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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Londonmetric Property Plc | LSE:LMP | London | Ordinary Share | GB00B4WFW713 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 1.00 | 0.52% | 194.70 | 193.90 | 194.20 | 196.40 | 192.50 | 193.40 | 3,938,367 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Agents & Mgrs | 146.7M | -506.3M | -0.4648 | -4.18 | 2.11B |
From Apr 2019 to Apr 2024
TIDMLMP
RNS Number : 6264G
LondonMetric Property PLC
31 May 2017
LONDONMETRIC PROPERTY PLC
("LondonMetric" or the "Group" or the "Company")
ANNUAL RESULTS FOR THE YEARED 31 MARCH 2017
Structural calls delivering reliable income and income growth
LondonMetric today announces its annual results for the year ended 31 March 2017
Financials 31 March 2017 31 March 2016 ------------------------------- -------------- ------------- Net rental income (GBPm)(1) 81.8 77.7 EPRA Earnings (GBPm) 51.0 48.5 EPRA EPS (p) 8.2 7.8 Dividend per share (p) 7.50 7.25 Reported Profit (GBPm) 63.0 82.7 EPRA NAV per share (p) 149.8 147.7 LTV (%)(1) 30 38 1 Including share of Joint Ventures. Further details on Alternative Performance Measures and the presentation of financial information can be found in the Finance Review
EPRA earnings of GBP51m or 8.2p per share, up 5%
-- Net rental income up 5% to GBP82m -- GBP21m revaluation surplus contributed to a reported profit of GBP63m
Dividend increased 3% to 7.5p for year, 109% dividend cover in year
-- Fourth quarterly interim dividend declared today of 2.1p with scrip alternative
EPRA NAV of 149.8p (FY 16: 147.7p)
-- Portfolio revaluation surplus(1) of GBP44m in second half resulted in a gain of GBP21m for the year (FY 16: GBP50m)
-- Portfolio valued at GBP1,534m, topped up NIY of 5.4% -- Total Property Return of 7.4% compared to IPD of 4.6%, 280 bps outperformance
Distribution weighting up to 64% following post period end activity, retail parks down to 13%
-- GBP148m of retail, leisure and residential assets sold, with a further GBP42m sold PPE -- GBP107m of distribution investments and, as announced today, a further GBP24m acquired PPE
-- Urban logistics portfolio of 26 assets as at today, valued at GBP185m with strong terminal values
Strong income growth across the portfolio
-- GBP5.8m pa of additional income from 33 lettings at an average WAULT of 18.2 years -- GBP1.3m pa of additional income from 36 rent reviews at 4.6% above passing, 4.3% above ERV
-- Portfolio delivered 4.6% like for like income growth and 3.8% ERV growth, 5.6% on distribution
Short cycle development activity creating future long income and capital growth
-- 1.1m sq ft delivered at yield on cost of 6.5%, adding GBP7.9m pa of additional income
-- 0.7m sq ft under construction at yield on cost of 6.3%, adding GBP4.9m pa of additional income
Portfolio metrics reflect income longevity, contractual uplifts and occupier contentment
-- Occupancy of 99.6%, WAULT of 12.8 years and only 1% of income expiring within 3 years -- 28% of rental income is inflation linked and 24% subject to fixed uplifts
Finances strengthened and diversified by private debt placement and equity placing
-- Undrawn facilities of GBP300m and LTV at 30% (FY 16: 38%) -- Debt maturity of 5.2 years, average cost of debt at 3.5% with marginal cost at 1.5% -- GBP95m of placing proceeds now fully allocated
Andrew Jones, Chief Executive of LondonMetric, commented:
"On top of political and economic uncertainty, the World continues to be transformed by technological innovation and continuing social change. This is having a profound impact on real estate. The tectonic plates in retail are shifting and the industry is experiencing radical disruption driven by these trends.
"Retailers are closing marginal stores and investing in 'flagship' destinations and new supply chains to service ever-increasing online sales and consumer expectations. Retailers are prioritising distribution and fulfilment ahead of their stores, which is why we have repositioned LondonMetric's portfolio from retail into logistics. Logistics will soon represent more than 70% of our investments as our urban logistics portfolio grows further and our short cycle developments complete.
"In a low interest rate environment, investors are increasingly searching for reliable and repetitive income streams. Compounding our income returns is central to our strategy as we embrace the very purpose of a REIT. Our logistics focus has enhanced our portfolio's income characteristics and we believe that it is these structural calls that will help define the real estate winners."
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 /Tom Gough /Richard Gotla
Meeting and audio webcast
A meeting for investors and analysts will be held at 9.00 am today at FTI Consulting. A conference call dial-in is available for the meeting: +44(0)330 336 9131 (Participant Passcode: 8971906).
For the live webcast see: http://webcasting.brrmedia.co.uk/broadcast/5924398458267d427ee607f8
An on demand recording will be available shortly after the meeting from the same link and also from: http://www.londonmetric.com/investors/reports-and-presentations
Notes to editors
LondonMetric is a FTSE 250 REIT (ticker: LMP) that specialises in retailer-led distribution, convenience and out of town retail with a focus on strong and growing income and adding value through asset management initiatives and short cycle developments. LondonMetric has 12 million sq ft under management and a high proportion of its assets are in retailer-led distribution.
Neither the content of LondonMetric's website nor any other website accessible by hyperlinks from LondonMetric's 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 as to whether or not to acquire, continue to hold, or dispose of shares in LondonMetric.
Forward looking statements: 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 events and depend upon circumstances that may occur in the future. 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.
Chairman's statement
Our objective is to own good assets with strong real estate fundamentals. They must generate income in excess of our dividend and have a higher value in five years' time.
Whilst political and economic uncertainty was a significant distraction for the markets in the year, the attraction of secure income continued to grow. Not only are we living in a low growth, low interest rate environment but ageing demographics are accentuating the search for income and alternatives to low yielding government bonds. This need has already risen substantially and will grow further in the years to come. High quality companies offering well-covered and growing dividends ought to become ever more highly prized.
Our significant and increasing investment in distribution is delivering excellent returns, sustainable income growth and long term value for our shareholders. The sector is benefiting strongly from structural support as UK consumers continue to migrate to online. Conversely, physical retail continues to face significant challenges from this online shift with the inevitable space overcapacity this brings to the retail market.
This ongoing structural demand for distribution and lack of meaningful supply has given us the confidence to increase our investment across all distribution sub-sectors of mega box, regional and urban logistics. We continue to see good investment and short cycle development opportunities, particularly in urban logistics, and we have now fully committed the proceeds of our recent equity placing into sensible, accretive assets. Our distribution exposure is expected to exceed 70% within the current financial year.
Exposure to the best real estate sectors is driving demand for our space resulting in high occupancy, good like for like income growth and strong ERV uplifts. Our sector leading portfolio metrics have been maintained thanks to our strong occupier and property relationships. Over the last four years, through management activity, our occupancy level has been above 99% and our unexpired lease term has remained at 12.8 years with only 1% of our leases due to expire within the next three years.
Our predictable, repetitive and growing income streams have allowed us to progress the dividend again this year by 3.4%. An attractive dividend needs to be adequately covered by operating earnings and I'm pleased that we have maintained the 1.1x dividend cover we achieved last year.
We will continue to build the foundations for future dividend progression. Contractual rental uplifts are embedded in over 50% of the portfolio, we are achieving strong rent review uplifts and are adding new income from short cycle developments.
LondonMetric is well placed and I am genuinely excited by its outlook and look forward to the year with confidence.
Patrick Vaughan
Chairman
31 May 2017
Chief Executive's review
Our focus as a REIT is to compound our long and strong income and to enhance its repetitive, reliable and secure characteristics.
Income growth with structural support
We continue to live in a world characterised by both political and economic uncertainty. The prolonged low interest rate environment and unorthodox monetary policy has created an almost desperate search for yield across a widening spectrum of investment classes.
Our focus, as a REIT, is to collect and compound our long and strong income and to enhance its repetitive, reliable and secure characteristics. We expect this strategy to outperform more traditional hyper-active development and trading models where volatile and uncertain returns are diluted by income interruption and frictional costs.
Technological advancement and innovation is having a profound impact on many businesses as they attempt to remain relevant in an evolving world where the pace of change is accelerating. The real estate sector is not immune.
In recent years, we have seen a significant shift in consumer shopping habits, with customer expectations of efficiency, speed and convenience driving omni-channel retailing. This has significantly increased the proportion of non-food retail sales online, which is expected to reach 26% by 2020 compared to just 13% in 2011; a growth rate of 10% pa.
These structural changes in how people shop are driving retailer demand for logistics. We have responded to these trends by actively pivoting our investment focus from retail parks into the logistics and distribution sectors, which we expect to account for over 70% of our portfolio by the end of the current financial year. We remain disciplined and unemotional in our investment approach and will continue to dispose of assets where we think growth prospects are less exciting.
These actions have put us on the right side of the changing retail landscape and consequently we expect to be a strong beneficiary. We believe that the favourable demand/supply metrics for logistics will exist for some time, leading to high occupancy, long leases and attractive income.
Our portfolio is positioned around strong fundamentals of owning highly desirable assets that are benefiting from structural trends, let to good companies and where, over time, the income will grow and the returns will compound. This will allow us to deliver ongoing dividend growth over the next few years.
Behaving as a REIT
With interest rates hovering not far from all time lows, and a growing number of people retiring every year, the demand for alternative sources of income is on the rise.
We take comfort in having made the right structural calls, focusing on income and income growth, and our alignment to the logistics sector will continue to provide a highly repetitive, predictable and reliable income stream and deliver exactly what a REIT was designed to do. Ten years on from the introduction of REITs, it's notable how few companies have fully embraced the REIT structure.
Our income focus remains central to our investment thesis and we aim to own assets where the net income exceeds the dividend and the 'terminal' value will be higher in five years' time.
Our ultimate priority is to pass on income generated from our tenants to our shareholders in the form of a dividend. Since merger in 2013, our EPRA earnings have grown from 3.9p to 8.2p per share, which has allowed us to not only cover our dividend comfortably but also progress it for the second year running.
Enhancing our strong portfolio metrics
We continue to maintain our very strong portfolio metrics with long average lease lengths of 12.8 years, high occupancy at 99.6%, high gross to net income ratio of 98.6% and with only 1.2% of our rent due to expire in the next three years. Over 50% of our portfolio is now subject to contractual rental increases.
Continued refinement of our portfolio has delivered a strong performance in the year with a total property return of 7.4%, outperforming IPD All Property by 280bps, and ERV growth of 3.8%.
These robust metrics are reflective of our sector calls, the strength of our occupier relationships and the high occupier appeal of our real estate.
In the year, we delivered 69 asset management activities generating like for like income growth of 4.6%. New lettings achieved an average lease length of 18.2 years, helped by new leases to Amazon, Michelin and Eddie Stobart. Open market rent reviews on distribution assets were particularly strong and we settled three urban logistics reviews with an average uplift of 16.9% on a five yearly equivalent basis.
This demonstrates not only the attractive dynamics of our buildings but increasingly the growing importance that occupiers are putting on logistics and fulfilment.
Structural changes impacting shopping habits and occupier demand
Technology is disrupting many long established industries and real estate is no exception.
Structural trends in consumer behaviour and shopping patterns continue to drive retail sales online leading to c.10% per annum online growth.
Retailers are therefore increasingly committing more of their capital expenditure into improving the efficiencies of their fulfilment operation with more investment in digital infrastructure and distribution warehousing. Today it is estimated that retailers and third party logistics operators account for 60-70% of all distribution warehousing real estate take up.
The benchmark continues to be set by Amazon which doubled its UK logistics footprint in 2016 and accounted for c.20% of take up in 2016. The urban logistics infrastructure that they are building is evidence of the importance they attach to same day, even same hour, delivery, something that the rest of the market will also have to address to stay competitive.
The impact of this evolution on traditional retail has never been more pronounced and, as retailers seek to 'right size' their store portfolios, their demand for physical retail space falls. There is clearly going to be pain felt across the sector as retailers continue to adjust to the growth of online shopping. Department stores and apparel retailers feel the most at risk, and whilst the stronger destinations will inevitably fare better, even the owners of super-prime locations will not be immune, as they have to deal with increasing polarisation, impending lease expiries, building obsolescence and/or tenant defaults.
The property markets are increasingly aware of the shifting tectonic plates and are beginning to price in these changes.
Aligning our portfolio further towards distribution through investment and development
We have been a significant beneficiary of an early move into the logistics and distribution sectors where demand/supply dynamics have strengthened considerably over recent years. Our strategy is aligned to the structural benefits of the distribution sector whilst overlaying a tactical approach to ensure we invest in the sub sector that offers the most compelling investment proposition.
After a record year for distribution take up in 2016, occupier demand remains strong across the UK. Supply remains highly restricted, there is limited speculative development and estimates suggest that there is only four to five years of land available to accommodate warehouse demand.
These macro trends and attractive dynamics have seen investor demand for the asset class increase globally. Despite a more competitive landscape we have again made strong progress in growing our footprint across this sector, whilst remaining patient, disciplined and rational.
Over the year, we acquired a further GBP107.0 million of new distribution investments and developments at an average yield of 6.2%.
As at the year end, our distribution portfolio was valued at GBP950.2 million, which represented 62% of our whole portfolio, against 54% a year ago. This has increased to 64% following post period end activity.
Increasing focus on urban logistics
As part of our end to end logistics strategy, our investment focus in the year was on building our platform in urban logistics.
Urban logistics is an essential part of modern distribution and enables the retailer and parcel operator to get closer to its point of delivery and fulfil orders quickly. Operators are increasingly looking to move closer to their end customer, albeit there are some severe supply constraints.
The functionality of urban logistics has evolved from a location which stored products previously to an operation today that is designed to maximise speed of delivery. Rising consumer expectations have reduced average delivery times down from 28 days to just a few days, with next day delivery now common.
Looking forward, delivery times are likely to fall further as expectations grow and more demanding younger shoppers, in particular millennials, account for a larger proportion of retail spend. Half of shopping by millennials is expected to be online by 2019.
Vacancy across the urban logistics market is already very low and new supply is very limited, especially around the major UK cities. According to the UK Warehousing Association, there has been a 46% reduction of industrial space across Greater London since 1980. This is expected to fall by a further 30% over the next 20 years.
Achieving scale in this sub-sector is not easy, which in itself creates barriers to entry. Over the year, our urban logistics portfolio increased from eight to 23 assets valued at GBP160.8 million, the majority of which are located around major UK cities. We have made a further GBP23.9 million of acquisitions since the year end and expect this portfolio to grow quickly to c.GBP250 million in value.
0.9m sq ft distribution developments completed in the year
We have previously commented on the very attractive property fundamentals underpinning the strong pricing of mega and regional distribution warehouse investments.
Investing further in that market has therefore been less compelling of late and we have shifted our sights to growing our exposure through well located short cycle development opportunities, where the returns are significantly more attractive.
In Wakefield, our 527,000 sq ft development completed in September 2016. This was pre-let to Poundworld on a new 15 year lease with contracted rental uplifts linked to RPI.
In Warrington, our 357,000 sq ft regional distribution development completed in November 2016. Five weeks later we let the building to Amazon on a new 15 year lease with contracted rental uplifts linked to CPI. This will become a major automated fulfilment centre for Amazon and will employ c.1,200 people.
We also completed a 53,000 sq ft distribution facility in Crawley, which is let to furniture retailer Barker & Stonehouse on a new 15 year lease.
0.6m sq ft distribution developments under construction
We continue to look at refilling our development 'hopper' but will only do so where the demand/supply dynamics are attractive and our exposure to market timings are short.
Therefore to minimise development risk, we only commit to developments once planning consent has been received and once pre-lets are agreed or where we have strong confidence of a letting before practical completion.
Today, we are committed to 0.6 million sq ft of developments at Dagenham, Stoke and Crawley delivering an anticipated yield on cost of 6.2%. We have secured pre-lettings on over half of the space.
Further reducing our retail portfolio
Our further push in the distribution sector has largely been funded by the sale of mature retail parks where business plans have been fully executed.
Despite the political and economic uncertainty, we have continued to see strong buying interest for our assets with our retail disposals totalling GBP127.6 million. These disposals crystallised a geared IRR, on average, of 13%.
As a result of this activity our retail park weighting has halved over the last two years to 13% of the overall portfolio. We will continue to monetise further retail assets upon completion of various asset management initiatives during the year.
Post year end, we disposed of our Morrisons foodstore in Loughborough for GBP32.5 million, reflecting a net initial yield of 4.3% and a profit on cost of 26.0%.
Opportunistic retail acquisitions
We fully recognise the competitive nature of the retail market and therefore increasingly view this sector opportunistically. We will therefore limit our involvement to new convenience food opportunities and those where we partner with our retail customers in securing new outlets that they consider integral to growing their business.
Over the period we completed the development of seven convenience retail stores mainly let to Aldi and M&S. The average yield on cost for all of our retail developments was 6.7% and the average lease length achieved was 13.4 years.
During the year, we also acquired two single let retail assets for our long income MIPP Joint Venture at an average yield of 6.8% and with a lease length of over 15 years.
Finances strengthened and diversified
Our financing arrangements remain aligned to our property strategy and we have continued to strengthen our debt facilities with new lenders and flexible arrangements.
During the year we entered into a GBP130 million private debt placement at a blended coupon of 2.7% and a weighted average maturity of 8.3 years. This increased headroom available under our facilities which, as at 31 March 2017, was GBP299.7 million.
In addition, our GBP95 million equity raising in the year has given us the flexibility to accelerate our distribution investments and developments without impacting on our conservative approach to gearing.
As at 31 March, LTV was 30%, average debt maturity was 5.2 years and our cost of debt was 3.5% with a marginal cost on drawing further debt of just 1.5%.
Outlook
The sustained low interest rate and uncertain environment has driven strong demand for long duration assets with stable cash flows that are less sensitive to economic cycles.
However, not all income is the same. Whilst strong and sustainable income with structural support will endure, weak and over-rented income will be exposed as structurally challenged assets see their income shortening. We are therefore increasingly wary over the pricing of some assets where cash flows are at risk from continuing defensive capital expenditure and ongoing structural change. The yield gap between the very good and the poor assets has arguably compressed too far. As such we believe that structural changes will put some of these capitalisation rates under outward pressure.
Our disciplined investment approach continues to focus on delivering attractive risk-adjusted returns which are structurally supported and underpin a steady long term income return profile for our shareholders. We will behave rationally through maintaining a margin of safety in our actions whilst retaining appropriate portfolio liquidity and flexibility.
We continue to see attractive investment opportunities where we can leverage our relationships and expertise, and we remain confident in our business model and ability to deliver on our strategic objectives and priorities.
Investment review
We invest in structurally supported real estate that delivers repetitive, dependable and growing income. Our investment activity in the year was focused on urban logistics investments largely funded by mature retail park sales.
Structural support for distribution
We have been a significant beneficiary of an early move into distribution. The demand/supply dynamics for this sector have strengthened considerably and remain highly attractive. 2016 was a record year for occupier take up and supply remains restricted with limited speculative development. This is driving sustainable rental growth.
High quality distribution portfolio
The value of our distribution assets, including developments, increased to GBP950.2 million, representing 62% of the total portfolio. This is expected to grow to over 70% as we complete developments and further investments. Our distribution investments are 100% let and have a WAULT of 12.9 years, with 57.8% of income subject to contractual uplifts.
Disciplined investing in distribution
The investment market for mega and regional warehousing remains competitive, particularly where assets are let to strong covenants on long leases. We have, however, remained disciplined and not chased the market.
Despite the sale of our HUT Group warehouse, we increased our mega and regional exposure in the year through further development completions. We spent GBP71.0 million on our Wakefield and Warrington developments, achieving a blended yield of 6.6%, which is c.150bps better than completed investment yields. We also acquired a regional warehouse let to One Stop in Wakefield for GBP9.5 million.
GBP97 million of investments in urban logistics
During the year, we increased our urban logistics portfolio significantly to GBP160.8 million through 15 acquisitions. These acquisitions have enhanced our end to end logistics portfolio.
They are typically 50-100,000 sq ft, and provide 'spoke' operations for larger 'hubs'. They are well located and facilitate next day and same day delivery to major cities and conurbations. They are increasingly critical to the distribution networks for retailers, third party logistics providers and other operators in meeting rising consumer delivery expectations.
Our average yield on acquisitions was 6.2%, which is c.100bps better than for larger warehouse investments. These assets offer strong rental growth prospects as evidenced by the ERV growth of 9.5% achieved on our existing assets.
We remain excited by the opportunities in urban logistics where we continue to leverage our relationships to often secure off market purchases. Since the year end, we have acquired a further GBP23.9 million of assets.
Hot Features
Premium
As at 31 March 2017 Mega Regional Urban logistics
500,000 + 100-500,000 50-100,000
Typical warehouse size sq ft sq ft sq ft
Value(1) GBP478m GBP311m GBP161m
Yield(2) 4.8% 5.0% 5.8%
Contractual uplifts(3) 74% 60% 9%
----------------------- --------- ----------- ---------------
1 Including developments
2 Topped up NIY
3 Percentage of portfolio that benefits from contractual rental uplifts
Investment activity by sub sector
Acquisitions Disposals
-------------
Proceeds
Cost at share NIY at share NIY
GBPm % GBPm %
------------- ------------- --- --------- ---
Distribution 107.0 6.2 54.4 6.5
Retail 9.2 6.8 127.6 6.3
Leisure - - 9.1 5.5
Residential - - 10.8 2.4
------------- ------------- --- --------- ---
Total 116.2 6.2 201.9 6.2
------------- ------------- --- --------- ---
Significant further retail sales
As at 31 March 2017, our retail parks represented 13% of the overall portfolio and this weighting has more than halved over two years. Our long income JV retail assets represented 7% and our convenience retail assets accounted for 6% of the portfolio.
Retail disposal activity was particularly strong in the year at GBP127.6 million. The key retail disposals were at Newry, King's Lynn and Christchurch which totalled GBP89.2 million and represented the opportunity to monetise several of our larger retail park investments following intense asset management activity and where business plans had been fully executed.
Post year end, we disposed of our Morrisons retail asset in Loughborough at a very attractive yield of 4.3%.
Leisure asset sales
During the year, we sold an Odeon cinema in Taunton for GBP9.1 million. Post year end, we sold a further cinema in Birkenhead for GBP5.8 million.
The sales have reduced our cinema ownership to six which account for GBP3.5 million of income per annum, 100% of which is RPI linked, and have a WAULT of 21.3 years. We continue to see strong buying appetite for our cinema portfolio.
Opportunistic retail acquisitions
Our MIPP Joint Venture acquired two single let warehouses for GBP18.4 million (Group Share: GBP9.2 million) at a yield of 6.8% and continues to see opportunities in selective high quality assets that are smaller lot sizes and offer the potential to generate stable, consistent income returns.
Following discussions with our Joint Venture partner, we have agreed to extend the term of the MIPP Joint Venture by a further three years to 2023.
21 Residential disposals
At Moore House in Chelsea, our last remaining residential asset in which we have a 40% share, we continue to patiently sell down individual units.
Purchaser interest has remained strong since last autumn and we sold 13 units in the second half of the year, taking the number sold in the year to 21. A further two units have been sold post period end and 10 are currently under offer. There are 58 units remaining of the original 149 owned.
Distribution acquisitions
382,000 sq ft portfolio
GBP26.0 million acquisition of six assets in established distribution locations. Acquired at a NIY of 6.5% and with a WAULT of 7.0 years.
120,000 sq ft in Wakefield
GBP9.5 million acquisition of a regional warehouse let to OneStop. Acquired at a NIY of 5.7% and with a WAULT of 6.2 years.
100,000 sq ft in Leeds
GBP7.9 million acquisition of a warehouse let to Vision Alert. Acquired at a NIY of 6.0% and with a WAULT of 14.8 years.
89,000 sq ft in Hemel Hempstead
GBP8.3 million acquisition of a warehouse let to ITAB. Acquired at a NIY of 6.4% and with a WAULT of 8.3 years.
74,000 sq ft in Stevenage
GBP7.3 million acquisition of a warehouse let to Dixons Carphone. Acquired at a NIY of 6.3% with a WAULT of 8.7 years.
49,000 sq ft in Leeds
GBP4.0 million acquisition of a warehouse let to Siemens. Acquired at a NIY of 6.0% with a WAULT of 3.0 years.
49,000 sq ft in Dartford
GBP6.3 million acquisition of a warehouse let to Antalis. Acquired at a NIY of 6.0% with a WAULT of 10.0 years.
41,000 sq ft in Basildon
GBP3.8 million acquisition of a warehouse let to Modular Heating Group. Acquired at a NIY of 6.5% with a WAULT of 4.0 years.
30,000 sq ft in Bicester
GBP3.2 million acquisition of a warehouse let to DPD. Acquired at a NIY of 5.9% and with a WAULT of 9.5 years.
Distribution developments
114,000 sq ft in Crawley
Speculative development acquired at an anticipated cost of GBP20 million reflecting a 6.3% yield on cost.
53,000 sq ft in Crawley
Pre-let development in Crawley acquired for GBP10.7 million at a yield on cost of 5.2% let to Barker & Stonehouse with a WAULT of 15.0 years.
Distribution acquisitions post period end
51,000 sq ft in Crawley
GBP6.4 million acquisition of an urban logistics warehouse let to TNT. Acquired at a reversionary yield of 6.2% and with a WAULT of 6.4 years.
90,000 sq ft in Coventry
GBP5.7 million acquisition of an urban logistics warehouse let to DHL for ten years at a NIY of 7.0%.
120,000 sq ft in Huyton
GBP11.8 million acquisition of an urban logistics warehouse let to Antolin Interiors for 15.0 years at a yield on cost of 6.1%.
Distribution disposals
690,000 sq ft in Warrington
Following an option exercise in the prior year by the occupier, The Hut Group acquired its warehouse for GBP53.7 million reflecting a NIY of 6.5%. The yield on cost for the development was 8.0%. The sale completed in November 2016 and generated a 22% geared IRR.
2.2 acre site in Yeovil
We disposed of a small site for GBP0.7 million.
Retail and leisure acquisitions
Our MIPP joint venture acquired two assets for GBP18.4 million (Group share: GBP9.2 million)
Hull
GBP9.4 million acquisition of a 71,000 sq ft warehouse at a NIY of 7.5%, let to B&Q with a WAULT of 12 years.
Dartford
GBP9.0 million acquisition of a 40,000 sq ft warehouse at a NIY of 6.2%, let to Wickes who signed a new 20 year lease on acquisition.
Retail and leisure disposals
11 assets sold for GBP152.9 million (Group share: GBP136.7 million)
Newry
The 165,000 sq ft Damolly Retail Park was sold for GBP30.7 million at a NIY of 7.4%. During ownership, new lettings were signed with Lidl, Pets at Home, Home Bargains and Costa.
Christchurch
The 104,000 sq ft retail park was sold for GBP34.5 million, reflecting a NIY of 5.7%. The property was purchased in 2013 for GBP27.1 million and since then new lettings had been signed with Costa, DFS, Home Bargains and Subway. The WAULT was 7.0 years.
King's Lynn
The refurbished 74,000 sq ft Pierpoint Retail Park was sold for GBP24.0 million at a NIY of 5.8%. New lettings had been signed with Next, B&M, DFS, Tapi, Poundland and Greggs, increasing the rental income by 47% and the WAULT from 4.3 years to 13.3 years.
Bedford
The 66,000 sq ft Alban Retail Park was sold for GBP14.3 million, reflecting a NIY of 5.9%. The property was acquired in 2010 for GBP9.2 million and, following asset management initiatives with B&M, Dunelm and Gym Group, rental income had increased by over 30%. The WAULT was 8.3 years.
Warrington
The 20,000 sq ft Fordton Retail Park was sold for GBP6.6 million at a NIY of 5.4%.
St Albans
The 25,000 sq ft retail asset was sold for GBP5.8 million at a NIY of 6.1%.
Chatham, Bridgwater and Grimsby
Our MIPP Joint Venture sold three properties for GBP15.9 million (Group share: GBP8.0 million) at a NIY of 5.7%.
Maidstone
A DFS property was sold for GBP12.0 million (Group share: GBP3.7 million) on behalf of our DFS joint venture, reflecting a NIY of 7.5%. The property was acquired in March 2014 as part of a portfolio of DFS stores off an overall NIY of 9.3%. The joint venture retains 12 assets.
Taunton
One Odeon Multiplex Cinema was sold for GBP9.1 million at a NIY of 5.5%.
Retail and leisure disposals post period end
Loughborough
GBP32.5 million disposal of a 55,000 sq ft Morrisons store at a NIY of 4.3%. The asset had been extended recently and a new 25 year lease had been agreed with Morrisons. Our profit on cost was 26.0%.
Birkenhead
GBP5.8 million disposal of a Vue cinema at a NIY of 7.2%.
Newcastle-under-Lyme
GBP2.8 million disposal of a retail park in Newcastle-under-Lyme at a NIY of 8.0%.
Asset management and development
Our portfolio metrics continue to remain strong as our underlying income becomes more resilient and we deliver sustainable income growth. Our asset management and development activity continue to deliver value driven by our occupational intelligence.
Delivering long term sustainable income
As an important driver of our repetitive income, we continued to achieve long lease lengths from our activity. The 33 lettings in the year were agreed at an average lease length of 18.2 years and our lettings to Amazon and Eddie Stobart in the year were particularly significant transactions. This activity helped to maintain our WAULT at 12.8 years (12.1 years to break) which remains one of the longest in the sector. Only 1.2% of our income expires over the next three years, and over 17% of income has a WAULT of 20 years or greater.
Protecting the reliability of our income
Maintaining a strong tenant list with high occupier satisfaction is a key priority. Our occupancy rate at the year end was 99.6%, a high level that has been maintained for several years. We have a high quality list of tenants as reflected in our top five tenants which account for 34% of income and consist of Primark, Dixons Carphone, M&S, Argos and Eddie Stobart.
Our gross to net income ratio of 98.6% reflects our further alignment to distribution where operational requirements are minimal.
Achieving income growth
Through 69 occupier transactions we generated GBP7.1 million of additional income and like for like income growth of 4.6%. The 33 new lettings delivered GBP5.8 million of income whilst contractual income uplifts and open market rent reviews helped to generate GBP1.3 million of additional income.
With 52% of our rental income benefiting from fixed or inflation linked uplifts, our portfolio has certainty of income growth.
Lettings
33 lettings were undertaken in the year generating additional contractual income of GBP5.8 million, of which GBP3.8 million related to distribution developments. Lettings were achieved with an average lease length of 18.2 years.
Five distribution lettings or regears were signed at:
-- Dagenham, where a new 26 year lease was signed with Eddie Stobart over an enlarged 436,000 sq ft and we are building a new 180,000 sq ft unit for the tenant
-- Warrington, where a 15 year lease was signed with Amazon at our recently developed 357,000 sq ft warehouse
-- Stoke, where a 15 year pre-let was signed with Michelin on 137,000 sq ft at our development. The c.277,000 sq ft scheme is under construction and we continue to engage with potential tenants on the remaining space
-- Nottingham, where Hilary's Blinds extended their lease to ten years
-- Newark, where we installed 1MW of solar, generating additional income of GBP0.1 million p.a.
At our 114,000 sq ft development in Crawley a pre-let has been agreed on 35,000 sq ft and we expect to sign the letting shortly.
26 retail lettings were signed during the year. The key lettings were at:
-- Tonbridge, where the former B&Q unit is fully pre-let following lettings with Home Bargains, Go-Outdoors, Jollyes, Costa and, most recently, with Carpetright
-- Launceston, where the former B&Q unit is fully pre-let following lettings with B&M, M&S and Costa in the second half of the year
-- Kirkstall, where lettings were signed with Peacocks, Holland & Barrett, Shoezone and Specsavers
-- Dartford, where Wickes has signed a 20 year lease on 40,000 sq ft at our recently acquired investment
-- Ipswich, where Wickes signed a 15 year lease on 21,000 sq ft at our development and Costa has signed a 15 year lease on 2,000 sq ft. We are under offer on letting the remaining space
At our last remaining office in Marlow, two leases were signed across 21,000 sq ft. The property is 96.7% occupied.
Rent reviews
Including contractual uplifts, 36 rent reviews were agreed across 4.1 million sq ft adding GBP1.3 million of income at 4.6% above passing and 4.3% above ERV.
Rental growth on our distribution assets was strong and we settled nine reviews at 5.0% above previous passing, three of which were open market reviews on urban logistics and regional warehouses where the average uplift was 16.9% above passing on a five yearly equivalent basis.
On our retail and leisure assets, we settled 27 rent reviews at 3.0% above previous passing and 6.5% above ERV. The majority of these reviews were inflation linked rent reviews and seven were open market reviews which were settled at 4.4% above previous passing.
Short cycle developments
Following the completion of 1.9 million sq ft of developments last year, we successfully completed 1.1 million sq ft of further developments in the period representing GBP7.9 million of additional income. The blended yield on cost for these developments was 6.5%.
Committed developments currently total 0.7 million sq ft, of which 0.6 million sq ft relates to distribution developments at Dagenham, Stoke and Crawley all of which are expected to be completed within 6 to 12 months. The blended yield on cost for all committed development is anticipated to be 6.3%.
We continue to de-risk our pipeline developments. At Bedford, where the site has planning for up to 700,000 sq ft, a six month extension has been agreed to purify the conditions of purchase with the council. We anticipate completing the land purchase by the end of 2017.
Area Additional Yield Practical
sq ft Rent on cost completion
Scheme Sector '000 GBPm % date
Completed
Wakefield Distribution 527 2.5 6.3 Sept 16
Warrington Distribution 357 2.1 7.1 Nov 16
Crawley Distribution 53 0.6 5.2 March 17
Liverpool Retail 29 0.5 6.2 July 16
St Margaret's, Leicester Retail 29 0.4 8.1 July 16
Aldi, Leicester Retail 19 0.3 6.0 August 16
Coventry Retail 18 0.3 8.0 Feb 17
Tonbridge Retail 18 0.4 10.5 Oct 16
Loughborough(1) Retail 12 0.5 5.1 Jan 17
Ferndown Retail 11 0.3 5.4 May 16
------------------------- ------------- ------ ---------- -------- -----------
1,073 7.9 6.5
--------------------------------------- ------ ---------- -------- -----------
Under construction
Stoke(2) Distribution 277 1.4 6.3 Q1 18
Dagenham Distribution 180 0.9 5.7 Q2 18
Crawley(2) Distribution 114 1.3 6.3 Dec 17
Tonbridge (ex B&Q) Retail 53 0.3 6.1 July 17
Ipswich(2) Retail 31 0.7 7.1 Q4 17
Launceston Retail 30 0.3 6.2 Q4 17
------------------------- ------------- ------ ---------- -------- -----------
685 4.9 6.3
--------------------------------------- ------ ---------- -------- -----------
1 Sold post year end
2 Based on anticipated rents
Property valuation and return
Despite continued political and economic uncertainty, we generated a positive valuation movement of GBP21.0 million for the year. Our GBP44.0 million valuation gain in the second half more than reversed the GBP23.0 million valuation loss that we saw in the first half. Our actions accounted for 77.1% of the total valuation uplift for the year.
Our sector leading occupancy rates and lease lengths within the structurally winning real estate sectors continue to provide strong support to our valuations delivering a total capital return of 1.7% and significantly outperformed the IPD All Property return measure of -0.1%.
Distribution real estate continues to see healthy demand in both the investment and occupational market. As a result, it is one of the best performing real estate subsectors and delivered a capital return of 2.8%. Our distribution assets strongly outperformed the subsector generating a capital return of 4.4%, as a result of both the quality of our assets and our development and asset management action.
The Company's retail and leisure portfolio saw a 0.5% valuation increase, with a 2.9% decline in the retail park portfolio offset by the strength in our long income retail, convenience and leisure assets.
Our last two non-core buildings in Marlow and Moore House saw adverse valuation impacts over the year. Overall, our office and residential assets fell in value by 10.5%.
The valuation uplift, combined with the portfolio's sustainable and growing income, helped us to deliver a total property return of 7.4%, substantially beating the IPD All Property return measure of 4.6%. We believe that income will be the major component of total returns going forward, and we expect that the portfolio's strong income characteristics will help to deliver further total return outperformance.
Financial review
Our commitment to repositioning the portfolio into our preferred distribution sector has delivered growth in secure and sustainable income and property values this year.
Overview
We have achieved both earnings and NAV growth this year and have strengthened and de-risked our financing position through a private debt placement and an equity placing.
EPRA earnings have increased by 5.3% to GBP51.0 million or 8.2p per share, compared with GBP48.5 million or 7.8p last year. Reported profit under IFRS has fallen by GBP19.7 million to GBP63.0 million primarily as a result of lower valuation gains this year. EPRA NAV is GBP1,030.5 million or 149.8p per share, an increase of 11.8% or 1.4% on a per share basis which reflects the impact of the equity placing.
In September we entered into a new GBP130 million private debt placement which diversified our funding sources and provided further capacity for investment. We supplemented this in March by an equity placing of 62.8 million ordinary shares which raised gross proceeds of GBP95.5 million.
Our loan to value ratio has improved as a result of the debt raised and equity issued in the year, falling to 30% from 38% last year. Other financing metrics remain strong, with average cost of debt unchanged at 3.5% and loan maturity, despite the passing of a year, of 5.2 years (2016: 5.6 years). We have GBP299.7 million of undrawn debt facilities, up from GBP69.9 million last year.
Our strong financial results and robust portfolio metrics have enabled us to increase the dividend for the year to 7.5p per share, up 3.4% from last year. Three quarterly payments totalling 5.4p per share have been made to date and a further 2.1p is proposed for payment on 10 July 2017. The dividend continues to be fully covered by EPRA earnings at 109%. A scrip alternative to a cash dividend payment was offered to shareholders for all dividends declared in the year to 31 March 2017 and it is our intention to continue to offer shareholders this choice.
EPRA highlights
2017 2016
EPRA EPS 8.2p 7.8p
EPRA NAV per share 149.8p 147.7p
EPRA triple NAV per share 146.4p 143.9p
EPRA vacancy rate 0.4% 0.7%
EPRA cost ratio 16% 17%
EPRA NIY 4.5% 4.9%
EPRA 'topped up' NIY 5.4% 5.4%
-------------------------- ------ ------
The definition of each of these measures can be found in the Glossary
Presentation of financial information
The Group financial statements are prepared in accordance with IFRS.
We account for our interests in joint ventures using the equity method as required by IFRS 11 which means the results and investment in joint venture entities are presented as a single line item in the consolidated income statement and balance sheet.
Management monitors the performance of the business on a proportionally consolidated basis which includes the Group's share of income, expenses, assets and liabilities of joint ventures on a line by line basis in the income statement and balance sheet.
The figures and commentary in this review are consistent with our management approach as we believe this provides a more meaningful analysis of overall performance.
Alternative performance measures
The Group uses EPRA earnings and EPRA net assets as alternative performance measures as they highlight the underlying recurring performance of the Group's property rental business.
The EPRA alternative measures are widely recognised and used by public real estate companies and seek to improve transparency, comparability and relevance of published results.
The Group's key EPRA measures are summarised in the table below and also in note 8 to the financial statements and Supplementary notes i to vii.
Definitions of EPRA alternative performance measures are also given in the Glossary.
Alternative Rationale
performance
measure
EPRA earnings Recurring earnings from core operational activities.
It excludes items considered to be non - recurring
or exceptional in accordance with EPRA Best Practice
Recommendations including property and derivative valuation
movements, profits and losses on disposal of properties
and financing break costs.
It is presented as it is one of the Group's KPIs, an
industry standard comparable measure and supports the
level of dividend payments. A reconciliation between
EPRA earnings and IFRS reported profit is provided
in note 8 to the financial statements.
EPRA net EPRA net asset value is a key measure of the Group's
assets overall performance reflecting both income and capital
returns. It excludes the fair valuation of derivative
instruments that are reported in IFRS net assets. A
reconciliation between EPRA net assets and IFRS reported
net assets is provided in note 8 to the financial statements.
Income statement
EPRA earnings for the Group and its share of joint ventures are detailed as follows:
For the year to Group JV 2017 Group JV 2016 31 March GBPm GBPm GBPm GBPm GBPm GBPm Gross rental income 73.9 9.1 83.0 67.9 11.1 79.0 Property costs (0.8) (0.4) (1.2) (0.8) (0.5) (1.3) -------------------- ------ ----- ------ ------ ----- ------ Net rental income 73.1 8.7 81.8 67.1 10.6 77.7 Management fees 1.7 (0.7) 1.0 2.2 (0.9) 1.3 Administrative costs (13.3) (0.1) (13.4) (13.6) (0.2) (13.8) Net finance costs (16.3) (2.1) (18.4) (13.8) (2.9) (16.7) -------------------- ------ ----- ------ ------ ----- ------ EPRA earnings 45.2 5.8 51.0 41.9 6.6 48.5 -------------------- ------ ----- ------ ------ ----- ------
The table below reconciles the movement in EPRA earnings in the year.
GBPm p
EPRA earnings 2016 48.5 7.8
Net rental income 4.1 0.7
Management fees (0.3) (0.1)
Administrative costs 0.4 0.1
Net finance costs (1.7) (0.3)
--------------------- ----- -----
EPRA earnings 2017 51.0 8.2
--------------------- ----- -----
Net rental income
The growth in EPRA earnings was driven by additional net rental income of GBP4.1 million, which increased by 5.3% in the year to GBP81.8 million. Movements in net rental income are reflected in the table below.
GBPm
Net rental income 2016 77.7
Existing properties(1) 0.7
Developments 5.1
Acquisitions 6.1
Disposals (7.9)
Property costs 0.1
----------------------- -----
Net rental income 2017 81.8
----------------------- -----
1 Based on properties held throughout 2016 and 2017 on a proportionately consolidated basis to exclude the distortive impact of acquisitions, disposals and development completions in either period
The existing portfolio generated GBP0.7 million of additional income and the Group's completed developments delivered a further GBP5.1 million.
Net disposals reduced income by GBP1.8 million, offset by marginal savings in property costs of GBP0.1 million.
Our net income as a percentage of gross rents has increased marginally to 98.6%.
Administrative costs
Administrative costs have fallen by 2.9% to GBP13.4 million after capitalising staff costs of GBP1.8 million (2016: GBP1.5 million) in respect of time spent on development activity in the year.
EPRA cost ratio
The Group's cost base continues to be closely monitored and the EPRA cost ratio is used as a key measure of effective cost management.
2017 2016
% %
EPRA cost ratio including direct vacancy costs 16 17
EPRA cost ratio excluding direct vacancy costs 15 17
----------------------------------------------- ---- ----
The EPRA cost ratio for the year, including direct vacancy costs, was 16% compared with 17% last year. The ratio reflects total operating costs, including the cost of vacancy, 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 GBP18.4 million, an increase of GBP1.7 million over the previous year.
This was due to decreases in interest receivable from forward funded development projects and interest capitalised on developments of GBP0.4 million and GBP0.7 million respectively. In addition, increased Group bank interest costs of GBP1.4 million associated with higher average levels of debt were offset by lower joint venture interest costs of GBP0.8 million as a result of repaying debt facilities. The movements are shown in notes 5 and 10 to the financial statements.
Our interest rate exposure is hedged by a combination of fixed and forward starting interest rate swaps and caps.
Share of joint ventures
EPRA earnings from joint venture investments were GBP5.8 million, a reduction of GBP0.8 million over last year due to the impact of disposals as reflected in the table below.
2017 2016
For the year to 31 March GBPm GBPm
MIPP 3.4 4.0
Retail Warehouse 2.2 2.4
Residential 0.2 0.2
------------------------- ----- -----
5.8 6.6
------------------------- ----- -----
In addition, the Group received net management fees of GBP1.0 million for acting as property advisor to each of its joint ventures (2016: GBP1.3 million).
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.
The tax risk identification and management process is documented in the Risk Register and Internal Control Evaluation which is reviewed annually by the Audit Committee who reports its findings to the Board. The Board also considers risk at a high level at each quarterly meeting via a risk dashboard. The Finance Director has overall responsibility for the execution of the tax strategy.
We pay business rates on void properties and stamp duty land tax. In addition we collect VAT, employment taxes and withholding tax on dividends and pay these over to HMRC.
We continue to monitor and comfortably comply with the REIT balance of business tests and distribute as a Property Income Distribution 90% of REIT relevant earnings to ensure our REIT status is maintained.
Our formal tax strategy has been published on the Group's website at www.londonmetric.com.
Dividend
The Directors have approved a fourth quarterly interim dividend of 2.1p per share, payable on 10 July 2017 to shareholders on the register at the close of business on 9 June 2017, bringing the total amount paid and payable for 2017 to 7.5p, an increase of 0.25p compared with the previous year.
This year the Company has commenced a quarterly dividend payment cycle and has offered shareholders a scrip alternative to cash payments.
The first two quarterly payments totalling 3.6p per share were paid as Property Income Distributions (PIDs) in the year. The third quarterly dividend of 1.8p per share has since been paid as a PID. The fourth quarterly dividend will comprise a PID of 1.3p per share and an ordinary dividend of 0.8p per share and a scrip alternative will be offered.
IFRS reported profit
The Group's reported profit for the year was GBP63.0 million compared with GBP82.7 million last year. The reduction was primarily due to lower property valuation gains realised, offset by a favourable movement in derivatives compared with the previous year as reflected in the table below.
Other movements in reported profit include the loss on sale of properties and associated debt and hedging break costs, which together reduced profit by GBP9.1 million this year as opposed to increasing profit by GBP1.6 million last year.
Disposals of mature retail parks, principally at Newry, King's Lynn and Christchurch, generated losses over book value of GBP4.5 million. The total profit over original cost on sales in the year was GBP7.4 million or 3.8% (2016: GBP37.9 million or 23.0%). Disposals are discussed in detail in the Investment review section of the Strategic report.
In April 2016 we bought down GBP66.3 million of legacy out of the money interest rate swaps at a cost of GBP3.5 million as reflected in the table as hedging close out costs.
The IFRS reported profit excluding the fair value of derivatives, together with the dividend charge in the year of GBP43.7 million, represents a total accounting return of 6.4%.
A full reconciliation between EPRA earnings and IFRS reported profit is given in note 8(a) to the financial statements and is summarised in the table below.
For the year to Group JV 2017 Group JV 2016 31 March GBPm GBPm GBPm GBPm GBPm GBPm EPRA earnings 45.2 5.8 51.0 41.9 6.6 48.5 Revaluation of investment property 22.2 (1.2) 21.0 51.1 (1.3) 49.8 Fair value of derivatives 0.2 0.1 0.3 (16.7) (0.1) (16.8) Debt and hedging early close out costs (3.5) (0.1) (3.6) (0.1) (0.4) (0.5) (Loss)/profit on disposal (4.5) (1.0) (5.5) 2.4 (0.3) 2.1 Other items(1) (0.2) - (0.2) (0.4) - (0.4) --------------------- ----- ----- ----- ------ ----- ------ IFRS reported profit 59.4 3.6 63.0 78.2 4.5 82.7 --------------------- ----- ----- ----- ------ ----- ------
1 Other items include amortisation of intangible assets
Balance sheet
EPRA net assets for the Group and its share of joint ventures are as follows:
Group JV 2017 Group JV 2016
As at 31 March GBPm GBPm GBPm GBPm GBPm GBPm
Investment property 1,373.4 160.4 1,533.8 1,346.2 174.7 1,520.9
Gross debt (473.2) (54.5) (527.7) (575.0) (62.9) (637.9)
Cash 42.9 3.2 46.1 42.6 4.1 46.7
Other net (liabilities)/assets (20.4) (1.3) (21.7) (11.7) 4.1 (7.6)
------------------------------- ------- ------ ------- ------- ------ -------
EPRA net assets 922.7 107.8 1,030.5 802.1 120.0 922.1
------------------------------- ------- ------ ------- ------- ------ -------
EPRA net assets increased in the year by GBP108.4 million or 11.8% to GBP1,030.5 million. On a per share basis and after reflecting the impact of the equity placing, net assets increased by 2.1p, or 1.4%, to 149.8p. The table below highlights the principal movements in the year.
GBPm p
--------------------------- -------- ------
EPRA net asset value 2016 922.1 147.7
EPRA earnings 51.0 8.2
Property revaluation 21.0 3.4
Dividends (45.9) (7.3)
Equity placing 92.8 -
Other movements(1) (10.5) (2.2)
EPRA net asset value 2017 1,030.5 149.8
--------------------------- -------- ------
1 Other movements include loss on sales (GBP5.5 million), debt/hedging break costs (GBP3.6 million), share based awards (GBP3.6 million) offset by scrip shares issued (GBP2.2 million)
IFRS reported net assets increased by GBP108.7 million in the year to GBP1,006.9 million. A reconciliation between IFRS and EPRA net assets is detailed in note 8(c) to the financial statements.
Portfolio valuation
The Group's portfolio including its share of joint venture properties grew to GBP1,533.8 million over the year, with investment in distribution assets, including those under development, increasing to 62% of the portfolio compared with 54% last year as reflected in the table below and in Supplementary note ix.
2017 2016
As at 31 March GBPm GBPm
Distribution 927.4 784.4
Retail 404.8 474.8
Leisure 63.2 69.0
Offices 70.0 80.2
--------------------- ------- -------
Investment portfolio 1,465.4 1,408.4
Residential 41.1 55.9
Development(1) 27.3 56.6
--------------------- ------- -------
Property value 1,533.8 1,520.9
--------------------- ------- -------
1 Distribution GBP22.8 million; Retail GBP4.5 million (2016: Distribution GBP40.0 million, Retail GBP16.6 million)
Investment in development assets has fallen as developments at Ferndown, Liverpool, Leicester, Wakefield and Warrington completed on schedule in the year and have been reclassified as investment assets. We have retained our remaining office at Marlow and have continued to sell down residential assets.
The movement in the investment portfolio is explained in the table below.
Portfolio
value(1)
GBPm
Opening valuation 2016 1,520.9
Acquisitions 90.2
Developments 68.7
Capital expenditure on completed properties 18.5
Disposals (198.2)
Revaluation 21.0
Lease incentives 12.7
-------------------------------------------- ---------
Closing valuation 2017 1,533.8
-------------------------------------------- ---------
1 Further detail on the split between Group and joint venture movements and the EPRA capital expenditure analysis can be found in Supplementary note vii
Despite the market uncertainty over the past year, we have seen property values increase by GBP21.0 million and have delivered a total property return of 7.4% compared to the IPD index of 4.6%. Further detail can be found in the Asset Management review.
The Group's commitment to development activity is demonstrated by the significant spend of GBP68.7 million in the year which included GBP52.7 million on forward funded developments principally at Warrington, Wakefield and Crawley. At the year end, the Group had capital commitments of GBP57.8 million as reported in note 9 to the financial statements, relating primarily to committed developments in progress at Dagenham, Crawley, Stoke and Ipswich. Further detail can be found in the Asset management and development review.
The Group acquired 16 distribution assets and two retail assets through its MIPP joint venture in the year as reported in the Investment review.
It has continued to dispose of mature retail assets that have delivered their business plans and recycle capital into end to end distribution units which offer attractive yields, strong rental growth prospects and asset management opportunities.
The disposal of 13 commercial and 21 residential assets in the year generated proceeds of GBP201.9 million and reduced the carrying value of property by GBP198.2 million.
Included within the trade and other receivables balance of GBP18.8 million on the Group balance sheet is GBP14.3 million due on completion of the sale of Alban Retail Park, Bedford.
Financing
The performance indicators used to monitor the Group's debt and liquidity position are shown in the table below.
2017 2016
As at 31 March GBPm GBPm
Gross debt 527.7 637.9
Cash 46.1 46.7
Net debt 481.6 591.2
Loan to value(1) 30% 38%
Cost of debt(2) 3.5% 3.5%
Undrawn facilities 299.7 69.9
Average debt maturity 5.2 years 5.6 years
Hedging(3) 87% 84%
---------------------- --------- ---------
1 LTV includes GBP14.3 million of deferred consideration receivable on sales (2016: GBP10.2 million)
2 Cost of debt is based on gross debt and including amortised costs but excluding commitment fees
3 Based on the notional amount of existing and forward starting hedges and total debt facilities
The Group and joint venture split is shown in Supplementary note iii.
In September 2016 the Group entered into a private placement at a blended coupon of 2.7% and a weighted average maturity of 8.3 years. The proceeds were used to repay existing unsecured debt which remained available to draw in full.
In March 2017 the group completed a successful equity placing of 62.8 million ordinary shares raising gross proceeds of GBP95.5 million. It used the proceeds in part to further repay its existing unsecured facility, increasing available undrawn facilities to GBP299.7 million at the year end.
The Group's share of joint venture gross debt has fallen by GBP8.4 million or 13.4% since last year as a result of sales and consequent debt repayments. The Moore House debt facility was repaid in full in December 2016.
The Group's key financial ratios remain strong with loan to value falling to 30% and the average cost of debt remaining stable at 3.5%. We intend to keep LTV below 40% to provide sufficient flexibility to take advantage of opportunities and execute transactions whilst maintaining sufficient headroom under our gearing covenants should property values decline.
The Group's policy is to substantially de-risk the impact of movements in interest rates by entering into hedging arrangements. Independent advice is given by J C Rathbone Associates.
At 31 March 2017, 87% of our exposure to interest rate fluctuations was hedged by way of current and forward starting swaps and caps assuming existing debt facilities are fully drawn (2016: 84%). We continue to monitor our hedging profile in light of forecast interest rate movements.
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 facility and private placement loan notes contain gearing and interest cover financial covenants. At 31 March 2017 the Group's gearing ratio as defined within these funding arrangements was 43% compared with the maximum limit of 125% and interest cover ratio was 4.5 times compared with the minimum level of 1.5 times.
Cash flow
During the year the Group's cash balances increased by GBP0.3 million as reflected in the table below.
2017 2016
As at 31 March GBPm GBPm
Cash flows from operating activities 50.8 30.9
Cash flows from investing activities 7.4 (92.1)
Cash flows from financing activities (57.9) 53.3
----------------------------------------------------- ------ ------
Net increase/(decrease) in cash and cash equivalents 0.3 (7.9)
----------------------------------------------------- ------ ------
Further detail is provided in the Group Cash flow Statement.
Cash flows from operating activities have increased by GBP19.9 million compared to last year as a result of higher net rental income and changes to net working capital requirements.
Cash flows from investing activities reflect property acquisitions, including those classified as forward funded developments, of GBP147.3 million and capital expenditure of GBP25.9 million offset by net proceeds from disposals of GBP165.0 million and distributions from joint ventures of GBP16.1 million.
Net repayment of bank facilities in the year of GBP101.8 million and cash dividends paid of GBP43.7 million was offset in part by net proceeds received from the equity placing of GBP92.8 million.
Risk Management
As an income focused REIT our strategic priorities continue to be the delivery of sustainable, progressive earnings and long term capital growth.
Every business faces inherent risk and uncertainty. Whilst risk cannot be completely eliminated we recognise that effective risk management reduces the negative impact of risk on our business and improves our prospects for achieving our strategic objectives.
Our risk management process
The Board operates a culture of embedding risk consideration into its decision making processes. It recognises its responsibility to undertake a robust assessment of the principal risks facing the Company and the extent to which it is willing to accept some level of risk in achieving its strategy. Risk appetite is low where it prejudices strategic objectives and controls are in place to minimise the level of residual risk.
The Board considers risk at a high level at each meeting via a risk dashboard. The dashboard monitors material issues so that key risks can be managed appropriately and new risks identified early enabling action to be taken to remove or reduce the risk and any potential negative impact. The Board also considers the long-term viability of the Company in the context of the principal risks it faces and its Viability Statement is prepared in accordance with the provisions of the UK Corporate Governance Code.
The responsibility for detailed assurance on the risk management process has been delegated by the Board to the Audit Committee. The Audit Committee carries out a detailed review of the risk register and internal controls at least once a year to consider the effectiveness of the risk management and internal control processes and reports its findings to the Board. The risk register was last presented to and considered by the Audit Committee in March 2017.
The Executive Committee is responsible for the identification of risk and the design, implementation and maintenance of the systems of internal controls, assisted by senior management. Appropriate mitigation plans are developed based on an assessment of the impact and likelihood of a risk occurring. Members of the Executive Committee are closely involved in day-to-day matters and the Company has a relatively low number of personnel all operating from one office location. This and the flat management structure enable risks to be quickly identified so appropriate responses can be put in place.
The risk register rates the significance and probability of each risk identified by management as having either a high, medium or low impact. 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. Specific risk management safeguards for each risk are identified, detailed and rated as strong, medium or weak with greater weighting applied the stronger the safeguard.
The gross risk rating and strength of 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 it is considered necessary. Finally each risk is allocated an owner and details of how the safeguards are evidenced is noted.
The Board has limited control over certain external factors such as the heightened level of uncertainty associated with major political events such as the EU Referendum and the triggering of Article 50, the UK election outcome and the cyclical nature of the property market. The Board's strategy over the last few years has however been to reshape its UK only portfolio into more resilient asset classes closely aligned to rapidly changing consumer shopping habits.
Viability Statement
In accordance with provision C.2.2 of the UK Corporate Governance Code, the Directors have assessed the prospects of the Group and future viability over a three year period, being longer than the 12 months required by the 'Going Concern' provision. The Board conducted this review taking account of the Group's long term strategy, principal risks and risk appetite, current position, asset performance and future plans.
This period was chosen for the following reasons:
-- The Group's financial business plan and detailed budgets cover a rolling three year period. The business plan includes budgeted profit and cash flows and also considers capital commitments, dividend cover, loan to value, loan covenants and REIT compliance metrics. These are updated and reviewed at least quarterly against actual performance
-- It reflects the short-cycle nature of the Group's developments and asset management initiatives. Six forward funded developments completed in the year at Ferndown, Leicester, Liverpool, Wakefield, Warrington and Crawley. All of these developments were completed within one year. The other committed developments in progress at the end of the year, including those at Crawley, Stoke and Dagenham, are expected to complete next year
-- The average length of asset management initiatives involving significant reconfiguration of retail parks is under one year
-- The Group's weighted average debt maturity at 31 March 2017 was 5.2 years
-- Three years is considered to be the optimum balance between long term property investment and the inability to accurately forecast ahead given the cyclical nature of property investment
The Group's business model consists of a base case scenario which only includes deals under offer and also an assumed case which factors in reinvestment.
A sensitivity analysis was carried out which involved flexing a number of key assumptions to consider the impact of changes to the Group's principal risks affecting the viability of the business, being:
-- changes to macro-economic conditions impacting rental income levels and property values
-- changes in the retail environment impacting occupancy levels and lettings
-- changes in the availability of funds impacting committed expenditure and investment transactions
The business model was stress tested to validate its resilience to property valuation and rental income decline, as well as increases in future libor and swap rates. It assessed the impact of these movements on future performance, liquidity and solvency and the ability to finance forecast transactions and committed capital expenditure and refinance maturing debt. It took into account the flexibility of capital expenditure and disposal plans and hedging in place.
In addition, further stress testing assessed the limits at which key financial covenants and ratios would be breached or deemed unacceptable. Property values would need to fall by approximately 30% to reach the loan to value covenant threshold under the existing debt facilities.
The Directors have also taken into account the strong financial position at 31 March 2017, significant cash and available facilities, low LTV and the Group's ability to raise new finance.
Based on the results of their review, 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 of their assessment.
Corporate risks
Risk, impact, appetite How it is managed Commentary 1 Strategy That the Company's strategy The Board review and The Company has transitioned is unclear or unrealistic update strategy and objectives its portfolio so that for the current stage regularly adapting to 62% is now in the distribution of the property cycle changes in economic conditions sector. This and convenience and the economic climate and opportunities as retail are strong performing Impact: they arise. sectors with real prospects Suboptimal returns for The Executive Directors for rental and capital shareholders. A potential are closely involved growth due to a supply/demand inability to take advantage in day to day management imbalance driven by
of opportunities and effectively and the Company operates structural changes in
manage threats. The Company from one office location consumer shopping habits.
may not be able to ensure with a relatively flat Completed developments
that the people, resources organisational structure of 1.1 million sq ft
and systems are in place making it easier to identify of space in the year
to ensure ongoing success. market changes. added rent of GBP7.9
Appetite: Management have an entrepreneurial million per annum.
The Board views this as approach and extensive Development in progress
fundamental to the business experience in real estate. of 0.7 million sq ft
and the Company's reputation. Research is commissioned is expected to add a
into consumer shopping further GBP4.9 million
patterns and occupational of rental income.
markets to assist strategic Like for like income
decision making. growth was 4.6% over
Financial forecasts are 69 lettings and rent
updated in light of strategic reviews.
changes and reported These strong operational
to the Board and Executive metrics supported EPRA
Committee regularly. earnings of 8.2p per
The Group has a rolling share an increase of
three year forecast. 5.1% on the prior year.
Management has a substantial Executive Directors
investment in the Company hold 10.0 million shares
with interests aligned between them and have
with external shareholders. unvested interests over
The Company's staffing a further 6.1 million
plan is focused on experience shares and comfortably
and expertise necessary meet the Company's increased
to deliver its strategy. shareholding guidelines.
No significant change from 2016
Risk, impact, appetite How it is managed Commentary
2 Economic and political outlook
A downturn or specific Research is commissioned The Company has a weighted
sector turbulence may into economic matters average unexpired lease
result from economic and and market volatility term of 12.8 years and
political factors is monitored. an EPRA vacancy rate
Impact: The Company only invests of 0.4%. This continues
Poorer than expected performance, in the UK and has little to be amongst the highest
asset values may fall, exposure to the London and lowest respectively
tenant demand and asset market. in the industry.
liquidity may reduce. A significant proportion Distribution assets
Debt markets may be impacted. of the Company's portfolio now represent 62% of
Appetite: is in a resilient asset the portfolio. Logistics
Market conditions are class with a supply/demand space is still heavily
outside of the Company's imbalance. under supplied.
control. The weighted average GBP52.7 million of expenditure
unexpired lease term in the year related
is high reducing re-letting to forward funded and
risk. pre-let opportunities.
The vacancy rate is low Successful equity placing
due to strict investment in March increased available
and development criteria. facilities for further
The tenant base is diversified. investment to GBP299.7
Acquisition due diligence million.
considers tenant covenant The Board is confident
strength. that economic and political
Developments and asset risk is mitigated through
management initiatives the makeup of the portfolio
are usually undertaken with its strong focus
on a pre-let basis or on distribution and
where a researched supply/demand convenience retail.
imbalance exists. The strong portfolio
The Company has medium metrics and financial
term, flexible funding returns provide protection
with significant headroom in the form of a sustainable
in covenant levels and long term income return
no reliance on sales. to investors.
This risk has increased since the last year end. Heightened
economic and political uncertainty exists from major events
such as the triggering of Article 50 and the upcoming UK election.
Risk, impact, appetite How it is managed Commentary
3 Human resources
An inability to attract, The Company maintains The Chairman's contract
motivate and retain high an organisational structure was extended to 31 March
calibre staff with clear responsibilities 2018.
Impact: and reporting lines. Further consideration
That the Company doesn't The remuneration structure will be given to the
have staff with the skills is aligned to long term position of Chairman
and experience to deliver performance targets for during the course of
its business plan. the business with long the current year.
Appetite: term share based incentive The Executive Directors
The Board views it as arrangements in place. have a significant shareholding
vitally important that Senior management shareholdings and unvested share awards
the Company has the appropriate in the Company are significant. in the Company to incentivise
level of leadership, expertise Annual appraisals identify performance and retention,
and experience to deliver training requirements providing stability
its objectives and adapt and assess performance. in the management structure
to change. Specialist agencies are of the business.
contracted where appropriate Senior managers are
if there are perceived incentivised in the
short term skills shortfalls. same way.
No significant change from 2016
Risk, impact, appetite How it is managed Commentary
4 Systems, processes and financial management
There are weak controls The Company has a strong An extension of the
for safeguarding assets control culture. property database was
and supporting strategy Systems security is in implemented in the year
Impact: place, supported by a to improve administrative
Inadequate asset security. specialist advisor. Business and reporting procedures.
Potentially suboptimal continuity plans are The risk posed by cyber
returns and decisions up to date with adequate attacks continues to
made on inaccurate information. back up which is tested. grow as attacker capabilities
Appetite: Procedures are in place become increasingly
Appetite for such risk to ensure accuracy of sophisticated and open
is low and management the property database to an ever widening
continually strives to and data capture. and global organised
monitor and improve processes. Assets are safeguarded crime network. The Board
with appropriate levels however considers that
of insurance. the delivery of the
Appropriate segregation Company's strategy is
of duties and controls not dependent on the
over financial systems operation of its technology.
are in place. Strategic risk therefore
Financial information is not materially increased
is provided to management as a result of a cyber
on a timely basis for attack. IT security
approval and decision is an integral part
making purposes. of the Company's risk
Costs are controlled management and control
with procedures to ensure processes and the Audit
that expenditure is valid, Committee has considered
properly authorised and the safeguards in place.
monitored. There is a rolling programme
in place for IT improvements
and updates to ensure
security, systems and
equipment remains fit
for purpose.
No significant change from 2016
Risk, impact, appetite How it is managed Commentary
5 Regulatory and tax framework
Non compliance with legal There is a clear focus The Company may be affected
or regulatory obligations on obligations under in the future by proposed
Impact: the Company's responsible tax changes to loss
Fines, penalties, sanctions business strategy and relief should there
and reputational damage regulatory influences be any future profits
which may impact investor on the business such which are not covered
demand in the Company. as Health and Safety, by its REIT exemption.
Potential loss of REIT environmental, employment, These however are unlikely
status. Increased costs. anti-corruption related to be material. Changes
Impact on re-letting potential legislation and the UK relating to taxation
of an asset. Corporate Governance of residential property,
Appetite: Code. particularly the rate
The Board has no appetite Responsibility for specific of SDLT has, in addition
where non compliance risks obligations is allocated to economic factors,
injury or damage to staff, to individuals and overseen led to a slowdown in
tenants, assets, shareholders by the Executive Committee. the London residential
and reputation. External specialists market to which the
provide advice and support. Company still has some
Staff training is provided. exposure through its
The Company receives 40% joint venture interest
external specialist tax in Moore House. The
advice. joint venture has continued
Compliance with REIT to sell down flats with
legislation is monitored 21 being sold in the
on an ongoing basis for year.
decision making purposes
and reported.
The impact of legislative
changes is considered
in strategic terms.
No significant change from 2016
Property risks
Risk, impact, appetite How it is managed Commentary
6 Investment risk
Investment opportunities Management's extensive The Company acquired
cannot be sourced at attractive experience and their GBP116.2 million of
prices strong network of connections property with a number
Impact: provide insight into of significant off market
Ability to implement strategy the property market and transactions.
and deploy capital into opportunities. The Company recycled
value and earnings accretive Management's relationship capital out of mature
investments at risk. with retailers and its and non core retail,
Appetite: ability to forward fund leisure and residential
This risk is largely affected assets is an important assets with disposals
by matters outside of factor in generating of GBP147.5 million
the Board's control, but deal flow given the difficulty in the year.
is minimised by having in finding value in income
the right people and funding generating assets due
in place to take advantage to yield compression
of opportunities as they in the market.
arise.
No significant change from 2016
Risk, impact, appetite How it is managed Commentary
7 Development risk
Excessive capital is allocated The Company only considers The 357,000 sq ft speculative
to activities with development short cycle and relatively development at Warrington
risk. Developments fail uncomplicated development, was let within five
to deliver expected returns although management have weeks of completion
due to inconsistent timing significant experience to Amazon.
with the economic cycle, of more complex development. Development only represents
adverse letting conditions, Exposure to development 1.8% of the portfolio
increased costs, planning and phasing of projects at the year end.
or construction delays is regularly considered. 10 developments representing
Impact: The overall level of 1.1 million sq ft of
Poorer than expected performance. exposure to development space were delivered
Appetite: is low as a percentage in the year on time
The Board is willing to of the total portfolio. and budget.
take some speculative Standardised appraisals Committed development
development and planning and cost budgets are at the year end of 0.7
risk if it represents prepared for developments million sq was over
a relatively small proportion with regular monitoring 50% pre-let.
of the total portfolio of expenditure against
and is supported by robust budget to highlight potential
research in respect of overruns at an early
demand and a high likelihood stage. External project
of planning approval. managers appointed.
Procurement processes
include tendering and
the use of highly regarded
firms with track records
of delivery to minimise
uncertainty over costs.
Developments are only
undertaken in areas of
high occupier demand.
Significant pre-lets
are secured where possible
before commencement to
de-risk projects.
Where possible development
sites are acquired with
planning approval in
place.
This risk has reduced
from 2016
Risk, impact, appetite How it is managed Commentary
8 Valuation risk
Assets may devalue As reported the Board's Valuations should continue
Impact: strategy has been to to be supported by a
Pressure on NAV growth transition the portfolio supply/demand imbalance
and potentially loan covenants. into resilient asset in the Company's preferred
Appetite: classes. The property sector.
This is an inherent risk cycle is continually The valuation decline
in the industry. There monitored with investment at the Interim stage
is no certainty that property and divestment decisions following the outcome
values will be realised. made strategically in of the EU Referendum
anticipation of changing had been recouped by
conditions. the year end with an
Property portfolio performance overall gain of GBP21.0
is regularly reviewed million.
and benchmarked on an Delivery of developments
asset by asset basis. on time and budget supported
Focus is on income security. valuation assumptions.
Lettings to high quality The top ten tenants
tenants within a diversified contribute 51.8% of
portfolio of well located contracted commercial
assets and a high weighted rental income.
average unexpired lease
term reduces the risk
of negative movements
in a downturn.
Increased risk due to greater economic uncertainty
Risk, impact, appetite How it is managed Commentary
9 Transaction and tenant risk
Property purchases are Acquisitions are thoroughly The Company has a very
inconsistent with strategy. evaluated through a detailed low level of tenant
Inadequate due diligence financial, legal and default and high occupancy
is undertaken. Lettings operational appraisal levels.
are made to inappropriate prior to Board approval. The EPRA vacancy rate
tenants Asset management initiatives at the year end was
Impact: undergo cost-benefit 0.4%.
Pressure exerted on NAV, analysis before implementation. There were no significant
earnings and potentially External advisors ensure trade debtors considered
loan covenants. appropriate pricing of at risk at the year
Appetite: lease transactions and end.
The Board's appetite for assist acquisition due The tenant base has
risk arising out of poor diligence. been further diversified
due diligence processes Tenant covenant strength during the year with
on acquisitions, disposals and concentration are the covenant strength
and lettings is low. assessed for all acquisitions of the top ten tenants
and leasing transactions. increasing.
An experienced property The Board considers
management team work that the occupational
closely with tenants market is strong in
and consider action for the distribution and
slow payers. convenience retail sectors.
Rent collection is closely
monitored and reported
to identify potential
issues.
The Group has a diverse
tenant base and limited
exposure to individual
occupiers in bespoke
properties.
No significant change
from 2016
Financing risks
Risk, impact, appetite How it is managed Commentary
10 Capital and finance risk
The Company has insufficient Assets which have achieved A private placement
funds and credit available target returns and strategic was entered into in
to it asset plans are considered September 2016 at a
Impact: for sale. blended rate of 2.7%
Implementation of strategy Cash flow forecasts are and a weighted average
is at risk. monitored closely to maturity of 8.3 years
Appetite: ensure sufficient funds diversifying the Company's
The Board has no appetite are available to take lending partners.
for imprudently low levels advantage of investment An oversubscribed placing
of available headroom opportunities and meet of GBP95.5 million completed
in its reserves or credit financial commitments. in March 2017 to predominantly
lines. Relationships with a fund distribution acquisitions
It accepts a low degree diversified range of and a distribution development
of lenders are nurtured pipeline.
market standard inflexibility and loan facilities regularly Headroom on the Company's
in return for the availability reviewed. The availability GBP443.8 million unsecured
of credit. of debt and the terms revolving credit facility
on which it is available has been increased as
is considered as part a result of the private
of the strategy and analysis placement, placing and
for each acquisition sales providing greater
and development. operational flexibility.
Loan facilities incorporate 76% of the facility
covenant headroom, appropriate has been extended for
cure provisions and sufficient a further year to April
flexibility to implement 2022.
asset management initiatives. Disposals of GBP201.9
Headroom is actively million and acquisitions
monitored and incorporated of GBP116.2 million
into forecasts. Non financial in the year demonstrate
covenants are also closely our ability to recycle
monitored. capital.
Gearing levels are carefully At 31 March 2017, the
considered and stress Group had hedging in
tested before entering place covering 87% of
into new arrangements. total available debt
A modest level of gearing facilities including
is maintained overall. joint venture arrangements.
The impact of disposals The Company has complied
on secured loan facilities with and has significant
covering multiple assets headroom in all financial
is considered as part covenants. The Company's
of the decision making diversified and predominantly
process. unsecured lending base,
Interest rate derivatives and its derivatives
are used to fix or cap insulate it from credit
exposure to rising rates. risks associated with
Hedging recommendations one off shocks from
are received from a specialist any single asset.
advisor.
The Company has joint
ventures with well capitalised
partners Joint venture
partners are chosen with
care to ensure that strategies
are not misaligned which
may impact asset value
and liquidity.
Risk reduced since 2016
Directors' responsibility 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 Financial Reporting Standards (IFRSs) as adopted by the European Union and Article 4 of the IAS Regulation and have elected to prepare the Parent 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 Parent 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 Financial Reporting Standard 101 (FRS101) 'Reduced Disclosure Framework' has been followed, subject to any material departures disclosed and explained in the financial statements
-- 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
-- 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
-- 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
31 May 2017
Andrew Jones
Chief Executive
31 May 2017
Group income statement
For the year ended 31 March
2017 2016
Note GBP000 GBP000
Gross rental income 73,905 67,948
Property operating expenses (814) (830)
----------------------------------------------- ---- -------- --------
Net rental income 3 73,091 67,118
Property advisory fee income 1,713 2,191
----------------------------------------------- ---- -------- --------
Net income 74,804 69,309
Administrative costs 4 (13,268) (13,636)
Amortisation of intangible asset (182) (315)
----------------------------------------------- ---- -------- --------
Total administrative costs (13,450) (13,951)
Profit on revaluation of investment properties 9 22,200 51,063
(Loss)/profit on sale of investment properties (4,503) 2,359
Share of profits of joint ventures 10 3,560 4,528
----------------------------------------------- ---- -------- --------
Operating profit 82,611 113,308
Finance income 1,740 2,182
Finance costs 5 (21,340) (32,748)
----------------------------------------------- ---- -------- --------
Profit before tax 63,011 82,742
Taxation 6 (13) (18)
----------------------------------------------- ---- -------- --------
Profit for the year and total comprehensive
income 62,998 82,724
----------------------------------------------- ---- -------- --------
Earnings per share
Basic and diluted 8 10.1p 13.3p
----------------------------------------------- ---- -------- --------
EPRA 8 8.2p 7.8p
----------------------------------------------- ---- -------- --------
All amounts relate to continuing activities.
Group balance sheet
As at 31 March
2017 2016
Note GBP000 GBP000
Non current assets
Investment properties 9 1,373,400 1,346,110
Investment in equity accounted joint
ventures 10 107,567 119,666
Intangible assets - 182
Other tangible assets 310 392
------------------------------------- ---- --------- ---------
1,481,277 1,466,350
Current assets
Trade and other receivables 11 18,758 16,049
Cash and cash equivalents 12 42,944 42,621
------------------------------------- ---- --------- ---------
61,702 58,670
------------------------------------- ---- --------- ---------
Total assets 1,542,979 1,525,020
------------------------------------- ---- --------- ---------
Current liabilities
Trade and other payables 13 46,395 35,343
------------------------------------- ---- --------- ---------
46,395 35,343
Non current liabilities
Borrowings 14 466,319 567,910
Derivative financial instruments 14 23,350 23,570
------------------------------------- ---- --------- ---------
489,669 591,480
------------------------------------- ---- --------- ---------
Total liabilities 536,064 626,823
------------------------------------- ---- --------- ---------
Net assets 1,006,915 898,197
------------------------------------- ---- --------- ---------
Equity
Called up share capital 16 69,238 62,804
Share premium 88,548 -
Capital redemption reserve 9,636 9,636
Other reserve 221,374 222,936
Retained earnings 618,119 602,821
------------------------------------- ---- --------- ---------
Equity shareholders' funds 1,006,915 898,197
------------------------------------- ---- --------- ---------
Net asset value per share 8 146.4p 143.9p
------------------------------------- ---- --------- ---------
EPRA net asset value per share 8 149.8p 147.7p
------------------------------------- ---- --------- ---------
The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2017 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
Share Share redemption Other Retained
capital premium reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2016 62,804 - 9,636 222,936 602,821 898,197
Profit for the year
and total comprehensive
income - - - - 62,998 62,998
Equity placing 6,280 86,492 - - - 92,772
Purchase of shares held
in trust - - - (5,195) - (5,195)
Vesting of shares held
in trust - - - 3,633 (3,629) 4
Share based awards - - - - 1,833 1,833
Dividends 7 154 2,056 - - (45,904) (43,694)
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 31 March 2017 69,238 88,548 9,636 221,374 618,119 1,006,915
------------------------- ---- -------- -------- ----------- -------- --------- ---------
Capital
Share Share redemption Other Retained
capital premium reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
At 1 April 2015 62,804 - 9,636 223,061 574,650 870,151
Profit for the year
and total comprehensive
income - - - - 82,724 82,724
Purchase of shares held
in trust - - - (419) - (419)
Vesting of shares held
in trust - - - 294 12 306
Share based awards - - - - 1,606 1,606
Dividends 7 - - - - (56,171) (56,171)
------------------------- ---- -------- -------- ----------- -------- --------- --------
At 31 March 2016 62,804 - 9,636 222,936 602,821 898,197
------------------------- ---- -------- -------- ----------- -------- --------- --------
Group cash flow statement
For the year ended 31 March
2017 2016
GBP000 GBP000
Cash flows from operating activities
Profit before tax 63,011 82,742
Adjustments for non cash items:
Profit on revaluation of investment properties (22,200) (51,063)
Loss/(profit) on sale of investment properties 4,503 (2,359)
Share of post tax profit of joint ventures (3,560) (4,528)
Movement in lease incentives 293 (5,173)
Share based payment 1,833 1,606
Amortisation of intangible asset 182 315
Net finance costs 19,600 30,566
----------------------------------------------------- --------- ---------
Cash flows from operations before changes in
working capital 63,662 52,106
Change in trade and other receivables 902 2,360
Change in trade and other payables 9,686 (165)
----------------------------------------------------- --------- ---------
Cash flows from operations 74,250 54,301
Interest received 64 50
Interest paid (17,149) (16,516)
Tax paid (34) (8)
Financial arrangement fees and break costs (6,340) (6,960)
----------------------------------------------------- --------- ---------
Cash flows from operating activities 50,791 30,867
----------------------------------------------------- --------- ---------
Investing activities
Purchase of investment properties (147,348) (179,000)
Purchase of other tangible assets - (60)
Capital expenditure on investment properties (19,387) (43,584)
Lease incentives paid (6,495) (26,006)
Sale of investment properties 165,035 123,353
Investments in joint ventures (450) (10)
Distributions from joint ventures 16,109 33,238
----------------------------------------------------- --------- ---------
Cash flow from investing activities 7,464 (92,069)
----------------------------------------------------- --------- ---------
Financing activities
Dividends paid (43,694) (56,171)
Proceeds from issue of ordinary shares 92,772 -
Purchase of shares held in trust (5,195) (419)
Vesting of shares held in trust 4 306
New borrowings 226,181 478,275
Repayment of loan facilities (328,000) (368,736)
----------------------------------------------------- --------- ---------
Cash flows from financing activities (57,932) 53,255
----------------------------------------------------- --------- ---------
Net increase/(decrease) in cash and cash equivalents 323 (7,947)
Opening cash and cash equivalents 42,621 50,568
----------------------------------------------------- --------- ---------
Closing cash and cash equivalents 42,944 42,621
----------------------------------------------------- --------- ---------
Notes forming part of the Group financial statements
For the year ended 31 March 2017
1 Significant accounting policies
The financial information set out herein does not constitute the Company's statutory accounts for the years ended 31 March 2017 or 2016, but is derived from those accounts. Statutory accounts for the years ended 31 March 2017 and 31 March 2016 have been reported on by the independent auditor. The independent auditor's reports on the Annual Reports and financial statements for 2017 and 2016 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 2016 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 March 2017 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 for use in the European Union (collectively Adopted IFRSs). The accounting policies adopted in this results announcement have been consistently applied to all the years presented and are consistent with the policies used in the preparation of the statutory accounts for the year ended 31 March 2016.
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 1 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 Financial Reporting Standards ('IFRS') as adopted by the European Union.
c) Basis of preparation
The financial statements are prepared on a going concern basis.
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 accounting policies have been applied consistently in all material respects.
i) Significant judgements and key estimates
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 as follows:
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 future lease income, lease incentives, current market rental yields, future development costs and the appropriate discount rate. 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.
Significant transactions
Some property transactions are complex and require management to assess whether the acquisition of property through a corporate vehicle represents an asset acquisition or a business combination under IFRS3.
Where there are significant other assets and liabilities acquired in addition to property, the transaction is accounted for as a business combination. Where there are not it is accounted for as an asset purchase.
Other complexities include conditionality inherent in transactions and deferred property completions.
Revenue recognition
Certain transactions require management to make judgements as to whether, and to what extent, revenue should be recognised and the appropriate cut off for property transactions. Management consider whether the significant risks and rewards of ownership of assets have been transferred between buyer and seller and the point at which developments reach practical completion.
Other complexities include accounting for rent free periods and capital incentive payments.
Presentation of information
The Group operates through a number of joint venture operations which are accounted for under the equity method as described in section d(ii) of this note. As management monitor the business on a proportionately consolidated basis, the information presented in the Strategic Report is consistent with this approach.
In addition, EPRA performance measures are presented as Key Performance Indicators and in the Strategic report in line with other public real estate companies to highlight the recurring performance of the Group. There is a reconciliation between IFRS reported profit and net assets and the equivalent EPRA measures in note 8 to these financial statements.
REIT status
The Group must comply with the UK REIT regulation to benefit from the favourable tax regime.
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
Amendments to: IFRS 5 Non Current Assets Held
for Sale and Discontinued Operations, IFRS 7
Financial Instruments - Disclosures, IAS 19
Annual Improvements Employee Benefits and IAS 34 Interim Financial
to IFRSs: 2012 - 2014 Reporting
Amendments to IFRS Accounting for Acquisitions of Interests in
11 Joint Operations
Amendments to IFRS Clarification of Acceptable Methods of Depreciation
16 and IAS 38 and Amortisation
Amendments to IAS
27 Equity Method in Separate Financial Statements
IAS 1 and IAS 7 Disclosure Initiative
Amendments to IFRS
10, IFRS 12 and IAS
28 Applying the Consolidation Exception
---------------------- ---------------------------------------------------
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 9 Financial Instruments
IFRS 15 Revenue from Contracts with Customers
IFRS 16 Leases
Classification and Measurement of Share Based
IFRS 2 (amendments) Payment Transactions
IAS 40 (amendments) Transfers of Investment Property
IAS 7 (amendments) Disclosure Initiative
Recognition of Deferred Tax Assets for Unrealised
IAS 12 (amendments) Losses
Annual Improvements
to IFRSs: 2014 - 2016
cycle Amendments to IFRS 12
---------------------- -------------------------------------------------
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods, except that IFRS 9 will impact both the measurement and disclosures of financial instruments, IFRS 15 may have an impact on the timing of revenue recognition and related disclosures, and IFRS 16 will impact the accounting for those leases currently classified as operating leases. Beyond the information above, it is not practicable to provide a reasonable estimate of the effect of IFRS 9, IFRS 15 and IFRS 16 until a detailed review has been completed.
d) 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 return from its involvement with the investee; and -- 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, in other cases the purchase method is used.
ii) Joint ventures and associates
Joint ventures are those entities over whose activities the Group has joint control. Associates are those entities over whose activities the Group is in a position to exercise significant influence but does not have the power to jointly control.
Joint ventures and associates 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 associates. The consolidated income statement incorporates the Group's share of joint venture and associate profits after tax.
The Group's joint ventures and associates adopt the accounting policies of the Group for inclusion in the Group financial statements.
e) 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
-- There are no material conditions precedent which could prevent completion
-- 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) 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 expect the sale to complete within one year from the balance sheet date.
iii) Tenant leases
Management has exercised judgement in considering the potential transfer of the risks and rewards of ownership in accordance with IAS 17 for all properties leased to tenants and has determined that such leases are operating leases.
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.
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 profit or loss.
v) Profit and loss on sale of investment properties
Profits and losses on sales of investment properties are calculated by reference to the carrying value at the previous year end valuation date, adjusted for subsequent capital expenditure.
f) 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. Unless otherwise indicated, the carrying amounts of the financial assets and liabilities are a reasonable approximation of the fair values.
i) Trade and other receivables and payables
Trade and other receivables and payables are initially measured at fair value and subsequently at amortised cost using the effective interest method. An impairment provision is created where there is objective evidence to suggest that the Group will not be able to collect receivables in full.
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.
iii) Borrowings
Borrowings are recognised initially at fair value less attributable transaction costs. Subsequently, borrowings are stated at amortised cost with any difference being recognised in the income statement over the term of the borrowing.
iv) 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.
g) 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.
h) 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.
i) 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.
j) 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 assets per share.
k) 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 2017 2016
100% Share 100% Share
owned of JV Total owned of JV Total
Property value GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------- --------- ------- --------- --------- ------- ---------
Distribution 921,165 6,172 927,337 778,340 6,068 784,408
Retail 290,020 114,800 404,820 360,505 114,323 474,828
Leisure 63,245 - 63,245 68,970 - 68,970
Offices 70,000 - 70,000 80,200 - 80,200
Residential 1,655 39,456 41,111 1,545 54,350 55,895
Development 27,315 - 27,315 56,550 - 56,550
--------------- --------- ------- --------- --------- ------- ---------
1,373,400 160,428 1,533,828 1,346,110 174,741 1,520,851
--------------- --------- ------- --------- --------- ------- ---------
For the year to
31 March 2017 2016
100% Share 100% Share
owned of JV Total owned of JV Total
Gross rental income GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
-------------------- ------- ------- ------- ------- ------- -------
Distribution 46,144 411 46,555 37,252 583 37,835
Retail 19,251 7,747 26,998 20,473 9,112 29,585
Leisure 4,421 - 4,421 5,593 - 5,593
Offices 3,941 - 3,941 4,471 - 4,471
Residential 68 953 1,021 79 1,389 1,468
Development 80 - 80 80 - 80
-------------------- ------- ------- ------- ------- ------- -------
73,905 9,111 83,016 67,948 11,084 79,032
-------------------- ------- ------- ------- ------- ------- -------
For the year to
31 March 2017 2016
100% Share 100% Share
owned of JV Total owned of JV Total
Net rental income GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ------- ------- ------- ------- -------
Distribution 46,200 412 46,612 37,115 573 37,688
Retail 18,677 7,683 26,360 19,835 9,053 28,888
Leisure 4,421 - 4,421 5,581 - 5,581
Offices 3,678 - 3,678 4,434 - 4,434
Residential 32 603 635 71 943 1,014
Development 83 - 83 82 - 82
------------------ ------- ------- ------- ------- ------- -------
73,091 8,698 81,789 67,118 10,569 77,687
------------------ ------- ------- ------- ------- ------- -------
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 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 are not monitored by segment. However, property assets are reviewed on an ongoing basis. The Group operates almost entirely in the UK and no geographical split is provided in information reported to the Board.
3 Net rental income
2017 2016
For the year to 31 March GBP000 GBP000
Gross rental income 73,905 67,948
Property operating expenses (814) (830)
---------------------------- ------- -------
73,091 67,118
---------------------------- ------- -------
For the year to 31 March 2017, 14% of the Group's gross rental income was receivable from one tenant. For the comparative period, 22% of the Group's gross rental income was receivable from two tenants.
4 Administration expenses
a) Total administration expenses
2017 2016
For the year to 31 March GBP000 GBP000
Staff costs 9,787 9,852
Auditor's remuneration 184 183
Depreciation 105 103
Other administrative expenses 3,192 3,498
------------------------------ ------- -------
13,268 13,636
------------------------------ ------- -------
b) Staff costs
2017 2016
For the year to 31 March GBP000 GBP000
Employee costs, including those of Directors,
comprise the following:
Wages and salaries 8,720 8,567
Less staff costs capitalised (1,762) (1,488)
---------------------------------------------- ------- -------
6,958 7,079
Social security costs 720 724
Pension costs 276 443
Share based payment 1,833 1,606
---------------------------------------------- ------- -------
9,787 9,852
---------------------------------------------- ------- -------
The long term share incentive plan ('LTIP') that was created following the merger 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 GBP1.8 million (2016: GBP1.6 million).
The Company awarded 2,196,467 LTIP shares during the year, 1,708,370 of which were awarded to Executive Directors. The cost of acquiring the shares expected to vest under the LTIP of GBP5.2 million has been charged to reserves.
Employee costs of GBP1.8 million (2016: GBP1.5 million) have been capitalised in respect of time spent on development projects.
c) Staff numbers
The average number of employees including Executive Directors during the year was:
2017 2016
Number Number
Head office and property management 33 35
------------------------------------ ------- -------
d) Auditor's remuneration
2017 2016
For the year to 31 March GBP000 GBP000
Audit services:
Audit of the Group and Company financial statements,
pursuant to legislation 74 74
Audit of subsidiary financial statements, pursuant
to legislation 79 79
Audit related assurance services 26 26
Other fees:
Other advisory services - -
----------------------------------------------------- ------- -------
Total fees for audit and other services 179 179
----------------------------------------------------- ------- -------
In addition to the above audit fees, GBP31,000 (2016: GBP31,000) was due to the Group's auditor in respect of its joint venture operations (excluding LMP Retail Warehouse JV Property Unit Trust).
5 Finance costs
2017 2016
For the year to 31 March GBP000 GBP000
Interest payable on bank loans and related derivatives 16,916 15,641
Debt and hedging early close out costs 3,516 77
Amortisation of loan issue costs 1,409 1,404
Commitment fees and other finance costs 1,643 1,595
------------------------------------------------------- ------- -------
Total borrowing costs 23,484 18,717
Less amounts capitalised on the development of
properties (1,924) (2,669)
------------------------------------------------------- ------- -------
Net borrowing costs 21,560 16,048
Fair value (profit)/loss on derivative financial
instruments (220) 16,700
------------------------------------------------------- ------- -------
Total finance costs 21,340 32,748
------------------------------------------------------- ------- -------
In April 2016 the Company bought down GBP66.3 million legacy out of the money interest rate swaps at a cost of GBP3.5 million.
6 Taxation
2017 2016
For the year to 31 March GBP000 GBP000
The tax charge comprises:
Current tax
UK tax charge on profit 13 18
-------------------------- ------- -------
The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:
2017 2016
For the year to 31 March GBP000 GBP000
Profit before tax 63,011 82,742
Tax at the standard rate of corporation tax in
the UK of 20% (2016: 20%) 12,602 16,548
Effects of:
Expenses not deductible for tax purposes 36 63
Tax effect of income not subject to tax (11,913) (15,687)
Share of post tax profit of joint ventures (712) (906)
----------------------------------------------- -------- --------
UK tax charge on profit 13 18
----------------------------------------------- -------- --------
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
2017 2016
For the year to 31 March GBP000 GBP000
Ordinary dividends paid
2015 Final dividend: 3.5p per share - 21,843
2015 Special dividend: 2.0p per share - 12,482
2016 Interim dividend: 3.5p per share - 21,846
2016 Second interim dividend: 3.75p per share 23,404 -
2017 First quarterly interim dividend: 1.8p per
share 11,257 -
2017 Second quarterly interim dividend: 1.8p
per share 11,243 -
------------------------------------------------ ------- -------
45,904 56,171
------------------------------------------------ ------- -------
Quarterly dividend payable in 2017/18
2017 Third quarterly interim dividend: 1.8p per
share 11,269
2017 Fourth quarterly interim dividend: 2.1p
per share 14,458
------------------------------------------------ ------- -------
The Company paid its third quarterly interim dividend in respect of the current financial year of 1.8p per share, wholly as a Property Income Distribution (PID), on 18 April 2017 to ordinary shareholders on the register at the close of business on 17 March 2017.
The fourth quarterly interim dividend for 2017 of 2.1p per share, of which 1.3p is payable as a PID, will be payable on 10 July 2017 to shareholders on the register at the close of business on 9 June 2017. 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 2018.
During the year the Company issued 1,534,136 ordinary shares in relation to the first two quarterly dividends which reduced the cash dividend payment by GBP2.2 million to GBP43.7 million.
8 Earnings and net assets per share
Adjusted earnings and net assets per share are calculated in accordance with the Best Practice Recommendations of The European Public Real Estate Association (EPRA). The EPRA earnings measure highlights the underlying recurring performance of the property rental business.
The 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 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.
a) EPRA earnings
EPRA earnings for the Group and its share of joint ventures are detailed as follows:
For the year to Group JV 2017 Group JV 2016 31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Gross rental income 73,905 9,111 83,016 67,948 11,084 79,032 Property costs (814) (413) (1,227) (830) (515) (1,345) --------------------- -------- ------- -------- -------- ------- -------- Net income 73,091 8,698 81,789 67,118 10,569 77,687 Management fees 1,713 (732) 981 2,191 (865) 1,326 Administrative costs (13,268) (85) (13,353) (13,636) (172) (13,808) Net finance costs(1) (16,304) (2,094) (18,398) (13,789) (2,947) (16,736) Other (13) - (13) (18) - (18) --------------------- -------- ------- -------- -------- ------- -------- EPRA earnings 45,219 5,787 51,006 41,866 6,585 48,451 --------------------- -------- ------- -------- -------- ------- --------
1 Group net finance costs reflect net borrowing costs of GBP21,560,000 (note 5) less early close out costs of GBP3,516,000 (note 5) and finance income of GBP1,740,000
The reconciliation of EPRA earnings to IFRS reported profit can be summarised as follows:
For the year to Group JV 2017 Group JV 2016 31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 EPRA earnings 45,219 5,787 51,006 41,866 6,585 48,451 Revaluation of investment property 22,200 (1,227) 20,973 51,063 (1,276) 49,787 Fair value of derivatives 220 108 328 (16,700) (132) (16,832) Debt and hedging early close out costs (3,516) (126) (3,642) (77) (411) (488) (Loss)/profit on disposal (4,503) (982) (5,485) 2,359 (238) 2,121 Amortisation of intangible assets (182) - (182) (315) - (315) --------------------- ------- ------- ------- -------- ------- -------- IFRS reported profit 59,438 3,560 62,998 78,196 4,528 82,724 --------------------- ------- ------- ------- -------- ------- --------
b) Earnings per ordinary share
2017 2016
For the year to 31 March GBP000 GBP000
Basic and diluted earnings 62,998 82,724
EPRA adjustments(1) (11,992) (34,273)
--------------------------- -------- --------
EPRA earnings 51,006 48,451
--------------------------- -------- --------
1 Adjustments shown in table reconciling EPRA earnings with IFRS reported profit
2017 Number 2016 Number
of shares of shares
For the year to 31 March '000 '000
Weighted average number of ordinary shares 625,457 624,159
------------------------------------------- ----------- -----------
1 Excludes shares held in the LondonMetric Property Plc Employee Benefit Trust
Basic and diluted earnings per share 10.1p 13.3p EPRA earnings per share 8.2p 7.8p ------------------------------------- ----- -----
c) Net assets per share
2017 2016
As at 31 March GBP000 GBP000
Equity shareholders' funds 1,006,915 898,197
Fair value of derivatives 23,350 23,570
Fair value of joint ventures' derivatives 229 338
------------------------------------------ --------- -------
EPRA net asset value 1,030,494 922,105
------------------------------------------ --------- -------
2017 Number 2016 Number
of shares of shares
As at 31 March '000 '000
Ordinary share capital 692,383 628,044
Number of shares held in employee trust (4,502) (3,945)
---------------------------------------- ----------- -----------
Number of ordinary shares 687,881 624,099
---------------------------------------- ----------- -----------
Basic net asset value per share 146.4p 143.9p
EPRA net asset value per share 149.8p 147.7p
---------------------------------------- ----------- -----------
Further EPRA performance measures are reflected in the Supplementary notes.
9 Investment properties
a) Investment properties
As at 31 March 2017 2016
Under development Total Under development Total
Completed GBP000 GBP000 GBP000 Completed GBP000 GBP000 GBP000
------------------- ---------------- ------------------ --------- ---------------- ------------------- ---------
Opening balance 1,289,560 56,550 1,346,110 1,033,045 131,095 1,164,140
Acquisitions 81,043 60,840 141,883 109,546 70,290 179,836
Other capital
expenditure 18,055 7,901 25,956 13,720 34,665 48,385
Disposals (174,965) (650) (175,615) (128,493) - (128,493)
Property transfers 103,976 (103,976) - 204,823 (204,823) -
Revaluation
movement 15,615 6,585 22,200 41,991 9,072 51,063
Movement in tenant
incentives and
rent--free uplifts 12,801 65 12,866 14,928 16,251 31,179
------------------- ---------------- ------------------ --------- ---------------- ------------------- ---------
1,346,085 27,315 1,373,400 1,289,560 56,550 1,346,110
------------------- ---------------- ------------------ --------- ---------------- ------------------- ---------
Investment properties are held at fair value as at 31 March 2017 based on external valuations performed by professionally qualified valuers CBRE Limited ('CBRE') and Savills Advisory Services Limited ('Savills'). The valuation of property held for sale at 31 March 2017 was GBP40.9 million (2016: GBP62.8 million).
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 and Savills 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 GBP102.0 million (2016: GBP93.9 million). All other properties are freehold. Included within the investment property valuation is GBP65.3 million (2016: GBP52.5 million) in respect of unamortised lease incentives and rent free periods.
The historical cost of all of the Group's investment properties at 31 March 2017 was GBP1,135.5 million (2016: GBP1,127.9 million). Capital commitments have been entered into amounting to GBP57.8 million (2016: GBP85.5 million) which have not been provided for in the financial statements.
Internal staff costs of the development team of GBP1.8 million (2016: GBP1.5 million) have been capitalised, being directly attributable to the development projects in progress.
Forward funded development costs of GBP52.7 million have been classified within investment property under development as acquisitions.
b) Valuation technique and quantitative information
Net initial Reversionary
ERV yield yield
------------- ------- --------------------
Weighted
Fair average Range
value (GBP (GBP Weighted Weighted
2017 Valuation per sq per sq average Range average Range
Asset type GBP000 technique ft) ft) % % % %
------------- ------- -------------------- -------- ---------- -------- --------- -------- ---------
Retail 290,020 Yield capitalisation 17.03 9.01-27.00 5.50 4.14-8.01 5.37 4.14-8.01
Leisure 63,245 Yield capitalisation 14.13 9.93-17.50 5.84 5.39-7.50 5.47 5.06-7.50
Distribution 921,165 Yield capitalisation 5.92 3.95-12.00 5.00 4.15-6.98 5.18 4.30-7.66
Office 70,000 Yield capitalisation 25.03 25.03 6.45 6.45 7.57 7.57
Residential 1,655 Comparison n/a n/a n/a n/a n/a n/a
Development 27,315 Residual 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 Management. There have been no transfers of properties between Levels 1, 2 and 3 during the year ended 31 March 2017. The fair value at 31 March 2017 represents the highest and best use.
i) Technique
The valuation techniques described below are consistent with IFRS 13 and use significant 'unobservable' inputs. 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
An increase or decrease in ERV will increase or decrease the fair value of the Group's investment properties.
An increase or decrease to the net initial yields and reversionary yields will decrease or increase the fair value of the Group's investment properties.
An increase or decrease in the estimated costs of development will decrease or increase the fair value of the Group's investment properties under development.
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 and Savills 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
CBRE and Savills meet the Auditors and the Audit Committee semi-annually.
10 Investment in joint ventures
At 31 March 2017, the following principal property interests, being jointly-controlled entities, have been equity accounted for in these financial statements:
Country of incorporation
or registration Property sector Group share
Metric Income Plus Partnership England and Wales Retail 50.0%
LMP Retail Warehouse JV PUT Guernsey Retail 30.5%
LSP London Residential Investments
Ltd Guernsey Residential 40.0%
----------------------------------- ------------------------- ---------------- -----------
The principal activity of all 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.
The Metric Income Plus Partnership ('MIPP'), in which the Company has a 50% interest, acquired two assets in the year for GBP18.4 million (Group share: GBP9.2 million) and disposed of three assets for gross proceeds of GBP15.9 million (Group share: GBP8.0 million).
The LMP Retail Warehouse joint venture disposed of one asset in Maidstone for GBP12.0 million (Group share: GBP3.7 million).
The Group also disposed of 21 residential flats for GBP27.0 million (Group share: GBP10.8 million) through its 40% interest in LSP London Residential Investments Limited in the year. The associated bank loan was repaid in full in the year.
At 31 March 2017, the freehold and leasehold investment properties were externally valued by Royal Institution of Chartered Surveyors ('RICS') Registered Valuers of CBRE Limited and Savills Advisory Services Limited.
The valuation of property held for sale by joint ventures at 31 March 2017 was GBP1.6 million (Group share: GBP0.7 million), (2016: GBP17.4 million and Group share GBP8.7 million).
The movement in the carrying value of joint venture interests in the year is summarised as follows:
2017 2016
As at 31 March GBP000 GBP000
Opening balance 119,666 148,366
Additions at cost 450 10
Share of profit in the year 3,560 4,528
Disposals (5,384) (14,110)
Profit distributions received (10,725) (19,128)
------------------------------ -------- --------
107,567 119,666
------------------------------ -------- --------
The Group's share of the profit after tax and net assets of its joint ventures is as follows:
Metric LMP LSP
Income Plus Retail Warehouse London Residential Group share
Partnership JV PUT Investments Total 2017 2017
GBP000 GBP000 GBP000 GBP000 GBP000
Summarised income statement
Gross rental income 10,290 9,881 2,381 22,552 9,111
Property costs (115) (20) (874) (1,009) (413)
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Net rental income 10,175 9,861 1,507 21,543 8,698
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Administration expenses (24) (93) (77) (194) (85)
Management fees (774) (384) (570) (1,728) (732)
Revaluation 5,123 (2,035) (7,921) (4,833) (1,227)
Finance income 39 2 3 44 22
Finance cost (2,766) (2,365) (343) (5,474) (2,242)
Movement in derivatives 251 (80) 19 190 108
(Loss)/profit on disposal (95) 977 (3,080) (2,198) (982)
Tax (1) - - (1) -
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Profit/(loss) after tax 11,928 5,883 (10,462) 7,349 3,560
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
EPRA adjustments:
Revaluation (5,123) 2,035 7,921 4,833 1,227
Movement in derivatives (251) 80 (19) (190) (108)
Loss/(profit) on disposal 95 (977) 3,080 2,198 982
Debt and hedging early
close out costs 204 - 60 264 126
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
EPRA earnings 6,853 7,021 580 14,454 5,787
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Group share of EPRA earnings 3,426 2,128 233 5,787
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Summarised balance sheet
Investment properties 174,370 110,775 98,641 383,786 160,428
Other current assets 268 - 289 557 240
Cash 4,029 779 2,371 7,179 3,200
Current liabilities (3,089) (1,021) (526) (4,636) (2,068)
Bank debt (75,900) (54,470) - (130,370) (54,563)
Unamortised finance costs 716 658 - 1,374 559
Derivative financial instruments (462) 6 - (456) (229)
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Net assets 99,932 56,727 100,775 257,434 107,567
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
Group share of net assets 49,967 17,290 40,310 107,567
--------------------------------- ------------ ----------------- ------------------- ---------- -----------
LMP LSP LSP LSP
Metric Retail London Green Green Group
Income Warehouse Residential Park Distribution Park Total share
Plus Partnership JV PUT Investments Holdings Trust 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Summarised income
statement 100% 100% 100% 100% 100% 100%
Gross rental income 12,359 10,964 3,472 343 - 27,138 11,084
Property costs (117) (2) (1,113) (21) - (1,253) (515)
----------------------- ----------------- ---------- ------------ ------------------ ------- --------- --------
Net rental income 12,242 10,962 2,359 322 - 25,885 10,569
----------------------- ----------------- ---------- ------------ ------------------ ------- --------- --------
Administration expenses (124) (117) (113) (26) (38) (418) (172)
Management fees (939) (425) (550) (93) - (2,007) (865)
Revaluation loss (1,534) (960) (540) - - (3,034) (1,276)
Finance income 45 4 3 - - 52 14 Finance cost (3,555) (2,935) (1,432) (277) - (8,199) (3,372) Movement in derivatives (338) (188) 105 105 - (316) (132) (Loss)/profit on disposal (514) 1,006 (1,108) (185) 771 (30) (238) Tax - - - (5) - (5) - ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- Profit/(loss) after tax 5,283 7,347 (1,276) (159) 733 11,928 4,528 ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- EPRA adjustments: Revaluation loss 1,534 960 540 - - 3,034 1,276 Movement in derivatives 338 188 (105) (105) - 316 132 Loss/(profit) on disposal 514 (1,006) 1,108 185 (771) 30 238 Debt and hedging early close out costs 364 326 153 138 - 981 411 ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- EPRA earnings 8,033 7,815 420 59 (38) 16,289 6,585 ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- Group share of EPRA earnings 4,014 2,387 168 21 (5) 6,585 ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- Summarised balance sheet Investment properties 165,335 123,685 135,875 - - 424,895 174,741 Other current assets 12,912 75 349 - - 13,336 6,620 Cash 3,198 3,285 3,596 20 - 10,099 4,049 Current liabilities (3,588) (3,971) (860) - - (8,419) (3,349) Bank debt (77,075) (60,328) (14,933) - - (152,336) (62,911) Unamortised finance costs 1,068 1,011 29 - - 2,108 854 Derivative financial instruments (713) 86 (19) - - (646) (338) ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- Net assets 101,137 63,843 124,037 20 - 289,037 119,666 ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- -------- Group share of net assets 50,569 19,472 49,615 10 - 119,666 ----------------------- ----------------- ---------- ------------ ------------------ ------- --------- --------
11 Trade and other receivables
2017 2016
As at 31 March GBP000 GBP000
Trade receivables 280 1,771
Amounts receivable from property sales 14,931 11,402
Prepayments and accrued income 3,455 2,744
Other receivables 92 132
--------------------------------------- ------- -------
18,758 16,049
--------------------------------------- ------- -------
All amounts fall due for payment in less than one year.
Trade receivables comprise rental income which is due on contractual quarter days with no credit period.
At 31 March 2017 there were no trade receivables which were overdue and considered at risk (2016: none).
12 Cash and cash equivalents
Cash and cash equivalents include GBP5.3 million (2016: GBP4.9 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
2017 2016
As at 31 March GBP000 GBP000
Trade payables 9,118 4,780
Amounts payable on property acquisitions and
disposals 1,832 9,595
Rent received in advance 13,724 12,160
Accrued interest 1,664 1,897
Other payables 3,102 525
Other accruals 16,955 6,386
--------------------------------------------- ------- -------
46,395 35,343
--------------------------------------------- ------- -------
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
14 Borrowings and financial instruments
a) Non current financial liabilities
2017 2016
As at 31 March GBP000 GBP000
Secured bank loans 196,170 179,989
Unsecured bank loans 277,000 395,000
Unamortised finance costs (6,851) (7,079)
-------------------------- ------- -------
466,319 567,910
-------------------------- ------- -------
On 21 September 2016 the Group entered into a GBP130 million private placement at a blended fixed coupon of 2.7% and a weighted average maturity of 8.3 years. The proceeds were used to repay debt drawn under the existing unsecured credit facility.
Certain bank loans at 31 March 2017 are secured by fixed charges over Group investment properties with a carrying value of GBP388.6 million.
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. The trade receivable amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the receivables concerned. The 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 placed on deposit with a diverse mix of institutions with suitable credit ratings and rates of return and for varying periods of time. 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 and committed investments. The Group's funding sources are diversified across a range of banks and institutions. Weekly cash flow forecasts are prepared for the Executive Committee to ensure sufficient resources of cash and undrawn borrowing facilities are in place to meet liabilities as they fall due.
The Group had cash reserves of GBP42.9 million (2016: GBP42.6 million) and available and undrawn bank loan facilities at 31 March 2017 of GBP296.8 million (2016: GBP64.9 million).
The following table shows the contractual maturity profile of the Group's financial liabilities on an undiscounted cash flow basis and assuming settlement on the earliest repayment date.
Less than One to Two to More than
one year two years five years five years Total
As at 31 March 2017 GBP000 GBP000 GBP000 GBP000 GBP000
Bank loans 12,245 12,245 265,620 251,672 541,782
Derivative financial instruments 5,712 6,500 21,529 16 33,757
--------------------------------- --------- ---------- ----------- ----------- -------
17,957 18,745 287,149 251,688 575,539
--------------------------------- --------- ---------- ----------- ----------- -------
Less than One to Two to More than
one year two years five years five years Total
As at 31 March 2016 GBP000 GBP000 GBP000 GBP000 GBP000
Bank loans 14,358 14,358 43,112 578,087 649,915
Derivative financial instruments 5,750 6,279 18,389 5,767 36,185
--------------------------------- --------- ---------- ----------- ----------- -------
20,108 20,637 61,501 583,854 686,100
--------------------------------- --------- ---------- ----------- ----------- -------
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 and caps 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.
At 31 March 2017, 87% of the Group's exposure (including share of joint ventures) to interest rate fluctuations was hedged by way of current and forward starting swaps and caps assuming existing debt facilities are fully drawn (2016: 84%).
The average interest rate payable by the Group (including share of joint ventures) on all bank borrowings at 31 March 2017, including the cost of amortising finance arrangement fees, was 3.5% (2016: 3.5%). A 1% change in interest rates would decrease or increase the Group's annual profit before tax by less than GBP0.1 million.
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.
c) Financial instruments
i) Categories of financial instruments
Loans and receivables
----------------------------------------------------------
2017 2016
As at 31 March GBP000 GBP000
---------------------------------------------------------- ----------- -----------
Current assets
Cash and cash equivalents (note 12) 42,944 42,621
Trade receivables (note 11) 280 1,771
Other receivables (note 11) 92 132
---------------------------------------------------------- ----------- -----------
43,316 44,524
---------------------------------------------------------- ----------- -----------
Measured at amortised
cost Measured at fair value
---------------------------------
2017 2016 2017 2016
As at 31 March GBP000 GBP000 GBP000 GBP000
--------------------------------- ----------- ---------- ----------- -----------
Non current liabilities
Borrowings (note 14) 466,319 567,910 - -
Current liabilities
Trade payables (note 13) 9,118 4,780 - -
Accrued interest (note 13) 1,664 1,897 - -
Other accruals (note 13) 16,955 6,386 - -
Other payables (note 13) 3,102 525 - -
Derivative financial instruments
(see 14c(iii)) - - 23,350 23,570
--------------------------------- ----------- ---------- ----------- -----------
497,158 581,498 23,350 23,570
--------------------------------- ----------- ---------- ----------- -----------
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 2017.
iii) Derivative financial instruments
Details of the fair value of the Group's derivative financial instruments that were in place at 31 March 2017 are provided below:
As at 31 March Average rate Notional amount Fair value
------------------
2017 2016 2017 2016 2017 2016
Interest rate
caps - expiry % % GBP000 GBP000 GBP000 GBP000
------------------ ------ ------ -------- -------- -------- --------
Less than one
year 2.0 2.4 16,313 77,500 - -
One to two years 2.0 2.0 100,000 16,313 1 4
Two to five years 2.3 2.1 29,620 110,000 121 128
More than five
years - 2.0 - 19,620 - 234
------------------ ------ ------ -------- -------- -------- --------
2.1 2.2 145,933 223,433 122 366
------------------ ------ ------ -------- -------- -------- --------
As at 31 March Average rate Notional amount Fair value
------------------
2017 2016 2017 2016 2017 2016
Interest rate
swaps - expiry % % GBP000 GBP000 GBP000 GBP000
------------------ ------ ------ -------- -------- -------- --------
Less than one
year - 3.3 - 10,500 - (12)
One to two years 0.6 3.2 50,000 16,313 (134) (624)
Two to five years 2.0 2.9 166,960 60,000 (6,187) (3,185)
More than five
years 2.1 2.0 425,000 581,960 (17,151) (20,115)
------------------ ------ ------ -------- -------- -------- --------
1.9 2.2 641,960 668,773 (23,472) (23,936)
------------------ ------ ------ -------- -------- -------- --------
Total fair value (23,350) (23,570)
------------------ ------ ------ -------- -------- -------- --------
All derivative financial instruments are non current interest rate derivatives, and are carried at fair value following a valuation as at 31 March 2017 by J C Rathbone Associates Limited.
The market values of hedging products change with interest rate fluctuations, but the exposure of the Group to movements in interest rates is protected by way of the hedging products listed above. 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 Commitments under operating leases
The Group's minimum lease rentals receivable under non cancellable operating leases, excluding joint ventures, are as follows:
2017 2016
As at 31 March GBP000 GBP000
Less than one year 78,420 73,090
Between one and five years 304,595 288,518
Between six and ten years 292,985 287,566
Between 11 and 15 years 192,168 186,977
Between 16 and 20 years 92,599 82,761
Over 20 years 59,872 43,387
--------------------------- --------- -------
1,020,639 962,299
--------------------------- --------- -------
The Group's minimum lease payments under non cancellable operating leases, excluding joint ventures, are as follows:
2017 2016
As at 31 March GBP000 GBP000
Less than one year 810 810
Between one and five years 337 1,147
--------------------------- ------- -------
1,147 1,957
--------------------------- ------- -------
16 Share capital
2017 2017 2016 2016
As at 31 March Number GBP000 Number GBP000
Issued, called up and
fully paid
----------------------- ----------- ------- ----------- -------
Ordinary shares of 10p
each 692,382,431 69,238 628,043,905 62,804
----------------------- ----------- ------- ----------- -------
On 27 March 2017 the Company issued 62,804,390 ordinary shares through a placing undertaken by Peel Hunt and J P Morgan Cazenove at 152p per share which raised gross proceeds of GBP95.5 million. After costs of GBP2.7 million, net proceeds received were GBP92.8 million. In addition, the Company issued 1,534,136 shares under the terms of its Scrip Dividend Scheme in the year.
In June 2016, the Company granted options over 2,711,575 ordinary shares under its Long Term Incentive Plan and Deferred Bonus Plan. In the year to 31 March 2017, 414,727 ordinary shares in the Company's Deferred Bonus Plan and 2,503,419 ordinary shares in the Company's Long Term Incentive Plan that were granted in 2013 vested.
17 Reserves
The following describes the nature and purpose of each reserve within equity:
Share capital The nominal value of shares issued.
The premium paid for new ordinary shares issued
Share premium above the nominal value.
Capital redemption Amounts transferred from share capital on redemption
reserve of issued ordinary shares.
A reserve relating to the application of merger
relief in the acquisition of LondonMetric Management
Limited and Metric Property Investments plc by
the Company, the cost of the Company's shares
held in treasury and the cost of shares held
in trust to provide for the Company's future
Other reserve obligations under share award schemes.
The cumulative profits and losses after the payment
Retained earnings of dividends.
------------------ -----------------------------------------------------
18 Related party transactions
Management fees and profit distributions receivable from the Group's joint venture arrangements in which it has an equity interest were as follows:
Management fees Profit distributions
--------------------------------------------
2017 2016 2017 2016
For the year to 31 March Group interest GBP000 GBP000 GBP000 GBP000
-------------------------------------------- -------------- -------- ------- ---------- ----------
LSP Green Park Property Trust 31.4% - - 10 231
LSP Green Park Distribution Holdings 50.0% - 92 - 11,210
LSP London Residential Investments 40.0% 475 458 5,120 -
Metric Income Plus Partnership 50.0% 854 1,216 3,434 4,161
LMP Retail Warehouse JV Property Unit Trust 30.5% 384 425 2,161 3,526
-------------------------------------------- -------------- -------- ------- ---------- ----------
1,713 2,191 10,725 19,128
-------------------------------------------- -------------- -------- ------- ---------- ----------
Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation.
19 Events after the balance sheet date
On 11 April 2017 the Group exchanged to sell the Morrisons store at Loughborough for GBP32.5 million.
On 18 April 2017 the Group acquired a distribution warehouse in Crawley let to TNT for GBP6.4 million.
On 11 May 2017 the Group exchanged to sell Vue Cinema, Conway Park in Birkenhead for GBP5.8 million.
On 26 May 2017 the Group acquired a distribution warehouse in Coventry let to DHL for GBP5.7 million.
On 26 May 2017 the Group completed the disposal of Barracks Road Retail Park in Newcastle-under-Lyme for GBP2.8 million.
On 30 May 2017 the Group acquired an urban logistics warehouse in Huyton let to Antolin Interiors for GBP11.8 million.
Supplementary information (not audited)
i EPRA summary table
2017 2016
EPRA earnings per share 8.2p 7.8p
EPRA net asset value per share 149.8p 147.7p
EPRA triple net asset value per share 146.4p 143.9p
EPRA vacancy rate 0.4% 0.7%
EPRA cost ratio (including vacant property costs) 16% 17%
EPRA cost ratio (excluding vacant property costs) 15% 17%
EPRA net initial yield 4.5 4.9%
EPRA 'topped up' net initial yield 5.4 5.4%
-------------------------------------------------- ------ ------
ii EPRA proportionally consolidated income statement
For the year to Group JV 2017 Group JV 2016 31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 Gross rental income 73,905 9,111 83,016 67,948 11,084 79,032 Property costs (814) (413) (1,227) (830) (515) (1,345) -------------------- -------- ------- -------- -------- ------- -------- Net income 73,091 8,698 81,789 67,118 10,569 77,687 Management fees 1,713 (732) 981 2,191 (865) 1,326 Administrative costs (13,268) (85) (13,353) (13,636) (172) (13,808) Net finance costs (16,304) (2,094) (18,398) (13,789) (2,947) (16,736) Other (13) - (13) (18) - (18) -------------------- -------- ------- -------- -------- ------- -------- EPRA earnings 45,219 5,787 51,006 41,866 6,585 48,451 -------------------- -------- ------- -------- -------- ------- --------
iii EPRA proportionally consolidated balance sheet
Group JV 2017 Group JV 2016
As at 31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Investment property 1,373,400 160,428 1,533,828 1,346,110 174,741 1,520,851
Gross debt (473,170) (54,563) (527,733) (574,989) (62,911) (637,900)
Cash 42,944 3,200 46,144 42,621 4,049 46,670
Other net (liabilities)/assets (20,476) (1,269) (21,745) (11,641) 4,125 (7,516)
------------------------------- --------- -------- --------- --------- -------- ---------
EPRA net assets 922,698 107,796 1,030,494 802,101 120,004 922,105
------------------------------- --------- -------- --------- --------- -------- ---------
Loan to value 30% 32% 30% 38% 34% 38%
Cost of debt 3.6% 3.4% 3.5% 3.5% 3.6% 3.5%
Undrawn facilities 296,750 2,938 299,688 64,931 5,000 69,931
------------------------------- --------- -------- --------- --------- -------- ---------
iv EPRA cost ratio
2017 2016
For the year to 31 March GBP000 GBP000
Property operating expenses 814 830
Administration expenses 13,268 13,636
Share of joint venture property operating, administration
expenses and management fees 1,230 1,552
Less:
Joint venture property management fee income (1,713) (2,191)
Ground rents (121) (59)
---------------------------------------------------------- ------- -------
Total costs including vacant property costs (A) 13,478 13,768
Group vacant property costs (548) (369)
Share of joint venture vacant property costs (236) (292)
---------------------------------------------------------- ------- -------
Total costs excluding vacant property costs (B) 12,694 13,107
Gross rental income 73,905 67,948
Share of joint venture gross rental income 9,111 11,084
---------------------------------------------------------- ------- -------
83,016 79,032
Less:
Ground rents (121) (59)
---------------------------------------------------------- ------- -------
Total gross rental income (C) 82,895 78,973
---------------------------------------------------------- ------- -------
Total EPRA cost ratio (including vacant property
costs) (A)/(C) 16% 17%
---------------------------------------------------------- ------- -------
Total EPRA cost ratio (excluding vacant property
costs) (B)/(C) 15% 17% ---------------------------------------------------------- ------- -------
v EPRA net initial yield and 'topped up' net initial yield
2017 2016
As at 31 March GBP000 GBP000
Investment property - wholly owned 1,373,400 1,346,110
Investment property - share of joint ventures 160,428 174,741
Less development properties (27,315) (56,550)
Less residential properties (41,111) (55,895)
Completed property portfolio 1,465,402 1,408,406
Allowance for:
Estimated purchasers' costs 99,647 95,772
Estimated costs to complete 39,309 43,967
--------------------------------------------------- --------- ---------
EPRA property portfolio valuation (A) 1,604,358 1,548,145
--------------------------------------------------- --------- ---------
Annualised passing rental income 65,169 71,945
Share of joint ventures 8,814 8,064
Less development properties (1,243) (3,972)
Less residential properties (526) (856)
--------------------------------------------------- --------- ---------
Annualised net rents (B) 72,214 75,181
Contractual rental increases for rent free periods 10,558 5,334
Contractual rental increases for fixed uplifts 3,151 3,641
--------------------------------------------------- --------- ---------
'Topped up' net annualised rent (C) 85,923 84,156
--------------------------------------------------- --------- ---------
EPRA net initial yield (B/A) 4.5% 4.9%
--------------------------------------------------- --------- ---------
EPRA 'topped up' net initial yield (C/A) 5.4% 5.4%
--------------------------------------------------- --------- ---------
vi EPRA Vacancy rate
2017 2016
As at 31 March GBP000 GBP000
Annualised estimated rental value of vacant premises 384 604
Portfolio estimated rental value(1) 86,228 82,720
----------------------------------------------------- ------- -------
EPRA vacancy rate 0.4% 0.7%
----------------------------------------------------- ------- -------
1 Excludes residential and development properties
vii EPRA capital expenditure analysis
Group JV Total Group JV Total
2017 2017 2017 2016 2016 2016
As at 31 March GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Opening valuation 1,346,110 174,741 1,520,851 1,164,140 236,245 1,400,385
Acquisitions 81,043 9,146 90,189 109,546 3,477 113,023
Developments(1) 68,741 - 68,741 104,955 - 104,955
Capital expenditure(2) 18,055 561 18,616 13,720 761 14,481
Disposals (175,615) (22,631) (198,246) (128,493) (64,749) (193,242)
Revaluation 22,200 (1,227) 20,973 51,063 (1,276) 49,787
Lease incentives 12,866 (162) 12,704 31,179 283 31,462
----------------------- --------- -------- --------- --------- -------- ---------
Closing valuation 1,373,400 160,428 1,533,828 1,346,110 174,741 1,520,851
----------------------- --------- -------- --------- --------- -------- ---------
1 Includes capitalised interest of GBP1.9 million (2016: GBP2.7 million) and capitalised staff costs of GBP1.8 million (2016: GBP1.5 million)
2 Capital expenditure on completed properties
viii Total accounting return
2017 2016
For the year to 31 March GBP000 GBP000
EPRA net asset value
- at end of year 1,030,494 922,105
- at start of year 922,105 877,226
------------------------- --------- -------
Increase 108,389 44,879
Dividend paid 43,694 56,171
Equity placing (92,772) -
------------------------- --------- -------
Net increase 59,311 101,050
------------------------- --------- -------
Total accounting return 6.4% 11.5%
------------------------- --------- -------
ix Portfolio split and valuation
2017 2017 2016 2016
As at 31 March GBPm % GBPm %
Distribution 927.4 60.4 784.4 51.6
Retail 404.8 26.4 474.8 31.2
Leisure 63.2 4.1 69.0 4.5
Office 70.0 4.6 80.2 5.3
---------------------------------- ------- ----- ------- -----
Investment portfolio 1,465.4 95.5 1,408.4 92.6
---------------------------------- ------- ----- ------- -----
Development - distribution 22.8 1.5 40.0 2.6
Development - retail 4.5 0.3 16.6 1.1
Residential 41.1 2.7 55.9 3.7
---------------------------------- ------- ----- ------- -----
1,533.8 100.0 1,520.9 100.0
---------------------------------- ------- ----- ------- -----
Retail (Group and JV split)
Wholly owned - retail parks 197.0 12.8 293.9 19.3
Wholly owned - convenience retail 93.0 6.1 66.6 4.4
Metric Income Plus Partnership 87.2 5.7 82.7 5.4
LMP Retail Warehouse JV Property
Unit Trust 27.6 1.8 31.6 2.1
---------------------------------- ------- ----- ------- -----
404.8 26.4 474.8 31.2
---------------------------------- ------- ----- ------- -----
x Investment Portfolio yields
As at 31 March 2017 2016
EPRA EPRA
topped up Equivalent topped up Equivalent
EPRA NIY NIY yield EPRA NIY NIY yield
% % % % % %
--------------------- -------- ---------- ---------- -------- ---------- ----------
Distribution 4.9 5.0 5.5 4.7 5.2 5.4
Retail 5.8 5.8 5.8 4.8 5.8 5.8
Leisure 4.1 5.8 6.9 6.0 6.0 7.0
Office 5.8 6.5 7.4 5.3 5.6 6.6
--------------------- -------- ---------- ---------- -------- ---------- ----------
Investment portfolio 4.5 5.4 5.8 4.9 5.4 5.7
--------------------- -------- ---------- ---------- -------- ---------- ----------
xi Investment Portfolio - Key statistics
WAULT
Area WAULT to first Average rent
'000 sq to expiry break Occupancy GBP per sq
As at 31 March 2017 ft years years % ft
Distribution 9,009 12.9 12.3 100.0 5.73
Retail 2,080 12.5 11.5 99.2 17.33
Leisure 261 20.2 20.2 100.00 15.07
Office 231 7.2 7.0 96.7 21.96
--------------------------------- -------- ---------- --------- --------- ------------
Investment portfolio 11,581 12.8 12.1 99.6 7.87
--------------------------------- -------- ---------- --------- --------- ------------
Distribution development(1) 391
Retail development 31
--------------------------------- --------
Total investment and development
portfolio 12,003
--------------------------------- --------
1 Excludes conditional development site at Bedford
xii Total property returns (%)
All property All property
2017 2016
For the year to 31 March % %
Capital return 1.7 4.9
Income return 5.6 5.3
------------------------------ ------------ ------------
Total return 7.4 10.5
------------------------------ ------------ ------------
xiii Contracted rental income
2017 2016
As at 31 March GBPm GBPm
Distribution 50.9 42.3
Retail 25.8 31.3
Leisure 3.9 4.4
Office 4.9 4.9
--------------------------- ----- -----
Investment portfolio 85.5 82.9
--------------------------- ----- -----
Development - distribution 0.8 2.5
Development - retail 0.5 0.8
Residential 0.5 0.9
--------------------------- ----- -----
Total portfolio 87.3 87.1
--------------------------- ----- -----
xiv Rent subject to expiry
Within 5 Within 10 Within 15 Within 20 Over 20
years years years years years
As at 31 March 2017 % % % % %
Distribution 7.6 41.0 63.7 81.7 100.0
Retail 7.2 32.2 74.8 92.6 100.0
Leisure - - 11.4 11.4 100.0
Office 28.2 100.0 100.0 100.0 100.0
-------------------- -------- --------- --------- --------- -------
8.5 39.8 66.7 82.8 100.0
-------------------- -------- --------- --------- --------- -------
xv Contracted rent subject to RPI or fixed uplifts for investment portfolio (%)
2017 2017 2016 2016
As at 31 March GBPm % GBPm %
Distribution 29.9 57.8 26.0 57.9
Retail 8.6 32.8 8.9 27.7
Leisure 3.9 100.0 4.4 100.0
Office 3.0 60.9 3.0 60.9
------------------------ ------ ----- ------ -----
Commercial portfolio(1) 45.4 52.4 42.3 49.0
------------------------ ------ ----- ------ -----
1 Excluding residential assets
xvi Top ten assets (by value)
WAULT
Area Contracted WAULT to first
'000 sq rent Occupancy to expiry break
As at 31 March 2017 ft GBPm % years years
Primark Distribution Centre,
Islip 1,062 5.4 100.0 23.5 23.5
Primark Distribution Centre,
Thrapston 783 4,1 100.0 15.5 15.5
Dixons Carphone, Newark
Distribution Centre 726 4.4 100.0 16.3 16.3
Argos, Bedford 658 3.8 100.0 5.7 5.7
Eddie Stobart, Dagenham 456 4.1 100.0 26.5 26.5
Marlow International,
Marlow 231 4.9 96.7 7.2 7.0
Royal Mail, Daventry 273 2.5 100.0 6.4 6.4
Poundworld, Wakefield 527 2.6 100.0 14.5 14.5
M&S, Sheffield 626 2.6 100.0 6.7 4.3
Kirkstall Bridge Shopping
Park, Leeds 120 2.4 95.3 11.4 9.0
----------------------------- -------- ---------- --------- ---------- ---------
xvii Top ten occupiers
Contracted Contracted
rental income Market capitalisation rental income
As at 31 March 2017 GBPm GBPbn %
Primark(1) 9.5 22.2 11.0
Dixons Carphone 6.2 4,5 7.2
M&S 5.5 5.8 6.3
Argos(1) 4.1 5.6 4.7
Eddie Stobart 4.1 0.6 4.7
Odeon 3.5 3.1 4.0
Royal Mail 3.3 4.1 3.8
Allergan 3.0 58.2 3.5
DFS 3.0 0.6 3.4
DHL(1) 2.8 34.5 3.2
------------------------- -------------- --------------------- --------------
Top ten 45.0 51.8
Other commercial income 41.8 48.2
------------------------- -------------- --------------------- --------------
Total commercial 86.8 100.00
------------------------- -------------- --------------------- --------------
Residential income 0.5
------------------------- -------------- --------------------- --------------
Total Group income 87.3
------------------------- -------------- --------------------- --------------
1 Market capitalisation of Parent Company
Glossary
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
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 drawn debt
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 total operating costs (including and excluding costs of direct vacancy) as a percentage of gross rental income
EPRA Earnings per Share (EPS)
Recurring earnings from core operational activities divided by the average number of shares in issue over the year
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 NNNAV per Share
EPRA NAV per share adjusted to include the fair value of financial instruments, debt and deferred taxes at the balance sheet date
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 divided by total annualised rent 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)
The European Public Real Estate Association (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 taking into account the net effects of straight lining for lease incentives, including 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
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)
Investment Property Databank (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
Logistics
The organisation and implementation of operations to manage the flow of physical items from origin to the point of consumption
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 annualised rent of the Investment Portfolio
Omni-Channel Retailing
The evolution of multi channel retailing providing a seamless shopping experience for the consumer through all available shopping channels, ie physical, internet, mobile, social media, telephone, catalogue etc
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 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 NAV plus the dividend paid during the period expressed as a percentage of the EPRA NAV 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FBLLXDEFLBBK
(END) Dow Jones Newswires
May 31, 2017 02:00 ET (06:00 GMT)
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