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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -4.10 | -2.07% | 193.70 | 193.80 | 194.10 | 197.70 | 193.40 | 197.70 | 6,656,469 | 16:35:07 |
| 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 : 6912I
LondonMetric Property PLC
28 November 2018
LONDONMETRIC PROPERTY PLC
("LondonMetric" or the "Group" or the "Company")
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2018
Structurally supported sectors and assets driving strong income backed returns
LondonMetric today announces its half yearly results for the six months ended 30 September 2018.
Hot Features
Premium
Six months to Six months to
Income Statement 30 Sept 2018 30 Sept 2017
---------------------------- ------------- -------------
Net rental income (GBPm)(1) 47.1 44.5
EPRA Earnings (GBPm) 30.9 28.8
EPRA EPS (p) 4.4 4.2
IFRS EPS (p) 11.4 11.5
Reported Profit (GBPm) 79.3 79.6
Dividend per share (p) 3.8 3.7
Balance Sheet 30 Sept 2018 31 March 2018
---------------------------- ------------- -------------
IFRS net assets (GBPm) 1,198.6 1,149.5
IFRS NAV per share (p) 172.5 165.7
EPRA NAV per share (p) 172.1 165.2
LTV (%)(1,2) 37 35
1 Including share of Joint Ventures. Further details on Alternative Performance Measures and the presentation of financial information can be found in the Financial Review and definitions can be found in the Glossary.
2 Including deferred consideration payable and receivable on transactions that have exchanged in the period.
Continued income growth increases earnings and dividends
-- Net rental income up 5.8% to GBP47.1m(1)
-- Reported profit was GBP79.3m and EPRA earnings up 7.3% to GBP30.9m, 6.6% on a per share basis
-- Dividend increased 2.7% to 3.8p, 117% covered, including a second quarterly interim dividend declared of 1.9p
Sector alignment and asset selection delivers further valuation gains, contributing to total returns
-- EPRA NAV per share up 4.1% to 172.1p (March 2018: 165.2p)
-- Driven by a revaluation surplus of GBP51.0m1, reflecting a 2.7% uplift, with urban logistics increasing by 4.5%
-- Equivalent yield compression on portfolio of 9bps and ERV growth of 0.9%
-- Total Accounting Return of 6.7% and Total Property Return of 5.4%, outperforming IPD All Property by 210bps
Investment activity increases distribution weighting to 72% and further improves portfolio quality
-- GBP139.0m of acquisitions increase urban logistics portfolio to 54 assets, representing 25% of total portfolio
o 14 years' WAULT on acquisitions, with nearly 60% of income subject to contractual uplifts
-- GBP92.5m of disposals including shorter let distribution, convenience, retail parks and residential
o 10 years' WAULT on disposals, with retail assets sold at book, reflecting their strong income characteristics
-- GBP39.4m of disposals post period end reduce retail parks to 5% and residential to 1% of the portfolio
o includes GBP17.4m of distribution disposals at book value with a WAULT of under 2 years
31 asset management initiatives
-- GBP1.2m pa income uplift from lettings, signed with a WAULT of 12 years
-- GBP1.1m pa income uplift from rent reviews, 12% uplift above passing on a five yearly equivalent basis
-- Offsets loss of income from Poundworld vacancy, where we are in active discussions on re-letting
Short cycle developments creating future long income at attractive yields
-- Recently completed distribution developments are 68% let -- 0.9m sq ft in construction or pipeline at 6.5% yield on cost
-- At Bedford, construction of three warehouses totalling 180,000 sq ft will complete in Q2 2019 with terms agreed on over half the space. Discussions ongoing on the remaining 500,000 sq ft and construction is subject to pre-lets
Portfolio metrics reflect our focus on long income, contractual uplifts and low operational requirements
-- WAULT of 12 years with only 6% of income expiring within three years -- 54% of income subject to contractual uplifts -- 98.3% gross to net income ratio
Conservative financing continues to enhance income
-- Average cost of debt at 2.9% and debt maturity of 4.5 years following new GBP75m facility with Wells Fargo
Andrew Jones, Chief Executive of LondonMetric, commented:
"Our alignment towards logistics and convenience assets together with the portfolio's sustainable and growing income has delivered another strong performance.
"As the real estate markets polarise further, we continue to refine the portfolio to ensure that it remains fit for purpose and outperforms. Our exposure to structurally supported sectors has grown further as we enthusiastically embrace the logistics market buoyed by the ongoing shift from bricks to clicks, constrained supply and rising occupier demand. In a yield tranquil environment, asset selection as well as sector calls are increasingly paramount to providing income certainty, income growth and capital enhancement.
"Looking ahead, the strength of our assets allows us to take a longer term investment horizon where we can collect, compound and grow our income and be a little less obsessed about predicting exact market movements or timing of cycles. This long term approach, combined with our beliefs in the merits of behaving as a 'true REIT' and our full shareholder alignment, will ensure that we continue to make rational decisions, grow our income and progress the dividend. After all, it is the consistency of compounding that produces a good performance and satisfied shareholders."
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 Londonmetric@fticonsulting.com
Meeting and audio webcast
A meeting for investors and analysts will be held at 9.00 am today at 120 London Wall, London, EC2Y 5ET. The conference call dial-in for the meeting is: +44 (0)330 3369105. (Participant Passcode: 3269662).
For the live webcast see: http://webcasting.brrmedia.co.uk/broadcast/5bf6ec57a05b353a6df242f2
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 distribution, convenience and long income property. It focuses on strong and growing income and enhancing capital values. LondonMetric has 13 million sq ft under management. Further information is available at www.londonmetric.com
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.
Alternative performance measures: The Group financial statements are prepared in accordance with IFRS where the Group's interests in joint ventures are shown as a single line item on the income statement and balance sheet. Management reviews the performance of the business principally on a proportionately consolidated basis which includes the Group's share of joint ventures on a line by line basis. Alternative performance measures are financial measures which are not specified under IFRS but are used by management as they highlight the underlying performance of the Group's property rental business and are based on the EPRA Best Practice Recommendations (BPR) reporting framework which is widely recognised and used by public real estate companies.
CEO's Overview
The Company's objective is to deliver attractive and dependable income returns to our shareholders whilst preserving and enhancing capital through owning structurally supported real estate let to good tenants. We aim to behave as a true REIT.
We continue to operate within a market framed by political and economic uncertainty combined with ongoing structural changes and the disruption from technology. Whilst we cannot predict exactly how these trends will play out, the direction of travel is clear and so we continue to adapt.
We believe that our strategy of prioritising a sustainable and growing income stream together with aligning the portfolio towards logistics and convenience has placed us in a good position to deliver continued outperformance. This approach has again delivered a strong financial performance in the half year period, with the Company increasing EPRA earnings by 7.3%, EPRA and IFRS NAV by 4.3% and reporting an IFRS profit of GBP79.3 million. The dividend in the period increased by 2.7% and was 117% covered by earnings, which gives us confidence in our ability to further progress our dividend.
Our strategic priorities and our focus on owning a fit for purpose portfolio allows us to take a longer term investment horizon where we can collect, compound and grow our income. In an environment where yields are likely to remain tranquil, we are increasingly conscious that asset selection, together with sector calls, is paramount to generating income certainty, income growth and capital enhancement.
Polarisation in real estate with logistics continuing to benefit from online adoption
It has been apparent for a while now that the various real estate sectors have been operating at different speeds. The sub sectors of 'beds, sheds and meds' have all continued to enjoy further yield compression and income growth, whilst legacy sectors of retail and office continue to be disrupted by online competition, political and economic uncertainty and the rise of flexible and more dynamic business models. Yields across the sectors are polarising, anticipating the trajectory, certainty and timing of future cashflows.
As noted in our full year results, we believe that the channel shift in retail is both material and permanent. The headwinds facing legacy real estate have continued as this channel shift has quickened, with the state of the UK's retailers dominating headlines on an almost daily basis. It is now very evident that the first phase of valuation falls across the retail property sector is underway, although valuers are still exhibiting a tendency to overprice the almost near certainty of further rental falls.
However, there is a second challenge looming that will prompt a further phase of valuation declines. It is becoming clear that the 'retail survivors' are fast inheriting an enormous pricing power that strengthens with every retailer failure. The strong survivors are the new price setters leaving landlords with the unenviable decision of either taking back yet another vacant unit or being a price taker and accepting reduced rents, shorter leases and more generous tenant incentives.
As recent CVAs have shown, it's not a case of 'prime' versus 'secondary' anymore, it's much more indiscriminate than that. Whilst many believe that we are entering the final stage of repricing, there are still too many retailers with outdated models, legacy estates and too much debt. As a result, further disruption and value destruction within the retail sector is inevitable.
The logistics market, however, continues to move in an opposite trajectory as the virtual tills continue to ring. The migration of sales online is leading to greater volumes and numerous returns coupled with increasing expectations of quicker deliveries. This is forcing occupiers to improve their distribution infrastructure, generate operational efficiencies and deliver with greater accuracy and speed.
These structural drivers will continue to drive the logistics market as online adoption grows further. Distribution take-up in 2018 has significantly exceeded levels recorded in 2017 and, although supply has responded, it remains both controlled and rational. The healthy demand/supply tension is driving rental growth, particularly in urban logistics where greater restriction of supply and strong competition from more valuable alternative uses is reducing availability of warehousing further.
Despite the continuing popularity of logistics amongst investors, we believe that valuations in the sector remain largely rational. The positive momentum in logistics is clear and investment returns are significantly more attractive than other sectors. However, we remain alert and conscious of investors exuberantly extrapolating the sector's fundamentals across all geographies and assets.
We are also conscious of the impact that BREXIT might have on occupier and investor appetite for UK property. Whilst the distribution sector will never be immune from the potential fallout from a disorderly departure from the EU, there is growing evidence that occupiers are intensifying their search for additional distribution space both to increase near term storage capacity as well as longer term solutions to maximise the efficiency of their global supply chains in a post BREXIT environment. As part of our customer focus, we continue to engage with our occupiers on these issues and their wider property requirements in a rapidly changing environment.
Our portfolio is aligned to sectors and assets that will outperform
Our exposure to structurally supported sectors has grown further. Over the period, we further aligned our assets towards distribution, which now accounts for 72% of our portfolio, up from 69% in March. We acquired GBP92.5 million of urban logistics in the period which, together with further investment into developments and post period end activity, has increased our urban logistics platform to GBP486 million, representing a third of our distribution exposure. Our focus on income and geography, has increased the WAULT on our urban logistics to nearly 10 years and its weighting to London and the South East to c.50%.
Whilst we will look to grow our logistics exposure further, our overwhelming focus is to own the right assets that can provide an 'all weather' portfolio and deliver consistent, reliable and growing income. In the same way that not all retail is equal, the same is true for logistics and discrimination between the future winners and losers is key.
Even though our portfolio is in good shape, a continual assessment of the market is necessary to check that market pricing is rational and correlated to income trajectories and total return expectations. Some regular activity ensures that it remains fit for purpose and, as a result, we monetised six older and shorter let distribution assets in the period, and a further two assets post period end.
Events at our Wakefield warehouse serve as a good reminder of the negative impact from income interruption. In 2015, we bought a new 527,000 sq ft building let to Poundworld at a low and reversionary rent of GBP4.85 psf, representing a yield on cost of 6.3%. After two years of occupation, and following administration, the building was vacated in September. Whilst current occupier discussions validate the attractiveness of the building and a successful letting has the potential to generate a material asset valuation uplift, we do not underestimate the impact of earnings interruption. It has also reaffirmed our belief that if you are not backing the winning occupiers then you need comfort from the quality of the underlying asset.
In retail and leisure, we have focused on low energy convenience and long income assets that we believe can successfully navigate the retail disruption. Together with our deep experience and occupier relationships, we expect these assets to generate comparable returns to distribution. Our retail and leisure portfolio has strong income characteristics and is:
-- 100% let on long leases with over 12 years remaining, let at sustainable rents; -- typically single let in nature with low operational requirements; and
-- has an average lot size of c.GBP10 million, with 43% of income subject to contractual uplifts.
These assets again performed well in the period, delivering a property return of 3.1%, and we continue to see strong interest for our assets from low energy pension fund investors. Our recent disposals have focused on retail parks where we have materially reduced our remaining exposure through sales at Launceston and Ipswich. These disposals totalled GBP43.9 million and were at book value, providing strong support for our valuations. We now have three wholly owned retail parks, representing just 5% of the portfolio, which is down from 17% three years ago.
We continue to acquire selective long income, convenience retail and leisure opportunities. In the period, we invested GBP46.5 million on average lease lengths of 19 years and with 62% of income benefiting from contractual rental uplifts. A further GBP10.2 million of convenience assets were acquired post period end.
Income growth will continue to define this decade's investment winners and our portfolio's income metrics remain strong
We highlighted some time ago that we were in a period of yield tranquillity and that income and income growth would be the defining characteristics of the next decade's investment environment. Income remains central to our investment thesis and allows us to be a little less obsessed about predicting exact market movements or timing of cycles. In a time when demographic shifts show no signs of abatement and demand for liquidity is increasing, our investments have focused on long let assets with an inflation hedge that appeal to owners seeking to match long term liabilities.
Our portfolio's income metrics remain strong with long leases of 12 years, only 6% of income expiring within the next three years, occupancy at 94.4% and little defensive capex requirements. Our focus on single let properties continues to minimise our gross to net income leakage to under 2%.
We are strongly of the view that delivering income growth will be key to outperformance. Therefore, our portfolio has consciously been constructed to deliver this growth in three ways:
-- Contractual uplifts in the form of RPI, CPI or fixed increases - 54% of our rental income benefits from some form of contractual uplift and this dominates our mega and regional logistics assets as well as our convenience and leisure assets;
-- Organic growth through the five yearly rent review cycles - this dominates our urban logistics portfolio, where we are settling material uplifts on open market rent reviews; and
-- Asset management initiatives - historically this was focused across our retail park assets but now is increasingly being undertaken within our urban logistics portfolio.
During the period, our lettings and rent reviews helped to deliver GBP2.3 million of additional income. Rent reviews were settled at 12% ahead of passing on a five yearly basis and average lease lengths of 12 years were achieved on lettings. Our distribution development at Bedford is progressing well and will provide a material source of future additional income.
Our financing activities continue to provide us with attractive debt at an average cost of 2.9% and average maturity of 4.5 years. In the period, we completed a new GBP75 million unsecured debt facility with Wells Fargo, of which GBP50 million has been drawn on a seven year term.
Outlook
We expect further polarisation of performance across real estate markets and continue to prepare ourselves to ensure that we remain fit for purpose.
Our exposure to structurally supported sectors has continued to grow as we enthusiastically embrace the logistics market buoyed by structural shifts from bricks to clicks, constrained supply and rising occupier demand. This will continue, as indeed will investor demand for these assets as they rebalance their portfolios away from traditional retail and office sectors.
We have a strong view on the disruption affecting retail property and a long history of experience to guide us. Whilst we remain attracted to the convenience sector, as a beneficiary of changing shopping patterns, we have continued to reduce our remaining exposure to the multi let general merchandise market which is facing increasing disruption. Whilst many will point to new opportunities for repositioning, or that pricing is close to the bottom, we believe there is still more value destruction to come as yields expand, more retailers fail and rents fall as the retail 'survivors' inherit almost unprecedented pricing power.
We know that the wider markets are uncertain, threats exist and a lot of the easy money has been made. However, we are not so pessimistic that we want to be defensive. We have made some sound decisions and are well positioned with a fit for purpose portfolio. An income focus allows us to be a little less obsessed about predicting exact market movements or timing of cycles.
We are still moving forward, but we remain rational and increasingly selective. Our long term approach, combined with our beliefs in the merits of behaving as a 'true REIT' and our full shareholder alignment, will ensure that we continue to make rational decisions and progress the dividend. After all it is the consistency of compounding that produces a good performance and satisfied shareholders.
Property Review
Our activities continue to focus on owning long let logistics and convenience assets
Acquisitions in the period totalled GBP139.0 million and focused mostly on the urban logistics and convenience sectors where we acquired long let assets in strong geographies. These assets had an average lease length of 14 years and nearly 60% of the income is subject to contractual uplifts. Consequently, together with reversionary potential, the blended acquisition NIY of 4.7% is expected to increase to 5.5% over the next five years.
As part of our disciplined portfolio management, we sold GBP92.5 million of assets at a NIY of 5.3% and with a WAULT of 10 years. These disposals comprised GBP36.0 million of older and shorter let distribution warehouses, GBP26.5 million of convenience and leisure assets and GBP30.0 million of assets outside our preferred sectors, namely Launceston Retail Park and 13 flats at our only residential asset in Chelsea.
Acquisitions Disposals
---------------------------------- --------- ------------ --------- ---------
Cost Proceeds
Investment activity in the period at share NIY at share NIY
by sub sector GBPm % GBPm %
---------------------------------- --------- ------------ --------- ---------
Distribution(3) 92.5 4.6 36.0 5.9
Long Income 16.6 5.4 - -
Convenience & Leisure(1,2,3) 29.9 4.9 26.5 4.6
Retail Parks - - 21.9 5.6
Residential - - 8.1 3.4
---------------------------------- --------- ------------ --------- ---------
Total 139.0 4.7 92.5 5.3
---------------------------------- --------- ------------ --------- ---------
(1) Includes acquisition of a portfolio of convenience assets for GBP12.1 million that exchanged in the period and completed post period end
(2) Includes disposal of Odeon Warrington for GBP13.7 million that exchanged in the period with a deferred completion in the second half of the year
(3) Excludes proceeds from disposals in Loughborough and South Elmsall totalling GBP47.5 million that exchanged last year but completed in the period and are reflected in the half year financial statements
Our activity over the period increased urban logistics exposure from 20% to 25% of the portfolio and total distribution exposure from 69% to 72%. Long income increased to 13% whilst convenience and leisure fell from 10% to 8%. Following a further sale post period end, directly owned retail parks now represent just 5%, down from 7% at the start of the period. Residential has also fallen to 1% with 34 flats remaining to sell of the original 149 owned.
Portfolio metrics remain strong, delivering sustainable and growing income
The portfolio's average lease length of 12.0 years (11.1 years to break) provides a high level of income security with only 6% of income expiring over three years and 43% over 10 years. Occupancy remains high at 94.4% and, whilst it fell from 97.5% at the start of the period as a result of the vacancy at our Wakefield distribution warehouse, this will revert back as we re-let the property. Gross to net income ratio of 98.3% continues to compare very favourably against our peers and reflects the low operational requirements of owning single let assets.
The portfolio continues to generate good income growth through:
-- Contractual rental uplifts which applies to 54% of the portfolio's rental income, of which over half are inflation linked. During the period, we settled 15 contractual rent reviews, delivering GBP0.5 million of increased rent at an average of 12% above passing on a five yearly equivalent basis;
-- Open market rental uplifts, principally on distribution, where we are delivering organic rental growth. During the period, we settled six open market reviews, delivering GBP0.6 million of additional income at an average of 10% above passing on a five yearly equivalent basis, with urban logistics seeing an increase of 52%; and
-- Leasing activity where, in the period, we signed 10 leases or re-gears on an average of 12 year terms, generating GBP1.2 million additional income at rents in line with ERV.
Like for like income growth in the period was 3.0%, excluding our Poundworld distribution vacancy at Wakefield, or -0.1% including the vacancy. Whilst this vacancy reduced our contracted income in the period by GBP2.6 million, our contracted income fell by only GBP1.0 million to GBP93.4 million. As mentioned in the CEO's Overview, we are in active discussions on the re-letting of Wakefield.
Property Performance driven by urban logistics
Over the period, the portfolio delivered a total property return of 5.4%, significantly outperforming the IPD All Property return of 3.3%. Distribution delivered a total return of 6.6% whilst retail and leisure delivered a total return of 3.1%.
The portfolio revaluation gain over the period was GBP51.0 million, reflecting a 2.7% increase. This was driven by an equivalent yield compression of 9bps on a like for like basis and ERV growth of 0.9%. ERV growth was highest in urban logistics, which generated a 3.1% increase, whilst retail and leisure fell by 0.2%.
Distribution delivered a GBP45.9 million revaluation gain, a 3.5% increase. Urban logistics again outperformed with a 4.5% uplift and developments delivering a 20.3% increase equating to an GBP8.3 million uplift. Retail and leisure capital values fell by 0.4%, with a positive contribution from convenience and leisure of 1.7% offset by a 2.7% fall at our retail parks. Residential saw a GBP1.3 million valuation decline.
The investment portfolio's EPRA topped up net initial yield is 4.6%, which rises to 4.9% assuming full occupancy. The equivalent yield is 5.2%.
Distribution portfolio review
Our distribution assets are spread across the urban, regional and mega subsectors and are single let in nature. Including developments, their value increased over the period from GBP1,263 million to GBP1,385 million, accounting for 72% of our portfolio. The average WAULT is 12 years with 60% of income subject to contractual income uplifts.
As at 30 September 2018 Mega Regional Urban
------------------------- ----------- ----------- -------------
500,000+ sq 100-500,000 Up to 100,000
Typical warehouse size ft sq ft sq ft
Value(1) GBP513m GBP400m GBP472m
WAULT 13 years 14 years 10 years
Average Rent (psf) GBP5.40 GBP6.15 GBP6.60
Topped up NIY(2) 4.5% 4.5% 4.7%
Contractual uplifts(3) 71% 74% 37%
Total Property Return 4.9% 7.9% 7.6%
------------------------- ----------- ----------- -------------
(1) Including developments
(2) Excluding vacant assets
(3) Percentage of portfolio that benefits from contractual rental uplifts
Increasing our urban logistics exposure to GBP486 million
Over recent years, we have been increasingly attracted to urban logistics where we continue to perceive investment returns will be greatest. The restricted supply in urban logistics together with strong occupier demand continues to generate highly favourable market dynamics which is driving strong rental growth.
Our recent distribution investments have focused exclusively on urban logistics and we have selectively grown this part of the portfolio over the last three years from GBP33 million to GBP486 million. During the period, we acquired GBP92.5 million of urban logistics at a NIY of 4.6% which is expected to increase to 5.4% over five years. These acquisitions had a WAULT of 11 years with 55% of the income subject to contractual uplifts:
-- 340,000 sq ft portfolio let to occupiers including Ceva Logistics, DSV, Jewson and Vodafone for a further eight years, acquired for GBP49.1 million;
-- 112,000 sq ft warehouse in Milton Keynes let to Royal Mail for a further 10 years, acquired for GBP12.0 million;
-- 80,000 sq ft warehouse in Cambridgeshire let to Cambridge Commodities for a further 20 years, acquired for GBP10.0 million;
-- 78,000 sq ft warehouse in Thorne let to Omega Plc for 20 years, acquired for GBP7.9 million; and
-- 48,000 sq ft warehouse in Avonmouth let to Chep for a further nine years, acquired for GBP13.5 million.
Whilst we remain focused on growing our logistics exposure, our key focus is to own the right assets in strong geographies that can deliver consistent, reliable and growing income. Therefore, to ensure that our portfolio remains fit for purpose, we sold six of our oldest distribution assets for GBP36.0 million at a blended NIY of 5.9%, generating an ungeared IRR of 15% per annum since purchase.
The WAULT on the assets sold was only 5.7 years and their disposal has helped to increase the average lease length on our urban portfolio from 8.5 years to 9.6 years over the period. They were also located in less attractive and more northerly geographies and, consequently, our urban portfolio's geographical split has improved with c.50% located in London and the South East.
Post period end, our investment activity continued to focus on geography, income certainty and growth. We sold two assets in Leicester and Doncaster for GBP17.4 million with a WAULT of under two years. In addition, we acquired two assets for GBP14.1 million let for 17.4 years, 100% inflation linked and both South East located in:
-- Basildon, where the unit is let for 20 years to WCM, with rental increases to RPI 1.5% - 4.5%; and
-- Orpington, where the unit is let for 15 years to Selco, with rental increases at the higher of CPI 2-3% or open market;
Growing our distribution income through portfolio management
During the period, we settled eight distribution rent reviews across 2.9 million sq ft adding GBP0.9 million of income at 10% above passing on a five yearly equivalent basis.
In urban logistics, reflecting the sector's strong rental growth, we settled two reviews in Leyton and Crawley at an average of 52% above previous rent, generating GBP0.3 million of additional income. Whilst these were particularly strong reversionary reviews, we continue to see good potential for further organic income growth with over 60% of our urban logistics subject to open market reviews and average ERVs of GBP7.40 psf compared to passing rent of GBP6.60 psf.
This contrasts with the more muted rental growth that bigger box logistics is experiencing generally. In the period, our mega and regional assets delivered 9% growth on a five yearly equivalent basis:
-- three open market reviews were settled in Wakefield, Swindon and Bedford at 6% above previous passing, generating an uplift of GBP0.3 million; and
-- three contractual reviews were settled at 10% above passing on a five yearly equivalent basis, generating an uplift of GBP0.3 million. This higher rental growth from contractual reviews validates our preference to have over 70% of our mega and regional assets subject to inflation or fixed uplifts.
Distribution lettings in the period added GBP0.8 million of income, comprising two urban logistics warehouses:
-- a 7.5 year lease extension at Croydon where the rent increased by 34% to GBP1.9 million; and
-- a new 10 year lease to DPD at our completed and fully let 62,000 sq ft development in Frimley
Post period end, we have agreed four further urban logistics lease re-gears at Basildon, Greenford, Doncaster and Havant, where the average lease length increases from 0.6 years to 7.5 years and the average rent rises by 35%, adding GBP0.4 million of income. As part of these re-gears, we will undertake some modernisation works to the buildings.
Retail & Leisure portfolio review
Over recent years, we have significantly reduced our retail park exposure and focused on selectively acquiring single let assets with long leases that generate reliable and growing income. Our retail and leisure portfolio is 100% let with a WAULT of 12 years, let to strong occupiers at affordable average rents of GBP18.00 psf and valued at an attractive NIY of 5.6%. The average lot size is GBP10 million with 43% of income subject to contractual uplifts.
Long Convenience Retail
As at 30 September 2018 Income & Leisure Parks
------------------------ -------- ----------- --------
Value(1) GBP249m GBP151m GBP117m
WAULT 11 years 16 years 11 years
Average Rent (psf) GBP19.00 GBP15.30 GBP19.50
Topped up NIY 5.9% 5.0% 5.7%
Contractual uplifts(2) 33% 84% 17%
Total Property Return 3.2% 5.4% 0.2%
------------------------ -------- ----------- --------
(1) Including developments
(2) Percentage of portfolio that benefits from contractual rental uplifts
Attracted by these strong characteristics, these assets continue to see good demand from low energy pension fund investors, as evidenced by our GBP48.4 million of disposals during the period which was transacted at a premium to book value. Overall, our retail and leisure disposals were broadly offset by GBP46.5 million of acquisitions. Reflecting our long income focus, the average WAULT on acquisitions of 19 years compared to 15 years for disposals, with investment yields broadly the same at 5.1%.
Our letting activity continues to deliver long leases and, in the period, we signed eight retail leases with a WAULT of 14 years, with contractual uplifts on 37% and average occupier incentives of only 8 months. 13 rent reviews were also settled generating an uplift of GBP0.2 million at 16% above previous passing on a five yearly equivalent basis. These reviews were almost exclusively on convenience and leisure assets with RPI or fixed uplifts.
Long income
Long income represents 13% of the portfolio and consists of properties held predominantly within our MIPP and DFS joint ventures. These assets have very limited operational requirements, are let on average for 11 years, typically to single tenants such as Dunelm, Wickes and DFS. A third of income has contractual uplifts.
During the period, we acquired GBP16.6 million at a NIY of 5.4% and a WAULT of 14 years:
-- Four assets in Aldershot, Beverley, Newmarket and Telford totalling GBP21.4 million (Group Share: GBP10.7 million) were acquired by our MIPP JV. These assets are let predominantly to Wickes and the Range and other occupiers include Burger King, KFC and Costa; and
-- A 34,000 sq ft asset in Derby let to Wickes was acquired for GBP5.9 million.
Convenience & Leisure
These assets represent 8% of the portfolio, have an average lease length of 16 years and 84% of income is subject to contractual rental uplifts. They consist of convenience-led stores let mainly to M&S, Aldi and Lidl, and five Odeon cinemas, mostly acquired as part of a portfolio of ten cinemas in 2013 at a NIY of 7.2%.
During the period, we purchased GBP29.9 million at a NIY of 4.9% and a reversionary yield of 5.4%, with a WAULT of 22 years:
-- A 58,000 sq ft forward fund convenience development in Durham was acquired for GBP13.6 million pre-let to Lidl and The Range with a WAULT of 20 years and 40% of income RPI linked;
-- A portfolio of eight roadside convenience assets were acquired for GBP12.1 million let for 24 years to Euro Garages under franchise agreements with Starbucks, Burger King, Greggs and Subway. The assets benefit from annual rental increases and occupy prominent roadside locations, with the largest two in Bicester; and
-- A 35,000 sq ft acquisition of an Odeon Cinema in Hull for GBP4.3 million with a WAULT of 20 years.
Sales in the period totalled GBP26.5 million at a NIY of 4.6% and consisted of:
-- Two assets let to Euro Garages for GBP2.2 million;
-- Two M&S convenience stores for GBP10.7 million, which had delivered an ungeared IRR of 17% per annum since acquisitions; and
-- A 36,000 sq ft Odeon Cinema in Warrington for GBP13.7 million, which had delivered an ungeared IRR of 20% per annum
Post period end, two convenience assets in London let to the Co-op for 16 years were acquired for GBP10.2 million.
Retail Parks
Over the last three years our direct retail park exposure has significantly reduced from 13 assets to three today. During the period, we sold a 70,000 sq ft retail park in Launceston for GBP21.9 million at a NIY of 5.6% and, post period end, we sold our Martlesham Heath Retail Park for GBP22.0 million at a NIY of 5.2%. These disposals were sold at book value. Retail Parks now represent just 5% of the total portfolio and consist of assets in Tonbridge, Coventry and Kirkstall let on average for a further 11 years.
Top occupiers
Greater than 2% of Total contracted 30 September 31 March rent 2018 2018 ------------------- ------------ -------- Primark 10.4% 10.2% Dixons Carphone 8.5% 8.3% M&S 6.7% 7.4% Argos 4.5% 4.3% Eddie Stobart 4.4% 4.3% DFS(1) 4.2% 4.2% Odeon 3.9% 3.5% DHL 3.3% 4.3% Tesco(1) 2.7% 2.2% Clipper Logistics 2.5% 2.4% Amazon 2.3% 2.3% Wickes 2.2% 1.4% Next 2.1% 2.0%
(1) 2018 numbers adjusted for inclusion of wider subsidiaries for comparative purposes
Developments
We completed three developments in the period at a yield on cost of 5.9%. Including Stoke, Crawley and Huyton, recently completed distribution developments across 749,000 sq ft are 68% let:
-- At Crawley, two units totalling c.80,000 sq ft remain to let with advanced discussions on 47,000 sq ft
-- At Stoke, we remain in discussions on letting the remaining unit of c.140,000 sq ft
Developments under construction and in the pipeline totalled 880,000 sq ft and are expected to generate a yield of 6.5% on total costs of GBP108 million.
Area Yield
sq ft Additional on cost Practical
Sector '000 Rent GBPm % Completion(1)
------------------------ ------------- ------ ---------- -------- --------------
Completed in the period
Dagenham Distribution 180 0.9 5.7 Completed
Ipswich Retail 31 0.7 6.9 Completed
Frimley Distribution 62 0.7 5.3 Completed
------------------------ ------------- ------ ---------- -------- --------------
273 2.3 5.9
-------------------------------------- ------ ---------- -------- --------------
Under construction and
pipeline
Bedford (Regional)(2) Distribution 500 3.3 7.3 2019/2020
Bedford (Urban) (2) Distribution 180 1.3 6.4 Q2 2019
Durham Convenience 58 0.7 5.4 Q3 2019
New Malden(3) Long Income 57 0.4 5.6 2020
Ringwood Long Income 35 0.2 5.0 Dec 2018
Weymouth(2) Convenience 27 0.6 6.3 2019/2020
Derby(2) Convenience 16 0.4 6.7 2020
Telford Long Income 7 0.1 5.7 Dec 2018
------------------------ ------------- ------ ---------- -------- --------------
880 7.0 6.5
-------------------------------------- ------ ---------- -------- --------------
(1) Based on calendar quarters and years
(2) Anticipated yield on cost and rents
(3) Marginal yield on cost
Bedford - At the 40 acre site, construction of three urban warehouses commenced in the summer and will complete in Q2 2019. We are under offer on 55% of the 180,000 sq ft urban distribution development. We continue discussions to conclude pre-lets on the 500,000 sq ft of regional distribution development. Construction of these two units will be subject to agreeing pre-lets.
Durham - Forward funded development pre-let to Lidl and The Range with a WAULT of 20 years.
New Malden - Extension to and modification of an existing asset to accommodate three new convenience related occupiers. On completion, the asset will be let for c.17 years to occupiers including Dixons, an existing tenant, and Lidl, a new occupier who signed a pre-let for 25 years post period end on 11,000 sq ft. Planning consent is expected in Q2 2019.
Weymouth - 19,000 sq ft has been pre-let to Aldi and offers have been received on the letting of three small pods. The development is expected to have a WAULT of 18 years. The site has been purchased and planning consent for the Aldi unit is expected in December 2018.
Ringwood - Forward funded development pre-let to Premier Inn for 25 years.
Derby - The development has been pre-let to M&S, Starbucks and Nandos with a WAULT of 16 years. Acquisition of the development is subject to planning.
Telford - Forward funded development pre-let to Burger King, KFC and Costa with a WAULT of 21 years.
Financial Review
Our continued focus on owning fit for purpose real estate that provides sustainable and growing income for shareholders, has delivered another strong financial performance in the period. Both earnings and net assets have increased and our distribution assets now represent 72% of our portfolio.
IFRS reported profit for the period was GBP79.3 million compared with GBP79.6 million last year and included a portfolio revaluation gain of GBP51.0 million including share of joint ventures. IFRS net assets increased 4.3% since March to GBP1,198.6 million or 172.5p per share.
EPRA earnings have increased by 7.3% to GBP30.9 million or 4.4p per share. On a per share basis, EPRA earnings are up 0.2p or 6.6%, from 4.2p per share last half year. We have increased our dividend for the same period by 2.7% to 3.8p per share, which continues to be fully covered by EPRA earnings at 117%.
In July, we entered into a new GBP75 million unsecured debt facility with Wells Fargo, of which GBP50 million has been drawn on a seven year term. The undrawn balance of GBP25 million is on a five year term and can be extended by up to two years.
Our financing transactions have maintained or strengthened our key metrics. Our average cost of debt is 2.9% (March 18: 2.8%), loan to value is 37% (March 18: 35%), average maturity is 4.5 years (March 18: 4.8 years) and we have GBP103.5 million (March 18: GBP65.8 million) of undrawn facilities. Our debt strategy is well aligned with our real estate strategy and provides flexibility and optionality.
Presentation of financial information
The Group financial statements are prepared in accordance with IFRS where the Group's interests in joint ventures are shown as a single line item in the consolidated income statement and balance sheet and all subsidiaries are consolidated at 100%.
Management monitors the performance of the business principally on a proportionately consolidated basis, which includes the Group's share of joint ventures on a line by line basis in the financial statements. These measures, presented on a proportionately consolidated basis, are alternative performance measures, as they are not defined under IFRS.
The figures and commentary in this review are consistent with our management approach, as we believe this provides a meaningful analysis of overall performance. The income statement and cash flow comparatives are for the six month period to 30 September 2017 and the balance sheet comparative is 31 March 2018.
Alternative performance measures
The Group uses alternative performance measures based on the European Public Real Estate (EPRA) Best Practice Recommendations (BPR) to supplement IFRS as they highlight the underlying performance of the Group's property rental business.
The EPRA measures are widely recognised and used by public real estate companies and seek to improve transparency, comparability and relevance of published results in the sector. EPRA earnings is one of the Group's KPIs and supports the level of dividend payments.
Further details, definitions and reconciliations between EPRA measures and the IFRS financial statements can be found in note 7 to the financial statements, Supplementary notes i to vii and in the Glossary.
Income statement
EPRA earnings for the Group and its share of joint ventures are detailed as follows:
Group JV 2018 Group JV 2017
For the six months to 30 September GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----- ----- ----- ----- ----- -----
Gross rental income 42.4 5.5 47.9 40.6 4.5 45.1
Property costs (0.5) (0.3) (0.8) (0.4) (0.2) (0.6)
----------------------------------- ----- ----- ----- ----- ----- -----
Net rental income 41.9 5.2 47.1 40.2 4.3 44.5
Management fees 0.9 (0.4) 0.5 0.8 (0.4) 0.4
Administrative costs (6.9) - (6.9) (6.7) - (6.7)
Net finance costs (8.8) (1.0) (9.8) (8.5) (0.9) (9.4)
EPRA earnings(1) 27.1 3.8 30.9 25.8 3.0 28.8
----------------------------------- ----- ----- ----- ----- ----- -----
(1) A full reconciliation to IFRS reported profit can be found in note 7(a) to the financial statements
The movement in EPRA earnings from the last half year is reflected in the table below.
GBPm p
--------------------- ----- -----
EPRA earnings 2017 28.8 4.2
Net rental income 2.6 0.3
Management fees 0.1 -
Administrative costs (0.2) -
Net finance costs (0.4) (0.1)
EPRA earnings 2018 30.9 4.4
--------------------- ----- -----
Net rental income
Net rental income increased 5.8% to GBP47.1 million, driving the growth in EPRA earnings and dividend payments. Movements in net rental income are reflected in the table below.
GBPm
----------------------- -----
Net rental income 2017 44.5
Existing properties(1) 0.7
Developments(2) 1.4
Acquisitions(3) 7.2
Disposals(3) (6.5)
Property costs (0.2)
------------------------ -----
Net rental income 2018 47.1
------------------------ -----
(1) Properties held since 1 April 2017
(2) Developments completed since 1 April 2017
(3) Acquisitions and disposals completed since 1 April 2017
Like for like income from our existing portfolio and completed developments delivered additional income of GBP2.1 million in the period compared with last half year. Net acquisitions increased income by a further GBP0.7 million.
Property costs have increased by GBP0.2 million due to increased vacant unit costs. However, our property cost leakage continues to be extremely low at 1.7%.
Administrative costs
Administrative costs have increased marginally to GBP6.9 million and are stated after capitalising staff costs of GBP0.9 million (2017: GBP0.9 million) in respect of time spent on development activity in the period.
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.
2018 2017
For the six months to 30 September % %
----------------------------------------------- ---- ----
EPRA cost ratio including direct vacancy costs 15 15
EPRA cost ratio excluding direct vacancy costs 14 15
----------------------------------------------- ---- ----
The EPRA cost ratio for the period, including direct vacancy costs, has fallen 40 bps since March to 14.9%. 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 period were GBP9.8 million, an increase of GBP0.4 million over the previous period.
This was due to higher bank interest costs associated with higher average levels of debt this half year compared to the comparative six month period of GBP0.3 million, and a reduction of GBP0.1 million in interest capitalised on developments. Further detail is provided in notes 4 and 9 to the financial statements.
Our interest rate exposure is hedged by a combination of fixed and forward starting interest rate swaps and caps as discussed further in the Financing section of this review.
Share of joint ventures
EPRA earnings from joint venture investments were GBP3.8 million, an increase of GBP0.8 million over the comparative period as reflected in the table below.
2018 2017
For the six months to 30 September GBPm GBPm
------------------------------------ ----- -----
MIPP 2.5 1.9
Retail Warehouse (DFS) 1.3 1.0
Residential (Moore House) - 0.1
3.8 3.0
------------------------------------ ----- -----
In addition, the Group received net management fees of GBP0.5 million for acting as property advisor to each of its joint ventures (2017: GBP0.4 million).
Our MIPP joint venture received surrender income of GBP0.9 million in the period. Additional property costs and management fees incurred reduced the increase in EPRA earnings to GBP0.6 million compared with last half year.
In September 2017 we increased our shareholding in the DFS joint venture by 14.5% to 45.0% resulting in an increase in profits this year compared with the same period last year.
Dividend
The Company has continued to declare quarterly dividends and has offered shareholders a scrip alternative to cash payments.
The Company paid the third and fourth quarterly dividends for the year to March 2018 of GBP29.1 million or 4.2p per share in the period as reflected in note 6 to the financial statements. The Company issued 0.6 million ordinary shares under the terms of the Scrip Dividend Scheme, which reduced the cash dividend payment by GBP1.1 million to GBP28.0 million.
The first quarterly payment for the current year of 1.9p per share was paid as a Property Income Distribution (PID) in October 2018. The second quarterly dividend will comprise a PID of 1.9p per share and has been approved by the Board for payment in January 2019. The total dividend payable for the half year of 3.8p represents an increase of 2.7% over the same comparative period.
IFRS reported profit
Management principally monitors the Group's underlying EPRA earnings which reflect earnings from core operational activities and excludes property and derivative valuation movements, profits and losses on disposal of properties and financing break costs. A full reconciliation between EPRA earnings and IFRS reported profit is given in note 7(a) to the accounts and is summarised in the table below.
Group JV 2018 Group JV 2017
For the six months to 30 September GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ----- ----- ----- ----- ----- -----
EPRA earnings 27.1 3.8 30.9 25.8 3.0 28.8
Revaluation of investment property 53.6 (2.6) 51.0 50.0 2.8 52.8
Fair value of derivatives (0.4) - (0.4) 10.5 0.1 10.6
Debt/hedging early close out costs - - - (6.3) (0.1) (6.4)
Loss on disposal (0.8) (1.4) (2.2) (5.8) (0.4) (6.2)
IFRS reported profit/(loss) 79.5 (0.2) 79.3 74.2 5.4 79.6
----------------------------------- ----- ----- ----- ----- ----- -----
The Group's reported profit for the period was GBP79.3 million, a marginal decrease of GBP0.3 million over the previous comparative period. The property revaluation of GBP51.0 million represents the largest single contributor to reported profit and was GBP1.8 million lower than in the previous period.
Other movements in reported profit include loss on sales of properties and a small adverse movement in the fair value of derivatives. Together, these reduced reported profit by GBP2.6 million compared with a loss of GBP2.0 million last year, which also included swap break costs of GBP6.4 million and a corresponding favourable derivative movement of GBP10.6 million.
Sales of 13 flats at Moore House generated a loss on sale of GBP1.4 million. In the comparative period we disposed of our remaining office at Marlow generating a loss over book value of GBP3.6 million. The total profit over original cost of all sales in the period was GBP15.5 million representing a return of 14.3%.
Balance sheet
EPRA net asset value is a key measure of the Group's 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 IFRS and EPRA net assets is detailed in the table below and in note 7(c) to the financial statements.
EPRA net assets for the Group and its share of joint ventures are as follows:
30 September
Group JV 2018 Group JV 31 March 2018
As at GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ------ ------------ ------- ------ -------------
Investment property 1,756.2 165.8 1,922.0 1,677.6 164.4 1,842.0
Gross debt (685.0) (61.2) (746.2) (650.0) (58.9) (708.9)
Cash 30.7 7.4 38.1 26.2 13.1 39.3
Other net liabilities (16.4) (1.4) (17.8) (24.8) (1.0) (25.8)
---------------------- ------- ------ ------------ ------- ------ -------------
EPRA net assets 1,085.5 110.6 1,196.1 1,029.0 117.6 1,146.6
---------------------- ------- ------ ------------ ------- ------ -------------
Derivatives 2.4 0.1 2.5 2.8 0.1 2.9
---------------------- ------- ------ ------------ ------- ------ -------------
IFRS net assets 1,087.9 110.7 1,198.6 1,031.8 117.7 1,149.5 ---------------------- ------- ------ ------------ ------- ------ -------------
EPRA net assets have increased GBP49.5 million or 4.3% since March to GBP1,196.1 million. On a per share basis EPRA net assets increased by 6.9p, or 4.1% to 172.1p. The movement in the period is summarised below.
EPRA EPRA NAV
Net Assets per share
GBPm p
--------------------- ----------- ----------
At 1 April 2018 1,146.6 165.2
EPRA earnings 30.9 4.4
Property revaluation 51.0 7.3
Dividends (29.1) (4.2)
Other movements(1) (3.3) (0.6)
At 30 September 2018 1,196.1 172.1
--------------------- ----------- ----------
(1) Other movements include loss on sales (GBP2.2 million) and share based awards (GBP2.2 million), offset by scrip share issues (GBP1.1 million)
The increase in both IFRS and EPRA net assets per share was principally due to the property revaluation gain of 7.3p. EPRA earnings of 4.4p covered the 4.2p dividend paid in the period.
The movement in EPRA net assets per share, together with the dividend paid in the period, results in a total accounting return of 6.7%. The full calculation can be found in supplementary note viii.
Portfolio valuation
Our property portfolio, including the share of joint venture assets, grew by GBP80.0 million or 4.3% over the six month period to GBP1,922.0 million and was predicated on a strong valuation performance.
We have continued to invest in urban logistics assets that have once again delivered high levels of rental and valuation growth. Our distribution exposure has increased to 72% including distribution developments, up from 69% at the year end.
Following the sale of a further 13 flats at Moore House, our residential exposure has fallen to just 1% of our portfolio.
A breakdown of the property portfolio by sector is reflected in the table below.
30 September 2018 30 September 2018 31 March 31 March
GBPm % 2018 2018
As at GBPm %
---------------------- ----------------- ----------------- -------- --------
Distribution 1,349.5 70.2 1,233.1 66.9
Convenience & leisure 141.4 7.4 174.7 9.5
Long income 245.3 12.8 220.8 12.0
Retail Parks 117.0 6.1 139.8 7.6
Investment portfolio 1,853.2 96.5 1,768.4 96.0
Residential 19.8 1.0 30.1 1.6
Development(1) 49.0 2.5 43.5 2.4
---------------------- ----------------- ----------------- -------- --------
Property value 1,922.0 100.0 1,842.0 100.0
---------------------- ----------------- ----------------- -------- --------
(1) Represents regional distribution of GBP24.9 million (1.3%), urban logistics of GBP10.9 million (0.6%), long income of GBP4.1 million (0.2%) and convenience and leisure of GBP9.1 million (0.4%). Split in March 2018 was regional distribution of GBP16.2 million (0.9%), urban logistics of GBP13.2 million (0.7%), long income of GBP8.2 million (0.5%) and convenience and leisure of GBP5.9 million (0.3%)
Investment in development assets remains at modest levels as projects at Frimley and Spenhill completed in the period and new opportunities at Durham and Telford were acquired. Total development expenditure of GBP18.7 million in the period is reflected in the movement table below.
Portfolio value
GBPm
-------------------------------------------- ---------------
Valuation as at 1 April 2018 1,842.0
Acquisitions 118.6
Developments 18.7
Capital expenditure on completed properties 10.6
Disposals (115.5)
Revaluation 51.0
Lease incentives(1) (3.4)
-------------------------------------------- ---------------
Valuation as at 30 September 2018 1,922.0
-------------------------------------------- ---------------
(1) Comprises incentive payments and rent frees of GBP6.6 million offset by amortisation costs of GBP1.0 million and amounts written off on disposal of GBP9.0 million
(2) Further detail on the split between Group and joint venture movements and the EPRA capital expenditure analysis can be found in Supplementary note vii
Property values have increased by GBP51.0 million in the half year, most significantly in our urban logistics and development sectors and the portfolio has delivered a total property return of 5.4% compared to the IPD All Property index of 3.3%.
The Group spent GBP118.6 million in the period acquiring GBP98.4 million urban logistics, GBP15.6 million long income and GBP4.6 million leisure assets.
We completed 11 commercial property and 13 residential flat sales in the period generating net proceeds of GBP122.3 million and reducing the book value of property by GBP124.5 million (including the cost of lease incentives written off of GBP9.0 million).
Two disposals at Loughborough and South Elmsall that exchanged last year have completed in the period generating proceeds of GBP47.5 million and have been accounted for in these financial statements.
Following the adoption of IFRS 15, we have changed our accounting policy to recognise the acquisition and disposal of property on completion of the transaction as opposed to unconditional exchange. We have elected not to restate comparatives in accordance with the transitional provisions of the standard.
We also exchanged to sell the Odeon cinema in Warrington for GBP13.7 million and to acquire a portfolio of assets for GBP12.1 million in the period, both of which have deferred completions and will be reflected in the financial statements in the second half of the year.
The Group had capital commitments of GBP27.6 million as reported in note 8 to the financial statements, relating primarily to committed developments in progress at Bedford and Durham.
Further detail on property acquisitions, sales, asset management and development can be found in the Property Review.
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.
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.
Financing
The key performance indicators used to monitor the Group's debt and liquidity position are shown in the table below. The Group and joint venture split is shown in Supplementary note iii.
30 September 2018 31 March 2018
As at GBPm GBPm
---------------------- ----------------- -------------
Gross debt 746.2 708.9
Cash 38.1 39.3
Net debt 708.1 669.6
Loan to value(1) 37% 35%
Cost of debt(2) 2.9% 2.8%
Undrawn facilities 103.5 65.8
Average debt maturity 4.5 years 4.8 years
Hedging(3) 77% 80%
---------------------- ----------------- -------------
(1) LTV at 30 September 2018 includes GBP13.7 million deferred consideration receivable and GBP12.1 million deferred consideration payable (March 18: GBP47.5 million deferred consideration receivable)
(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 hedges and total debt drawn
In July 2018 we entered into a new unsecured debt facility with Wells Fargo for GBP75 million, of which GBP50 million was immediately drawn on a seven year term. The undrawn balance of GBP25 million is on a five year term and can be extended by up to two years. This new facility lengthened our debt maturity and increases available undrawn facilities.
Net debt has increased by GBP38.5 million (Group: GBP30.5 million, Share of JV: GBP8.0 million) in order to fund acquisitions and development expenditure.
Our key financial ratios remain strong with average debt cost of 2.9% (March 18: 2.8%) and average maturity of 4.5 years (March 18: 4.8 years).
Loan to value, net of cash resources and deferred consideration on purchases and sales which exchanged in the period and will complete in the second half of the year, was 37% (March 18: 35%) and it is our intention to keep this below 40%.
The Group has comfortably complied throughout the period with the financial covenants contained in its debt funding arrangements and has substantial levels of headroom.
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 30 September 2018 we had hedged 77% of our exposure to interest rate fluctuations by way of swaps and caps (March 18: 80%). We continue to monitor our hedging profile in light of forecast interest rate movements.
Cash flow
During the period, the Group's cash balances increased by GBP4.5 million as reflected in the table below.
2018 2017
For the six months to 30 September GBPm GBPm
------------------------------------------------------ ------- --------
Cash flows from operations 43.2 37.3
Changes in working capital (12.0) (8.3)
Finance costs and taxation (7.5) (8.1)
Cash flows from operating activities 23.7 20.9
Cash flows from investing activities (21.2) (157.4)
Cash flows from financing activities 2.0 125.1
------------------------------------------------------ ------- --------
Net increase/(decrease) in cash and cash equivalents 4.5 (11.4)
------------------------------------------------------ ------- --------
Cash flows from operating activities have increased by GBP2.8 million compared to the previous comparative period reflecting increases in net rental income.
Cash flows from investing activities reflect property acquisitions of GBP118.0 million and capital expenditure and incentives of GBP15.5 million offset by cash inflows from disposals of GBP105.5 million and net distributions from joint ventures of GBP6.8 million.
Cash flows from financing activities reflect net new borrowings of GBP35.0 million, cash dividend payments of GBP28.0 million, financing costs of GBP1.5 million and share purchases of GBP3.5 million.
Further detail is provided in the Group Cash Flow Statement.
Key risks and uncertainties
Risk management
Our risk management procedures reduce the negative impact of risk on our business. They are critical to maintaining our sustainable, progressive earnings and long term capital growth whilst operating in a socially responsible manner. Although risk cannot be eliminated completely the Board's risk tolerance is low where it prejudices these objectives.
The process for identifying, assessing and mitigating the principal risks of the business are set out on pages 48 to 59 of the 2018 Annual Report in the Risk Management section. The Board is satisfied that these processes continue to be sound and it considers risk management at a high level at each of its meetings.
Since publication of the 2018 Annual Report there has been no significant change in the risks being faced by the business and no new principal risks have been identified.
The principal risks and uncertainties facing the Group and the Board's appetite for each are summarised as follows:
Corporate risks
These risks relate to the business as a whole and include those which affect strategy, our market, systems and stakeholders and our regulatory, social and environmental responsibilities.
Strategy
The Group's strategy may be inappropriate for the current stage of the property cycle and economic climate. This may lead to underperformance and an inability to take advantage of opportunities. Threat management may be ineffective and we may not have the most appropriate skillsets, resources and systems in place.
The Board view the Group's strategic priorities as fundamental to its business and reputation.
Economic and political factors
Risks from external factors may lead to a downturn in the economy or specific industry and sector turbulence resulting in poorer than expected performance.
As reported in the CEO's Overview, we are conscious of the impact that BREXIT might have on occupier and investor appetite for UK property and continue to engage with our occupiers on these issues and their wider property requirements.
Whilst economic and political factors are researched and monitored, feeding into strategy, market conditions are outside of the Board's control.
Human resources
There may be an inability to attract, motivate and retain high calibre skilled staff which could jeopardise delivery of the Group's strategy and its ability to maintain a competitive advantage.
The Board believes it is vitally important to have the appropriate level of leadership, expertise and experience to deliver its objectives and adapt to change.
Regulatory and tax framework
Non-compliance with legal or regulatory obligations such as planning, environmental, health and safety and tax could result in increased costs or fines and may impact the letting prospects of assets, damage corporate reputation and access to debt and capital markets.
The Board has no appetite where non-compliance risks injury or damage to a broad range of stakeholders, assets and reputation.
Responsible business approach
As environmental, social and governance concerns, such as climate change and treating stakeholders fairly, have become more mainstream, non-compliance with responsible business practices may similarly damage corporate reputation, access to debt and capital markets and lettings.
The Board has a low tolerance for non-compliance which impacts reputation and stakeholder sentiment towards the Group.
Systems, processes and financial management
Controls for safeguarding assets and financial management systems may not be robust compromising security and the accuracy of information which may lead to losses and negatively impact decision making processes.
Appetite for such risk is low and management continually strive to monitor and improve processes.
Property risks
These are risks associated with the Group's core business, they relate to portfolio composition and management, development activity, factors impacting capital value and tenants.
Investment risk
The Group may be unable to source investment opportunities at attractive prices and deploy capital into value enhancing and earnings accretive investments.
The Board aims to keep this risk to a minimum but matters outside of its control may have a negative impact. The Board continues to focus on having the right people and funding in place to take advantage of opportunities as they arise.
Development risk
Excessive capital could be allocated to activities which carry development risk. Developments may fail to deliver expected returns due to inconsistent timing with the economic cycle, adverse letting conditions, increased costs, planning or construction delays, contractor failure or other supply chain interruption.
The Board is willing to take some speculative development and planning risk if it represents a relatively small proportion of the overall portfolio and is supported by robust research into tenant demand and where there is a high likelihood of planning approval.
Valuation risk
Property values may not be realised. This risk is inherent to the property industry.
Transaction and tenant risk
Acquisitions and asset management initiatives may be inconsistent with strategy and due diligence undertaken may be inadequate. Tenant default and failure to let vacant assets may impact earnings and, if material, could reduce dividend cover and put pressure on loan covenants.
The Board's appetite for risks arising out of poor due diligence processes on investment, divestment and lettings is low. The Board is willing to accept a higher degree of risk in relation to tenant covenant strength and unexpired lease term on urban logistics assets where there is high occupational demand, redevelopment opportunity or alternative site use.
Financing risks
Financing risks relate to how business funds its operations.
Capital and finance risk
The Group may have insufficient funds and credit available to it to enable it to fund investment opportunities and implement strategy.
The Board has no appetite for imprudently low levels of available headroom in its reserves or credit lines. It accepts a low degree of market standard inflexibility in return for the availability of credit and has some appetite for interest rate risk. Loans are not fully hedged. This follows cost benefit analysis and takes into account that loans are not fully drawn all the time.
Group income statement
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
Note GBP000 GBP000 GBP000
-------------------------------------- ---- ------------- ------------- ---------
Gross revenue 3 43,302 41,443 83,709
-------------------------------------- ---- ------------- ------------- ---------
Gross rental income 42,355 40,634 81,988
Property operating expenses (505) (401) (828)
-------------------------------------- ---- ------------- ------------- ---------
Net rental income 41,850 40,233 81,160
Property advisory fee income 947 809 1,721
-------------------------------------- ---- ------------- ------------- ---------
Net income 42,797 41,042 82,881
Administrative costs (6,871) (6,735) (13,800)
Profit on revaluation of investment
properties 8 53,646 50,044 114,723
Loss on sale of investment properties (873) (5,796) (2,139)
Share of (loss)/profit of joint
ventures 9 (195) 5,419 13,655
-------------------------------------- ---- ------------- ------------- ---------
Operating profit 88,504 83,974 195,320
Finance income 159 178 415
Finance costs 4 (9,374) (4,541) (9,685)
---------
Profit before tax 79,289 79,611 186,050
Taxation 5 (22) (18) (32)
-------------------------------------- ---- ------------- ------------- ---------
Profit for the period and total
comprehensive income 79,267 79,593 186,018
-------------------------------------- ---- ------------- ------------- ---------
Earnings per share
Basic 7 11.4p 11.5p 26.9p
-------------------------------------- ---- ------------- ------------- ---------
Fully diluted 7 11.3p 11.5p 26.9p
-------------------------------------- ---- ------------- ------------- ---------
EPRA (basic and fully diluted) 7 4.4p 4.2p 8.5p
-------------------------------------- ---- ------------- ------------- ---------
All amounts relate to continuing activities.
Group balance sheet
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
Note GBP000 GBP000 GBP000
--------------------------------- ---- ------------- -------------- ---------
Non current assets
Investment properties 8 1,756,250 1,532,905 1,677,555
Investment in equity accounted
joint ventures 9 110,643 113,856 117,646
Derivative financial instruments 13 2,405 - 2,836
Other tangible assets 62 287 73
---------
1,869,360 1,647,048 1,798,110
Current assets
Trade and other receivables 10 9,633 55,208 2,344
Cash and cash equivalents 11 30,697 31,554 26,162
--------------------------------- ---- ------------- -------------- ---------
40,330 86,762 28,506
--------------------------------- ---- ------------- -------------- ---------
Total assets 1,909,690 1,733,810 1,826,616
--------------------------------- ---- ------------- -------------- ---------
Current liabilities
Trade and other payables 12 32,502 34,012 33,576
Non current liabilities
Borrowings 13 678,609 622,985 643,551
Derivative financial instruments 13 - 12,885 -
--------------------------------- ---- ------------- -------------- ---------
678,609 635,870 643,551
--------------------------------- ---- ------------- -------------- ---------
Total liabilities 711,111 669,882 677,127
--------------------------------- ---- ------------- -------------- ---------
Net assets 1,198,579 1,063,928 1,149,489
--------------------------------- ---- ------------- -------------- ---------
Equity
Called up share capital 14 69,783 69,461 69,722
Share premium 15 97,121 91,946 96,079
Capital redemption reserve 15 9,636 9,636 9,636
Other reserve 15 222,703 223,462 222,502
Retained earnings 15 799,336 669,423 751,550
--------------------------------- ---- ------------- -------------- ---------
Equity shareholders' funds 1,198,579 1,063,928 1,149,489
--------------------------------- ---- ------------- -------------- ---------
Net asset value per share 7 172.5p 153.8 165.7p
EPRA net asset value per share 7 172.1p 155.7 165.2p
--------------------------------- ---- ------------- -------------- ---------
Group statement of changes in equity
Six months ended 30 September 2018 (Unaudited)
Capital
Share Share redemption Other Retained
capital premium reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 1 April 2018 69,722 96,079 9,636 222,502 751,550 1,149,489
Profit for the period
and total comprehensive
income - - - - 79,267 79,267
Purchase of shares
held in trust - - - (3,773) - (3,773)
Vesting of shares
held in trust - - - 3,974 (3,662) 312
Share-based awards - - - - 1,329 1,329
Dividends 6 61 1,042 - - (29,148) (28,045)
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 30 September 2018 69,783 97,121 9,636 222,703 799,336 1,198,579
------------------------- ---- -------- -------- ----------- -------- --------- ---------
Year ended 31 March 2018 (Audited)
Capital
Share Share redemption Other Retained
capital premium reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 1 April 2017 69,238 88,548 9,636 221,374 618,119 1,006,915
Profit for the year
and total comprehensive
income - - - - 186,018 186,018
Purchase of shares
held in trust - - - (2,783) - (2,783)
Vesting of shares
held in trust - - - 3,911 (3,635) 276
Share-based awards - - - - 2,420 2,420
Dividends 6 484 7,531 - - (51,372) (43,357)
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 31 March 2018 69,722 96,079 9,636 222,502 751,550 1,149,489
------------------------- ---- -------- -------- ----------- -------- --------- ---------
Six months ended 30 September 2017 (Unaudited)
Capital
Share Share redemption Other Retained
capital premium reserve reserve earnings Total
Note GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 1 April 2017 69,238 88,548 9,636 221,374 618,119 1,006,915
Profit for the period
and total comprehensive
income - - - - 79,593 79,593
Purchase of shares
held in trust - - - (1,823) - (1,823)
Vesting of shares
held in trust - - - 3,911 (3,635) 276
Share-based awards - - - - 1,072 1,072
Dividends 6 223 3,398 - - (25,726) (22,105)
------------------------- ---- -------- -------- ----------- -------- --------- ---------
At 30 September 2017 69,461 91,946 9,636 223,462 669,423 1,063,928
------------------------- ---- -------- -------- ----------- -------- --------- ---------
Group cash flow statement
Unaudited Unaudited Audited
Six months to Six months to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------------------------- -------------- -------------- ---------
Cash flows from operating activities
Profit before tax 79,289 79,611 186,050
Adjustments for non-cash items:
Profit on revaluation of investment properties (53,646) (50,044) (114,723)
Loss on sale of investment properties 873 5,796 2,139
Share of post-tax loss/(profit) of joint ventures 195 (5,419) (13,655)
Movement in lease incentives 5,904 1,886 (1,975)
Share-based payment 1,329 1,072 2,420
Net finance costs 9,215 4,363 9,270
------------------------------------------------------------- -------------- -------------- ---------
Cash flows from operations before changes in working capital 43,159 37,265 69,526
Change in trade and other receivables (4,861) (2,497) 1,730
Change in trade and other payables (7,099) (5,848) (2,859)
------------------------------------------------------------- -------------- -------------- ---------
Cash flows from operations 31,199 28,920 68,397
Interest received 42 20 52
Interest paid (7,918) (8,254) (16,409)
Tax received/(paid) 348 266 (17)
Cash flows from operating activities 23,671 20,952 52,023
------------------------------------------------------------- -------------- -------------- ---------
Investing activities
Purchase of investment properties (118,004) (209,541) (306,245)
Capital expenditure on investment properties (13,327) (33,699) (56,199)
Lease incentives paid (2,136) (1,631) (3,049)
Sale of investment properties 105,516 88,306 183,780
Investments in joint ventures (8,315) (8,321) (12,662)
Distributions from joint ventures 15,123 7,451 16,238
------------------------------------------------------------- -------------- -------------- ---------
Cash flows from investing activities (21,143) (157,435) (178,137)
------------------------------------------------------------- -------------- -------------- ---------
Financing activities
Dividends paid (28,045) (22,105) (43,357)
Purchase of shares held in trust (3,773) (1,823) (2,783)
Vesting of shares held in trust 312 276 276
New borrowings and amounts drawndown 195,000 285,000 397,237
Repayment of loan facilities (160,000) (128,170) (220,407)
Financial arrangement fees and break costs (1,487) (8,085) (21,634)
Cash flows from financing activities 2,007 125,093 109,332
------------------------------------------------------------- -------------- -------------- ---------
Net increase/(decrease) in cash and cash equivalents 4,535 (11,390) (16,782)
Opening cash and cash equivalents 26,162 42,944 42,944
------------------------------------------------------------- -------------- -------------- ---------
Closing cash and cash equivalents 30,697 31,554 26,162
------------------------------------------------------------- -------------- -------------- ---------
Notes to the financial statements
1. Basis of preparation and general information
Basis of preparation
The condensed consolidated financial information included in this Half Year Report has been prepared in accordance with the Disclosure Guidance and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting', as adopted by the European Union. The current period information presented in this document is reviewed but unaudited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The financial information for the year to 31 March 2018 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006. A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) or (3) of the Companies Act 2006.
The same accounting policies, estimates, presentation and methods of computation are followed in the Half Year Report as those applied in the Group's annual financial statements for the year to 31 March 2018, except for a number of new standards and amendments to IFRSs that became effective for the financial year beginning 1 April 2018 as noted below:
IFRS 9 Financial Instruments
---------------------------------------------------------------------------------------------------------------------
Nature of change IFRS 9 addresses the classification and measurement of financial assets and liabilities, introduces
a new impairment model for financial assets and new rules for hedge accounting.
The Group has elected to apply IFRS 9 without restating comparatives, as permitted under the
transitional provisions within IFRS 9.
---------------- ---------------------------------------------------------------------------------------------------
Impact The main impact to the Group is in relation to the impairment of trade receivables and the
assessment of expected credit losses as opposed to incurred credit losses under IAS 39. The
expected credit loss model requires the Group to account for expected credit losses and changes
in those expected credit losses at each reporting date to reflect changes in credit risk since
initial recognition of the financial asset. It is no longer necessary for a credit event to
have occurred before credit losses are recognised.
We have performed an assessment of the Group's trade receivables at 30 September 2018 for
impairment in accordance with the requirements of IFRS 9. We have based our estimate of expected
credit losses on past experience of incurred credit losses and the trade debtor's current
financial condition and have specifically provided against receivables where there is no realistic
prospect of recovery, which at the half year amounted to GBP43,000. In addition to this, a
credit loss allowance of GBP140,000 has been recognised against trade receivables at the half
year.
Changes to debt modification rules for non-substantial modifications may result in a gain
or loss being recognised in the profit and loss equal to the difference in the present value
of cash flows under the original and modified terms of the debt, discounted at the effective
interest rate. We have reviewed debt modifications made in the previous year as a result of
refinancing our secured facility with Helaba and have concluded that there is no material
impact on the financial statements at transition.
IFRS 15 Revenue from Contracts with Customers
---------------------------------------------------------------------------------------------------------------------
Nature of change IFRS 15 is based on the principle that revenue is recognised when control of a good or service
transfers to a customer.
The Group has elected to apply IFRS 15 without restating comparatives, as permitted under
the transitional provisions within IFRS 15.
---------------- ---------------------------------------------------------------------------------------------------
Impact IFRS 15 does not apply to rental income which, at 30 September 2018, accounted for 98% of
total gross revenue of the Group, but does apply to management fees and surrender premiums
receivable. Management fees are recognised in the accounting period in which the service is
rendered. Surrender premiums receivable are recognised on completion of the surrender.
----------------
The standard also affects the timing of recognising property transactions. The Group's accounting
policy has been amended to recognise property transactions at the point of completion, which
is the point at which control of the property passes, rather than on unconditional exchange
of contracts, which was the point at which significant risks and rewards were transferred
under the previous accounting standard.
---------------- ---------------------------------------------------------------------------------------------------
In addition, 'Amendments to IFRS 2 Share Based Payments' and 'Amendments to IAS 40 Investment Property' came into effect during the period and have not had a significant impact on the accounting policies, method of computation or presentation in the condensed financial statements.
The following new standard has been issued but is not yet effective and has therefore not been adopted by the Group:
IFRS 16 Leases
----------------------------------------------------------------------------------------------------------------------
Nature of change IFRS 16 was issued in January 2016. It will result in almost all leases being recognised on
the balance sheet for a lessee, as the distinction between operating and finance leases is
removed. Under the new standard, an asset (the right to use the leased item) and a
financial
liability to pay rentals are recognised. The accounting for lessors will not significantly
change.
------------------------- -------------------------------------------------------------------------------------------
Impact The standard does not impact the accounting for the rental income earned by the Group as
lessor
as it scopes out leases of investment properties.
-------------------------
Management has performed an assessment of the impact of bringing operating leases on
balance
sheet based on leases held at 30 September 2018. IFRS 16 is estimated to have an immaterial
impact to the Group.
------------------------- -------------------------------------------------------------------------------------------
Date of adoption by Group Mandatory for the first time in the financial year commencing 1 April 2019. The Group does
not intend to adopt the standard before its effective date.
------------------------- -------------------------------------------------------------------------------------------
These condensed financial statements were approved and authorised for issue by the Board of Directors on 27 November 2018.
Going concern
The Group's business activities, together with the factors affecting its performance, position and future development are set out in the CEO's Overview and Property Review. The finances of the Group, its liquidity position and borrowing facilities are set out in the Financial Review.
The Directors have reviewed the current and projected financial position of the Group, making reasonable assumptions about future trading performance. As part of the review the Directors have considered the Group's cash balances, debt requirements and the maturity profile of its undrawn facilities. On the basis of this review, and after making due enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.
2. Segmental information
Property value
Unaudited Unaudited Audited
30 September 30 September 31 March
100% owned Share of JV 2018 2017 2018
GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ----------- ------------- ------------- ---------
Distribution 1,339,810 9,702 1,349,512 1,074,050 1,233,081
Convenience &
leisure 141,420 - 141,420 184,895 174,700
Long income 111,310 133,961 245,271 219,520 220,830
Retail parks 117,010 - 117,010 136,095 139,775
Residential 1,780 17,962 19,742 35,123 30,139
Development 44,920 4,125 49,045 55,360 43,485
1,756,250 165,750 1,922,000 1,705,043 1,842,010
-------------- ---------- ----------- ------------- ------------- ---------
Gross rental income
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
100% owned Share of JV 2018 2017 2018
GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ----------- ------------- ------------- ---------
Distribution 31,298 305 31,603 28,072 58,250
Convenience &
leisure 4,465 - 4,465 5,270 10,281
Long income 3,064 5,048 8,112 5,936 13,433
Retail parks 3,493 - 3,493 3,495 7,044
Office - - - 2,007 2,007
Residential 35 196 231 354 675
Development - - - - 92
42,355 5,549 47,904 45,134 91,782
-------------- ---------- ----------- ------------- ------------- ---------
Net rental income
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
100% owned Share of JV 2018 2017 2018
GBP000 GBP000 GBP000 GBP000 GBP000
-------------- ---------- ----------- ------------- ------------- ---------
Distribution 30,978 306 31,284 28,124 58,169
Convenience &
leisure 4,392 - 4,392 5,156 10,108
Long income 3,034 4,843 7,877 5,874 13,257
Retail parks 3,407 - 3,407 3,272 6,653
Office - - - 1,920 1,904
Residential 37 75 112 191 376
Development 2 - 2 (2) 86
41,850 5,224 47,074 44,535 90,553
-------------- ---------- ----------- ------------- ------------- ---------
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 United Kingdom and no geographical split is provided in information reported to the Board.
3. Gross revenue
Unaudited
Unaudited Six months Audited
Six months to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------- -------------- ------------- ---------
Gross rental income 42,355 40,634 81,988
Property advisory fee income 947 809 1,721
----------------------------- -------------- ------------- ---------
43,302 41,443 83,709
----------------------------- -------------- ------------- ---------
For the six months to 30 September 2018, 12% of the Group's gross rental income was receivable from one tenant. For the comparative periods to 30 September 2017 and 31 March 2018, 13% and 12% respectively of the Group's gross rental income was receivable from one tenant.
4. Finance costs
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------------- ------------- ------------- ---------
Interest payable on bank loans and
related derivatives 7,936 7,730 15,530
Debt and hedging early close out costs 6 6,367 18,981
Amortisation of loan issue costs 692 685 1,350
Commitment fees and other finance
costs 847 869 1,705
----------------------------------------- ------------- ------------- ---------
Total borrowing costs 9,481 15,651 37,566
Less amounts capitalised on developments (538) (645) (1,695)
----------------------------------------- ------------- ------------- ---------
Net borrowing costs 8,943 15,006 35,871
Fair value loss/(profit) on derivatives 431 (10,465) (26,186)
----------------------------------------- ------------- ------------- ---------
9,374 4,541 9,685
----------------------------------------- ------------- ------------- ---------
Debt and hedging break costs in the Cash flow statement have been classified within financing activities and prior period comparatives have been amended accordingly.
5. Taxation
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------- ------------- ------------- ---------
Current tax charge on profit 22 18 32
----------------------------- ------------- ------------- ---------
The current tax charge relates to income tax charged to non-resident landlords on property rental income in the Isle of Man. As the Group is a UK-REIT there is no provision for deferred tax arising on the revaluation of properties or other temporary differences.
6. Dividends
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
---------------------------------------- ------------- ------------- ---------
Ordinary dividends paid
2017 Third quarterly Interim dividend:
1.8p per share - 11,269 11,269
2017 Fourth quarterly Interim dividend:
2.1p per share - 14,457 14,457
2018 First quarterly Interim dividend:
1.85p per share - - 12,817
2018 Second quarterly Interim dividend:
1.85p per share - - 12,829
2018 Third quarterly interim dividend:
1.85p per share 12,837 - -
2018 Fourth quarterly interim dividend:
2.35p per share 16,311 - -
---------------------------------------- ------------- ------------- ---------
29,148 25,726 51,372
---------------------------------------- ------------- ------------- ---------
Unaudited
Six months
to
30 September
2018
GBP000
---------------------------------------- -------------
Ordinary dividends payable
2019 First quarterly interim dividend:
1.9p per share 13,206
2019 Second quarterly interim dividend:
1.9p per share 13,212
---------------------------------------- -------------
The Company paid its first quarterly interim dividend in respect of the current financial year of 1.9p per share, wholly as a Property Income Distribution (PID), on 5 October 2018 to ordinary shareholders on the register at the close of business on 31 August 2018.
The second quarterly interim dividend for 2019 of 1.9p per share will be paid on 10 January 2019, wholly as a PID, to ordinary shareholders on the register at the close of business on 7 December 2018. A scrip dividend alternative will be offered to shareholders as it was for the first quarterly dividend payment.
Neither dividend has been included as a liability in these accounts. Both dividends will be recognised as an appropriation of retained earnings in the six months to 31 March 2019.
During the period the Company issued 618,041 ordinary shares under the terms of the Scrip Dividend Scheme, which reduced the cash dividend payment by GBP1.1 million to GBP28.0 million.
7. 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 performance of the property rental business.
The earnings per share calculation uses the weighted average number of ordinary shares during the period and excludes the average number of shares held by the Employee Benefit Trust for the period.
The net asset per share calculation uses the number of shares in issue at the period end and excludes the actual number of shares held by the Employee Benefit Trust at the period end.
a) EPRA Earnings
EPRA earnings for the Group and its share of joint ventures are detailed as follows:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
Group JV 2018 2017 2018
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- ------- ------- ------------- ------------- ---------
Gross rental income 42,355 5,549 47,904 45,134 91,782
Property costs (505) (325) (830) (599) (1,229)
--------------------- ------- ------- ------------- ------------- ---------
Net income 41,850 5,224 47,074 44,535 90,553
Management fees 947 (409) 538 441 958
Administrative costs (6,871) (36) (6,907) (6,800) (13,906)
Net finance costs(1) (8,778) (1,030) (9,808) (9,375) (18,457)
Other (22) - (22) (18) (32)
EPRA earnings 27,126 3,749 30,875 28,783 59,116
--------------------- ------- ------- ------------- ------------- ---------
(1) Group net finance costs reflect net borrowing costs of GBP8,943,000 (note 4) less early close out costs of GBP6,000 (note 4) and finance income of GBP159,000.
The reconciliation of EPRA earnings to IFRS reported profit/(loss) can be summarised as follows:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
Group JV 2018 2017 2018
GBP000 GBP000 GBP000 GBP000 GBP000
---------------------------- ------- ------- ------------- ------------- ---------
EPRA earnings 27,126 3,749 30,875 28,783 59,116
Revaluation of investment
property 53,646 (2,600) 51,046 52,836 121,565
Fair value of derivatives (431) 41 (390) 10,604 26,420
Debt and hedging early
close out costs (6) - (6) (6,420) (19,057)
Loss on disposal (873) (1,385) (2,258) (6,210) (2,026)
IFRS reported profit/(loss) 79,462 (195) 79,267 79,593 186,018
---------------------------- ------- ------- ------------- ------------- ---------
b) Earnings per ordinary share
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
--------------------------- ------------- ------------- ---------
Basic and diluted earnings 79,267 79,593 186,018
EPRA adjustments(1) (48,392) (50,810) (126,902)
--------------------------- ------------- ------------- ---------
EPRA earnings 30,875 28,783 59,116
--------------------------- ------------- ------------- ---------
(1) Adjustments shown in table reconciling EPRA earnings with IFRS reported profit/(loss)
Unaudited Unaudited
Six months Six months Audited
to to Year to
Weighted average number of shares (in 30 September 30 September 31 March
thousands) 2018 2017 2018
---------------------------------------- ------------- ------------- ---------
Ordinary share capital 697,589 693,649 695,121
Shares held in employee benefit trust (2,394) (3,019) (2,983)
---------------------------------------- ------------- ------------- ---------
Weighted average number of ordinary
shares(1) 695,195 690,630 692,138
---------------------------------------- ------------- ------------- ---------
(1) Fully diluted weighted average number of ordinary shares at 30 September 2018 is 700,558,000, which includes the expected vesting of all outstanding share awards. There was no material difference in the fully diluted weighted average number of ordinary shares in the previous comparative periods
Basic earnings per share 11.4p 11.5p 26.9p
Fully diluted earnings per share 11.3p 11.5p 26.9p
EPRA earnings per share (basic and fully
diluted) 4.4p 4.2p 8.5p
c) Net assets per share
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------------ ------------- ------------- ---------
Equity shareholders' funds 1,198,579 1,063,928 1,149,489
Fair value of derivatives (2,405) 12,885 (2,836)
Fair value of joint ventures' derivatives (91) 90 (43)
EPRA net asset value 1,196,083 1,076,903 1,146,610
------------------------------------------ ------------- ------------- ---------
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
Number of shares (in thousands) 2018 2017 2018
-------------------------------------- ------------- ------------- ---------
Ordinary share capital 697,834 694,613 697,216
Shares held in employee benefit trust (2,807) (2,777) (3,323)
-------------------------------------- ------------- ------------- ---------
Number of ordinary shares 695,027 691,836 693,893
-------------------------------------- ------------- ------------- ---------
Basic net asset value per share 172.5p 153.8p 165.7p
EPRA net asset value per share 172.1p 155.7p 165.2p
8. Investment properties
Unaudited Audited
30 September 31 March
Completed Under development 2018 Completed Under development 2018
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------- --------- ----------------- ------------- --------- ----------------- ---------
Opening balance 1,634,995 42,560 1,677,555 1,346,085 27,315 1,373,400
Acquisitions 109,277 8,907 118,184 274,562 32,064 306,626
Capital expenditure 10,082 6,916 16,998 20,236 29,584 49,820
Disposals (105,865) (500) (106,365) (172,038) - (172,038)
Property transfers 20,965 (20,965) - 60,366 (60,366) -
Revaluation movement 45,652 7,994 53,646 101,353 13,370 114,723
Tenant incentives (3,776) 8 (3,768) 4,431 593 5,024
--------------------- --------- ----------------- ------------- --------- ----------------- ---------
1,711,330 44,920 1,756,250 1,634,995 42,560 1,677,555
--------------------- --------- ----------------- ------------- --------- ----------------- ---------
Investment properties are held at fair value as at 30 September 2018 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 30 September 2018 was GBP52.9 million (30 September 2017: GBP79.6 million, 31 March 2018: GBP89.9 million).
The valuations have been prepared in accordance with the RICS Valuation - Professional Standards 2014 on the basis of fair value. There has been no change in the valuation technique in the period.
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 GBP116.9 million (30 September 2017: GBP90.7 million, 31 March 2018: GBP101.4 million). All other properties are freehold.
Included within the investment property valuation is GBP66.6 million (30 September 2017: GBP65.1 million, 31 March 2018: GBP70.3 million) in respect of lease incentives and rent free periods.
The historical cost of all of the Group's investment properties at 30 September 2018 was GBP1,362.9 million (30 September 2017: GBP1,251.8 million, 31 March 2018: GBP1,328.8 million).
Capital commitments have been entered into amounting to GBP27.6 million (30 September 2017: GBP51.3 million, 31 March 2018: GBP47.5 million) which have not been provided for in the financial statements.
Internal staff costs of the development team of GBP0.9 million (30 September 2017: GBP0.9 million, 31 March 2018: GBP1.8 million) have been capitalised in the period, being directly attributable to the development projects in progress.
Forward funded development costs of GBP6.6 million (30 September 2017: GBP2.4 million, 31 March 2018 GBP9.8 million) have been classified within investment property as acquisitions.
9. Investment in joint ventures
At 30 September 2018 the following principal property interests, being jointly-controlled entities, have been equity accounted for in these financial statements:
Country of
Incorporation
or Registration(1) Property Sector Group Share
----------------------------------- -------------------- --------------------------- -----------
Metric Income Plus Partnership England Long income 50.0%
LMP Retail Warehouse JV PUT Guernsey Long income & distribution 45.0%
LSP London Residential Investments
Ltd Guernsey Residential 40.0%
----------------------------------- -------------------- --------------------------- -----------
(1) The registered address for entities incorporated in England is One Curzon Street, London, W1J 5HB. The registered address for entities incorporated in Guernsey is Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3AP.
The principal activity of 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 a forward funded development in Telford for GBP4.0 million (Group share: GBP2.0 million) and three further investment assets for GBP17.4 million (Group share: GBP8.7 million) in the period.
LSP London Residential Investments Limited disposed of 13 residential flats at Moore House for GBP20.2 million (Group share: GBP8.1 million) in the period.
At 30 September 2018, the freehold and leasehold investment properties were externally valued by CBRE and Savills.
The valuation of property held for sale by joint ventures at 30 September 2018 was GBP6.1 million (Group share: GBP2.9 million) (30 September 2017: GBP14.7 million (Group share: GBP6.2 million), 31 March 2018: GBP21.9 million (Group share: GBP8.8 million)).
The movement in the carrying value of joint venture interests in the period is summarised as follows:
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
------------------------------------- ------------- ------------- ---------
Opening balance 117,646 107,567 107,567
Additions at cost 8,315 8,321 12,662
Share of (loss)/profit in the period (195) 5,419 13,655
Disposals (3,230) (2,907) (3,964)
Profit distributions received (11,893) (4,544) (12,274)
------------------------------------- ------------- ------------- ---------
Closing balance 110,643 113,856 117,646
------------------------------------- ------------- ------------- ---------
The Group's share of the profit after tax and net assets of its joint ventures is as follows:
LMP LSP
Metric Retail London Unaudited Unaudited
Income Plus Warehouse Residential 30 September 30 September
Partnership JV PUT Investments 2018 2018
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Summarised income statement 100% 100% 100% 100% Group share
Gross rental income 7,233 3,856 490 11,579 5,549
Property costs (403) (3) (304) (710) (325)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Net rental income 6,830 3,853 186 10,869 5,224
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Administrative costs (19) (23) (41) (83) (36)
Management fees (535) (151) (185) (871) (409)
Revaluation (1,747) (1,028) (3,160) (5,935) (2,600)
Finance income 120 - 1 121 60
Finance cost (1,344) (928) - (2,272) (1,090)
Derivative movement 82 (1) - 81 41
Loss on disposal - - (3,461) (3,461) (1,385)
Profit/(loss) after tax 3,387 1,722 (6,660) (1,551) (195)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of profit/(loss) after tax 1,694 775 (2,664) (195)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
EPRA adjustments
Revaluation 1,747 1,028 3,160 5,935 2,600
Derivative movement (82) 1 - (81) (41)
Loss on disposal - - 3,461 3,461 1,385
EPRA earnings 5,052 2,751 (39) 7,764 3,749
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of EPRA earnings 2,526 1,238 (15) 3,749
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Summarised balance sheet
Investment properties 207,480 97,840 44,905 350,225 165,750
Other current assets 585 - 141 726 349
Cash 10,898 2,334 2,171 15,403 7,369
Current liabilities (3,588) (826) (290) (4,704) (2,286)
Bank debt (80,518) (46,619) - (127,137) (61,247)
Unamortised finance costs 1,055 198 - 1,253 617
Derivative financial instruments 182 - - 182 91
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Net assets 136,094 52,927 46,927 235,948 110,643
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of net assets 68,047 23,825 18,771 110,643
--------------------------------------- ------------ ---------- ------------ ------------- -------------
LMP LSP
Metric Retail London Unaudited Unaudited
Income Plus Warehouse Residential 30 September 30 September
Partnership JV PUT Investments 2017 2017
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Summarised income statement 100% 100% 100% 100% Group share
Gross rental income 5,604 4,426 809 10,839 4,500
Property costs (66) (5) (410) (481) (198)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Net rental income 5,538 4,421 399 10,358 4,302
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Administrative costs (75) (33) (40) (148) (65)
Management fees (425) (172) (255) (852) (368)
Revaluation 7,757 1,099 (3,952) 4,904 2,792
Finance income - - 2 2 1
Finance cost (1,285) (1,017) (11) (2,313) (968)
Derivative movement 282 (4) - 278 139
Loss on disposal (15) (385) (622) (1,022) (414)
Profit/(loss) after tax 11,777 3,909 (4,479) 11,207 5,419
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of profit/(loss) after tax 5,888 1,322 (1,791) 5,419
--------------------------------------- ------------ ---------- ------------ ------------- -------------
EPRA adjustments
Revaluation (7,757) (1,099) 3,952 (4,904) (2,792)
Derivative movement (282) 4 - (278) (139)
Loss on disposal 15 385 622 1,022 414
Debt and hedging early close out costs - 144 11 155 53
--------------------------------------- ------------ ---------- ------------ ------------- -------------
EPRA earnings 3,753 3,343 106 7,202 2,955
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of EPRA earnings 1,877 1,036 42 2,955
LMP LSP
Metric Retail London Audited Audited
Income Plus Warehouse Residential 31 March 31 March
Partnership JV PUT Investments 2018 2018
GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Summarised balance sheet 100% 100% 100% 100% Group share
Investment properties 183,355 98,630 70,935 352,920 164,455
Other current assets 351 37 208 596 272
Cash 21,682 1,142 4,434 27,258 13,128
Current liabilities (3,002) (950) (290) (4,242) (2,043)
Bank debt (75,900) (46,619) - (122,519) (58,938)
Unamortised finance costs 1,169 321 - 1,490 729
Derivative financial instruments 85 - - 85 43
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Net assets 127,740 52,561 75,287 255,588 117,646
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of net assets 63,870 23,661 30,115 117,646
--------------------------------------- ------------ ---------- ------------ ------------- -------------
10. Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
--------------------------------------- ------------- ------------- ---------
Trade receivables 5,690 2,102 776
Amounts receivable from property sales 851 48,861 10
Prepayments and accrued income 1,360 4,021 1,443
Other receivables 1,732 224 115
--------------------------------------- ------------- ------------- ---------
9,633 55,208 2,344
--------------------------------------- ------------- ------------- ---------
All amounts fall due for payment in less than one year. Trade receivables comprise rental income which is due on contractual payment dates with no credit period.
At 30 September 2018 there were trade receivables of GBP43,000 which were overdue and considered at risk (30 September 2017: GBP8,300, 31 March 2018: GBP2,200).
In addition to these specific provisions and in accordance with IFRS 9, an impairment provision of GBP140,000 has been made against trade receivables based on expected credit losses.
11. Cash and cash equivalents
Cash and cash equivalents include GBP3.9 million (30 September 2017: GBP4.7 million, 31 March 2018: GBP5.3 million) retained in rent and restricted accounts which are not readily available to the Group for day to day commercial purposes.
12. Trade and other payables
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
----------------------------------------- ------------- ------------- ---------
Trade payables 2,445 6,472 2,582
Amounts payable on property acquisitions
and disposals 2,218 3,096 1,173
Rent received in advance 15,757 13,857 15,973
Accrued interest 803 1,140 785
Other payables 1,877 1,939 4,139
Other accruals and deferred income 9,402 7,508 8,924
----------------------------------------- ------------- ------------- ---------
32,502 34,012 33,576
----------------------------------------- ------------- ------------- ---------
The Group has financial risk management policies in place to ensure that all payables are settled within the required credit timeframe.
13. Borrowings
Unaudited Unaudited Audited
30 September 30 September 31 March
2018 2017 2018
GBP000 GBP000 GBP000
-------------------------- ------------- ------------- ---------
Secured Bank loans 130,000 130,000 130,000
Unsecured Bank loans 555,000 500,000 520,000
Unamortised finance costs (6,391) (7,015) (6,449)
-------------------------- ------------- ------------- ---------
678,609 622,985 643,551
-------------------------- ------------- ------------- ---------
Certain bank loans at 30 September 2018 are secured by fixed charges over Group investment properties with a carrying value of GBP365.1 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 30 September 2018 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- --------- ---------- ----------- ----------- -------
Bank loans 18,186 18,236 477,308 254,763 768,493
Derivative financial instruments 984 905 1,356 - 3,245
--------------------------------- --------- ---------- ----------- ----------- -------
19,170 19,141 478,664 254,763 771,738
--------------------------------- --------- ---------- ----------- ----------- -------
Less than One to Two to More than
one year two years five years five years Total
As at 31 March 2018 GBP000 GBP000 GBP000 GBP000 GBP000
--------------------------------- --------- ---------- ----------- ----------- -------
Bank loans 16,047 16,091 426,590 270,587 729,315
Derivative financial instruments 1,000 1,244 2,439 - 4,683
--------------------------------- --------- ---------- ----------- ----------- -------
17,047 17,335 429,029 270,587 733,998
--------------------------------- --------- ---------- ----------- ----------- -------
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.
Details of the fair value of the Group's derivative financial instruments that were in place at 30 September 2018 are provided below:
Average rate Notional amount Fair value
----------------------------- ----------------------------- -----------------------------
Audited Audited Audited
Unaudited 31 March Unaudited 31 March Unaudited 31 March
30 September 2018 2018 30 September 2018 2018 30 September 2018 2018
Interest rate caps - expiry % % GBP000 GBP000 GBP000 GBP000
---------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Less than one year 3.0 2.0 10,000 100,000 - -
One to two years - 3.0 - 10,000 - -
Two to five years 2.0 2.0 19,620 19,620 50 74
---------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
2.3 2.1 29,620 129,620 50 74
---------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Average rate Notional amount Fair value
----------------------------- ----------------------------- -----------------------------
Audited Audited Audited
Unaudited 31 March Unaudited 31 March Unaudited 31 March
30 September 2018 2018 30 September 2018 2018 30 September 2018 2018
Interest rate swaps - expiry % % GBP000 GBP000 GBP000 GBP000
----------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Less than one year 2.0 0.6 10,000 50,000 (76) 18
One to two years - 2.0 - 10,000 - (122)
Two to five years 1.1 1.3 350,000 425,000 2,431 2,866
1.1 1.3 360,000 485,000 2,355 2,762
----------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Total fair value 2,405 2,836
----------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
All derivative financial instruments are non-current interest rate derivatives and are carried at fair value following a valuation as at 30 September 2018 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.
14. Share capital
Unaudited Unaudited Audited Audited
30 September 30 September 31 March 31 March
2018 2018 2018 2018
Number GBP000 Number GBP000
---------------------------- ------------- ------------- ----------- ---------
Issued, called up and fully
paid
Ordinary shares of 10p each 697,834,237 69,783 697,216,196 69,722
---------------------------- ------------- ------------- ----------- ---------
In June 2018, the Company granted options over 2,125,515 ordinary shares under its Long Term Incentive Plan.
In addition, 2,017,875 ordinary shares in the Company that were granted to certain Directors and employees under the Company's Long Term Incentive Plan in 2015 vested along with 574,242 ordinary shares in the Director's Deferred Bonus Plan. The share price on vesting was 187.63p.
The Company issued 618,041 ordinary shares in the period under the terms of its Scrip Dividend Scheme.
15. Reserves
The following describes the nature and purpose of each reserve within equity:
Share capital The nominal value of shares issued.
------------------ --------------------------------------------------------
Share premium The premium paid for new ordinary shares issued
above the nominal value.
------------------ --------------------------------------------------------
Capital redemption Amounts transferred from share capital on redemption
reserve of issued ordinary shares.
------------------ --------------------------------------------------------
Other reserve 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 obligations
under share award schemes.
------------------ --------------------------------------------------------
The cumulative profits and losses after the payment
Retained earnings of dividends.
------------------ --------------------------------------------------------
16. Analysis of movement in net debt
Unaudited
30 September Audited
2018 31 March 2018
---------------------- ----------------- -------------------- ----------------- --------------------
Cash and Cash and
cash equivalents Borrowings Net debt cash equivalents Borrowings Net debt
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- ----------------- ---------- -------- ----------------- ---------- --------
Opening balance 26,162 643,551 617,389 42,944 466,319 423,375
Cash movement 4,535 35,000 30,465 (16,782) 176,830 193,612
Loan issue costs paid - (634) (634) - (948) (948)
Amortisation of loan
issue costs - 692 692 - 1,350 1,350
---------------------- ----------------- ---------- -------- ----------------- ---------- --------
Closing balance 30,697 678,609 647,912 26,162 643,551 617,389
---------------------- ----------------- ---------- -------- ----------------- ---------- --------
17. 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
-------------- -------------------------------------- ------------------------------
Unaudited Unaudited
Unaudited Unaudited Six months to Six months to
Six months to Six months to 30 September 30 September
30 September 2018 30 September 2017 2018 2017
Group interest GBP000 GBP000 GBP000 GBP000
LSP London Residential
Investments Ltd 40.0% 154 212 8,680 1,800
Metric Income Plus
Partnership 50.0% 642 425 2,601 1,863
LMP Retail Warehouse JV PUT 45.0% 151 172 612 881
---------------------------- -------------- ------------------ ------------------ -------------- --------------
947 809 11,893 4,544
---------------------------- -------------- ------------------ ------------------ -------------- --------------
Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation.
18. Events after the balance sheet date
Post period end, the Group has transacted on the following:
-- Acquisitions:
o A portfolio of eight convenience assets for GBP12.1 million;
o Distribution units in Basildon (GBP6.3 million) and Orpington (GBP7.8 million); and
o Two convenience assets in London, let to the Co-op, for GBP10.2 million.
-- Disposals:
o Distribution units in Leicester (GBP7.5 million) and Doncaster (GBP9.9 million); and
o A retail park in Ipswich for GBP22.0 million.
Directors' responsibility statement
The Directors are responsible for preparing the condensed set of financial statements, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:
-- This condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting', as adopted by the European Union; and
-- This condensed set of financial statements includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
By order of the Board
Andrew Jones
Chief Executive
Martin McGann
Finance Director
27 November 2018
Independent review report to LondonMetric Property Plc
We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2018 which comprises the Group income statement, the Group balance sheet, the Group statement of changes in equity, the Group cash flow statement and related notes 1 to 18. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the Company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the Company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting,' as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
DELOITTE LLP
Statutory Auditor
London, United Kingdom
27 November 2018
Supplementary information
i EPRA Summary table
30 September 30 September 31 March
2018 2017 2018
------------------------------------------- ------------ ------------ --------
EPRA earnings per share 4.4p 4.2p 8.5p
EPRA net asset value per share 172.1p 155.7p 165.2p
EPRA triple net asset value per share 172.5p 153.8p 165.7p
EPRA vacancy rate 5.6% 0.6% 2.5%
EPRA cost ratio (including vacant property
costs) 15% 15% 15%
EPRA cost ratio (excluding vacant property
costs) 14% 15% 15%
EPRA net initial yield 4.3% 4.4% 4.5%
EPRA 'topped up' net initial yield 4.6% 5.2% 4.9%
------------------------------------------- ------------ ------------ --------
The definition of these measures can be found in the Glossary.
ii EPRA proportionally consolidated income statement
For the six months to Group JV 2018 Group JV 2017 30 September GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 -------------------- ------- ------- --------- ------- ------- -------- Gross rental income 42,355 5,549 47,904 40,634 4,500 45,134 Property costs (505) (325) (830) (401) (198) (599) -------------------- ------- ------- --------- ------- ------- -------- Net rental income 41,850 5,224 47,074 40,233 4,302 44,535 Management fees 947 (409) 538 809 (368) 441 Administrative costs (6,871) (36) (6,907) (6,735) (65) (6,800) Net finance costs (8,778) (1,030) (9,808) (8,461) (914) (9,375) Other (22) - (22) (18) - (18) ==================== ======= ======= ========= ======= ======= ======== EPRA earnings 27,126 3,749 30,875 25,828 2,955 28,783 ==================== ======= ======= ========= ======= ======= ========
iii EPRA proportionally consolidated balance sheet
30 September 31 March
Group JV 2018 Group JV 2018
As at GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
---------------------- --------- -------- -------------- --------- -------- ---------
Investment property 1,756,250 165,750 1,922,000 1,677,555 164,455 1,842,010
Gross debt (685,000) (61,247) (746,247) (650,000) (58,938) (708,938)
Cash 30,697 7,369 38,066 26,162 13,128 39,290
Other net liabilities (16,416) (1,320) (17,736) (24,710) (1,042) (25,752)
---------------------- --------- -------- -------------- --------- -------- ---------
EPRA net assets 1,085,531 110,552 1,196,083 1,029,007 117,603 1,146,610
---------------------- --------- -------- -------------- --------- -------- ---------
Loan to value 37% 33% 37% 35% 28% 35%
Cost of debt 2.9% 3.4% 2.9% 2.7% 3.4% 2.8%
Undrawn facilities 93,750 9,741 103,491 53,750 12,050 65,800
---------------------- --------- -------- -------------- --------- -------- ---------
iv EPRA cost ratio
2018 2017
For the six months to 30 September GBP000 GBP000
--------------------------------------------------- ------- -------
Property operating expenses 505 401
Administrative costs 6,871 6,735
Share of joint venture property, administrative
and management costs 770 632
Less:
Joint venture property management fee income (947) (809)
Ground rents (58) (68)
--------------------------------------------------- ------- -------
Total costs including vacant property costs (A) 7,141 6,891
Group vacant property costs (291) (226)
Share of joint venture vacant property costs (85) (116)
--------------------------------------------------- ------- -------
Total costs excluding vacant property costs (B) 6,765 6,549
Gross rental income 42,355 40,634
Share of joint venture gross rental income 5,549 4,500
--------------------------------------------------- ------- -------
47,904 45,134
Less: Ground rents (58) (68)
--------------------------------------------------- ------- -------
Total gross rental income (C) 47,846 45,066
Total EPRA cost ratio (including vacant property
costs) (A)/(C) 15% 15%
Total EPRA cost ratio (excluding vacant property
costs) (B)/(C) 14% 15%
--------------------------------------------------- ------- -------
v EPRA net initial yield and 'topped up' net initial yield
30 September 31 March
2018 2018
As at GBP000 GBP000
--------------------------------------------------- ------------ ---------
Investment property - wholly-owned 1,756,250 1,677,555
Investment property - share of joint ventures 165,750 164,455
Less development properties (49,045) (43,485)
Less residential properties (19,742) (30,139)
--------------------------------------------------- ------------ ---------
Completed property portfolio 1,853,213 1,768,386
Allowance for:
Estimated purchasers' costs 126,018 120,250
Estimated costs to complete 16,308 30,848
--------------------------------------------------- ------------ ---------
EPRA property portfolio valuation (A) 1,995,539 1,919,484
--------------------------------------------------- ------------ ---------
Annualised passing rental income 78,247 78,378
Share of joint ventures 9,744 9,263
Less development properties (1,391) (1,198)
Less residential properties (190) (352)
--------------------------------------------------- ------------ ---------
Annualised net rents (B) 86,410 86,091
Contractual rental increases for rent free periods 5,036 6,247
Contractual rental increases for stepped rental
uplifts 1,100 1,685
--------------------------------------------------- ------------ ---------
'Topped up' net annualised rent (C) 92,546 94,023
--------------------------------------------------- ------------ ---------
EPRA net initial yield (B/A) 4.3% 4.5%
--------------------------------------------------- ------------ ---------
EPRA 'topped up' net initial yield (C/A) 4.6% 4.9%
--------------------------------------------------- ------------ ---------
vi EPRA vacancy rate
30 September 31 March
2018 2018
As at GBP000 GBP000
----------------------------------------------------- ------------ --------
Annualised estimated rental value of vacant premises 5,474 2,407
Portfolio estimated rental value(1) 97,194 95,808
----------------------------------------------------- ------------ --------
EPRA vacancy rate 5.6% 2.5%
----------------------------------------------------- ------------ --------
(1) Excludes residential and development properties
vii EPRA capital expenditure analysis
30 September 31 March
Group JV 2018 Group JV 2018
As at GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
======================= ========= ======= ============ ========= ======== =========
Opening valuation 1,677,555 164,455 1,842,010 1,373,400 160,428 1,533,828
Acquisitions 109,277 9,309 118,586 274,562 15,180 289,742
Developments(1) 15,823 2,904 18,727 61,648 848 62,496
Capital expenditure(2) 10,082 527 10,609 20,236 125 20,361
Disposals (106,365) (9,172) (115,537) (172,038) (18,937) (190,975)
Revaluation 53,646 (2,600) 51,046 114,723 6,842 121,565
Lease incentives (3,768) 327 (3,441) 5,024 (31) 4,993
======================= ========= ======= ============ ========= ======== =========
Closing valuation 1,756,250 165,750 1,922,000 1,677,555 164,455 1,842,010
======================= ========= ======= ============ ========= ======== =========
(1) Includes capitalised interest of GBP0.5 million (March 2018: GBP1.7 million) and capitalised staff costs of GBP0.9 million (March 2018: GBP1.8 million)
(2) Capital expenditure on completed properties
viii Total accounting return
30 September 30 September 31 March
2018 2017 2018
As at p/share p/share p/share
------------------------------- ------------ ------------ --------
EPRA net asset value per share
- at end of period 172.1 155.7 165.2
- at start of period 165.2 149.8 149.8
------------------------------- ------------ ------------ --------
Increase 6.9 5.9 15.4
Dividend paid 4.2 3.9 7.6
Net increase 11.1 9.8 23.0
------------------------------- ------------ ------------ --------
Total accounting return 6.7% 6.5% 15.4%
------------------------------- ------------ ------------ --------
ix Portfolio split and valuation
31 March
30 September
2018 2018
As at GBPm % GBPm %
------------------------------ ------- ------------ ------- --------
Mega distribution 513.8 26.7 500.8 27.2
Regional distribution 374.8 19.5 379.0 20.6
Urban logistics 460.9 24.0 353.3 19.1
------------------------------ ------- ------------ ------- --------
Distribution 1,349.5 70.2 1,233.1 66.9
------------------------------ ------- ------------ ------- --------
Convenience & leisure 141.4 7.4 174.7 9.5
Long income 245.3 12.8 220.8 12.0
Retail parks 117.0 6.1 139.8 7.6
Investment portfolio 1,853.2 96.5 1,768.4 96.0
============================== ======= ============ ======= ========
Development - distribution(1) 35.8 1.9 29.4 1.6
Development - retail(2) 13.2 0.6 14.1 0.8
Residential 19.8 1.0 30.1 1.6
============================== ======= ============ ======= ========
Total portfolio 1,922.0 100.0 1,842.0 100.0
============================== ======= ============ ======= ========
(1) Represents regional distribution of GBP24.9 million (1.3%) and urban logistics of GBP10.9 million (0.6%) at 30 September 2018
(2) Represents long income of GBP4.1 million (0.2%) and convenience and leisure of GBP9.1 million (0.4%) at 30 September 2018
x Investment portfolio yields
30 September 31 March
EPRA 2018 EPRA 2018
topped Equivalent topped up Equivalent
EPRA NIY up NIY yield EPRA NIY NIY yield
As at % % % % % %
--------------------- ---------- ------- ------------ ---------- ---------- ---------------
Distribution 3.9 4.3 5.0 4.3 4.6 5.3
Convenience &
leisure 4.9 5.0 5.4 4.7 4.9 5.3
Long income 5.7 5.9 5.5 5.6 5.9 5.5
Retail parks 5.3 5.7 5.7 4.5 5.6 5.6
Investment portfolio 4.3 4.6 5.2 4.5 4.9 5.3
--------------------- ---------- ------- ------------ ---------- ---------- ---------------
xi Investment portfolio - Key statistics
WAULT Average
Area WAULT to first rent
'000 sq to expiry break Occupancy GBP per
As at 30 September 2018 ft years years % sq ft
========================= ======== ========== ========= =========== =========
Distribution 11,212 12.0 11.3 91.8 6.00
Convenience & leisure 508 15.6 15.3 100.0 15.30
Long income 1,337 10.9 9.3 100.0 19.00
Retail parks 367 11.0 9.2 100.0 19.50
Investment portfolio 13,424 12.0 11.1 94.4 7.70
------------------------- -------- ---------- --------- ----------- ---------
xii Total property returns
All property All property All property
------------ ------------- ------------
30 September 30 September 31 March
2018 2017 2018
% % %
--------------- --- ------------ ------------- ------------
Capital return 2.9 3.3 7.9
Income return 2.5 2.8 5.5
-------------------- ------------ ------------- ------------
Total return 5.4 6.1 13.7
-------------------- ------------ ------------- ------------
xiii Contracted rental income
30 September 30 September 31 March
2018 2017 2018
As at GBPm GBPm GBPm
--------------------------- ------------ ------------ --------
Distribution 61.4 57.1 61.1
Convenience & leisure 7.8 10.4 9.4
Long income 15.5 14.5 13.9
Retail parks 7.1 8.4 8.4
Investment portfolio 91.8 90.4 92.8
=========================== ============ ============ ========
Development - distribution - 2.4 0.4
Development - retail(1) 1.4 0.5 0.8
--------------------------- ------------ ------------ --------
Commercial portfolio 93.2 93.3 94.0
--------------------------- ------------ ------------ --------
Residential 0.2 0.5 0.4
--------------------------- ------------ ------------ --------
Total portfolio 93.4 93.8 94.4
--------------------------- ------------ ------------ --------
(1) Represents long income of GBP0.3 million and convenience and leisure of GBP1.1 million at 30 September 2018
xiv Rent subject to expiry
Within Within Within Within Within Over
As at 30 September 3 years 5 years 10 years 15 years 20 years 20 years
2018 % % % % % %
---------------------- -------- -------- --------- --------- --------- ---------
Distribution 8.4 17.3 47.3 78.4 83.3 100.0
Convenience & leisure 4.0 4.0 24.3 29.8 89.1 100.0
Long income 1.8 10.0 37.8 88.7 97.2 100.0
Retail parks 1.1 1.1 43.4 87.9 100.0 100.0
Commercial portfolio 6.3 13.6 43.2 76.3 87.5 100.0
---------------------- -------- -------- --------- --------- --------- ---------
xv Contracted rent subject to RPI or fixed uplifts
30 September 31 March
2018 2018
GBPm % GBPm %
---------------------- ---- ------------ ---- --------
Distribution 36.6 59.6 34.6 56.2
Convenience & leisure 7.4 83.7 6.9 73.4
Long income 5.1 32.7 4.7 32.2
Retail parks 1.2 16.8 1.1 12.5
Commercial portfolio 50.3 54.0 47.3 50.3
---------------------- ---- ------------ ---- --------
xvi Top ten assets (by value)
WAULT
Area Contracted WAULT to first
'000 Rent Occupancy to expiry break
As at 30 September 2018 sq ft GBPm % years years
---------------------------- ------ ---------- ----------- ---------- ---------
Primark, Islip 1,062 5.6 100.0 22.0 22.0
Eddie Stobart, Dagenham 454 4.1 100.0 25.0 25.0
Primark, Thrapston 783 4.1 100.0 14.0 14.0
Dixons Carphone, Newark 726 4.4 100.0 14.8 14.8
Argos, Bedford 657 4.1 100.0 4.2 4.2
M&S, Sheffield 626 2.6 100.0 5.2 5.2
Amazon, Warrington 357 2.1 100.0 13.2 13.2
Wakefield 527 - - - -
Tesco, Croydon 191 1.9 100.0 9.6 9.6
Burlington Road, New Malden 51 1.9 100.0 13.0 8.6
---------------------------- ------ ---------- ----------- ---------- ---------
xvii Top ten occupiers
Contracted Contracted
rental income Market capitalisation rental income
As at 30 September 2018 GBPm GBPbn %
------------------------ -------------- --------------------- --------------
Primark(1) 9.7 18.9 10.4
Dixons Carphone 7.9 2.0 8.5
M&S 6.3 4.8 6.7
Argos(1) 4.2 6.9 4.5
Eddie Stobart 4.1 0.4 4.4
DFS 3.9 0.4 4.2
Odeon(1) 3.7 1.6 3.9
DHL(1) 3.1 30.4 3.3
Tesco 2.5 20.9 2.7
Clipper Logistics 2.3 0.3 2.5
------------------------ -------------- --------------------- --------------
Top ten 47.7 51.1
------------------------ -------------- --------------------- --------------
Other commercial 45.5 48.7
------------------------ -------------- --------------------- --------------
Total commercial 93.2 99.8
------------------------ -------------- --------------------- --------------
Residential 0.2 0.2
------------------------ -------------- --------------------- --------------
Total Group 93.4 100.0
------------------------ -------------- --------------------- --------------
(1) Market capitalisation of Parent Company
Glossary
Capital Return Equivalent Yield Logistics The valuation movement The weighted average The organisation and on the property portfolio income return expressed implementation of operations adjusted for capital as a percentage of the to manage the flow of expenditure and expressed market value of the property, physical items from origin as a percentage of the after inclusion of estimated to the point of consumption capital employed over purchaser's costs Net Debt the period Estimated Rental Value The Group's bank loans Commercial portfolio (ERV) net of cash balances The Group's property The external valuers' at the period end portfolio excluding residential opinion of the open market Net Rental Income properties rent which, on the date Gross rental income receivable Contracted Rent of valuation, could reasonably after deduction for ground The annualised rent excluding be expected to be obtained rents and other net property rent free periods on a new letting or rent outgoings including void Cost of debt review of a property costs and net service Weighted average interest European Public Real charge expenses rate payable Estate Association (EPRA) Occupancy Rate Debt maturity The European Public Real The ERV of the let units Weighted average period Estate Association (EPRA) as a percentage of the to expiry of drawn debt is the industry body total ERV of the Investment Distribution for European Real Estate Portfolio The activity of delivering Investment Trusts (REITs) Passing Rent a product for consumption Gross rental income The gross rent payable by the end user Rental income for the by tenants under operating EPRA Cost Ratio period from let properties leases, less any ground Administrative and operating reported under IFRS, rent payable under head costs (including and after accounting for leases excluding costs of direct lease incentives and Property Income Distribution
vacancy) as a percentage rent free periods. Gross (PID)
of gross rental income rental income will include, Dividends from profits
EPRA Earnings per Share where relevant, turnover of the Group's tax-exempt
(EPS) based rent, surrender property business under
Underlying earnings from premiums and car parking the REIT regulations.
the Group's property income The PID dividend is paid
rental business divided Group after deducting withholding
by the average number LondonMetric Property tax at the basic rate
of shares in issue over Plc and its subsidiaries Real Estate Investment
the period IFRS Trust (REIT)
EPRA NAV per Share The International Financial A listed property company
Balance sheet net assets Reporting Standards issued which qualifies for and
excluding fair value by the International has elected into a tax
of derivatives, divided Accounting Standards regime which is exempt
by the number of shares Board and adopted by from corporation tax
in issue at the balance the European Union on profits from property
sheet date Income Return rental income and UK
EPRA NNNAV per Share Net rental income expressed capital gains on the
EPRA NAV per share adjusted as a percentage of capital sale of investment properties
to include the fair value employed over the period Total Accounting Return
of financial instruments, Investment Portfolio (TAR)
debt and deferred taxes The Group's property The movement in EPRA
at the balance sheet portfolio excluding development, NAV per share plus the
date land holdings and residential dividend paid during
EPRA net initial yield properties the period expressed
Annualised rental income Investment Property Databank as a percentage of the
based on cash rents passing (IPD) EPRA NAV per share at
at the balance sheet Investment Property Databank the beginning of the
date, less non recoverable (IPD) is a wholly owned period
property operating expenses, subsidiary of MSCI producing Total Property Return
expressed as a percentage an independent benchmark (TPR)
of the market value of of property returns and Unlevered weighted capital
the property, after inclusion the Group's portfolio and income return of
of estimated purchaser's returns the property portfolio
costs Like for Like Income as calculated by IPD
EPRA topped up net initial Growth Total Shareholder Return
yield The movement in contracted (TSR)
EPRA net initial yield rental income on properties The movement in the ordinary
adjusted for expiration owned through the period share price as quoted
of rent free periods under review, excluding on the London Stock Exchange
or other lease incentives properties held for development plus dividends per share
such as discounted rent and residential assuming that dividends
periods and stepped rents Loan to Value (LTV) are reinvested at the
EPRA Vacancy Net debt expressed as time of being paid
The Estimated Rental a percentage of the total Weighted Average Interest
Value (ERV) of immediately property portfolio value Rate
available vacant space at the period end, adjusted The total loan interest
as a percentage of the for deferred completions and derivative costs
total ERV of the Investment per annum (including
Portfolio 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 news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
IR PGGQCGUPRPUM
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November 28, 2018 02:01 ET (07:01 GMT)
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