the Scrip Dividend Scheme, which reduced the
cash dividend payment by GBP3.2 million to GBP72.4 million.
8 Earnings and net assets per share
Adjusted earnings and net assets per share are calculated in
accordance with the Best Practice Recommendations ('BPR') of the
European Public Real Estate Association ('EPRA'). The EPRA earnings
measure highlights the underlying performance of the property
rental business.
The basic earnings per share calculation uses the weighted
average number of ordinary shares during the year and excludes the
average number of shares held by the Employee Benefit Trust for the
year. The basic net asset per share calculation uses the number of
shares in issue at the year end and excludes the actual number of
shares held by the Employee Benefit Trust at the year end. The
fully diluted calculations assume that new shares are issued in
connection with the expected vesting of the Group's long term
incentive plan. Further EPRA performance measures are reflected in
the Supplementary notes.
a) EPRA earnings
EPRA earnings for the Group and its share of joint ventures are
detailed as follows:
Group JV NCI 2021 Group JV NCI 2020
For the year to 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Gross rental income 121.3 5.3 (1.5) 125.1 112.3 6.3 (1.3) 117.3
Property costs (1.6) (0.2) - (1.8) (1.2) (0.2) - (1.4)
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Net rental income 119.7 5.1 (1.5) 123.3 111.1 6.1 (1.3) 115.9
Management fees 0.9 (0.4) - 0.5 1.1 (0.5) - 0.6
Administrative costs (15.8) - - (15.8) (15.8) (0.1) - (15.9)
Net finance costs(1) (21.5) (1.2) 0.2 (22.5) (24.9) (1.5) 0.3 (26.1)
Other(1) (0.1) - 0.2 0.1 (0.2) - 0.2 -
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
EPRA earnings 83.2 3.5 (1.1) 85.6 71.3 4.0 (0.8) 74.5
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
1 Group net finance costs reflect net borrowing costs of GBP29.6
million (note 5) less early close out costs of GBP7.5 million (note
5) and finance income of GBP0.6 million
The reconciliation of EPRA earnings to IFRS reported profit can
be summarised as follows:
Group JV NCI 2021 Group JV NCI 2020
For the year to 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ----- ----- ----- ----- ------ ------ ----- ------
EPRA earnings 83.2 3.5 (1.1) 85.6 71.3 4.0 (0.8) 74.5
Revaluation of property 169.9 3.4 0.4 173.7 (3.8) (10.2) 2.0 (12.0)
Fair value of derivatives 4.7 0.1 - 4.8 (3.2) (0.4) - (3.6)
Profit/(loss) on disposal 0.8 (0.1) - 0.7 (4.9) (2.3) - (7.2)
Debt and hedging early close out costs (7.5) - - (7.5) (0.2) - - (0.2)
Impairment of goodwill - - - - (48.3) - - (48.3)
Acquisition costs - - - - (8.9) - - (8.9)
--------------------------------------- ----- ----- ----- ----- ------ ------ ----- ------
IFRS reported profit/(loss) 251.1 6.9 (0.7) 257.3 2.0 (8.9) 1.2 (5.7)
--------------------------------------- ----- ----- ----- ----- ------ ------ ----- ------
b) Earnings per ordinary share attributable to equity
shareholders
2021 2020
For the year to 31 March GBPm GBPm
--------------------------- ------- -----
Basic and diluted earnings 257.3 (5.7)
EPRA adjustments above (171.7) 80.2
--------------------------- ------- -----
EPRA earnings 85.6 74.5
--------------------------- ------- -----
2021 2020
Number of Number of
shares shares
For the year to 31 March (millions) (millions)
----------------------------------------------------------- ------------ ------------
Ordinary share capital 901.9 806.7
Shares held in the Employee Benefit Trust (2.8) (2.5)
----------------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares - basic 899.1 804.2
Employee share schemes 4.8 6.0
----------------------------------------------------------- ------------ ------------
Weighted average number of ordinary shares - fully diluted 903.9 810.2
----------------------------------------------------------- ------------ ------------
Earnings per share
Basic 28.61p (0.70)p
Diluted 28.46p (0.70)p
EPRA earnings per share
Basic 9.52p 9.26p
Diluted 9.47p 9.19p
----------------------------------------------------------- ------------ ------------
c) Net assets per share attributable to equity shareholders
In October 2019, EPRA published new best practice
recommendations for financial disclosures by public real estate
companies. The best practice recommendations introduced three new
measures of net asset value: EPRA net tangible assets ('NTA'), EPRA
net reinstatement value ('NRV') and EPRA net disposal value
('NDV').
These recommendations became effective for accounting periods
commencing on 1 January 2020 and have been adopted by the Group in
the year. The three new measures have replaced the previously
reported metrics of EPRA net asset value ('NAV') and EPRA triple
net asset value ('NNNAV').
EPRA NTA is considered to be the most relevant measure for the
Group and replaces EPRA NAV as the primary measure of net asset
value. All three measures are calculated on a diluted basis, which
assumes that new shares are issued in connection with the expected
vesting of the Group's long term incentive plan.
A reconciliation between the three new EPRA NAV metrics to IFRS
NAV and the previously reported EPRA NAV is shown in the table
below. For the Group, EPRA NDV is equivalent to EPRA NNNAV on a
fully diluted basis and therefore no reconciliation is
presented.
EPRA net tangible assets EPRA net disposal value EPRA net reinstatement value
As at 31 March 2021 GBPm GBPm GBPm
------------------------------------- ------------------------ ----------------------- ----------------------------
Equity shareholders' funds 1,731.3 1,731.3 1,731.3
Fair value of group derivatives - - -
Fair value of joint ventures'
derivatives 0.6 0.6 0.6
------------------------------------- ------------------------ ----------------------- ----------------------------
EPRA net asset value (as previously
reported) 1,731.9 1,731.9 1,731.9
------------------------------------- ------------------------ ----------------------- ----------------------------
Fair value of derivatives - (0.6) -
Mark to market of fixed rate debt - (4.9) -
Purchasers' costs(1) - - 176.0
------------------------------------- ------------------------ ----------------------- ----------------------------
EPRA net asset value (new measures) 1,731.9 1,726.4 1,907.9
------------------------------------- ------------------------ ----------------------- ----------------------------
1 Estimated from the portfolio's external valuation which is
stated net of purchasers' costs of 6.8%.
EPRA net tangible assets EPRA net reinstatement value
As at 31 March 2020 GBPm EPRA net disposal value GBPm GBPm
-------------------------------- ------------------------ ---------------------------- ----------------------------
Equity shareholders' funds 1,431.8 1,431.8 1,431.8
Fair value of group derivatives 4.7 4.7 4.7
Fair value of joint ventures'
derivatives 0.7 0.7 0.7
-------------------------------- ------------------------ ---------------------------- ----------------------------
EPRA net asset value (as
previously reported) 1,437.2 1,437.2 1,437.2
-------------------------------- ------------------------ ---------------------------- ----------------------------
Fair value of derivatives - (5.4) -
Mark to market of fixed rate
debt - 1.7 -
Purchasers' costs - - 159.9
-------------------------------- ------------------------ ---------------------------- ----------------------------
EPRA net asset value (new
measures) 1,437.2 1,433.5 1,597.1
-------------------------------- ------------------------ ---------------------------- ----------------------------
2021 2020
Number of shares Number of shares
As at 31 March (millions) (millions)
------------------------------------------ ----------------- ------------------
Ordinary share capital 909.6 841.5
Shares held in Employee Benefit Trust (4.4) (4.3)
------------------------------------------ ----------------- ------------------
Number of ordinary shares - basic 905.2 837.2
------------------------------------------ ----------------- ------------------
Employee share schemes 4.7 6.5
------------------------------------------ ----------------- ------------------
Number of ordinary shares - fully diluted 909.9 843.7
------------------------------------------ ----------------- ------------------
IFRS net asset value per share 191.3p 171.0p
------------------------------------------ ----------------- ------------------
EPRA net tangible assets per share 190.3p 170.3p
------------------------------------------ ----------------- ------------------
EPRA net disposal value per share 189.7p 169.9p
------------------------------------------ ----------------- ------------------
EPRA net reinstatement value per share 209.7p 189.3p
------------------------------------------ ----------------- ------------------
9 Investment properties
a) Investment properties
2021 Under 2020
Completed Total Completed development Total
As at 31 March GBPm Under development GBPm GBPm GBPm GBPm GBPm
---------------------------------------- --------- ---------------------- ------- --------- ------------ -------
Opening balance 2,212.0 55.9 2,267.9 1,628.2 59.8 1,688.0
Acquisitions 212.4 16.8 229.2 634.2 31.9 666.1
Capital expenditure 4.9 21.1 26.0 10.2 11.2 21.4
Disposals (200.8) - (200.8) (113.1) (0.3) (113.4)
Property transfers 55.5 (55.5) - 50.3 (50.3) -
Revaluation movement 149.7 20.2 169.9 (7.3) 3.5 (3.8)
Movement in tenant incentives and rent
free uplifts 7.1 0.2 7.3 9.5 0.1 9.6
Property portfolio 2,440.8 58.7 2,499.5 2,212.0 55.9 2,267.9
Head lease and right of use assets 5.1 - 5.1 5.7 - 5.7
---------------------------------------- --------- ---------------------- ------- --------- ------------ -------
2,445.9 58.7 2,504.6 2,217.7 55.9 2,273.6
---------------------------------------- --------- ---------------------- ------- --------- ------------ -------
Investment properties are held at fair value as at 31 March 2021
based on external valuations performed by professionally qualified
valuers CBRE Limited ('CBRE'), Savills (UK) Limited ('Savills') and
Cushman & Wakefield Debenham Tie Leung Limited ('Cushman &
Wakefield'). The valuation of property held for sale at 31 March
2021 was GBP22.4 million (2020: GBP67.8 million), representing
GBP2.3 million distribution, GBP10.5 million long income and GBP9.6
million office assets.
The valuations have been prepared in accordance with the RICS
Valuation - Professional Standards 2014 on the basis of fair value
as set out in note 1. There has been no change in the valuation
technique in the year. The total fees earned by CBRE, Savills and
Cushman & Wakefield from the Company represent less than 5% of
their total UK revenues. CBRE and Savills have continuously been
the signatory of valuations for the Company since October 2007 and
September 2010 respectively.
Long term leasehold values included within investment properties
amount to GBP148.7 million (2020: GBP176.9 million). All other
properties are freehold. The historical cost of all of the Group's
investment properties at 31 March 2021 was GBP1,948.2 million
(2020: GBP1,884.0 million).
Included within the investment property valuation is GBP79.4
million (2020: GBP72.1 million) in respect of unamortised lease
incentives and rent free periods.
Capital commitments have been entered into amounting to GBP93.3
million (2020: GBP28.9 million) which have not been provided for in
the financial statements.
Internal staff costs of the development team of GBP2.2 million
(2020: GBP2.1 million) have been capitalised, being directly
attributable to the development projects in progress.
Forward funded development costs of GBP15.5 million (2020:
GBP9.9 million) have been classified within investment property as
acquisitions.
At 31 March 2021, investment properties included GBP5.1 million
for the head lease right of use assets in accordance with IFRS 16
(2020: GBP5.7 million).
b) Valuation technique and quantitative information
ERV Net initial yield Reversionary yield
Fair
value Weighted Weighted Weighted
2021 Valuation average Range average Range average Range
Asset type GBPm technique (GBP per sq ft) (GBP per sq ft) % % % %
-------------- --------- -------------- --------------- --------------- --------- -------- --------- --------
Yield
Distribution 1,777.3 capitalisation 7.06 4.00-21.40 4.1 1.4-7.1 4.5 2.4-7.4
Yield
Long income 547.6 capitalisation 14.00 3.00-155.70 4.9 3.4-11.8 4.7 2.4-13.4
Yield
Retail parks 73.9 capitalisation 14.03 6.00-18.70 7.5 6.2-12.4 6.7 6.0-9.4
Yield
Office 41.1 capitalisation 17.38 11.50-33.90 6.0 5.0-7.4 6.5 5.6-9.3
Development 58.7 Residual 10.21 8.35-25.00 4.2 3.9-5.7 3.9 3.7-5.7
Residential 0.9 Comparison n/a n/a n/a n/a n/a n/a
-------------- --------- -------------- --------------- --------------- --------- -------- --------- --------
All of the Group's properties are categorised as Level 3 in the
fair value hierarchy as defined by IFRS 13 fair value measurement.
There have been no transfers of properties between Levels 1, 2 and
3 during the year ended 31 March 2021. The fair value at 31 March
2021 represents the highest and best use.
i) Technique
The valuation techniques described below are consistent with
IFRS 13 and use significant 'unobservable' inputs such as Expected
Rental Value ('ERV') and yield. There have been no changes in
valuation techniques since the prior year.
Yield capitalisation - for commercial investment properties,
market rental values are capitalised with a market capitalisation
rate. The resulting valuations are cross-checked against the net
initial yields and the fair market values per square foot derived
from recent market transactions.
Residual - for certain investment properties under development,
the fair value of the property is calculated by estimating the fair
value of the completed property using the yield capitalisation
technique less estimated costs to completion and a risk
premium.
Comparison - for residential properties the fair value is
calculated by using data from recent market transactions.
ii) Sensitivity
A 5% increase or decrease in ERV would increase or decrease the
fair value of the Group's investment properties by GBP75.7 million
or GBP73.8 million respectively.
An increase or decrease of 25 bps to the equivalent yield would
decrease or increase the fair value of the Group's investment
properties by GBP136.0 million or GBP152.0 million
respectively.
There are interrelationships between the unobservable inputs as
they are determined by market conditions; an increase in more than
one input could magnify or mitigate the impact on the
valuation.
iii) Process
The valuation reports produced by CBRE, Savills and Cushman
& Wakefield are based on:
-- Information provided by the Group, such as current rents,
lease terms, capital expenditure and comparable sales information,
which is derived from the Group's financial and property management
systems and is subject to the Group's overall control
environment
-- Assumptions applied by the valuers such as ERVs and yields
which are based on market observation and their professional
judgement
10 Investment in joint ventures
At 31 March 2021, the following principal property interests,
being jointly controlled entities, have been equity accounted for
in these financial statements:
Country of incorporation
or registration(1) Property sectors Group share
------------------------------------------- ------------------------- ----------------- -----------
Metric Income Plus Partnership England Long income 50.0%
LSP London Residential Investments Limited Guernsey Residential 40.0%
------------------------------------------- ------------------------- ----------------- -----------
1 The registered address for entities incorporated in England is
One Curzon Street, London, W1J 5HB. The registered address for
entities incorporated in Guernsey is Regency Court, Glategny
Esplanade, St Peter Port, Guernsey, GY1 3AP.
The principal activity of joint venture interests is property
investment in the UK in the sectors noted in the table above, which
complements the Group's operations and contributes to the
achievement of its strategy.
LSP London Residential Investments Limited disposed of four
residential flats at Moore House for GBP4.5 million (Group share:
GBP1.8 million) in the year, reducing the number held to four.
The Metric Income Plus Partnership ('MIPP'), in which the
Company has a 50% interest, sold two properties post year end for
GBP21.1 million (Group share: GBP10.6 million).
At 31 March 2021, the freehold and leasehold investment
properties were externally valued by Royal Institution of Chartered
Surveyors ('RICS') registered valuers of CBRE and Savills. The
valuation of property held for sale by joint ventures at 31 March
2021 was GBP21.1 million (Group share: GBP10.6 million), (2020:
GBP3.9 million and Group share GBP1.5 million).
The movement in the carrying value of joint venture interests in
the year is summarised as follows:
2021 2020
As at 31 March GBPm GBPm
----------------------------------- ----- ------
Opening balance 54.1 98.9
Additions at cost 4.7 0.3
Share of profit/(loss) in the year 6.9 (8.9)
Disposals - (20.5)
Distributions received (6.5) (15.7)
----------------------------------- ----- ------
59.2 54.1
----------------------------------- ----- ------
The Group's share of the profit after tax and net assets of its
joint ventures is as follows:
LSP
Metric London Group
Income Plus Residential Total share
Partnership Investments 2021 2021
GBPm GBPm GBPm GBPm
--------------------------------------- ------------ ------------ ------ ------
Summarised income statement
Gross rental income 10.7 - 10.7 5.3
Property costs (0.3) (0.1) (0.4) (0.2)
--------------------------------------- ------------ ------------ ------ ------
Net rental income 10.4 (0.1) 10.3 5.1
Administrative costs (0.1) - (0.1) -
Management fees (0.8) (0.1) (0.9) (0.4)
Revaluation 8.0 (1.5) 6.5 3.4
Net finance cost (2.5) - (2.5) (1.2)
Derivative movement 0.3 - 0.3 0.1
Loss on disposal - (0.2) (0.2) (0.1)
--------------------------------------- ------------ ------------ ------ ------
Profit/(loss) after tax 15.3 (1.9) 13.4 6.9
--------------------------------------- ------------ ------------ ------ ------
Group share of profit/(loss) after tax 7.7 (0.8) 6.9
--------------------------------------- ------------ ------------ ------ ------
EPRA adjustments:
Revaluation (8.0) 1.5 (6.5) (3.4)
Debt and hedging early close out costs 0.1 - 0.1 -
Derivative movement (0.3) - (0.3) (0.1)
Loss on disposal - 0.2 0.2 0.1
--------------------------------------- ------------ ------------ ------ ------
EPRA earnings 7.1 (0.2) 6.9 3.5
--------------------------------------- ------------ ------------ ------ ------
Group share of EPRA earnings 3.6 (0.1) 3.5
--------------------------------------- ------------ ------------ ------ ------
Summarised balance sheet
--------------------------------------- ------------ ------------ ------ ------
Investment properties 186.5 2.9 189.4 94.4
Other current assets 0.8 - 0.8 0.4
Cash 4.6 2.8 7.4 3.4
Current liabilities (2.6) - (2.6) (1.2)
Bank debt (74.9) - (74.9) (37.5)
Unamortised finance costs 0.5 - 0.5 0.3
Derivative financial instruments (1.1) - (1.1) (0.6)
--------------------------------------- ------------ ------------ ------ ------
Net assets 113.8 5.7 119.5 59.2
--------------------------------------- ------------ ------------ ------ ------
Group share of net assets 56.9 2.3 59.2
--------------------------------------- ------------ ------------ ------ ------
LMP
Metric Retail LSP Group
Income Plus Warehouse London Residential Total share
Partnership JV PUT Investments 2020 2020
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------------ ---------- ------------------- ------ ------
Summarised income statement
Gross rental income 11.8 0.5 0.3 12.6 6.3
Property costs (0.2) - (0.2) (0.4) (0.2)
--------------------------------------- ------------ ---------- ------------------- ------ ------
Net rental income 11.6 0.5 0.1 12.2 6.1
Administrative costs (0.1) - - (0.1) (0.1)
Management fees (0.9) - (0.2) (1.1) (0.5)
Revaluation (20.3) - (0.3) (20.6) (10.2)
Net finance cost (2.7) (0.2) - (2.9) (1.5)
Derivative movement (0.7) - - (0.7) (0.4)
Profit/(loss) on disposal 0.2 - (6.1) (5.9) (2.3)
--------------------------------------- ------------ ---------- ------------------- ------ ------
(Loss)/profit after tax (12.9) 0.3 (6.5) (19.1) (8.9)
--------------------------------------- ------------ ---------- ------------------- ------ ------
Group share of (loss)/profit after tax (6.4) 0.1 (2.6) (8.9)
--------------------------------------- ------------ ---------- ------------------- ------ ------
EPRA adjustments:
Revaluation 20.3 - 0.3 20.6 10.2
Derivative movement 0.7 - - 0.7 0.4
(Profit)/loss on disposal (0.2) - 6.1 5.9 2.3
--------------------------------------- ------------ ---------- ------------------- ------ ------
EPRA earnings 7.9 0.3 (0.1) 8.1 4.0
--------------------------------------- ------------ ---------- ------------------- ------ ------
Group share of EPRA earnings 4.0 0.1 (0.1) 4.0
--------------------------------------- ------------ ---------- ------------------- ------ ------
Summarised balance sheet
Investment properties 177.7 - 8.9 186.6 92.4
Other current assets 0.9 - 0.1 1.0 0.5
Cash 5.6 - 5.7 11.3 5.1
Current liabilities (2.9) - (0.1) (3.0) (1.5)
Bank debt (84.3) - - (84.3) (42.1)
Unamortised finance costs 0.9 - - 0.9 0.4
Derivative financial instruments (1.3) - - (1.3) (0.7)
--------------------------------------- ------------ ---------- ------------------- ------ ------
Net assets 96.6 - 14.6 111.2 54.1
--------------------------------------- ------------ ---------- ------------------- ------ ------
Group share of net assets 48.3 - 5.8 54.1
--------------------------------------- ------------ ---------- ------------------- ------ ------
11 Trade and other receivables
2021 2020
As at 31 March GBPm GBPm
------------------------------- ----- -----
Trade receivables 4.8 5.8
Prepayments and accrued income 3.5 1.1
Other receivables 1.5 0.9
------------------------------- ----- -----
9.8 7.8
------------------------------- ----- -----
All amounts fall due for payment in less than one year. Trade
receivables comprise rental income which is due on contractual
payment days with no credit period. At 31 March 2021, trade
receivables of GBP159,200 were overdue and considered at risk
(2020: GBP69,800). Based on the IFRS 9 expected credit loss model,
an impairment provision of GBP760,000 (2020: GBP340,000) has also
been made against trade receivables.
12 Cash and cash equivalents
Cash and cash equivalents include GBP10.7 million (2020: GBP5.4
million) retained in rent and restricted accounts which are not
readily available to the Group for day to day commercial
purposes.
13 Trade and other payables
2021 2020
As at 31 March GBPm GBPm
------------------------------------------------------- ----- -----
Trade payables 4.6 4.2
Amounts payable on property acquisitions and disposals 1.3 0.4
Rent received in advance 22.6 19.8
Accrued interest 1.3 1.9
Other payables 5.3 4.1
Other accruals and deferred income 10.9 12.2
------------------------------------------------------- ----- -----
46.0 42.6
------------------------------------------------------- ----- -----
The Group has financial risk management policies in place to
ensure that all payables are settled within the required credit
timeframe.
14 Borrowings and financial instruments
a) Non current financial liabilities
2021 2020
As at 31 March GBPm GBPm
-------------------------- ----- -----
Secured bank loans 192.5 192.7
Unsecured bank loans 647.0 740.0
-------------------------- ----- -----
839.5 932.7
Unamortised finance costs (2.0) (6.0)
-------------------------- ----- -----
837.5 926.7
-------------------------- ----- -----
Certain bank loans at 31 March 2021 are secured by fixed charges
over Group investment properties with a carrying value of GBP584.9
million (2020: GBP529.7 million).
Floating rate(1) Fixed rate Total debt
As at 31 March 2021 GBPm GBPm GBPm Weighted average maturity (years)
-------------------------------------- ---------------- ---------- ---------- ---------------------------------
Secured bank loans:
Helaba term loan 130.0 - 130.0 3.3
Scottish Widows fixed rate debt - 62.5 62.5 10.7
--------------------------------------- ---------------- ---------- ---------- ---------------------------------
Unsecured bank loans:
Revolving credit facility (syndicate) 258.0 - 258.0 1.0
HSBC revolving credit facility 59.0 - 59.0 2.0
Wells Fargo revolving credit facility 50.0 - 50.0 4.3
Private Placement 2016 (syndicate) - 130.0 130.0 3.7
Private Placement 2018 (syndicate) - 150.0 150.0 9.8
--------------------------------------- ---------------- ---------- ---------- ---------------------------------
497.0 342.5 839.5 4.3
-------------------------------------- ---------------- ---------- ---------- ---------------------------------
1 Interest rate caps of GBP19.6 million were used to hedge the
Group's exposure to interest rate risk
Floating rate(1) Fixed rate Total debt
As at 31 March 2020 GBPm GBPm GBPm Weighted average maturity (years)
-------------------------------------- ---------------- ---------- ---------- ---------------------------------
Secured bank loans:
Helaba term loan 130.0 - 130.0 4.3
Scottish Widows fixed rate debt - 62.7 62.7 11.7
--------------------------------------- ---------------- ---------- ---------- ---------------------------------
Unsecured bank loans:
Revolving credit facility (syndicate) 410.0 - 410.0 1.8
Wells Fargo revolving credit facility 50.0 - 50.0 5.3
Private Placement 2016 (syndicate) - 130.0 130.0 4.7
Private Placement 2018 (syndicate) - 150.0 150.0 10.8
--------------------------------------- ---------------- ---------- ---------- ---------------------------------
590.0 342.7 932.7 4.8
-------------------------------------- ---------------- ---------- ---------- ---------------------------------
1 Interest rate caps of GBP19.6 million and swaps of GBP350
million were used to hedge the Group's exposure to interest rate
risk
b) Financial risk management
Financial risk factors
The Group's overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group's financial performance. The
Group's financial risk management objectives are to minimise the
effect of risks it is exposed to through its operations and the use
of debt financing.
The principal financial risks to the Group and the policies it
has in place to manage these risks are summarised below.
i) Credit risk
Credit risk is the risk of financial loss to the Group if a
client or counterparty to a financial instrument fails to meet its
contractual obligations.
The Group's principal financial assets are cash balances and
deposits and trade and other receivables. The Group's credit risk
is primarily attributable to its cash deposits and trade
receivables.
The Group mitigates financial loss from tenant defaults by
dealing with only creditworthy tenants. Trade receivables are
presented at amortised cost less loss allowance for expected credit
losses. The loss allowance balance is low relative to the scale of
the balance sheet and therefore the credit risk of trade
receivables is considered to be low. Cash is held in a diverse mix
of institutions with investment grade credit ratings. The credit
ratings of the banks are monitored and changes are made where
necessary to manage risk.
The credit risk on liquid funds and derivative financial
instruments is limited due to the Group's policy of monitoring
counterparty exposures with a maximum exposure equal to the
carrying amount of these instruments. The Group has no significant
concentration of credit risk, with exposure spread over a large
number of counterparties.
ii) Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall
due.
The Group actively maintains a mixture of long term and short
term committed facilities that are designed to ensure that the
Group has sufficient available funds for operations. The Group's
funding sources are diversified across a range of banks and
institutions. Weekly cash flow forecasts are prepared for the
Senior Leadership Team to ensure sufficient resources of cash and
undrawn debt facilities are in place to meet liabilities as they
fall due.
The Group had cash reserves of GBP51.4 million (2020: GBP81.8
million) and available and undrawn bank loan facilities at 31 March
2021 of GBP170.5 million (2020: GBP133.8 million).
The following table shows the contractual maturity profile of
the Group's bank loans, interest payments on bank loans and
derivative financial instruments on an undiscounted cash flow basis
and assuming settlement on the earliest repayment date. Other
financial liabilities as disclosed in note 14c(i) include trade
payables and accrued interest and are repayable within one year.
The contractual maturity profile of lease liabilities disclosed in
the balance sheet is reflected in note 15.
Less than One to Two to More than
one year two years five years five years Total
As at 31 March 2021 GBPm GBPm GBPm GBPm GBPm
-------------------- --------- ---------- ----------- ----------- -----
Bank loans 20.3 332.5 317.4 274.3 944.5
-------------------- --------- ---------- ----------- ----------- -----
Less than One to Two to More than
one year two years five years five years Total
As at 31 March 2020 GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- ---------- ----------- ----------- -------
Bank loans 24.4 120.5 588.0 332.8 1,065.7
Derivative financial instruments 1.6 1.6 - - 3.2
--------------------------------- --------- ---------- ----------- ----------- -------
26.0 122.1 588.0 332.8 1,068.9
--------------------------------- --------- ---------- ----------- ----------- -------
iii) Market risk - interest rate risk
The Group is exposed to interest rate risk from the use of debt
financing at a variable rate. It is the risk that future cash flows
of a financial instrument will fluctuate because of changes in
interest rates. It is Group policy that a reasonable portion of
external borrowings are at a fixed interest rate in order to manage
this risk.
The Group uses interest rate swaps, caps and fixed rates to
manage its interest rate exposure and hedge future interest rate
risk for the term of the bank loan. Although the Board accepts that
this policy neither protects the Group entirely from the risk of
paying rates in excess of current market rates nor eliminates fully
the cash flow risk associated with interest payments, it considers
that it achieves an appropriate balance of exposure to these
risks.
In April 2020, the Group cancelled GBP350 million interest rate
swaps that hedged its unsecured facilities and were due to expire
in 2022. At 31 March 2021, 43% of the Group's debt drawn was hedged
(45% including share of joint ventures), mainly through fixed
coupon debt arrangements. Post year end in April, we entered into
new private placement and revolving credit facilities of GBP780
million, replacing the existing revolving credit facilities and
other existing debt as described in the Financial review. This
increased the percentage of Group and share of joint venture debt
hedged to 83%.
The average interest rate payable by the Group (including share
of joint ventures) on all bank borrowings at 31 March 2021
including the cost of amortising finance arrangement fees, was 2.5%
(2020: 2.9%). A 1% increase or decrease in interest rates during
the year would have decreased or increased the Group's annual
profit before tax by GBP5.1 million or GBP0.7 million
respectively.
iv) Capital risk management
The Group's objectives when maintaining capital are to safeguard
the entity's ability to continue as a going concern so that it can
provide returns to shareholders and as such it seeks to maintain an
appropriate mix of debt and equity. The capital structure of the
Group consists of debt, which includes long term borrowings and
undrawn debt facilities, and equity comprising issued capital,
reserves and retained earnings. The Group balances its overall
capital structure through the payment of dividends, new share
issues as well as the issue of new debt or the redemption of
existing debt.
The Group seeks to maintain an efficient capital structure with
a balance of debt and equity as shown in the table below.
2021 2020
As at 31 March GBPm GBPm
--------------------- -------- --------
Net debt 792.6 857.4
Shareholders' equity 1,731.3 1,431.8
----------------------- -------- --------
2,523.9 2,289.2
--------------------- -------- --------
c) Financial instruments
i) Categories of financial instruments
Measured at amortised cost Measured at fair value
------------------------------------------------- ---------------------------- ------------------------
2021 2020 2021 2020
As at 31 March GBPm GBPm GBPm GBPm
------------------------------------------------- ------------- ------------- ----------- -----------
Current assets
Cash and cash equivalents (note 12) 51.4 81.8 - -
Trade receivables (note 11) 4.8 5.8 - -
Other receivables (note 11) 1.5 0.9 - -
------------------------------------------------- ------------- ------------- ----------- -----------
57.7 88.5 - -
------------------------------------------------- ------------- ------------- ----------- -----------
Non current liabilities
Derivative financial instruments (see 14c (iii)) - - - 4.7
Borrowings (note 14a) 837.5 926.7 - -
Lease liabilities (note 15) 5.2 5.9 - -
Current liabilities
Trade payables (note 13) 4.6 4.2 - -
Accrued interest (note 13) 1.3 1.9 - -
------------------------------------------------- ------------- ------------- ----------- -----------
848.6 938.7 - 4.7
------------------------------------------------- ------------- ------------- ----------- -----------
ii) Fair values
To the extent financial assets and liabilities are not carried
at fair value in the consolidated balance sheet, the Directors are
of the opinion that book value approximates to fair value at 31
March 2021.
iii) Derivative financial instruments
Details of the fair value of the Group's derivative financial
instruments that were in place at 31 March 2021 are provided
below:
As at 31 March Average rate Notional amount Fair value
---------------------------- -------------- ----------------- --------------
2021 2020 2021 2020 2021 2020
Interest rate caps - expiry % % GBPm GBPm GBPm GBPm
---------------------------- ------ ------ -------- ------- ------ ------
Less than one year 2.0 - 19.6 - - -
One to two years - 2.0 - 19.6 - -
---------------------------- ------ ------ -------- ------- ------ ------
2.0 2.0 19.6 19.6 - -
---------------------------- ------ ------ -------- ------- ------ ------
As at 31 March Average rate Notional amount Fair value
----------------------------- -------------- ----------------- --------------
2021 2020 2021 2020 2021 2020
Interest rate swaps - expiry % % GBPm GBPm GBPm GBPm
----------------------------- ------ ------ -------- ------- ------ ------
Two to five years - 1.1 - 350.0 - (4.7)
----------------------------- ------ ------ -------- ------- ------ ------
Total fair value - (4.7)
----------------------------- ------ ------ -------- ------- ------ ------
All derivative financial instruments are non current interest
rate derivatives, and are carried at fair value following a
valuation as at 31 March 2021 by Chatham Financial. In accordance
with accounting standards, fair value is estimated by calculating
the present value of future cash flows, using appropriate market
discount rates. For all derivative financial instruments this
equates to a Level 2 fair value measurement as defined by IFRS 13
Fair Value Measurement.
The valuation therefore does not reflect the cost or gain to the
Group of cancelling its interest rate protection at the balance
sheet date, which is generally a marginally higher cost (or smaller
gain) than a market valuation.
15 Leases
The Group's minimum lease rentals receivable under non
cancellable leases, excluding joint ventures, are as follows:
2021 2020
As at 31 March GBPm GBPm
--------------------------- ------- -------
Less than one year 114.2 113.6
Between one and five years 416.8 421.6
Between six and ten years 392.6 399.6
Between 11 and 15 years 265.8 240.7
Between 16 and 20 years 129.4 121.5
Over 20 years 25.3 32.5
--------------------------- ------- -------
1,344.1 1,329.5
--------------------------- ------- -------
In accordance with IFRS 16, the Group has recognised a right of
use asset for its head office lease and other head lease
obligations. The Group's minimum lease payments are due as
follows:
Present value of minimum Present value of minimum
lease payments lease payments
Minimum lease payments Interest 2021 2020
As at 31 March GBPm GBPm GBPm GBPm
--------------------------- ---------------------- -------- -------------------------- ---------------------------
Less than one year 0.7 (0.1) 0.6 0.6
Between one and two years 0.7 (0.1) 0.6 0.6
Between two and five years 0.5 (0.2) 0.3 1.0
Over five years 7.3 (3.6) 3.7 3.7
--------------------------- ---------------------- -------- -------------------------- ---------------------------
9.2 (4.0) 5.2 5.9
--------------------------- ---------------------- -------- -------------------------- ---------------------------
16 Share capital
2021 2021 2020 2020
As at 31 March Number GBPm Number GBPm
--------------------------------- ----------- ----- ----------- -----
Issued, called up and fully paid
Ordinary shares of 10p each 909,643,040 91.0 841,498,022 84.2
--------------------------------- ----------- ----- ----------- -----
The movement in the share capital and share premium of the
Company during the current and previous year is summarised
below.
Ordinary shares Ordinary shares Share premium
Share capital issued, called up and fully paid Number GBPm GBPm
----------------------------------------------- --------------- --------------- -------------
At 1 April 2019 699,991,840 70.0 100.8
Share issue on acquisition 138,615,684 13.9 -
Issued under scrip share scheme 2,890,498 0.3 5.5
At 1 April 2020 841,498,022 84.2 106.3
Issued under equity placing 66,666,666 6.6 110.0
Issued under scrip share scheme 1,478,352 0.2 3.0
----------------------------------------------- --------------- --------------- -------------
At 31 March 2021 909,643,040 91.0 219.3
----------------------------------------------- --------------- --------------- -------------
On 7 May 2020, the Company issued 66,666,666 new ordinary shares
in connection with an equity placing that raised gross proceeds of
GBP120 million at an issue price of 180.0p per share. In addition,
the Company issued 1,478,352 ordinary shares under the terms of its
Scrip Dividend Scheme during the year. Post year end in April, the
Company issued a further 118,874 ordinary shares under the terms of
its Scrip Dividend Scheme.
The movement in the shares held by the Employee Benefit Trust in
the year is summarised in the table below.
Ordinary
shares Ordinary shares
Shares held by the Employee Benefit Trust Number GBPm
---------------------------------------------- ----------- ---------------
At 1 April 2020 4,330,731 0.4
Shares issued under employee share schemes (2,404,362) (0.2)
Shares acquired by the Employee Benefit Trust 2,463,826 0.2
---------------------------------------------- ----------- ---------------
At 31 March 2021 4,390,195 0.4
---------------------------------------------- ----------- ---------------
In June 2020, the Company granted options over 1,914,457
ordinary shares under its Long Term Incentive Plan. In addition,
2,151,447 ordinary shares in the Company that were granted to
certain Directors and employees under the Company's Long Term
Incentive Plan in 2017 vested along with 252,915 ordinary shares in
the Director's Deferred Bonus Plan. The average share price on
vesting was 225.3p. As at 31 March 2021, the Company's Employee
Benefit Trust held 4,390,195 shares in the Company to satisfy
awards under the Company's Long Term Incentive and Deferred Bonus
Plans.
17 Reserves
The following describes the nature and purpose of each reserve
within equity:
Share capital The nominal value of shares issued.
-------------------------- ------------------------------------------------------------------------------------------
Share premium The premium paid for new ordinary shares issued above the nominal value.
-------------------------- ------------------------------------------------------------------------------------------
Capital redemption reserve Amounts transferred from share capital on redemption of issued ordinary shares.
-------------------------- ------------------------------------------------------------------------------------------
Other reserve A reserve relating to the application of merger relief in the acquisition of LondonMetric
Management Limited, Metric Property Investments Plc and A&J Mucklow Group Plc by the
Company
and the cost of shares held in trust to provide for the Company's future obligations under
share award schemes. A breakdown of other reserves is provided for the Group below.
-------------------------- ------------------------------------------------------------------------------------------
Retained earnings The cumulative profits and losses after the payment of dividends.
-------------------------- ------------------------------------------------------------------------------------------
2021 2020
Merger Employee Benefit Total other Merger Employee Benefit Total other
reserve Trust shares reserves reserve Trust shares reserves
As at 31 March GBPm GBPm GBPm GBPm GBPm GBPm
------------------- -------- ----------------- ------------------ -------- ------------------ ------------------
Opening balance 497.4 (9.0) 488.4 227.9 (6.2) 221.7
Employee share
schemes:
Purchase of shares - (5.5) (5.5) - (7.2) (7.2)
Vesting of shares - 4.8 4.8 - 4.4 4.4
Acquisition of A&J
Mucklow - - - 269.5 - 269.5
------------------- -------- ----------------- ------------------ -------- ------------------ ------------------
Closing balance 497.4 (9.7) 487.7 497.4 (9.0) 488.4
------------------- -------- ----------------- ------------------ -------- ------------------ ------------------
18 Analysis of movement in net debt
Non cash movements
-------------------------------------------------
Interest
charge
Impact of and
Financing Other issue and unwinding
1 April cash cash arrangement Early close Fair value of 31 March
2020 flows flows costs out costs adjustments discount 2021
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Bank loans
and
derivatives 931.4 (97.9) - 1.4 2.6 - - 837.5
Interest
payable and
fees 1.9 (22.7) - 2.7 - - 19.4 1.3
Lease
liabilities 5.9 - - - - - (0.7) 5.2
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Total
liabilities
from
financing
activities 939.2 (120.6) - 4.1 2.6 - 18.7 844.0
Cash and
cash
equivalents (81.8) - 30.4 - - - - (51.4)
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Net debt 857.4 (120.6) 30.4 4.1 2.6 - 18.7 792.6
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Non cash movements
-------------------------------------------------
Interest
charge
Impact of and
Financing Other issue and unwinding
1 April cash cash arrangement Fair value of 31 March
2019 flows flows costs Acquisitions adjustments discount 2020
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Bank loans
and
derivatives 560.5 283.8 - - 84.0 3.1 - 931.4
Interest
payable and
fees 0.9 (26.1) - 3.5 0.8 - 22.8 1.9
Lease
liabilities - - - - 6.0 - (0.1) 5.9
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Total
liabilities
from
financing
activities 561.4 257.7 - 3.5 90.8 3.1 22.7 939.2
Cash and
cash
equivalents (20.6) - (61.2) - - - - (81.8)
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
Net debt 540.8 257.7 (61.2) 3.5 90.8 3.1 22.7 857.4
------------ --------- --------- --------- ----------- ------------ ----------- --------- ---------
19 Related party transactions
a) Joint ventures
Management fees and profit distributions receivable from the
Group's joint venture arrangements in which it had an equity
interest during the year were as follows:
Management fees Profit distributions
----------------------------------- -------------- ----------------- ----------------------
2021 2020 2021 2020
For the year to 31 March Group interest GBPm GBPm GBPm GBPm
----------------------------------- -------------- -------- ------- ---------- ----------
LSP London Residential Investments 40.0% 0.1 0.2 2.8 8.3
Metric Income Plus Partnership 50.0% 0.8 0.9 3.7 4.0
----------------------------------- -------------- -------- ------- ---------- ----------
0.9 1.1 6.5 12.3
----------------------------------- -------------- -------- ------- ---------- ----------
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation.
b) Non-controlling interest
The Group's non-controlling interest ('NCI') represents an 18%
shareholding in LMP Retail Warehouse JV Holdings Limited, which
owns a portfolio of DFS assets. The Group's interest in LMP Retail
Warehouse JV Holdings Limited is 82%, requiring it to consolidate
the results and net assets of its subsidiary in these financial
statements and reflect the non-controlling share as a deduction in
the consolidated income statement and consolidated balance
sheet.
As at the year end, the non-controlling interest share of
profits and net assets was GBP0.7 million and GBP6.4 million
respectively, with distributions of GBP1.4 million paid during the
year.
20 Post balance sheet events
Since the year end, we have completed acquisitions totalling
GBP78.8 million, of which GBP11.8 million had exchanged in the
year, and have exchanged on a further GBP1.0 million. We also
exchanged to acquire an asset in Milton Keynes for GBP23.9 million
which is expected to complete in the next financial year.
In addition, we exchanged in the year to sell assets totalling
GBP10.6 million, of which GBP2.4 million completed post year end,
and we have also exchanged to sell a further GBP15.8 million of
assets.
In April, we entered into a new GBP380 million private debt
placement with a number of institutional investors in North America
and the UK. We also entered into two new revolving credit
facilities with three and five year terms for GBP225 million and
GBP175 million respectively. Taken together, we have completed
GBP780 million of new debt, replacing the existing revolving credit
facilities and other existing debt facilities that are approaching
maturity.
Supplementary information (not audited)
i EPRA summary table
2021 2020
-------------------------------------------------- ------ ------
EPRA earnings per share 9.52p 9.26p
EPRA net tangible assets per share 190.3p 170.3p
EPRA net disposal value per share 189.7p 169.9p
EPRA net reinstatement value per share 209.7p 189.3p
EPRA vacancy rate 1.3% 1.4%
EPRA cost ratio (including vacant property costs) 13.6% 14.2%
EPRA cost ratio (excluding vacant property costs) 13.0% 13.3%
EPRA net initial yield 4.3% 4.3%
EPRA 'topped up' net initial yield 4.6% 5.0%
-------------------------------------------------- ------ ------
The definition of these measures can be found in the
Glossary.
ii EPRA proportionally consolidated income statement
100% Total 100% Total
owned JV NCI 2021 owned JV NCI 2020
For the year to 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Gross rental income 121.3 5.3 (1.5) 125.1 112.3 6.3 (1.3) 117.3
Property costs (1.6) (0.2) - (1.8) (1.2) (0.2) - (1.4)
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
Net rental income 119.7 5.1 (1.5) 123.3 111.1 6.1 (1.3) 115.9
Management fees 0.9 (0.4) - 0.5 1.1 (0.5) - 0.6
Administrative costs (15.8) - - (15.8) (15.8) (0.1) - (15.9)
Net finance costs (21.5) (1.2) 0.2 (22.5) (24.9) (1.5) 0.3 (26.1)
Other (0.1) - 0.2 0.1 (0.2) - 0.2 -
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
EPRA earnings 83.2 3.5 (1.1) 85.6 71.3 4.0 (0.8) 74.5
------------------------- ------ ----- ----- ------ ------ ----- ----- ------
iii EPRA proportionally consolidated balance sheet
100% Total 100% Total
owned JV NCI 2021 owned JV NCI 2020
As at 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
Investment property 2,504.6 94.4 (11.4) 2,587.6 2,273.6 92.4 (14.9) 2,351.1
Trading property 1.1 - - 1.1 1.1 - - 1.1
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
2,505.7 94.4 (11.4) 2,588.7 2,274.7 92.4 (14.9) 2,352.2
Gross debt (839.5) (37.5) - (877.0) (932.7) (42.1) - (974.8)
Cash 51.4 3.4 (0.2) 54.6 81.8 5.1 (0.8) 86.1
Other net liabilities (39.1) (0.5) 5.2 (34.4) (34.3) (0.6) 8.6 (26.3)
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
EPRA net tangible assets 1,678.5 59.8 (6.4) 1,731.9 1,389.5 54.8 (7.1) 1,437.2
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
Derivatives - (0.6) - (0.6) (4.7) (0.7) - (5.4)
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
IFRS net assets 1,678.5 59.2 (6.4) 1,731.3 1,384.8 54.1 (7.1) 1,431.8
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
Loan to value 32.2% 32.8% - 32.3% 35.7% 40.0% - 35.9%
Cost of debt 2.5% 3.0% - 2.5% 2.9% 3.1% - 2.9%
Undrawn facilities 170.5 - - 170.5 133.8 - - 133.8
------------------------- ------- ------ ------ ------- ------- ------ ------ -------
iv EPRA cost ratio
2021 2020
For the year to 31 March GBPm GBPm
-------------------------------------------------------------------------------- ----- -----
Property operating expenses 1.6 1.2
Administrative costs 15.8 15.8
Share of joint venture property costs, administrative costs and management fees 0.6 0.8
Less:
Joint venture property management fee income (0.9) (1.1)
Ground rents (0.1) (0.1)
-------------------------------------------------------------------------------- ----- -----
Total costs including vacant property costs (A) 17.0 16.6
-------------------------------------------------------------------------------- ----- -----
Group vacant property costs (0.7) (0.9)
Share of joint venture vacant property costs - (0.1)
-------------------------------------------------------------------------------- ----- -----
Total costs excluding vacant property costs (B) 16.3 15.6
-------------------------------------------------------------------------------- ----- -----
Gross rental income 121.3 112.3
Share of joint venture gross rental income 5.3 6.3
Share of non-controlling interest gross rental income (1.5) (1.3)
-------------------------------------------------------------------------------- ----- -----
125.1 117.3
-------------------------------------------------------------------------------- ----- -----
Less:
Ground rents (0.1) (0.1)
-------------------------------------------------------------------------------- ----- -----
Total gross rental income (C) 125.0 117.2
-------------------------------------------------------------------------------- ----- -----
Total EPRA cost ratio (including vacant property costs) (A)/(C) 13.6% 14.2%
-------------------------------------------------------------------------------- ----- -----
Total EPRA cost ratio (excluding vacant property costs) (B)/(C) 13.0% 13.3%
-------------------------------------------------------------------------------- ----- -----
v EPRA net initial yield and 'topped up' net initial yield
2021 2020
As at 31 March GBPm GBPm
------------------------------------------------- ------- -------
Investment property - wholly owned 2,499.5 2,267.9
Investment property - share of joint ventures 94.4 92.4
Trading property 1.1 1.1
Less development properties (59.8) (57.0)
Less residential properties (2.1) (4.9)
Less non-controlling interest (11.4) (14.9)
------------------------------------------------- ------- -------
Completed property portfolio 2,521.7 2,284.6
------------------------------------------------- ------- -------
Allowance for:
Estimated purchasers' costs 171.5 155.4
Estimated costs to complete 14.7 18.7
------------------------------------------------- ------- -------
EPRA property portfolio valuation (A) 2,707.9 2,458.7
------------------------------------------------- ------- -------
Annualised passing rental income 112.6 102.1
Share of joint ventures 6.2 6.0
Less development properties (2.3) (1.9)
------------------------------------------------- ------- -------
Annualised net rents (B) 116.5 106.2
Contractual rental increase across the portfolio 7.7 16.0
------------------------------------------------- ------- -------
'Topped up' net annualised rent (C) 124.2 122.2
------------------------------------------------- ------- -------
EPRA net initial yield (B/A) 4.3% 4.3%
------------------------------------------------- ------- -------
EPRA 'topped up' net initial yield (C/A) 4.6% 5.0%
------------------------------------------------- ------- -------
vi EPRA vacancy rate
2021 2020
As at 31 March GBPm GBPm
----------------------------------------------------- ----- -----
Annualised estimated rental value of vacant premises 1.7 1.7
Portfolio estimated rental value(1) 127.7 124.4
----------------------------------------------------- ----- -----
EPRA vacancy rate 1.3% 1.4%
----------------------------------------------------- ----- -----
1 Excludes residential and development properties
vii EPRA capital expenditure analysis
100% Total 100% Total
owned JV NCI 2021 owned JV NCI 2020
As at 31 March GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------- ------- ----- ------ ------- ------- ------ ------ -------
Opening valuation 2,274.7 92.4 (14.9) 2,352.2 1,688.0 158.2 - 1,846.2
Acquisitions(1) 212.4 - - 212.4 635.3 (41.2) (17.0) 577.1
Developments(2,4) 37.9 - - 37.9 43.1 - - 43.1
Capital expenditure(3) 4.9 0.3 (0.1) 5.1 10.2 0.3 (0.2) 10.3
Disposals (200.8) (1.8) 3.3 (199.3) (113.4) (15.1) 0.3 (128.2)
Revaluation 169.9 3.4 0.4 173.7 (3.8) (10.2) 2.0 (12.0)
Lease incentives 7.3 0.1 (0.1) 7.3 9.6 0.4 - 10.0
Head lease ROU asset (0.6) - - (0.6) 5.7 - - 5.7
----------------------- ------- ----- ------ ------- ------- ------ ------ -------
Closing valuation 2,505.7 94.4 (11.4) 2,588.7 2,274.7 92.4 (14.9) 2,352.2
----------------------- ------- ----- ------ ------- ------- ------ ------ -------
1 Group acquisitions in the year include completed investment
properties as reflected in note 9 to the financial statements
2 Group developments include acquisitions and capital
expenditure on properties under development as reflected in note
9
3 Capital expenditure on completed properties, of which GBP0.6
million created additional lettable space
4 Includes capitalised interest of GBP1.1 million (2020: GBP0.9
million)
viii Total accounting return
2021 2020
pence pence
For the year to 31 March per share per share
----------------------------------- ---------- ----------
EPRA net tangible assets per share
- at end of year 190.3 170.3
- at start of year 170.3 173.7
----------------------------------- ---------- ----------
Increase/(decrease) 20.0 (3.4)
Dividend paid 8.5 8.4
----------------------------------- ---------- ----------
Net increase 28.5 5.0
----------------------------------- ---------- ----------
Total accounting return 16.7% 2.9%
----------------------------------- ---------- ----------
ix Portfolio split and valuation
2021 2021 2020 2020
As at 31 March GBPm % GBPm %
----------------------------------- ------- ----- -------- -----
Mega distribution 351.9 13.6 349.6 14.9
Regional distribution 483.5 18.7 419.5 17.9
Urban logistics 941.9 36.5 824.6 35.1
----------------------------------- ------- ----- -------- -----
Distribution 1,777.3 68.8 1,593.7 67.9
Long income 629.4 24.3 552.5 23.5
Retail parks 73.9 2.9 83.3 3.6
Offices 41.1 1.6 55.1 2.4
----------------------------------- ------- ----- -------- -----
Investment portfolio 2,521.7 97.6 2,284.6 97.4
----------------------------------- ------- ----- -------- -----
Development(1) 59.8 2.3 57.0 2.4
Residential 2.1 0.1 4.9 0.2
----------------------------------- ------- ----- -------- -----
Total portfolio 2,583.6 100.0 2,346.5 100.0
Head lease and right of use assets 5.1 5.7
----------------------------------- ------- ----- -------- -----
2,588.7 2,352.2
----------------------------------- ------- ----- -------- -----
1 Represents urban logistics GBP51.8 million (2.0%), long income
GBP5.8 million (0.2%), office and other land GBP2.2 million (0.1%)
at 31 March 2021. Split of prior year comparatives was regional
distribution GBP38.1 million (1.6%), urban logistics GBP6.2 million
(0.3%), long income GBP10.5 million (0.5%), office and other land
GBP2.2 million.
x Investment portfolio yields
2021 2020
--------------------- ------------------------------------ ------------------------------------
EPRA Equivalent EPRA Equivalent
EPRA NIY topped up NIY yield EPRA NIY topped up NIY yield
As at 31 March % % % % % %
--------------------- -------- -------------- ---------- -------- -------------- ----------
Distribution 3.8 4.1 4.7 3.9 4.6 5.1
Long income 5.2 5.4 5.7 5.0 5.6 5.9
Retail parks 7.1 7.6 7.1 6.7 7.5 7.3
Offices 4.9 6.0 6.5 5.8 5.8 6.5
--------------------- -------- -------------- ---------- -------- -------------- ----------
Investment portfolio 4.3 4.6 5.1 4.3 5.0 5.5
--------------------- -------- -------------- ---------- -------- -------------- ----------
xi Investment portfolio - Key statistics
WAULT WAULT
Area to expiry to first break Occupancy
As at 31 March 2021 '000 sq ft years years % Average rent GBP per sq ft
--------------------- ----------- ---------- --------------- --------- --------------------------
Distribution 12,150 10.6 9.5 98.1 6.50
Long income 2,719 14.2 13.1 100.0 15.60
Retail parks 379 8.6 7.5 100.0 15.80
Offices 164 5.4 5.1 91.8 17.50
--------------------- ----------- ---------- --------------- --------- --------------------------
Investment portfolio 15,412 11.4 10.3 98.7 8.30
--------------------- ----------- ---------- --------------- --------- --------------------------
xii Total property returns
All property All property
2021 2020
For the year to 31 March % %
------------------------- ------------ ------------
Capital return 8.0 -
Income return 5.1 5.1
------------------------- ------------ ------------
Total return 13.4 5.1
------------------------- ------------ ------------
xiii Contracted rental income
2021 2020
As at 31 March GBPm GBPm
--------------------------- ----- -----
Distribution 77.6 77.3
Long income 35.8 33.9
Retail parks 6.0 6.8
Offices 2.6 3.4
--------------------------- ----- -----
Investment portfolio 122.0 121.4
--------------------------- ----- -----
Development - distribution 1.7 1.3
Development - long income 0.6 0.6
--------------------------- ----- -----
Total portfolio 124.3 123.3
--------------------------- ----- -----
xiv Rent subject to expiry
Within 3 years Within 5 years Within 10 years Within 15 years Within 20 years Over 20 years
As at 31 March 2021 % % % % % %
-------------------- -------------- -------------- --------------- --------------- --------------- -------------
Distribution 11.6 22.5 45.9 75.3 94.0 100.0
Offices 11.6 50.1 100.0 100.0 100.0 100.0
Long income 1.8 5.9 27.1 52.0 82.6 100.0
Retail parks 4.7 19.7 74.6 85.6 100.0 100.0
-------------------- -------------- -------------- --------------- --------------- --------------- -------------
Total portfolio 8.4 18.1 42.9 69.5 91.1 100.0
-------------------- -------------- -------------- --------------- --------------- --------------- -------------
xv Contracted rent subject to RPI or fixed uplifts
2021 2021 2020 2020
As at 31 March GBPm % GBPm %
---------------- ------ ---- ------ ----
Distribution 46.2 58.2 46.1 58.7
Long income 22.9 63.1 19.7 57.2
Retail parks 0.8 14.0 1.1 15.7
Offices 0.6 22.5 0.3 8.5
---------------- ------ ---- ------ ----
Total portfolio 70.5 56.8 67.2 54.5
---------------- ------ ---- ------ ----
xvi Top ten assets (by value)
Contracted WAULT WAULT
Area rent Occupancy to expiry to first break
As at 31 March 2021 '000 sq ft GBPm % years years
------------------------ ----------- ---------- --------- ---------- ---------------
Primark, T2, Islip 1,062 5.8 100 19.5 19.5
Eddie Stobart, Dagenham 454 4.1 100 22.5 22.5
Argos, Bedford 658 4.1 100 13.0 13.0
Primark, Thrapston 785 4.3 100 11.5 11.5
Tesco, Croydon 191 1.9 100 7.1 7.1
Amazon, Warrington 357 2.1 100 10.7 10.7
DHL, Reading 230 2.3 100 4.3 4.3
Ollerton, Clipper 364 2.0 100 16.5 16.5
Oak Furniture, Swindon 357 1.9 100 14.6 14.6
New Malden 51 1.9 100 10.6 6.0
------------------------ ----------- ---------- --------- ---------- ---------------
xvii Top ten occupiers
Contracted
Contracted rental income
As at 31 March 2021 rental income GBPm %
-------------------- ------------------- --------------
Primark 10.1 8.2
DFS 4.3 3.5
Amazon 4.2 3.4
Argos 4.2 3.4
Eddie Stobart 4.1 3.3
M&S(1) 3.9 3.2
DHL 3.6 2.9
Odeon 3.3 2.7
Waitrose 3.3 2.7
DSG 3.3 2.6
--------------------- ------------------- --------------
Top ten 44.3 35.9
--------------------- ------------------- --------------
1 Excludes income from post year end sales
Glossary
A&J Mucklow Group or A&J Mucklow or Mucklow
A&J Mucklow Group Plc acquired on 27 June 2019 and
re-registered as A&J Mucklow Group Limited on 24 September
2019.
Building Research Establishment Environmental Assessment
Methodology ('BREEAM')
A set of assessment methods and tools designed to help
construction professionals understand and mitigate the
environmental impacts of the developments they design and
build.
Capital return
The valuation movement on the property portfolio adjusted for
capital expenditure and expressed as a percentage of the capital
employed over the period.
Chief operating decision makers ('CODMs')
The Executive Directors, Senior Leadership Team members and
other senior managers.
Contracted rent
The annualised rent excluding rent free periods.
Cost of debt
Weighted average interest rate payable.
Debt maturity
Weighted average period to expiry of debt drawn.
Distribution
The activity of delivering a product for consumption by the end
user.
Energy Performance Certificate ('EPC')
Required certificate whenever a property is built, sold or
rented. An EPC gives a property an energy efficiency rating from A
(most efficient) to G (least efficient) and is valid for ten years.
An EPC contains information about a property's energy use and
typical energy costs, and recommendations about how to reduce
energy use and save money.
EPRA cost ratio
Administrative and operating costs (including and excluding
costs of direct vacancy) as a percentage of gross rental
income.
EPRA Earnings Per Share ('EPS')
Underlying earnings from the Group's property rental business
divided by the average number of shares in issue over the
period.
EPRA NAV per share
Balance sheet net assets excluding fair value of derivatives,
divided by the number of shares in issue at the balance sheet
date.
EPRA net disposal value per share
Represents the shareholders' value under a disposal scenario,
where assets are sold and/or liabilities are not held to maturity.
Therefore, this measure includes an adjustment to mark to market
the Group's fixed rate debt.
EPRA net reinstatement value per share
This reflects the value of net assets required to rebuild the
entity, assuming that entities never sell assets. Assets and
liabilities, such as fair value movements on financial derivatives
that are not expected to crystallise in normal circumstances, are
excluded. Investment property purchasers' costs are included.
EPRA net tangible assets per share
This reflects the value of net assets on a long term, ongoing
basis assuming entities buy and sell assets. Assets and
liabilities, such as fair value movements on financial derivatives
that are not expected to crystallise in normal circumstances, are
excluded.
EPRA net initial yield
Annualised rental income based on cash rents passing at the
balance sheet date, less non recoverable property operating
expenses, expressed as a percentage of the market value of the
property, after inclusion of estimated purchaser's costs.
EPRA topped up net initial yield
EPRA net initial yield adjusted for expiration of rent free
periods or other lease incentives such as discounted rent periods
and stepped rents.
EPRA vacancy
The Estimated Rental Value ('ERV') of immediately available
vacant space as a percentage of the total ERV of the investment
portfolio.
Equivalent yield
The weighted average income return expressed as a percentage of
the market value of the property, after inclusion of estimated
purchaser's costs.
Estimated Rental Value ('ERV')
The external valuers' opinion of the open market rent which, on
the date of valuation, could reasonably be expected to be obtained
on a new letting or rent review of a property.
European Public Real Estate Association ('EPRA')
EPRA is the industry body for European Real Estate Investment
Trusts ('REITs').
Gross rental income
Rental income for the period from let properties reported under
IFRS, after accounting for lease incentives and rent free periods.
Gross rental income will include, where relevant, turnover based
rent, surrender premiums and car parking income.
Group
LondonMetric Property Plc and its subsidiaries.
IFRS
The International Financial Reporting Standards issued by the
International Accounting Standards Board and adopted by the
European Union.
IFRS net assets
The Group's equity shareholders' funds at the period end, which
excludes the net assets attributable to the non-controlling
interest.
IFRS net assets per share
IFRS net assets divided by the number of shares in issue at the
balance sheet date.
Income return
Net rental income expressed as a percentage of capital employed
over the period.
Investment portfolio
The Group's property portfolio excluding development, land
holdings and residential properties.
Investment Property Databank ('IPD')
IPD is a wholly owned subsidiary of MSCI producing an
independent benchmark of property returns and the Group's portfolio
returns.
Like for like income growth
The movement in contracted rental income on properties owned
through the period under review, excluding properties held for
development and residential.
Loan To Value ('LTV')
Net debt expressed as a percentage of the total property
portfolio value at the period end, adjusted for deferred
completions on sales.
Logistics
The organisation and implementation of operations to manage the
flow of physical items from origin to the point of consumption.
Net debt
The Group's bank loans net of cash balances at the period
end.
Net rental income
Gross rental income receivable after deduction for ground rents
and other net property outgoings including void costs and net
service charge expenses.
Occupancy rate
The ERV of the let units as a percentage of the total ERV of the
Investment Portfolio.
Passing rent
The gross rent payable by tenants under operating leases, less
any ground rent payable under head leases.
Property Income Distribution ('PID')
Dividends from profits of the Group's tax-exempt property rental
business under the REIT regulations. The PID dividend is paid after
deducting withholding tax at the basic rate.
Real Estate Investment Trust ('REIT')
A listed property company which qualifies for and has elected
into a tax regime which is exempt from corporation tax on profits
from property rental income and UK capital gains on the sale of
investment properties.
Total Accounting Return ('TAR')
The movement in EPRA Net Tangible Assets per share plus the
dividend paid during the period expressed as a percentage of the
EPRA net tangible assets per share at the beginning of the
period.
Total Property Return ('TPR')
Unlevered weighted capital and income return of the property
portfolio as calculated by IPD.
Total Shareholder Return ('TSR')
The movement in the ordinary share price as quoted on the London
Stock Exchange plus dividends per share assuming that dividends are
reinvested at the time of being paid.
Weighted average interest rate
The total loan interest and derivative costs per annum
(including the amortisation of finance costs) divided by the total
debt in issue at the period end.
Weighted Average Unexpired Lease Term ('WAULT')
Average unexpired lease term across the investment portfolio
weighted by contracted rent.
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END
FR EAASKAENFEAA
(END) Dow Jones Newswires
May 27, 2021 02:00 ET (06:00 GMT)
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