TIDMLMP
RNS Number : 8011F
LondonMetric Property PLC
19 November 2020
LONDONMETRIC PROPERTY PLC
("LondonMetric" or the "Group" or the "Company")
HALF YEAR RESULTS FOR THE SIX MONTHSED 30 SEPTEMBER 2020
SECTOR AND ASSET CALLS UNDERPIN RESILIENT AND GROWING INCOME
DELIVERING STRONG PORTFOLIO OUTPERFORMANCE
LondonMetric today announces its half year results for the six
months ended 30 September 2020.
Six months to
30 September Six months to
Income Statement 2020 30 September 2019
------------------------------ ------------- ------------------
Net rental income (GBPm)(1,2) 61.3 54.9
IFRS net rental income
(GBPm) 59.6 52.3
EPRA Earnings (GBPm)
(2) 42.3 35.2
EPRA EPS (p) (2) 4.75 4.6
Dividend per share (p) 4.2 4.0
IFRS Reported Profit
/ (Loss) (GBPm) 85.1 (10.2)
30 September
Balance Sheet 2020 31 March 2020
------------------------------ ------------- ------------------
IFRS net assets (GBPm) 1,597.9 1,431.8
EPRA NTA per share (p)
(2,3) 175.5 170.3
IFRS NAV per share (p) 176.3 171.0
LTV (%)(1,2) 32.4 35.9
1. Including share of joint ventures, excluding non-controlling interest
2. Further details on alternative performance measures can be
found in the Financial Review and definitions can be found in the
Glossary
3. EPRA net tangible assets (NTA) is a new reporting measure
that replaces EPRA net asset value this year. Discussed further in
the Financial Review and note 7 to the financial statements
Continued focus on resilient and growing income increases
earnings and dividend
-- Net rental income up 12% to GBP61.3m(1) , on an IFRS basis net rental income increased 14%
-- EPRA earnings up 20% to GBP42.3m, +4% on a per share basis
-- Dividend progression of 5% to 4.2p, 113% covered, including Q2 dividend declared of 2.1p
-- Rent collection strong with less than 1% forgiven or
outstanding for the period. 98% of Q3 rents collected with 1%
deferred
Sector alignment and asset selection delivering strong portfolio
performance
-- Total Property Return of 4.9%, outperforming IPD All Property by 650bps
-- Capital return of 2.3% (IPD All Property: -3.7%), regional
and urban logistics best performing sectors
-- EPRA NTA per share increased by 3% to 175.5p driven by 4.8p valuation gain
-- IFRS net assets increased 12% to GBP1,597.9m
-- Total Accounting Return of 5.6%
Distribution weighting of 68.2%, including urban logistics at
35.4%, with growth in grocery exposure to 10.9% from investment
activity
-- GBP98.5m of acquisitions let to strong credits with a WAULT
of 17.6 years and 88% of rent subject to contractual uplifts
-- GBP71.9m of disposals, largely shorter let urban logistics,
where the WAULT to first break was 7.2 years
-- Further GBP18m of assets sold post period end
75 asset management initiatives completed and strong progress on
developments
-- GBP2.8m pa income uplift and 2.9%(2) like for like income growth
-- Lettings signed with WAULT of 13.9 years and open market rent reviews +22%
-- 251,000 sq ft of developments completed and 657,000 sq ft
under construction as we proceed with 350,000 sq ft at Bedford and
120,000 sq ft at Tyseley, where we expect to start construction
shortly
Resilient GBP2.4bn portfolio focused on operationally light
assets with reliable, repetitive and growing income
characteristics
-- WAULT of 11.5 years and occupancy of 98.5%
-- Gross to net income ratio of 98.7% and contractual rental uplifts on 55.3% of income
-- Income diversification and granularity improved further with
top 10 occupiers accounting for 35.0% of rent
Balance sheet strengthened with further corporate
efficiencies
-- LTV of 32.4% with a GBP120m equity raise in the period
-- Continued balance sheet discipline with weighted average debt
maturity of 4.7 years and cost of debt at 2.5%
-- EPRA cost ratio reduced further to 13.7% (-60bps)
Andrew Jones, Chief Executive of LondonMetric, commented :
"We continue to live in truly unprecedented times which are
affecting many aspects of our lives. Whilst society and economies
will undoubtedly recover from the pandemic, Covid-19 has
accelerated a number of structural changes which are having a
profound and permanent impact on real estate. Market conditions are
exposing both winning and losing strategies which, combined with a
continuation of low for longer interest rates, is intensifying the
demand for the right real estate that can deliver a reliable,
repetitive and growing income.
"Our activity and performance during the period represents a
continuation and endorsement of our strategy to position ourselves
firmly on the right side of structural trends. Logistics and
grocery have been clear beneficiaries of the pandemic, as
businesses have sought to future proof their operations in response
to the seemingly unstoppable rise in e-commerce penetration and
respond to changes in the way we live and shop. With both near term
and longer-term drivers underpinning our portfolio, our long held
sector conviction calls continue to be reaffirmed and support our
strong outperformance.
"Whilst we remain vigilant to the impact of Covid-19, our focus
on owning the right assets in the winning sectors that can generate
a secure and growing dividend, positions us well for the future. We
will continue to assess and anticipate the wider macro changes in
helping to frame the shape of our future portfolio."
For further information, please contact:
LondonMetric Property Plc: +44 (0)20 7484 9000
Andrew Jones (Chief Executive)
Martin McGann (Finance Director)
Gareth Price (Investor Relations)
FTI Consulting:
+44 (0)20 3727 1000
Dido Laurimore Londonmetric@fticonsulting.com
Richard Gotla
Andrew Davis
Meeting and audio webcast
A live audio webcast and conference call will be held at 8.30am
today.
The conference call dial-in for the meeting is: +44 (0)330 336
9125 (Participant Passcode: 1236198).
For the live webcast see:
https://webcasting.brrmedia.co.uk/broadcast/5f69c52883507b593b46d0c8
An on demand recording will be available shortly after the
meeting from the same link and from:
http://www.londonmetric.com/investors/reports-and-presentations
Notes to editors
LondonMetric is a FTSE 250 REIT that owns one of the UK's
leading listed logistics platforms alongside a diversified long
income portfolio, with 16 million sq ft under management. It owns
and manages desirable real estate that meets occupiers' demands,
delivers reliable, repetitive and growing income-led returns and
outperforms over the long term. Further information is available at
www.londonmetric.com
Neither the content of LondonMetric's website nor any other
website accessible by hyperlinks from its website are incorporated
in, or form part of this announcement nor, unless previously
published by means of a recognised information service, should any
such content be relied upon in reaching a decision to acquire,
continue to hold, or dispose of shares in LondonMetric. This
announcement may contain certain forward-looking statements with
respect to LondonMetric's expectations and plans, strategy,
management objectives, future developments and performance, costs,
revenues and other trend information. These statements and
forecasts involve risk and uncertainty because they relate to
future events and circumstances. There are a number of factors
which could cause actual results or developments to differ
materially from those expressed or implied by these forward-looking
statements and forecasts. Certain statements have been made with
reference to forecast price changes, economic conditions and the
current regulatory environment. Any forward-looking statements made
by or on behalf of LondonMetric speak only as of the date they are
made. LondonMetric does not undertake to update forward-looking
statements to reflect any changes in LondonMetric's expectations
with regard thereto or any changes in events, conditions or
circumstances on which any such statement is based. Nothing in this
announcement should be construed as a profit forecast. Past share
price performance cannot be relied on as a guide to future
performance.
Alternative performance measures: The Group financial statements
are prepared in accordance with IFRS where the Group's interests in
joint ventures and non-controlling interests are shown as single
line items on the income statement and balance sheet. Management
reviews the performance of the business principally on a
proportionately consolidated basis, which includes the Group's
share of joint ventures and excludes non-controlling interests on a
line by line basis. Alternative performance measures are financial
measures which are not specified under IFRS but are used by
management as they highlight the underlying performance of the
Group's property rental business and are based on the EPRA Best
Practice Recommendations (BPR) reporting framework which is widely
recognised and used by public real estate companies.
CEO Overview
Today's backdrop continues to be shaped by the acceleration of
many macro trends as we adapt to the disruption brought about by
Covid-19.
The acceleration of structural trends brought about by the
pandemic is both profound and permanent, creating a new economic
reality and investment environment. These structural forces,
together with a further intensification in the search for income,
is having a fundamental impact on real estate with an increasing
polarisation of sub sector performances as market turbulence
exposes both winning and losing strategies.
Logistics, healthcare and the grocery sectors continue to be the
standout performers and are enjoying an ever-wider margin of
victory. Conversely, legacy retail sub-sectors are facing an
acceleration of secular declines as shopping centres and shopping
parks experience rapid downward repricing, more than even the most
bearish experts predicted. Like in many other areas of the economy,
trends that were expected to take years, are now occurring in
months, and in some cases weeks.
We are also seeing disruption in some of the traditionally more
stable real estate sub-sectors as falling occupational demand
exposes the rational pricing of offices, leisure, hospitality and
student accommodation. These sectors are looking less resilient
today than they did at the start of the year and their weakness
will strengthen investor desire for exposure to structurally
supported sectors.
Whilst we are conscious of short term issues, our overriding
concern is the medium and long term drivers of returns. The
composition of our GBP2.4 billion portfolio continues to be
influenced by the trends that originate outside real estate but
that are fundamentally shaping its future. This approach has seen
us align 95% of our assets into the structurally supported sectors
of logistics and long income, as well as tilt our exposure towards
urban logistics and grocery-led convenience. In addition, we
continue to upscale our asset base into the highest quality
opportunities that offer reliable, repetitive and growing income
whilst providing strong intrinsic values and capital
protection.
We continue to pride ourselves on our process, discipline and
rationality. During the period, we deployed c.GBP100 million across
the logistics, grocery and roadside sectors. Whilst we could have
done much more, our rigorous approach tempered our activity as we
look to buy the best assets at the right price and hold them for a
long time. Indeed, our long term approach to capital allocation saw
us dispose of GBP61 million of shorter let and poorer located
logistics assets. The vast majority of these receipts are not due
until next year which allows us time to reinvest. We are always
open to selling assets when prices become full, even when there is
nothing immediate to buy as a replacement.
Operationally, we have performed well over the half year with
high levels of rent collection and strong like for like rental
growth delivered through lettings, rent reviews and numerous
regearing initiatives with the WAULT on leases signed of 14
years.
Our total property return of 4.9% significantly outperformed IPD
All Property by 650 bps, EPRA earnings per share increased by 3.9%
and EPRA net tangible assets per share rose by 3.1%. This
performance gives us the confidence to increase our dividend per
share for the period by 5.0%, which is 113% covered by
earnings.
Looking forward, we believe that the portfolio is well placed to
deliver on our sustainable and progressive dividend policy.
Technological and behavioural changes are fundamentally altering
the way we live, work and shop
The world continues to evolve and digitise at an increasingly
rapid rate, with Covid-19 accelerating shifts in how society
interacts and how the economy operates. These structural changes
are fundamentally affecting how we live, work and shop. Trends that
were expected to have taken years to play out are now occurring
within a matter of months.
Previously high barriers of entry to online retail were toppled
in a matter of weeks and consumers quickly realised the
convenience, safety and security of online shopping. It took 23
years for online grocery penetration to reach 7% of total food
shopping. However, since March, we have seen it double to over 13%
as 6.5 million new shoppers ordered their groceries online for the
first time. General merchandise penetration has also increased
dramatically since the first lockdown with average penetration
rates rising from 24% to over 40%, which helped to increase overall
online sales to 28% of all retail in September. We have seen these
shifts act as a catalyst for many retailers to better integrate
online and physical offerings, as store picked fulfilment
intensified to meet the surge in online orders.
Whilst the latest lockdown is likely to have caused less
disruption to the consumer than the first back in March, it is only
serving to reinforce the changes that we have seen in consumer
behaviour and further alter the corporate landscape. What we can be
certain about is that the tectonic plates are not reverting to
where they were.
The search for income continues to intensify and real estate is
attracting greater investor attention
We continue to believe that income will be the defining
characteristic of this decade's investing environment and that
income-led total return strategies will continue to outperform.
Whilst Covid-19 may have dramatically altered the interest rate
curve, the one element that it has not changed is the demographic
tsunami of an ageing population requiring an income return. The
global lockdown and imminent recession have not only lowered
interest rates further but also ensured that they will inevitably
stay lower for longer as governments and central banks are unlikely
to take their foot off the quantitative easing accelerator to
provide liquidity to a fragile global economy.
Today, 80% of global fixed income securities are yielding less
than 2% and corporate dividends have been cut significantly. This
is intensifying the demand for alternative assets that can deliver
a reliable, repetitive and growing income. We believe that, in an
economy of zero interest rates, investors can't afford not to buy
more alternative asset classes such as real estate and
infrastructure.
The right real estate can offer a fantastic arbitrage over
benchmark rates along with inflation protection. This is driving up
demand for 'in vogue' real estate assets as investors look for
safety; as opposed to the allure of higher yielding but less secure
income propositions. In this environment, smart real estate
investing will focus on the structurally supported asset classes,
the strength of the credits as well the reliability, granularity,
sustainability and trajectory of the rental income.
Logistics continues to experience strong tailwinds and benefit
from a weight of money
Investors are frantically trying to increase their allocation
towards logistics as they look to exit legacy assets and take
advantage of the sector's strong dynamics which have only
strengthened during the pandemic. Unsurprisingly, this has pushed
prime yields to a record low of 4% and very recent evidence
suggests there could be more compression to follow.
In many ways, the warehousing sector is enjoying an almost
perfect storm of limited new supply and growing demand. There has
been a step change increase in demand from short term occupier
requirements during the early stages of lockdown to longer term
requirements driven by higher online penetration. Furthermore, we
expect to see sustained demand from Brexit uncertainties as 'just
in time' logistics infrastructures are replaced by 'just in case'
strategies.
These dynamics continue to generate continued rental growth in
logistics where, despite strong increases to date, rents remain
affordable and still represent a very small proportion of a
company's operational costs. Rental growth is particularly strong
in urban logistics where there is high demand to meet ever growing
consumer expectations of quicker and more accurate deliveries in an
environment where the supply response is far more challenging due
to competition from higher value alternative uses.
The sector tailwinds are reflected in our total property return
for distribution of 8.0% and are supporting our development
activities where we will deliver 0.7 million sq ft next year at an
expected yield on cost of 7.2%. Our urban assets were strong
performers, delivering a total property return of 6.3% and open
market rental growth on rent reviews of 21%. It is unsurprising
therefore, that this sub-sector remains our strongest conviction
call and our ambitions remain undimmed.
Long income property is benefiting from disruption and
delivering attractive returns
Long income assets have increasingly been sought after because
of their defensive, long dated and growing income characteristics.
A long-let property with a high quality counterparty, guaranteed
income growth, no operational costs and offering a yield 400bps
higher than government bonds is an attractive proposition in
today's low interest rate environment and one we believe remains
underappreciated. This spread is even more appealing when you add
on indexation or guaranteed rental uplifts.
Our "all weather" long income assets focus on sectors that are
largely considered essential or non-discretionary. We therefore
believe that these assets are much less susceptible to the
migration of spend online and that they will continue to benefit
from the ongoing changes in the way people shop and live; namely
grocery and convenience food, roadside services, discount,
essential, trade and DIY. During the pandemic, we saw a strong
underlying trading performance across all of these categories which
is reflected in our high rent collection levels and a total
property return for long income of 2.3%.
Whilst most of our long income is within insulated categories,
2% of our total portfolio is exposed to out-of-town leisure and
hotels which has not been immune to the severity of the lockdown
and delivered a property return of -12.0%. We continue to work
closely with our occupiers affected.
During the period, we improved our long income portfolio with
the GBP62 million acquisition of five Waitrose food stores as well
as GBP22 million of other purchases, all let on very long leases
with the benefit of indexation. Our approach to sell when prices
become full has seen us dispose of further assets post period end,
including two M&S convenience stores at a NIY of 4.0%. In order
to ensure that our long income assets remain 'fit for purpose', our
asset management activity saw us extend leases, diversify our
occupier base and invest in geographies with higher intrinsic
values.
Physical retail continues to reprice but still remains a value
trap
Many of the challenges facing today's retailers are not new and
structural forces have been at play now for many years. However,
today's unprecedented environment has accelerated the changes such
that legacy retail strategies have been completely unmasked. Hoping
the way we shop returns to previous norms is not a strategy.
Whilst rents are continually resetting, much of the retail
sector still feels like a value trap as the high initial cap rates
feel increasingly temporary. Many in the market are taking their
cues from price action rather than values. These assets are often
cheap for a reason and the correlation between price and value is
far from perfect. Whilst we believe some parts of the retail market
are financially capable of being repurposed (with a number of
examples underway) we don't believe that this applies to the
majority and remain of the opinion that the majority of UK retail
is "over shopped", "under demolished" and still "over priced".
The virtual tills are ringing louder than ever and the
continuing transfer of sales from stores to online is resetting
rents on a continuous basis. The pandemic has acted as a catalyst
for better integration of online and physical shopping and, like
many of our customers, we do believe that stores have a role to
play in the retail supply chain either through showrooms, click and
collect, returns or as fulfilment facilities. However, if they are
to have a viable future, their rental levels still have a long way
to fall.
Unsurprisingly, the UK has seen a number of tenant failures.
Many legacy retailers will blame the disruption on lockdown but the
truth is that many of these companies have been around for a long
time, have a high street presence they no longer need and have been
struggling to reposition their businesses. The pandemic has simply
exacerbated their difficulties and accelerated their demise. An
interesting view is that the current operational health of these
occupiers is analogous to the virus itself: Covid-19 is not fatal
for the vast majority, however, when it encounters someone with an
immune system already weakened by age and/or pre-existing ailments,
it can be terminal.
We are living in a truly unprecedented world which makes it
difficult to have a strong conviction on where it all lands. When
something is too difficult to assess with a strong conviction, then
we prefer to just move on to another opportunity - what could be
simpler than that.
Our operations continue to enhance income metrics with the
portfolio demonstrating its resilience
The unprecedented disruption has aggressively tested our "all
weather" portfolio. Whilst the majority of our assets have
performed in line or ahead of expectations, we remain alert to the
few that are underperforming. Our shock absorbers are ensuring that
we are better placed than most but they can never guarantee total
immunity to extreme conditions.
Each quarter of 2020 has felt like a year and, as the pandemic
ensued, we focused on ensuring that our balance sheet and cash flow
remained robust, maintaining our long and strong portfolio metrics
and progressing our development activity only where we had good
visibility on letting success.
Our rent collection in the period was very strong and has
continued to remain at high levels. Against an annual rent roll of
GBP125 million, rent forgiven in the period totalled just GBP0.3
million with a further GBP0.2 million remaining unpaid, of which a
significant proportion relates to a property where we are securing
vacant possession for a new letting to Lidl.
This performance reflects the resilience of the portfolio, the
reliability of our income and the strength or our occupier
relationships. Recognising the negative impact that the pandemic
has had on a very select number of our occupiers, we did offer some
rent free concessions in exchange for value enhancing asset
management initiatives as well as agree some short term rental
deferral arrangements, all of which are being honoured.
During the period, we concluded 75 occupier initiatives, adding
GBP2.8 million per annum of additional rent and helping to deliver
like for like income growth of 2.9%. Lettings were signed with
lease lengths of nearly 14 years which helped to increase the
portfolio's WAULT from 11.2 years to 11.5 years, despite the
passage of time.
Occupancy remains high at 98.5% and our gross to net income
ratio of 98.7% continues to reflect the portfolio's very low
operational costs. We continue to increase our exposure to rent
reviews with contractual uplifts, which now account for 55.3% of
our income and provides a great long term hedge against the risk of
inflation.
After successfully letting the first phase at our Bedford
development, we commenced the speculative build out of another
165,000 sq ft which completes in January 2021 and is seeing strong
interest from potential occupiers. The favourable demand/supply
dynamics have seen a number of competing buildings let in the area
and has given us the confidence to progress with a build out of a
further 350,000 sq ft which will complete in Q3 2021 and conclude
our c.700,000 sq ft development in Bedford. We have also made good
progress at our Tyseley urban logistics development, where we have
gained planning on the next phase totalling 120,000 sq ft and
negotiations are well progressed which should allow us to commence
construction shortly.
We successfully raised GBP120 million of equity in the period
through a placing that was significantly oversubscribed and
provided us with resources to tap new and attractive investment
opportunities that would seldom otherwise be available in a
normalised market. Including cash receipts from sales that
exchanged but didn't complete in the period, our LTV is 32.4% which
provides us with firepower to make further investments.
Outlook
It is clear that the road to recovery from the pandemic will
undoubtedly be uneven with divergent trends, accelerating
structural shifts and enduring changes in consumer behaviour.
Our portfolio continues to perform strongly and we have built up
a collection of excellent assets that are closely aligned to the
structural tailwinds and offer reliable, predictable and growing
income streams. Combined with our strong operational platform and
high economic alignment, we are well placed to navigate these
uncertain times and will remain prudent in our decision making and
rational in our approach, work with our occupiers, protect our
capital and ensure that we emerge from this period stronger, better
placed and ready to take advantage of compelling new
opportunities.
Our approach is less about having to be 100% right every time,
but more about not getting it wrong. Our investment philosophy of
allocating capital to structurally supported sectors is simple but
when identifying opportunities, we don't just assess the potential
returns but weigh them against the risks involved and stress
incurred. Therefore, whilst the property market presents lots of
opportunities, we let most go, preferring to focus on quality
investments that offer long term income, capital growth and
downside protection from strong intrinsic values. After all, we
will continue to invest like it is our own money, because it
is.
Taking a step back and looking forward there is no doubt that
many things will eventually go back to the way they were. However,
given the material disruption, many will not. Therefore, we will
continue to assess and anticipate those changes that are temporary
but more importantly the macro changes that will be more permanent.
This is where the new opportunities will be and it will help frame
how we shape our future portfolio.
Whilst we cannot predict the future, we do know that our
tactical switch has positioned us on the right side of the
structural changes. As a long term investor, we remain optimistic
about the future and whilst we will invest like optimists we will
continue to prepare like realists.
Property Review
Our investment activity continues to improve the portfolio's
quality and resilience
Acquisitions in the period totalled GBP98.5 million and were let
for an average of 17.6 years, with 88% of income subject to
contractual rental uplifts. These acquisitions related to
grocery-led convenience and roadside as well as urban logistics
assets located in London. They were high quality opportunities at
attractive prices that would seldom present themselves in a
normalised market.
Disposals in the period totalled GBP71.9 million and consisted
primarily of seven shorter let urban logistics warehouses with a
WAULT to first break of 7.2 years. Here, we were prepared to trade
assets where the market's expectation of rental growth and future
returns exceeded our own. Post period end, we have sold a
further
GBP18 million, mostly relating to the sale of two convenience
food stores.
Disposed(1,2)
Acquired (GBPm) (GBPm)
----------------------------- --------------- -------------
Urban logistics 14.1 60.8
Regional & mega distribution - -
Long income 84.4 5.2
Office, residential &
retail parks - 5.9
----------------------------- --------------- -------------
Total 98.5 71.9
----------------------------- --------------- -------------
(1) Excludes GBP64.4 million of disposals, predominantly larger
box distribution, that exchanged in the previous year but completed
in the period
(2) GBP61.3 million of disposals relate to assets that exchanged
in the period with delayed completions
Assisted by a strong capital performance in the period, the
value of our distribution platform increased to
GBP1,668 million, representing 68.2% of the portfolio. The urban
logistics sector is our key conviction call and remains our largest
weighting, representing 35.4% of the portfolio. Over the period,
our weighting to mega distribution fell further to 13.5% primarily
due to the completion of a mega warehouse sale that exchanged in
the prior year.
Long income increased from 24.0% of the portfolio to 26.4%,
following significant net investment into grocery led convenience
and roadside assets, with these two sub sectors now dominating our
long income exposure.
The remaining 5.4% of the portfolio is deemed non-core and is
split between:
-- Offices, where we have nine remaining of the 11 acquired through the Mucklow acquisition
-- Retail parks, where six remain following a sale in the period for GBP4.1 million
-- Residential, where four flats were sold in the period and a
further four remain of the 149 originally owned.
Portfolio split
Urban Logistics 35.4%
Regional Distribution 19.3%
Mega Distribution 13.5%
Long Income 26.4%
Retail Parks 3.0%
Offices & Residential 2.4%
---------------------- -----
Our portfolio metrics continue to reflect our focus on
generating long and growing income
The portfolio's WAULT has increased since the year end from 11.2
years to 11.5 years and continues to provide a high level of income
security with only 7.0% of income expiring within three years and
45.8% within 10 years.
Occupancy remained high at 98.5% and our gross to net income
ratio of 98.7% continues to compare highly favourably against our
peers and reflects the portfolio's very low operational
requirements.
In the period, we undertook 75 occupier initiatives adding
GBP2.8 million per annum of additional rent and helping to deliver
like for like income growth of 2.9%. These initiatives consisted
of:
-- Contractual rental uplifts which apply to 55.3% of our
income, where 18 fixed and RPI linked reviews were settled
delivering GBP0.3 million of increased rent at an average of 8%
above passing on a five yearly equivalent basis;
-- Open market rent reviews, where 10 reviews were settled
delivering GBP0.8 million of increased rent at an average of 22%
above passing on a five yearly equivalent basis; and
-- Leasing activity, where we signed 47 new leases and regears
with average lease lengths of 13.9 years delivering GBP1.7 million
of increased rent. Six of these deals related to two occupiers
where, in response to Covid-19, we agreed to a rent free concession
in exchange for greater term certain, increasing the WAULT on those
assets to 22 years.
Over the period since March 2020, our contracted income
increased from GBP123.3 million to GBP125.4 million. Following post
period end investment activity, contracted income has reduced to
GBP121.2 million.
Our focus on income diversification, granularity and occupier
credit is delivering strong rent collection despite Covid-19
Our investment and asset management actions over a number of
years have increased the resilience of our portfolio by not only
allocating capital to structurally supported sectors but also by
improving our income's diversification and granularity as well as
the credit strength of our occupiers.
We have a diverse occupier base by type of business and our top
ten occupiers account for 35% of contracted income compared to 51%
in March 2019. In the period, we significantly increased our
exposure to Waitrose who now represent 2.6% of income and are our
eighth largest occupier.
The Covid-19 pandemic created unprecedented disruption but,
despite this uncertainty, our rent collection has been very strong.
We collected 96.5% of rent due in the period and just 0.8% of rent
was forgiven or remains outstanding, some of which relates to a
property where we are securing vacant possession for a new letting
to Lidl.
This resilience reflects high occupier contentment, our close
occupier relationships, their financial strength, our forthright
response to non-payment as well as the operational importance of
our distribution assets and the non-discretionary grocery-led
convenience and essential characteristics of our long income
assets.
As noted further above, we did offer some rent free concessions
in exchange for value enhancing asset management initiatives and we
also agreed some short term rental deferral arrangements, all of
which are being honoured. These account for the remaining 2.7% of
rent that was due in the period.
In respect of third quarter rents due up to 1 November 2020, 98%
has now been collected, 1% has been deferred under previously
agreed payment plans and 1% is outstanding. 100% of our
distribution rent due has been or is being collected, with long
income at 98%, offices at 97% and retail parks at 92%.
Valuation and total return performance
Over the six months, the portfolio delivered a strong total
property return of 4.9%, significantly outperforming the IPD All
Property index of -1.6%:
-- Distribution delivered 8.0%
-- Long income delivered 2.3% despite, as expected, our leisure assets dragging performance
-- Offices delivered 2.1% and retail parks delivered -1.7%
Portfolio outperformance was driven by both management actions
and through capturing rental reversion which helped to deliver
strong capital growth of 2.3% compared to IPD All Property of
-3.7%. Distribution delivered a 5.7% increase and long income was
0.5% lower, whilst offices and retail parks fell by 0.9% and 5.6%
respectively.
The investment portfolio's EPRA topped up net initial yield is
4.9% and the equivalent yield is 5.4% with a like for like
valuation movement of 7bps over the period. ERV growth for the
portfolio was driven by distribution which saw a 1.3% increase;
urban logistics and regional saw growth of 1.1% and 2.6%
respectively whilst mega distribution was flat. Overall ERV growth
was 0.2%.
Distribution Review
Our exposure to the distribution sector increased further in the
period to GBP1,668 million, accounting for 68.2% of our total
portfolio, with over half of our distribution assets in urban
logistics. Reflecting the strong sector dynamics, our distribution
portfolio continues to enjoy high occupancy at 98% and performed
well over the six months, delivering a property return of 8.0% with
regional distribution generating the best returns of 12.8%, driven
by strong performance in regional developments that either
completed in the period or are nearing completion.
As at 30 September 2020 Urban Regional Mega
------------------------------------- -------------- ------------------------ --------------------------
Up to
Typical warehouse size 100,000 sq ft 100,000 to 500,000 sq ft In excess of 500,000 sq ft
Value (1) GBP865.7m GBP472.4m GBP329.8m
WAULT 7.8 years 13.6 years 15.7 years
Average Rent (psf) GBP6.80 GBP6.40 GBP5.60
ERV (psf) GBP7.20 GBP6.70 GBP5.60
ERV growth (6 months) 1.1% 2.6% -
Topped up NIY 4.7% 4.4% 4.0%
Contractual uplifts 34% 76% 100%
Total Property Return (6 months) (1) 6.3% 12.8% 5.9%
------------------------------------- -------------- ------------------------ --------------------------
(1) Includes developments
Distribution investment activity
As investor appetite for logistics has continued to grow, this
has pushed yields to record lows of c.4% and significantly reduced
the number of compelling investment opportunities.
We did however deploy GBP13.7 million of capital expenditure on
our distribution estate, principally our development at Bedford and
forward funding at Goole. We also acquired two highly reversionary
urban logistics warehouses in London for GBP14.1 million reflecting
a net initial yield of 3.7% and a reversionary yield of 4.9%. These
investments consisted of:
-- a 14,000 sq ft warehouse acquired for GBP3.2 million and let
to Royal Mail in Epsom for 5.1 years, where we have since settled
the rent review at 39% ahead of passing, which increases the
running yield from 3.8% at acquisition to 5.2%; and
-- a 32,000 sq ft warehouse acquired for GBP10.9 million and let
at a rent of GBP13.40 psf to Ocado for 8.2 years in
Walthamstow.
The strength of investor appetite prompted us to take advantage
of approaches for a number of our assets where we saw less
potential for rental growth. In the period, we sold GBP60.8 million
of shorter let urban logistics at a net initial yield of 5.2%.
These consisted of:
-- a 21,000 sq ft warehouse sold for GBP3.5 million let to
Fenton Packaging in Hemel Hempstead with a WAULT of less than a
year; and
-- a portfolio of six distribution warehouses sold for GBP57.3
million in various locations including Worcester, Leamington Spa,
Royston, and Huyton. The assets are let to retailer Hamleys, CEVA,
ITAB, Transmec and Grupo Antolin, an automotive supplier to JLR,
and have a WAULT to first break of 7.5 years. Completion of the
sale has been delayed until March 2021.
Post period end, we sold a 25,000 sq ft urban logistics unit in
Edinburgh for GBP3.4 million with three years left to break and
acquired a highly reversionary urban logistics unit in Colliers
Wood for GBP2.5 million at a NIY of 4.0% through a 15 year sale and
leaseback with open market rent reviews.
Distribution asset management activity
Distribution lettings and regears in the period were signed on
0.7 million sq ft. These deals were mostly on urban logistics
warehousing, added GBP1.8 million per annum of additional income
and had a WAULT of 9.8 years with incentives equivalent to less
than six months' rent free. Regears delivered an increase in the
WAULT from 8.1 years to 12.6 years.
The most significant activity was:
-- 141,000 sq ft letting at Stoke
-- 113,000 sq ft of lettings and regears across our multi-let urban warehousing
-- 78,000 sq ft regear in Thorne
-- 70,000 sq ft regear in Barton
-- 48,000 sq ft regear in Fareham
-- 41,000 sq ft regear in Milton Keynes
-- 38,000 sq ft letting to Network Rail at Stargate in Birmingham
-- 35,000 sq ft regear in Wednesbury
-- 34,000 sq ft letting to an online pharmacy at a recently refurbished property in Greenford
Distribution rent reviews in the period were settled across 2.0
million sq ft. They added GBP1.0 million per annum of income at 13%
above previous passing rent on a five yearly equivalent basis:
-- eight urban reviews were settled at 17% above passing rent on
a five yearly equivalent basis, with open market reviews achieving
21% uplifts;
-- three regional reviews were settled at 19% above passing rent
on a five yearly equivalent basis, with two open market reviews
settled with DHL and Royal Mail achieving 27% uplifts; and
-- two mega reviews, both contractual uplifts, were settled at
8% above passing rent on a five yearly equivalent basis.
Long Income Review
Our long income assets are typically single tenant assets with
low operational requirements that are benefiting from the changes
in the way people live and shop. They are insulated from structural
dislocation and are predominantly focused on grocery, wholesale,
roadside services, discount and essential retail, trade and
DIY.
Over the period, our exposure to long income grew from GBP563
million to GBP645 million, representing 26.4% of our total
portfolio, as we transacted on significant net investment in
grocery/convenience and roadside assets with these two sub sectors
now accounting for over 40% of our long income exposure.
The long income assets have a WAULT of 13.9 years, are 100% let
to strong occupiers at affordable average rents of GBP15.10 psf and
are valued at an attractive topped up NIY of 5.5%. The average lot
size is c.GBP5 million with 62% of income subject to contractual
uplifts.
Over the period, our long income assets delivered a total
property return of 2.3% driven by an attractive income yield.
Excluding the leisure assets which, as expected dragged
performance, total property return would have been 3.6%.
Long income portfolio
Convenience
As at 30 September / Grocery NNN Trade Leisure &
2020 & Roadside Retail(2,3) & DIY Hotel
---------------------- -------------------- --------------------- --------------------- ----------------------
Value (1) GBP267.2m GBP175.2m GBP147.5m GBP55.0
WAULT 16.6 years 9.5 years 13.4 years 21.3 years
Average Rent (psf) GBP16.90 GBP21.20 GBP9.10 GBP17.10
Topped up NIY 4.6% 6.9% 5.5% 5.8%
Equivalent Yield 5.0% 6.6% 5.9% 7.0%
Contractual uplifts 94% 22% 59% 100%
Total Property Return
(6 months) (1) 3.0% 2.8% 5.7% -12.0%
Largest Occupiers B&M, Currys, DFS, B&Q, Howdens, Jewson, Odeon
Aldi, BP, Dunelm, Home Kwik Fit, Safestore (x5 cinemas)
Co-op, Costco, Bargains, Pets at Selco, Wickes Premier Inn (x1 hotel)
Euro Garages Home, Smyths Toys,
Lidl, M&S, Waitrose The Range
---------------------- -------------------- --------------------- --------------------- ----------------------
(1) Includes developments
(2) Properties in our MIPP joint venture are held within NNN
Retail
(3) TPR for Convenience/Grocery and Roadside rises to 5.0% if
acquisition costs are excluded
Long income investment activity
In the period, GBP84.4 million of long income assets were
purchased at a blended NIY of 4.5% and a reversionary yield of
5.1%. The acquisitions were all grocery-led convenience or roadside
assets, had a WAULT of 18.9 years and all benefited from
contractual rental uplifts. They have strong residual value
supported by alternative use, principally residential, and for
some, vacant possession value is above the purchase price. They
consisted of:
-- a GBP62.0 million sale and leaseback portfolio of five
convenience food stores let to Waitrose for 20 years and located in
Keynsham, Malmesbury, Paddock Wood, Towcester and Yateley. The
assets also operate as online fulfilment centres for Waitrose and
John Lewis;
-- a GBP10.8 million portfolio of three BP/M&S convenience
service stations in Brentwood, Pevensey and Lewes let to BP for 16
years;
-- a GBP9.6 million sale and leaseback portfolio of five service
centres in London let to Kwik Fit; and
-- a GBP2.0 million new build roadside convenience store, petrol
station and drive through Starbucks in Rushden let to Euro Garages
for 25 years;
Disposals totalled GBP5.2 million and were sold at a blended NIY
of 5.0%, consisting of:
-- a short let stand-alone Matalan unit in Leicester sold for GBP3.4 million; and
-- four Kwik Fit service centres let for 15 years and sold for GBP1.8 million
Post period end, we sold two M&S food stores in Haslemere
and Ferndown for GBP14.7 million, reflecting a NIY of 4.0%.
Long income leasing and rent review activity
In the period, we signed five regears with a WAULT of 21.5
years. These related to our cinemas where, in response to the
pandemic, we agreed lease extensions in return for a rent free
period.
Rent reviews settled in the period generated an uplift of GBP0.2
million at 12% above previous passing on a five yearly equivalent
basis. These reviews were mostly related to convenience assets with
RPI or fixed uplifts.
Development Review
In the period, we completed 251,000 sq ft of developments
generating GBP1.6 million of additional rent per annum, reflecting
a yield on cost of 5.3%. We have another 657,000 sq ft of
development under way or due to commence shortly that is expected
to generate GBP5.6 million of additional rent per annum, reflecting
a yield on cost of 7.2%. The expenditure on these developments over
the next 12 months is expected to total c.GBP56 million, of which
c.GBP35 million is committed.
Sq ft Income Yield on
Completed in the period ('000) (GBPm) cost (%)
------------------------ ------- ------- ---------
Croda, Goole (funding) 232 1.3 5.2
Weymouth (Aldi) 19 0.3 5.7
------------------------ ------- ------- ---------
Total 251 1.6 5.3
------------------------ ------- ------- ---------
Under construction & commencing shortly
-----------------------------------------------------
Bedford (Phase 2b) (1) 350 2.5 8.5
Bedford (Phase 2a) (1) 165 1.2 6.7
Tyseley (Phase 2) (1,2) 120 1.6 6.0
Wallingford (funding) 22 0.3 5.0
Total 657 5.6 7.2
------------------------ ------- ------- ---------
(1) Anticipated yield on cost and rents
(2) Construction subject to concluding current pre-let
discussions
Goole funding
Completion of a 232,000 sq ft distribution warehouse pre-let to
Croda for 20 years which was forward funded.
Weymouth
A 19,000 sq ft convenience store pre-let to Aldi completed in
July 2020. Offers have been received on the letting of two small
pods totalling a further 6,000 sq ft, where development remains
conditional on planning.
There is further development potential at the site.
Bedford Link
On site with the development of a regional distribution
warehouse totalling 165,000 sq ft which is expected to complete in
January 2021 and is seeing good occupier interest.
We have also commenced speculative construction of the final
phase of our development at Bedford Link which comprises a 350,000
sq ft regional distribution unit. Completion is expected in Q3
2021.
Tyseley
In the previous year, we completed 135,000 sq ft of distribution
development at our Tyseley site. 69,000 sq ft has been let and we
continue to let the remaining space.
We expect to commence shortly the development of a further
120,000 sq ft of distribution warehousing. Occupier discussions are
highly advanced and planning consent has been received subject to a
customary review period.
There is a further 15,000 sq ft of development potential which
we are in pre-let discussions on.
Wallingford funding
Forward funding of a 22,000 sq ft trade counter development in
Wallingford pre-let to MKM and Howdens with a WAULT of 18 years.
Construction has commenced with completion expected by the end of
the year.
Other development potential
Many of our long income assets are well located in suburban
locations with strong alternative use, such as residential, and
have the potential to be repurposed over time. We continually look
to upgrade existing long income assets and exploit potential
opportunities. Near term development potential includes
reconfiguration of:
-- a 51,000 sq ft long income NNN retail asset in New Malden,
London, which is predominantly let to Dixons and where planning has
been received to accommodate an additional convenience food
store;
-- a 32,000 sq ft long income trade asset in Ashford, Surrey,
where we are securing vacant possession and where planning is in
progress to accommodate an additional store let to Lidl on a 25
year lease; and
-- a 48,000 sq ft long income NNN retail asset in Orpington,
London, previously let to Carpetright, where we have agreed a new
20 year lease with Lidl to accommodate them alongside a smaller
Carpetright unit. Planning has been received and we are satisfying
certain conditions before commencing works.
Sustainability and ESG
We continue to improve the quality of our assets through
development and asset management.
All of our completed developments in the period were certified
as BREEAM Very Good. At Bedford Link, we are on site developing two
BREEAM Excellent buildings totalling c.515,000 sq ft and, at
Tyseley, we expect to commence shortly the development of a 120,000
sq ft building that is also expected to be BREEAM Excellent. These
projects would take the proportion of BREEAM Excellent developments
under construction to 97%.
At Bedford Link, development of the smaller building of 165,000
sq ft is showing a significant reduction in development related
carbon emissions compared to the earlier development phase. We are
setting even higher construction and energy standards on the larger
building of 350,000 sq ft which should see us make further
reductions in development related emissions as well as further
improve the building's environmental credentials.
As part of our corporate wide sustainability target this
financial year to introduce a net zero carbon ambition, we are also
looking at how we can manage the buildings at Bedford Link so as to
achieve net zero carbon. We are retrospectively installing energy
monitoring on the buildings already completed and are installing as
standard on the units under development.
We continue to engage with our occupiers on energy efficiency
initiatives including solar PV installations, LED lighting
upgrades, Electric Vehicle (EV) charging and improving the
environmental performance of our buildings, particularly across our
distribution portfolio. In the period, 1.5MW of solar was installed
at our 357,000 sq ft logistics warehouse in Warrington and we are
rolling out further EV charging points across our long income
assets and development assets.
Over the period, we maintained our Green Star status in the
Global Real Estate Sustainability Benchmark ('GRESB') 2020 survey.
Our score of 65% (2019: 71%) continues to compare favourably
against the average score of our peers of 61% (2019: 67%) and is
significantly up from the 34% we achieved in 2014.
Further detail on sustainability & ESG related matters can
be found in our latest Responsible Business report on our
website:
https://www.londonmetric.com/sites/london-metric/files/sustainability/lmp_responsible_business_2020.pdf
Financial Review
Despite the challenges posed by the global pandemic that has
dominated our lives for nearly eight months, we have again
delivered a very strong set of results with both earnings and NAV
progression, underpinned by a strong balance sheet and robust
portfolio metrics. We remain very well placed with a resilient
portfolio, lower leverage and significant liquidity to navigate the
uncertain times ahead.
Earnings growth includes a full six months' contribution from
the A&J Mucklow Group which we acquired in June last year, and
we have benefited from the deployment of funds raised through a
GBP120 million equity placing in May into attractive income
producing investment assets in our preferred portfolio sectors.
Rent collection has been a key priority and we have utilised the
close relationships we have with our tenants to provide assistance
where necessary and negotiate asset management initiatives and
concessions that benefit both parties.
EPRA earnings per share increased by 3.9% to 4.75p, driven by an
11.7% increase in net rental income and 9.6% reduction in finance
costs. We have continued to focus on growing our dividend, which at
4.2p per share for the half year, is a 5% increase over the
comparative period last year and 1.13 times covered by EPRA
earnings per share. Our shareholders continue to receive the full
benefit of our successful investment strategy, as we have continued
to pay our dividend despite the challenging market conditions.
IFRS reported profit is GBP85.1 million compared to a loss of
GBP10.2 million last year which included one off acquisition costs
related to the Mucklow transaction of GBP57.2 million. IFRS net
assets have increased to
GBP1,597.9 million, predicated on a strong portfolio performance
and valuation gain of GBP42.8 million or 4.8p per share and
including the proceeds from the equity raise. Our portfolio has
remained resilient and continues to be well positioned to weather
the disruption we have and continue to face, with 94.6% of our
assets in the structurally supported logistics and long income
sectors.
EPRA has introduced new reporting metrics for net asset value
this year and we have adopted EPRA net tangible assets (NTA) as our
primary measure and key performance indicator to replace EPRA net
asset value. EPRA NTA per share is on a fully diluted basis and
prior year comparatives have been presented for the new measure
accordingly. At 30 September, EPRA NTA per share was 175.5p,
reflecting an increase of 3.1% over the period (March 2020 EPRA
NTA: 170.3p per share).
Our financial position was strengthened by the equity placing,
which alongside asset disposals has helped to reduce LTV to 32.4%
at the half year from 35.9% in March. Our other financing metrics
remain strong. Average cost of debt has fallen to 2.5% (March 2020:
2.9%), largely as a result of the cancellation of GBP350 million
short dated interest rate swaps in April, leaving only 45% of debt
drawn hedged through fixed coupon facilities which will allow us to
continue to take advantage of existing and future low rates of
interest. Our headroom has increased to GBP267 million from GBP220
million in March, providing ongoing operational optionality and
security in these unprecedented times.
Presentation of financial information
The Group financial statements have been prepared in accordance
with IFRS. Management monitors the performance of the business
principally on a proportionately consolidated basis, which includes
the Group's share of joint ventures ('JV') and excludes any
non-controlling interest ('NCI') on a line by line basis. The
figures and commentary in this review are presented on a
proportionately consolidated basis, consistent with our management
approach, as we believe this provides a meaningful analysis of
overall performance. These measures are alternative performance
measures, as they are not defined under IFRS.
The Group uses alternative performance measures based on the
European Public Real Estate Association ('EPRA') Best Practice
Recommendations ('BPR') to supplement IFRS, in line with best
practice in our sector, as they highlight the underlying
performance of the Group's property rental business and exclude
property and derivative valuation movements, profits and losses on
disposal of properties, financing break costs, goodwill and
acquisition costs, all of which may fluctuate considerably from
year to year. These are adopted throughout this report and are key
business metrics supporting the level of dividend payments.
In October 2019, EPRA introduced three new measures of net asset
value: EPRA net tangible assets (NTA), EPRA net reinstatement value
(NRV) and EPRA net disposal value (NDV). EPRA NTA is considered to
be the most relevant measure for the Group and replaces EPRA NAV as
the primary measure of net asset value this half year.
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 NCI 2020 Group JV NCI 2019
For the six months to 30 September GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------ ----- ------- ------ ------ ----- ------- ------
Gross rental income 60.3 2.7 (0.9) 62.1 52.9 3.3 (0.6) 55.6
Property costs (0.7) (0.1) - (0.8) (0.6) (0.1) - (0.7)
----------------------------------- ------ ----- ------- ------ ------ ----- ------- ------
Net rental income 59.6 2.6 (0.9) 61.3 52.3 3.2 (0.6) 54.9
Management fees 0.4 (0.2) - 0.2 0.6 (0.3) - 0.3
Administrative costs (8.0) - - (8.0) (7.7) - 0.1 (7.6)
Net finance costs (10.7) (0.7) 0.1 (11.3) (11.8) (0.8) 0.1 (12.5)
Other(1) - - 0.1 0.1 - - 0.1 0.1
----------------------------------- ------ ----- ------- ------ ------ ----- ------- ------
EPRA earnings 41.3 1.7 (0.7) 42.3 33.4 2.1 (0.3) 35.2
----------------------------------- ------ ----- ------- ------ ------ ----- ------- ------
(1) Other items include the tax charge attributable to the
non-controlling interest
Net rental income
We continue to focus on growing our underlying net rental income
and delivering dividend progression for our shareholders. The
pandemic has only intensified our search for income, which has
increased by 11.7% to
GBP61.3 million. The Mucklow portfolio, which we acquired on 27
June 2019, contributed fully this half year delivering gross rental
income of GBP13.1 million, compared with GBP6.9 million last half
year. Other movements in net rental income are reflected in the
table below.
GBPm GBPm
-------------------------------------------- ----- ------
Net rental income 2019 54.9
Additional rent from existing properties(1) 1.0
Additional rent from developments(2) 0.8
Additional rent from acquisitions(3) 10.1
Rent lost through disposals(3) (4.4)
-----
Additional rent from net acquisitions 5.7
Increase in rent provision(4) (1.0)
Increase in property costs (0.1)
--------------------------------------------- ----- ------
Net rental income 2020 61.3
--------------------------------------------- ----- ------
(1) Properties held since 1 April 2019
(2) Developments completed since 1 April 2019
(3) Acquisitions and disposals completed since 1 April 2019,
including the Mucklow portfolio
(4) Represents increases in provisions against group trade
debtors of GBP0.6 million (as reflected in note 10 to the financial
statements), MIPP JV rent debtors of GBP0.2 million and rent free
lease incentives in investment property of GBP0.2 million
Additional income from existing properties and developments is
based on properties held and developments completed since April
2019. On this basis, we generated additional rent from lettings,
rent reviews and regears of our existing portfolio and completed
developments of GBP1.8 million, which included GBP0.8 million
additional surrender premium receipts.
Income from net acquisitions of GBP5.7 million included the
additional Mucklow contribution of GBP6.2 million and the impact of
other net disposals which reduced income by GBP0.5 million compared
to the comparative period.
We have assessed the recoverability of our period end trade
debtor and lease incentive balances in accordance with IFRS 9, and
have increased our provision by GBP1.0 million since September
2019. At the half year, our provision against trade debtors is
GBP0.8 million, as reflected in note 10 to the financial
statements. This comprises an allowance for specific trade debtors
of GBP0.2 million and an expected credit loss provision of GBP0.6
million, which incorporates the potential widespread disruption
caused by lockdown restrictions implemented to combat the spread of
the virus over the next 12 months. However, our latest rent
collection rates have been exceptionally strong and we will
continue to monitor these over the second half of the year and
adjust our provision accordingly.
Property costs have increased marginally by GBP0.1 million and
our property cost leakage remains low at 1.3% (September 2019:
1.3%, March 2020: 1.2%).
Rent collection
Our rent collection in the period was very strong and has
continued to remain at high levels post period end. We have
collected 96.5% of rents due in the period and just 0.8% or GBP0.5
million remains unpaid or has been forgiven, some of which relates
to a property where we are securing vacant possession for a new
letting to Lidl. In respect of our third quarter rents due by 1
November, we have collected 98%, previously agreed deferrals apply
to a further 1% and 1% remains unpaid.
However, we have not been immune to the impact of the pandemic
and have proactively supported a number of our tenants who have
faced cash flow challenges by implementing deferred payment plans
and initiatives which offer short term rental concessions in
exchange for value enhancing asset management initiatives, all of
which are being honoured and account for the remaining 2.7% of rent
that was due in the period.
Administrative costs
Administrative costs have increased by GBP0.4 million to GBP8.0
million and are stated after capitalising staff costs of GBP1.1
million (September 2019: GBP1.0 million) in respect of time spent
on development projects in the period. The increase over the
comparative period last year includes an additional three months'
overheads for Mucklow of GBP0.2 million.
EPRA cost ratio
We continue to monitor our operational costs closely and use the
EPRA cost ratio to measure our effective management of costs.
Having fallen 60 bps over the year to 13.7%, it remains one of the
lowest in our sector.
30 September 2020 30 September 2019 31 March 2020
% % %
----------------------------------------------- ----------------- ----------------- -------------
EPRA cost ratio including direct vacancy costs 13.7 14.3 14.2
EPRA cost ratio excluding direct vacancy costs 13.4 13.6 13.3
----------------------------------------------- ----------------- ----------------- -------------
The ratio reflects total operating costs as a percentage of
gross rental income. The full calculation is shown in Supplementary
note iv.
Net finance costs
Net finance costs, excluding the costs associated with repaying
debt and terminating hedging arrangements on sales and refinancing
in the period were GBP11.3 million, a decrease of GBP1.2 million
over the previous period.
This reflected lower interest charges of GBP0.9 million and
additional interest capitalised and receivable on developments of
GBP0.3 million.
The average interest rate payable over the period was lower than
in the previous comparative period, due primarily to the
cancellation in April 2020 of GBP350 million interest rate swaps
that hedged our unsecured facilities. This reduced the proportion
of our drawn debt hedged to 45% and our cost of debt at the period
end to 2.5% (September 2019: 3.0%, March 2020: 2.9%). The
corresponding swap break cost was GBP4.9 million, which we expect
to be paid back over the next 12 months from interest cost
savings.
Further detail is provided in notes 4 and 9 to the financial
statements.
Share of joint ventures
EPRA earnings from joint venture investments were GBP1.7
million, a decrease of GBP0.4 million over the comparative period
as reflected in the table below.
2020 2019
For the six months to 30 September GBPm GBPm
------------------------------------------------- ----- -----
Metric Income Plus Partnership (MIPP) 1.8 2.0
LMP Retail Warehouse JV (DFS) - 0.1
LSP London Residential Investments (Moore House) (0.1) -
EPRA earnings 1.7 2.1
------------------------------------------------- ----- -----
As reported last year, our interest in DFS is now consolidated
in the Group accounts and our partner's 18% share reflected as a
non-controlling interest. During the period, DFS contributed GBP3.9
million in total to EPRA earnings compared with GBP2.4 million for
the previous comparative period. The increase was due to the
receipt of a surrender premium of GBP1.5 million at Carlisle in the
half year.
Income from our MIPP joint venture fell by GBP0.2 million due to
an increase in the rent provision for one property where we are
securing vacant possession for a new letting to Lidl.
The Group received net management fees of GBP0.2 million for
acting as property advisor to each of its joint ventures, which
have fallen by GBP0.1 million as a result of movements in property
valuations and sales.
Taxation
As the Group is a UK REIT, any income and capital gains from our
qualifying property rental business are exempt from UK corporation
tax. Any UK income that does not qualify as property income within
the REIT regulations is subject to UK tax in the normal way.
The Group's tax strategy is compliance oriented; to account for
tax on an accurate and timely basis and meet all REIT compliance
and reporting obligations. We seek to minimise the level of tax
risk and to structure our affairs based on sound commercial
principles. We strive to maintain an open dialogue with HMRC with a
view to identifying and solving issues as they arise. There were no
issues raised in the period.
We continue to monitor and comfortably comply with the REIT
balance of business tests and distribute as a Property Income
Distribution ('PID') 90% of REIT relevant earnings to ensure our
REIT status is maintained. The Group has paid the required PID for
the year to 31 March 2020 ahead of the deadline of 31 March 2021.
In accordance with REIT regulations, GBP3.8 million was withheld
from distributions and paid directly to HMRC in the period.
IFRS reported profit
A full reconciliation between EPRA earnings and IFRS reported
profit is given in note 7(b) to the accounts and is summarised in
the table below.
For the six NCI NCI
months to 30 Group JV GBPm 2020 Group JV GBPm 2019
September GBPm GBPm GBPm GBPm GBPm GBPm
-------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ------------
EPRA earnings 41.3 1.7 (0.7) 42.3 33.4 2.1 (0.3) 35.2
Revaluation of
property 44.3 (1.8) 0.3 42.8 19.3 (3.5) 0.8 16.6
Fair value of
derivatives 4.7 (0.1) - 4.6 (2.5) (0.3) - (2.8)
Profit/(loss)
on disposal 0.3 (0.1) 0.1 0.3 0.6 (2.3) - (1.7)
Debt/hedging
break costs (4.9) - - (4.9) (0.3) - - (0.3)
Impairment of
goodwill - - - - (48.3) - - (48.3)
Acquisition
costs - - - - (8.9) - - (8.9)
-------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ------------
IFRS reported
profit/(loss) 85.7 (0.3) (0.3) 85.1 (6.7) (4.0) 0.5 (10.2)
-------------- ----------- ----------- ----------- ----------- ------------ ----------- ----------- ------------
The Group's reported profit for the period was GBP85.1 million
compared with GBP47.0 million in the previous period before
exceptional goodwill and acquisition costs. The GBP38.1 million
increase was primarily due to the property revaluation being
GBP26.2 million higher and increased EPRA earnings of GBP7.1
million.
Property sales in the period generated a GBP0.3 million profit
over book value compared with a loss of GBP1.7 million last year.
The total profit over original cost was GBP7.1 million,
representing a return of 10.4%. Disposals are discussed in detail
in the Property Review.
The favourable movement in the fair value of derivatives is
offset by the swap break cost of GBP4.9 million, resulting in a
charge of GBP0.3 million in the period compared to a total charge
of GBP3.1 million last year.
Balance sheet
EPRA net tangible assets (NTA) is a new performance measure
introduced this year and for the Group replaces the previous metric
of EPRA net assets as a key performance indicator that reflects
both income and capital returns. It excludes the fair valuation of
derivative instruments that are reported in IFRS net assets. A
reconciliation between IFRS and EPRA NTA is detailed in the table
below and in note 7(c) to the financial statements. EPRA NTA per
share is on a fully diluted basis and prior year comparatives have
been presented for the new measure accordingly.
EPRA net tangible assets for the Group and its share of joint
ventures are as follows:
30 September
Group JV NCI 2020 Group JV NCI 31 March 2020
As at GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ------ ------- ------------ ------- ------ ------- -------------
Investment property 2,372.8 89.1 (11.3) 2,450.6 2,273.6 92.4 (14.9) 2,351.1
Trading property 1.1 - - 1.1 1.1 - - 1.1
---------------------- ------- ------ ------- ------------ ------- ------ ------- -------------
2,373.9 89.1 (11.3) 2,451.7 2,274.7 92.4 (14.9) 2,352.2
Gross debt (841.6) (37.5) - (879.1) (932.7) (42.1) - (974.8)
Cash 38.8 3.6 (0.2) 42.2 81.8 5.1 (0.8) 86.1
Other net liabilities (21.1) (0.5) 5.5 (16.1) (34.3) (0.6) 8.6 (26.3)
---------------------- ------- ------ ------- ------------ ------- ------ ------- -------------
EPRA NTA 1,550.0 54.7 (6.0) 1,598.7 1,389.5 54.8 (7.1) 1,437.2
---------------------- ------- ------ ------- ------------ ------- ------ ------- -------------
Derivatives - (0.8) - (0.8) (4.7) (0.7) - (5.4)
---------------------- ------- ------ ------- ------------ ------- ------ ------- -------------
IFRS net assets 1,550.0 53.9 (6.0) 1,597.9 1,384.8 54.1 (7.1) 1,431.8
---------------------- ------- ------ ------- ------------ ------- ------ ------- -------------
IFRS reported net assets have increased 11.6% since March to
GBP1,597.9 million. This incorporates the net proceeds received
from the equity raise of GBP116.6 million.
Both IFRS NAV per share and EPRA NTA per share have increased
3.1% since March to 176.3p and 175.5p per share respectively. The
movement in EPRA NTA and EPRA NTA per share is reflected in the
table below.
EPRA EPRA NTA
NTA per share
GBPm p
------------------------- ------- ----------
EPRA NTA at 1 April 2020 1,437.2 170.34
EPRA earnings 42.3 4.75
Dividends(2) (37.5) (4.21)
Property revaluation 42.8 4.80
Equity raise 116.6 -
Other movements(1) (2.7) (0.17)
At 30 September 2020 1,598.7 175.51
-------------------------- ------- ----------
(1) Other movements include debt break costs (GBP4.9 million)
offset by share based awards (GBP1.6 million), scrip share issue
savings (GBP0.3 million) and profit on sales (GBP0.3 million)
(2) Dividend per share is based on the weighted average number
of shares in the period. The actual dividend paid in the period was
4.3p as reflected in note 6 to the financial statements
The increase in EPRA NTA per share was principally due to the
property revaluation gain of 4.8p per share, as EPRA earnings per
share of 4.75p covered the dividend paid in the period.
The movement in EPRA NTA per share, together with the dividend
paid in the period, results in a total accounting return of 9.5p or
5.6% per share. Total accounting return is a key performance
indicator and component of the variable element of Directors'
remuneration arrangements. The strong growth in the period of 5.6%
is significantly ahead of the previous half year return of 2.4%.
The full calculation can be found in supplementary note viii.
Equity raise
In May 2020, we successfully raised gross proceeds of GBP120
million through an equity placing that was substantially
oversubscribed. A total of 66.7 million new ordinary shares were
issued at a price of 180.0p per share, representing a discount of
1.5% to the previous day's closing share price. The net proceeds
after issue costs of GBP116.6 million were used to acquire income
producing assets including a portfolio of five Waitrose stores for
GBP62 million as set out in the Property Review.
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 31 March 2020 of GBP37.5 million or 4.3p per share in
the period as reflected in note 6 to the financial statements. The
Company issued 0.2 million ordinary shares under the terms of the
Scrip Dividend Scheme, which reduced the cash dividend payment by
GBP0.3 million to GBP37.2 million. The fourth quarterly dividend of
2.3p per share for the year to 31 March 2020 was a cautious
progression given the circumstances of the global pandemic, taking
the total dividend for that year to 8.3p, a 0.1p increase over the
previous year.
The first quarterly payment for the current year of 2.1p per
share was paid as a Property Income Distribution (PID) in October
2020. The second quarterly dividend will comprise a PID of 2.1p per
share and has been approved by the Board for payment in January
2021. The total dividend payable for the half year of 4.2p
represents an increase of 5.0% over the previous comparative
period.
Portfolio valuation
Our property portfolio including share of joint ventures grew by
GBP99.8 million or 4.3% in the half year to
GBP2.45 billion as reflected in the table below.
Group JV NCI 30 September 2020 31 March 2020
GBPm GBPm GBPm GBPm GBPm
----------------------------------- ------------- ----------- ------------ ----------------- -------------
Opening valuation 2,269.0 92.4 (14.9) 2,346.5 1,846.2
Acquisitions(1) 105.0 - - 105.0 577.1
Developments(2) 16.0 - - 16.0 43.1
Capital expenditure(3) 2.4 0.2 (0.1) 2.5 10.3
Disposals (74.6) (1.8) 3.4 (73.0) (128.2)
Revaluation 44.3 (1.8) 0.3 42.8 (12.0)
Lease incentives(4) 6.4 0.1 - 6.5 10.0
Property portfolio value 2,368.5 89.1 (11.3) 2,446.3 2,346.5
----------------------------------- ------------- ----------- ------------ ----------------- -------------
Head lease and right of use assets 5.4 - - 5.4 5.7
----------------------------------- ------------- ----------- ------------ ----------------- -------------
Closing valuation 2,373.9 89.1 (11.3) 2,451.7 2,352.2
----------------------------------- ------------- ----------- ------------ ----------------- -------------
(1) Group acquisitions include purchase costs and represent
completed investment properties as shown in note 8 to the financial
statements
(2) Group developments include acquisitions and capital
expenditure on properties under development as reflected in note
8
(3) Capital expenditure on completed properties
(4) Comprises incentives and rent frees of GBP7.9 million (March
2020: GBP15.4 million) less amounts written off on disposal of
GBP1.4 million (March 2020: GBP5.4 million)
The Group invested GBP105.0 million in the period acquiring
GBP15.0 million distribution and GBP90.0 million long income
assets.
We completed nine commercial property disposals and four
residential flat sales generating net proceeds of GBP74.7 million
at share and reducing the book value of property by GBP74.4 million
(including the cost of lease incentives written off of GBP1.4
million) .
Four disposals that exchanged last year completed in the period,
generating proceeds of GBP64.4 million and have been accounted for
in these financial statements. We also exchanged to sell a
portfolio of six distribution warehouses for GBP57.3 million, a
Matalan unit in Leicester for GBP3.4 million and a Kwik Fit for
GBP0.6 million in the period, all of which will be accounted for on
completion. Further information is provided in the Property
Review.
Property values have increased by GBP42.8 million in the half
year, driven by both management actions and through capturing
rental reversion . The portfolio has delivered a strong total
property return of 4.9%, significantly outperforming the IPD All
Property index of -1.6%, with distribution assets delivering the
largest increase of 8.0%. A breakdown of the property portfolio by
sector is reflected in the table below.
30 September 30 September 31 March 31 March
2020 2020 2020 2020
As at GBPm % GBPm %
----------------------------------- ------------ ------------ -------- --------
Distribution 1,622.5 66.3 1,593.7 67.9
Long income 637.4 26.1 552.5 23.5
Retail Parks 74.1 3.0 83.3 3.6
Offices 54.5 2.2 55.1 2.4
Investment portfolio 2,388.5 97.6 2,284.6 97.4
Development(1) 55.1 2.3 57.0 2.4
Residential 2.7 0.1 4.9 0.2
Property portfolio value 2,446.3 100.0 2,346.5 100.0
Head lease and right of use assets 5.4 5.7
----------------------------------- ------------ ------------ -------- --------
2,451.7 2,352.2
----------------------------------- ------------ ------------ -------- --------
(1) Represents regional distribution GBP44.8 million (1.8%),
urban logistics GBP0.6 million (0.1%), long income GBP7.5 million
(0.3%), office and other land GBP2.2 million (0.1%) at 30 September
2020. Split of prior period comparatives was regional distribution
GBP38.1 million (1.6%), urban logistics GBP6.2 million (0.3%), long
income GBP10.5 million (0.5%), office and other land GBP2.2
million.
Investment in our preferred sectors of distribution and long
income has increased to 94.6%, from 93.8% in March. Our development
exposure remains modest at 2.3% of the portfolio and includes the
remaining 515,000 sq ft at Bedford, our forward funded pre-let
development in Wallingford and the Tyseley development site
acquired as part of the Mucklow portfolio.
Our forward funded development in Goole pre-let to Croda and our
convenience store in Weymouth pre-let to Aldi completed in the
period and have been transferred to investment properties.
The Group had capital commitments of GBP42.3 million as reported
in note 8 to the financial statements, relating primarily to the
next phase of development in Bedford.
Further detail on property acquisitions, sales, asset management
and development can be found in the Property Review.
Financing
The key performance indicators used to monitor the Group's debt
and liquidity position are shown in the table below. The Group and
joint venture split is shown in Supplementary note iii.
30 September 31 March
2020 2020
As at GBPm GBPm
---------------------- ------------ ---------
Gross debt 879.1 974.8
Cash 42.2 86.1
Net debt 836.9 888.7
Loan to value(1) 32.4% 35.9%
Cost of debt(2) 2.5% 2.9%
Undrawn facilities 224.8 133.8
Average debt maturity 4.7 years 4.7 years
Hedging(3) 45% 77%
---------------------- ------------ ---------
(1) LTV at 30 September 2020 includes the impact of sales that
exchanged in the period of GBP61.3 million within cash and
investment properties (March 2020: GBP64.4 million), and excludes
the fair value debt adjustment of GBP2.6 million (March 2020:
GBP2.7 million)
(2) Cost of debt is based on gross debt and including amortised
costs but excluding commitment fees
(3) Based on the notional amount of existing hedges and total
debt drawn
Net debt has decreased by GBP51.8 million in the period, as
proceeds from disposals and the equity raise exceeded property
acquisitions in the period.
Our key financial ratios remain strong with average debt cost
reducing to 2.5% (March 2020: 2.9%) and loan to value also falling
to 32.4% (March 2020: 35.9%).
The Group has headroom available from undrawn facilities and
cash balances held of GBP267 million, which provides operational
flexibility and security and ample cover for its contracted capital
commitments of
GBP42.3 million.
Of our total facilities of GBP1.1 billion, 54% or GBP594 million
are unsecured revolving credit facilities, providing operational
flexibility at low average costs. At 30 September 2020, debt drawn
under these facilities represented 42% of total debt drawn compared
with 47% in March. Debt maturity has been maintained at 4.7 years
despite the passing of time, as we have reduced the proportion of
our debt held in the shorter dated unsecured revolving facilities
at the period end.
The Group has comfortably complied throughout the period with
the financial covenants contained in its debt funding arrangements
and has substantial levels of headroom. Covenant compliance is
regularly stress tested for changes in capital values and income.
The Group's unsecured facilities and private placement loan notes,
which together account for 74% of debt drawn at the period end,
contain gearing and interest cover financial covenants.
At 30 September, the Group's gearing ratio as defined within
these funding arrangements was 51% which is significantly lower
than the maximum limit of 125%, and its interest cover ratio was
5.4 times, comfortably higher than the minimum level of 1.5 times.
Property values would have to fall by 39% and rents by 65% before
banking covenants are breached.
The Group's policy is to de-risk the impact of movements in
interest rates by entering into hedging and fixed rate
arrangements. However, in April this year we took advantage of the
low interest environment and cancelled GBP350 million interest rate
swaps that hedged our unsecured facilities and were due to expire
in 2022. This reduced the proportion of our drawn debt hedged to
45%, mainly through our fixed coupon private placement and Scottish
Widows debt and has contributed to interest cost savings in the
period and a lower average cost of debt of 2.5% at the period
end.
We are advised by Chatham Financial and continue to monitor our
hedging profile in light of interest rate projections.
Cash flow
During the period since March, the Group's cash balances
decreased by GBP43.0 million as reflected in the table below.
2020 2019
For the six months to 30 September GBPm GBPm
------------------------------------------------------ ------- --------
Net cash from operating activities 36.4 21.4
Net cash used in investing activities (48.9) (223.1)
Net cash (used in)/from financing activities (30.5) 229.6
------------------------------------------------------ ------- --------
Net (decrease)/increase in cash and cash equivalents (43.0) 27.9
------------------------------------------------------ ------- --------
The net cash inflow from operating activities of GBP36.4 million
is GBP0.6 million less than in the previous period after adjusting
for exceptional acquisition costs paid last year of GBP15.6
million.
The Group spent GBP114.3 million acquiring property in the
period and received net cash proceeds of GBP74.8 million from
property disposals and joint ventures. Capital expenditure on asset
management and development activities cost the Group GBP9.5 million
and interest received was GBP0.1 million.
Cash outflows from financing activities reflect loan repayments
of GBP91.0 million, dividend and distribution payments of GBP38.6
million, financing costs of GBP17.0 million and share purchases of
GBP0.5 million, offset by the net proceeds from the equity raise of
GBP116.6 million.
Further detail is provided in the Group Cash Flow Statement.
Key Risks and Uncertainties
Risk management
Our risk management procedures are designed to reduce the
negative impact of risk on the business and are critical to the
continuing generation of reliable and growing, income-led returns
and long term outperformance . The Board undertakes robust risk
assessments and establishes the extent to which it is willing to
accept some level of risk in achieving its strategic goals whilst
ensuring stakeholder interests are protected. The Board's
risk tolerance is low although the Board accepts risk cannot be eliminated completely.
The processes for identifying, assessing and mitigating
principal and emerging risks within the business is set out on
pages 60 to 75 of our 2020 Annual Report. The Board is satisfied
that these processes continue to be sound and it considers risk
management at each of its meetings.
Since publication of the 2020 Annual Report no new principal or
emerging risks have been identified. Covid-19 was identified as a
material risk at the year end and continues to present a
significant challenge affecting other risk categories. The adverse
impact of Covid-19 on the economy has already been substantial and
as a second wave of infections takes hold it continues to be
impossible to predict the timing and trajectory of an economic
recovery. The strong structural drivers for our core sectors have
however mitigated much of the negative impact from Covid-19 on our
business as demonstrated by our half year results.
The principal risks and uncertainties facing the Group, the
Board's appetite for each and significant changes in the period,
where identified, are summarised as follows:
Corporate risks
These risks relate to the entire Group and include those which
affect strategy, our market, systems, employees and wider
stakeholders, our regulatory and social and environmental
responsibilities.
Strategy
The Group's strategy may be inappropriate for the current
economic climate or market cycle or may be poorly implemented. 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 continues to view the Group's strategic priorities as
fundamental to its business and reputation and that they are
appropriate and well executed.
Covid-19
Global health crisis leading to a prolonged, severe economic
downturn.
Update: The macro economic environment continues to be
supportive of the right real estate in structurally supported
sectors.
Economic and political factors
Uncertainty over the outcome of international trade negotiations
following the UK's exit from the EU may further adversely impact
the economy in addition to the severe economic shock from Covid-19.
This may further reduce occupier demand and disrupt tenant
businesses exerting pressure on their ability to pay rent and
ultimately their solvency. It may also reduce asset liquidity and
impact debt markets.
Whilst economic and political factors continue to be monitored
and reflected in strategy, market conditions are outside of the
Board's control.
Update: Uncertainty remains over the form of a trade deal, if
any, with the EU as we head towards the end of the transition
period. We continue to believe that the accelerating impact of new
technology and profound structural changes in the retail landscape
will be more important than what ultimately happens with the UK's
relationship with the EU.
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. The Board is satisfied
with the delivery of our people strategy to have the right resource
appropriately remunerated.
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
Non-compliance with responsible business practices relating to
environmental, social and governance concerns, such as climate
change and treating stakeholders fairly, 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 risks are focused on our core business, they relate to
portfolio composition and management, development activity, factors
impacting capital values, income returns and our occupiers.
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.
Update: Whilst we have been able to make attractive investments
over the period, competition for our core sectors has increased
markedly. Our investment strategy remains cautious.
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 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.
Update: Our development exposure over the period has been
limited and no significant delays have been experienced.
Nationally, occupier take up, predominantly driven by the growth in
e-commerce as a result of Covid-19, has reduced the availability of
Grade A distribution space. As a result we have taken the decision
to build out the remaining units at Bedford Link on a speculative
basis.
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.
Update: We have experienced no significant delinquency within
our portfolio to date. Whether this remains the case depends
largely on the continuing impact of Covid-19. Whilst not immune we
remain confident that our investment decisions, our focus on strong
locations and strong credits and on credit control processes,
mitigate this risk.
Financing risks
Financing risks relate to how we fund our operations through
cash management, capital and debt markets and joint ventures.
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.
Update: We have initiated discussions with our lending partners
on refinancing our shorter dated revolving credit facility ahead of
announcing next years' Annual Report. Our access to capital and
debt markets remains strong.
Group income statement
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2020 2019 2020
Note GBPm GBPm GBPm
------------------------------------------- ---- ------------- ------------- ---------
Gross revenue 3 60.7 53.5 113.4
------------------------------------------- ---- ------------- ------------- ---------
Gross rental income 60.3 52.9 112.3
Property operating expenses (0.7) (0.6) (1.2)
------------------------------------------- ---- ------------- ------------- ---------
Net rental income 59.6 52.3 111.1
Property advisory fee income 0.4 0.6 1.1
------------------------------------------- ---- ------------- ------------- ---------
Net income 60.0 52.9 112.2
Administrative costs (8.0) (7.7) (15.8)
Impairment of goodwill on acquisition
of subsidiaries - (48.3) (48.3)
Acquisition costs - (8.9) (8.9)
Profit/(loss) on revaluation of investment
properties 8 44.3 19.3 (3.8)
Profit/(loss) on sale of investment
properties 0.3 0.6 (4.9)
Share of loss of joint ventures 9 (0.3) (4.0) (8.9)
------------------------------------------- ---- ------------- ------------- ---------
Operating profit 96.3 3.9 21.6
Finance income 0.6 0.4 0.7
Finance costs 4 (11.5) (15.0) (29.0)
---------
Profit/(loss) before tax 85.4 (10.7) (6.7)
Taxation 5 - - (0.2)
------------------------------------------- ---- ------------- ------------- ---------
Profit/(loss) for the period and
total comprehensive income 85.4 (10.7) (6.9)
------------------------------------------- ---- ------------- ------------- ---------
Attributable to:
Equity shareholders 85.1 (10.2) (5.7)
Non-controlling interest 17 0.3 (0.5) (1.2)
------------------------------------------- ---- ------------- ------------- ---------
Earnings per share
Basic 7 9.54p (1.33)p (0.70)p
Fully diluted 7 9.49p (1.31)p (0.70)p
EPRA Earnings per share
Basic 7 4.75p 4.57p 9.26p
Fully diluted 7 4.72p 4.53p 9.19p
All amounts relate to continuing activities.
Group balance sheet
Unaudited Unaudited Audited
30 September 30 September 31 March
2020 2019 2020
Note GBPm GBPm GBPm
------------------------------------- ---- ------------- -------------- ---------
Non current assets
Investment properties 8 2,372.8 2,315.9 2,273.6
Investment in equity accounted joint
ventures 9 53.9 64.4 54.1
Other tangible assets 0.3 0.4 0.4
---------
2,427.0 2,380.7 2,328.1
Current assets
Trading properties 1.1 1.1 1.1
Trade and other receivables 10 16.9 6.3 7.8
Cash and cash equivalents 11 38.8 48.5 81.8
------------------------------------- ---- ------------- -------------- ---------
56.8 55.9 90.7
------------------------------------- ---- ------------- -------------- ---------
Total assets 2,483.8 2,436.6 2,418.8
------------------------------------- ---- ------------- -------------- ---------
Current liabilities
Trade and other payables 12 38.2 41.6 42.6
Non current liabilities
Borrowings 13 836.2 916.8 926.7
Derivative financial instruments 13 - 4.1 4.7
Lease liabilities 5.5 6.0 5.9
------------------------------------- ---- ------------- -------------- ---------
841.7 926.9 937.3
------------------------------------- ---- ------------- -------------- ---------
Total liabilities 879.9 968.5 979.9
------------------------------------- ---- ------------- -------------- ---------
Net assets 1,603.9 1,468.1 1,438.9
------------------------------------- ---- ------------- -------------- ---------
Equity
Called up share capital 14 90.8 84.0 84.2
Share premium 15 216.6 103.3 106.3
Capital redemption reserve 15 9.6 9.6 9.6
Other reserve 15 493.0 492.7 488.4
Retained earnings 15 787.9 770.7 743.3
------------------------------------- ---- ------------- -------------- ---------
Equity shareholders' funds 1,597.9 1,460.3 1,431.8
------------------------------------- ---- ------------- -------------- ---------
Non-controlling interest 17 6.0 7.8 7.1
------------------------------------- ---- ------------- -------------- ---------
Total equity 1,603.9 1,468.1 1,438.9
------------------------------------- ---- ------------- -------------- ---------
IFRS net asset value per share 7 176.3p 174.3p 171.0p
EPRA net tangible assets per share 7 175.5p 173.5p 170.3p
Group statement of changes in equity
Six months ended 30 September 2020 (Unaudited)
Capital Equity
Share Share redemption Other Retained shareholders' Non-controlling Total
capital premium reserve reserve earnings funds interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
At 1 April 2020 84.2 106.3 9.6 488.4 743.3 1,431.8 7.1 1,438.9
Profit for the period
and total
comprehensive
income - - - - 85.1 85.1 0.3 85.4
Equity placing 6.6 110.0 - - - 116.6 - 116.6
Purchase of shares
held in trust - - - (0.2) - (0.2) - (0.2)
Vesting of shares
held in trust - - - 4.8 (5.1) (0.3) - (0.3)
Share-based awards - - - - 2.1 2.1 - 2.1
Distribution to
non-controlling
interest - - - - - - (1.4) (1.4)
Dividends - 0.3 - - (37.5) (37.2) - (37.2)
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
At 30 September 2020 90.8 216.6 9.6 493.0 787.9 1,597.9 6.0 1,603.9
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
Year ended 31 March 2020 (Audited)
Capital Equity
Share Share redemption Other Retained shareholders' Non-controlling Total
capital premium reserve reserve earnings funds interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
At 1 April 2019 70.0 100.8 9.6 221.7 814.7 1,216.8 - 1,216.8
Loss for the year
and total
comprehensive
income - - - - (5.7) (5.7) (1.2) (6.9)
Share issue on
acquisition 13.9 - - 269.5 - 283.4 - 283.4
Purchase of shares
held in trust - - - (7.2) - (7.2) - (7.2)
Vesting of shares
held in trust - - - 4.4 (4.4) - - -
Share based awards - - - - 2.9 2.9 - 2.9
Investment from
non-controlling
interest - - - - - - 8.7 8.7
Distribution to
non-controlling
interest - - - - - - (0.4) (0.4)
Dividends 0.3 5.5 - - (64.2) (58.4) - (58.4)
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
At 31 March 2020 84.2 106.3 9.6 488.4 743.3 1,431.8 7.1 1,438.9
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
Six months ended 30 September 2019 (Unaudited)
Capital Equity
Share Share redemption Other Retained shareholders' Non-controlling Total
capital premium reserve reserve earnings funds interest equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
At 1 April 2019 70.0 100.8 9.6 221.7 814.7 1,216.8 - 1,216.8
Loss for the period
and total
comprehensive
income - - - - (10.2) (10.2) (0.5) (10.7)
Share issue on
acquisition 13.9 - - 269.5 - 283.4 - 283.4
Purchase of shares
held in trust - - - (2.9) - (2.9) - (2.9)
Vesting of shares
held in trust - - - 4.4 (4.4) - - -
Share-based awards - - - - 1.3 1.3 - 1.3
Investment from
non-controlling
interest - - - - - - 8.7 8.7
Distribution to
non-controlling
interest - - - - - - (0.4) (0.4)
Dividends 0.1 2.5 - - (30.7) (28.1) - (28.1)
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
At 30 September 2019 84.0 103.3 9.6 492.7 770.7 1,460.3 7.8 1,468.1
---------------------- -------- -------- ----------- -------- --------- -------------- --------------- -------
Group cash flow statement
Unaudited Unaudited Audited
Six months to Six months to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------------------------------------- -------------- -------------- ---------
Cash flows from operating activities
Profit/(loss) before tax 85.4 (10.7) (6.7)
Adjustments for non-cash items:
(Profit)/loss on revaluation of investment properties (44.3) (19.3) 3.8
(Profit)/loss on sale of investment properties (0.3) (0.6) 4.9
Share of post-tax loss of joint ventures 0.3 4.0 8.9
Movement in lease incentives (5.7) (3.9) (5.7)
Impairment of goodwill on acquisition - 48.3 48.3
Share-based payment 2.1 1.3 2.9
Net finance costs 10.9 14.6 28.3
------------------------------------------------------- -------------- -------------- ---------
Cash from operations before changes in working capital 48.4 33.7 84.7
Change in trade and other receivables 0.1 (1.4) (3.0)
Change in trade and other payables (12.1) (10.9) (13.0)
------------------------------------------------------- -------------- -------------- ---------
Cash generated by operations 36.4 21.4 68.7
Tax paid - - (0.2)
Net cash from operating activities 36.4 21.4 68.5
------------------------------------------------------- -------------- -------------- ---------
Investing activities
Purchase of subsidiary undertakings - (119.6) (119.6)
Purchase of investment properties (114.3) (121.9) (185.2)
Capital expenditure on investment properties (8.8) (9.3) (18.1)
Lease incentives paid (0.7) (2.6) (3.9)
Sale of investment properties 74.9 20.2 112.2
Investment in joint ventures (4.7) (0.3) (0.3)
Distributions from joint ventures 4.6 10.3 15.7
Interest received 0.1 0.1 0.2
Net cash used in investing activities (48.9) (223.1) (199.0)
------------------------------------------------------- -------------- -------------- ---------
Financing activities
Dividends paid (37.2) (28.1) (58.4)
Distribution to non-controlling interest (1.4) (0.4) (0.4)
Proceeds from issue of ordinary shares 116.6 - -
Purchase of shares held in trust (0.2) (2.9) (7.2)
Vesting of shares held in trust (0.3) - -
New borrowings and amounts drawn down 191.0 295.0 304.9
Repayment of loan facilities (282.0) (21.1) (21.1)
Financial arrangement fees and break costs (5.2) (1.9) (2.1)
Interest paid (11.8) (11.0) (24.0)
Net cash (used in)/from financing activities (30.5) 229.6 191.7
------------------------------------------------------- -------------- -------------- ---------
Net (decrease)/increase in cash and cash equivalents (43.0) 27.9 61.2
Opening cash and cash equivalents 81.8 20.6 20.6
------------------------------------------------------- -------------- -------------- ---------
Closing cash and cash equivalents 38.8 48.5 81.8
------------------------------------------------------- -------------- -------------- ---------
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 2020 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.
These condensed financial statements were approved and
authorised for issue by the Board of Directors on 19 November 2020.
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 2020, except for certain new accounting amendments which
became effective for the financial year commencing 1 April 2020 as
noted below:
-- References to Conceptual Framework in IFRSs (amended)
-- IAS 1 and IAS 8 (amended) - Definition of Material
-- IFRS 3 (amended) - Definition of a Business
-- IFRS 16 (amended) - Covid-19 related Rent Concessions
The new amendments had no material impact on the financial
statements.
Going concern
Given the backdrop of the Covid-19 pandemic on the global
economy in which the Group is operating, the Board has continued to
pay particular attention to the appropriateness of the going
concern basis in preparing these financial statements.
The going concern assessment considers the principal risks and
uncertainties facing the Group's activities, future development and
performance, including those arising from the pandemic and are
discussed in detail in the Key Risks and Uncertainties section of
this report.
A key consideration is the Group's financial position, cash
flows and liquidity, including its access to debt facilities and
headroom under financial loan covenants. As reported in the
Financial Review, the Group's unsecured facilities and private
placement loan notes, which together represent 74% of total Group
borrowings including its share of joint ventures, contain gearing
and interest cover covenants. At 30 September 2020, the Group had
substantial headroom within these covenants. Gearing was 51%,
substantially lower than the maximum limit of 125% and its interest
cover ratio was 5.4 times, comfortably higher than the minimum
level of 1.5 times. Property values would have to fall by 39% and
rents by 65% before banking covenants are breached.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about future
trading performance including the impact of Covid-19. Key
assumptions included in the sensitivity analysis are as
follows:
-- rents decline by 15% across the portfolio
-- capital values fall by 15% across the portfolio
-- there are no new developments or uncommitted capital expenditure
-- asset sales that have exchanged or are agreed do not complete
-- no new financing is assumed
Throughout this downside scenario the Group has sufficient cash
reserves to continue in operation and remain compliant with banking
covenants. On the basis of this review, together with available
market information and the Directors' experience and knowledge of
the portfolio, they have a reasonable expectation that the Company
and the Group 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.
Significant accounting estimates and judgements
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. The accounting
policies subject to significant judgements and estimates are as
follows:
Significant areas of estimation uncertainty
i. Property valuations
The valuation of the property portfolio is a critical part of
the Group's performance. The Group carries the property portfolio
at fair value in the balance sheet and engages professionally
qualified external valuers to undertake six monthly valuations.
The determination of the fair value of each property requires,
to the extent applicable, the use of estimates and assumptions in
relation to factors such as future lease income, lease incentives,
current market rental yields, future development costs and the
appropriate discount rate. In addition, to the extent possible, the
valuers make reference to market evidence of transaction prices for
similar properties.
The Covid-19 pandemic has led to a heightened degree of
uncertainty surrounding property valuations and some real estate
markets have experienced lower transactional activity. In March
2020, our three external valuers included material uncertainty
clauses in their valuation reports. However, at the valuation date
of 30 September 2020, all of our valuers consider that there is
adequate market evidence upon which to base opinions of value and
have not included material uncertainty clauses in their valuation
reports.
ii. Impairment testing of trade receivables
Trade receivables are recognised and carried at amortised cost
as the Group's business model is to collect the contractual cash
flows due from tenants. An impairment provision is created based on
the expected credit loss model in accordance with IFRS 9, which
reflects the Group's historical incurred credit losses and the
lifetime expected credit loss. The impact of Covid-19 has given
rise to higher estimated probabilities of default for some
occupiers.
2. Segmental information
Property value
Unaudited Unaudited Audited
Share of Non-controlling 30 September 30 September 31 March
100% owned JV interest 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm GBPm
--------------- ------------- ---------- --------------- ------------- ------------- -------------
Distribution 1,622.5 - - 1,622.5 1,658.1 1,593.7
Long income 560.9 87.8 (11.3) 637.4 524.3 552.5
Retail parks 74.1 - - 74.1 88.5 83.3
Office 54.5 - - 54.5 61.9 55.1
Residential 1.4 1.3 - 2.7 6.7 4.9
Development(1) 55.1 - - 55.1 56.7 57.0
2,368.5 89.1 (11.3) 2,446.3 2,396.2 2,346.5
Head lease and
right of use
assets 5.4 - - 5.4 6.0 5.7
--------------- ------------- ---------- --------------- ------------- ------------- -------------
2,373.9 89.1 (11.3) 2,451.7 2,402.2 2,352.2
--------------- ------------- ---------- --------------- ------------- ------------- -------------
(1) Includes trading property of GBP1.1 million
Gross rental income
Unaudited Unaudited
Six months Six months Audited
to to Year to
Share of Non-controlling 30 September 30 September 31 March
100% owned JV interest 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------- ---------- -------- --------------- ------------- ------------- ---------
Distribution 38.5 - - 38.5 35.7 76.1
Long income 17.7 2.7 (0.9) 19.5 14.9 30.7
Retail parks 2.2 - - 2.2 3.8 7.1
Office 1.8 - - 1.8 1.1 3.2
Residential - - - - 0.1 0.2
Development 0.1 - - 0.1 - -
60.3 2.7 (0.9) 62.1 55.6 117.3
------------- ---------- -------- --------------- ------------- ------------- ---------
Net rental income
Unaudited Unaudited
Six months Six months Audited
to to Year to
Share of Non-controlling 30 September 30 September 31 March
100% owned JV interest 2020 2019 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------- ---------- -------- --------------- ------------- ------------- ---------
Distribution 38.2 - - 38.2 35.3 75.3
Long income 17.6 2.6 (0.9) 19.3 14.9 30.7
Retail parks 2.0 - - 2.0 3.6 6.7
Office 1.7 - - 1.7 1.1 3.2
Development 0.1 - - 0.1 - -
------------- ---------- -------- --------------- ------------- ------------- ---------
59.6 2.6 (0.9) 61.3 54.9 115.9
------------- ---------- -------- --------------- ------------- ------------- ---------
An operating segment is a distinguishable component of the Group
that engages in business activities, earns revenue and incurs
expenses, whose results are reviewed by the Group's chief operating
decision makers 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
2020 2019 2020
GBPm GBPm GBPm
----------------------------- -------------- ------------- ---------
Gross rental income 60.3 52.9 112.3
Property advisory fee income 0.4 0.6 1.1
----------------------------- -------------- ------------- ---------
60.7 53.5 113.4
----------------------------- -------------- ------------- ---------
No individual tenant contributed more than 10% of gross rental
income in the current or comparative periods. The contracted rental
income of the Group's top ten occupiers is shown in the
Supplementary information section in note xvii.
4. Finance costs
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------- ------------- ------------- ---------
Interest payable on bank loans and
related derivatives 9.9 10.9 22.8
Debt and hedging early close out costs 4.9 0.3 0.2
Amortisation of loan issue costs 0.9 0.7 1.5
Interest on lease liabilities - 0.1 0.1
Commitment fees and other finance
costs 1.1 0.9 2.1
----------------------------------------- ------------- ------------- ---------
Total borrowing costs 16.8 12.9 26.7
Less amounts capitalised on developments (0.6) (0.4) (0.9)
----------------------------------------- ------------- ------------- ---------
Net borrowing costs 16.2 12.5 25.8
Fair value (gain)/loss on derivative
financial instruments (4.7) 2.5 3.2
----------------------------------------- ------------- ------------- ---------
11.5 15.0 29.0
----------------------------------------- ------------- ------------- ---------
Net finance costs deducted from EPRA earnings as disclosed in
Supplementary note ii exclude the fair value gain on derivatives of
GBP4.7 million (30 September 2019: loss of GBP2.5 million, 31 March
2020: loss of GBP3.2 million) and early close out costs of GBP4.9
million (30 September 2019: GBP0.3 million, 31 March 2020: GBP0.2
million) and include interest receivable of GBP0.6 million (30
September 2019: GBP0.4 million, 31 March 2020: GBP0.7 million) as
reflected in the income statement.
5. Taxation
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
------------------------ ------------- ------------- ---------
UK tax charge on profit - - 0.2
------------------------ ------------- ------------- ---------
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
2020 2019 2020
GBPm GBPm GBPm
---------------------------------------- ------------- ------------- ---------
Ordinary dividends paid
2019 Third quarterly interim dividend:
1.9p per share - 13.3 13.3
2019 Fourth quarterly interim dividend:
2.5p per share - 17.4 17.4
2020 First quarterly interim dividend:
2.0p per share - - 16.7
2020 Second quarterly interim dividend:
2.0p per share - - 16.8
2020 Third quarterly interim dividend:
2.0p per share 16.7 - -
2020 Fourth quarterly interim dividend:
2.3p per share 20.8 - -
---------------------------------------- ------------- ------------- ---------
37.5 30.7 64.2
---------------------------------------- ------------- ------------- ---------
Ordinary dividends payable
2021 First quarterly interim dividend:
2.1p per share 19.0
2021 Second quarterly interim dividend:
2.1p per share 19.0
---------------------------------------- -------------
The Company paid its first quarterly interim dividend in respect
of the financial year to 31 March 2021 of 2.1p per share, wholly as
a Property Income Distribution (PID), on 7 October 2020 to ordinary
shareholders on the register at the close of business on 28 August
2020.
The second quarterly interim dividend for the current year of
2.1p per share will be paid on 8 January 2021, wholly as a PID, to
ordinary shareholders on the register at the close of business on
27 November 2020. 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 2021.
During the period, the Company issued 0.2 million ordinary
shares under the terms of the Scrip Dividend Scheme, which reduced
the cash dividend payment by GBP0.3 million to GBP37.2 million.
7. Earnings and net assets per share
Adjusted earnings and net assets per share are calculated in
accordance with the Best Practice Recommendations (BPR) of The
European Public Real Estate Association (EPRA). The EPRA earnings
measure highlights the underlying performance of the property
rental business.
The basic earnings per share calculation uses the weighted
average number of ordinary shares during the period and excludes
the average number of shares held by the Employee Benefit Trust for
the period. The basic 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. The fully diluted calculations assume that new shares are
issued in connection with the expected vesting of the Group's long
term incentive plan.
Further EPRA performance measures are reflected in the
Supplementary information section.
a) EPRA Earnings
EPRA earnings for the Group and its share of joint ventures are
summarised in the Financial Review and in Supplementary note
ii.
The reconciliation between EPRA earnings and IFRS reported
profit is disclosed in the Financial Review and in note 7(b)
below.
b) Earnings per ordinary share attributable to equity
shareholders
Unaudited Unaudited
Six months Six months Audited
to to Year to
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
----------------------------------- ------ ------------- ------------- ---------
IFRS reported profit 85.1 (10.2) (5.7)
EPRA adjustments(1)
Revaluation of investment property Group (44.3) (19.3) 3.8
JV 1.8 3.5 10.2
Fair value of derivatives Group (4.7) 2.5 3.2
JV 0.1 0.3 0.4
(Profit)/loss on disposals Group (0.3) (0.6) 4.9
JV 0.1 2.3 2.3
Debt early close out costs Group 4.9 0.3 0.2
Impairment of goodwill Group - 48.3 48.3
Acquisition costs Group - 8.9 8.9
Non-controlling interest share
of adjustments (0.4) (0.8) (2.0)
------------------------------------------- ------------- ------------- ---------
EPRA earnings 42.3 35.2 74.5
------------------------------------------- ------------- ------------- ---------
(1) EPRA adjustments are also shown in the table reconciling
EPRA earnings with IFRS reported profit/(loss) in the Financial
Review
Unaudited
Unaudited Six months Audited
Six months to Year to
to 30 September 31 March
30 September 2019 2020
2020 Number of Number of
Number of shares shares
shares (millions) (millions) (millions)
------------------------------------ ------------------ ------------- -------------
Ordinary share capital 894.8 772.1 806.7
Shares held in the Employee Benefit
Trust (3.0) (2.3) (2.5)
------------------------------------ ------------------ ------------- -------------
Weighted average number of ordinary
shares - basic 891.8 769.8 804.2
Employee share schemes 5.0 6.8 6.0
------------------------------------ ------------------ ------------- -------------
Weighted average number of ordinary
shares - fully diluted 896.8 776.6 810.2
------------------------------------ ------------------ ------------- -------------
Earnings per share
Basic 9.54p (1.33)p (0.70)p
Fully diluted 9.49p (1.31)p (0.70)p
EPRA Earnings per share
Basic 4.75p 4.57p 9.26p
Fully diluted 4.72p 4.53p 9.19p
c) Net assets per share attributable to equity shareholders
In October 2019, EPRA published new best practice
recommendations for financial disclosures by public real estate
companies. The best practice recommendations introduced three new
measures of net asset value: EPRA net tangible assets (NTA), EPRA
net reinstatement value (NRV) and EPRA net disposal value
(NDV).
These recommendations became effective for accounting periods
commencing on 1 January 2020 and have been adopted by the Group in
the period. The three new measures have replaced the previously
reported metrics of EPRA net asset value (NAV) and EPRA triple net
asset value (NNNAV).
EPRA NTA is considered to be the most relevant measure for the
Group and replaces EPRA NAV as the primary measure of net asset
value. All three measures are calculated on a diluted basis, which
assumes that new shares are issued in connection with the expected
vesting of the Group's long term incentive plan.
A reconciliation between the three new EPRA NAV metrics to IFRS
NAV and the previously reported EPRA NAV is shown in the table
below. For the Group, EPRA NDV is equivalent to EPRA NNNAV on a
fully diluted basis and therefore no reconciliation is
presented.
As at 30 September 2020 (unaudited) EPRA net EPRA net EPRA net
tangible disposal reinstatement
assets value value
GBPm GBPm GBPm
------------------------------------------ ------------------ ------------------ --------------
Equity shareholders' funds 1,597.9 1,597.9 1,597.9
Fair value of group derivatives - - -
Fair value of joint ventures' derivatives 0.8 0.8 0.8
EPRA net asset value (as previously
reported) 1,598.7 1,598.7 1,598.7
------------------------------------------- ------------------ ------------------ --------------
Fair value of derivatives - (0.8) -
Mark to market of fixed rate debt - (6.3) -
Purchasers' costs(1) - - 166.7
EPRA net asset value (new measures) 1,598.7 1,591.6 1,765.4
------------------------------------------- ------------------ ------------------ --------------
(1) Estimated from the portfolio's external valuation which is
stated net of purchasers' costs of 6.8%.
---------------------------------------------------------------------------------------------------
As at 30 September 2019 (unaudited) EPRA net EPRA net EPRA net
tangible disposal reinstatement
assets value value
GBPm GBPm GBPm
------------------------------------------ ------------------ ------------------ --------------
Equity shareholders' funds 1,460.3 1,460.3 1,460.3
Fair value of group derivatives 4.1 4.1 4.1
Fair value of joint ventures' derivatives 0.6 0.6 0.6
EPRA net asset value (as previously
reported) 1,465.0 1,465.0 1,465.0
------------------------------------------- ------------------ ------------------ --------------
Fair value of derivatives - (4.7) -
Mark to market of fixed rate debt - (2.2) -
Purchasers' costs - - 163.3
EPRA net asset value (new measures) 1,465.0 1,458.1 1,628.3
------------------------------------------- ------------------ ------------------ --------------
As at 31 March 2020 (audited) EPRA net EPRA net EPRA net
tangible disposal reinstatement
assets value value
GBPm GBPm GBPm
------------------------------------------ ------------------ ------------------ --------------
Equity shareholders' funds 1,431.8 1,431.8 1,431.8
Fair value of group derivatives 4.7 4.7 4.7
Fair value of joint ventures' derivatives 0.7 0.7 0.7
EPRA net asset value (as previously
reported) 1,437.2 1,437.2 1,437.2
------------------------------------------- ------------------ ------------------ --------------
Fair value of derivatives - (5.4) -
Mark to market of fixed rate debt - 1.7 -
Purchasers' costs - - 159.9
EPRA net asset value (new measures) 1,437.2 1,433.5 1,597.1
------------------------------------------- ------------------ ------------------ --------------
Unaudited Unaudited Audited
30 September 30 September 31 March
2020 2019 2020
Number of Number of Number of
shares shares shares
As at (millions) (millions) (millions)
------------------------------------------- ------------------ ------------------ --------------
Ordinary share capital 908.3 839.9 841.5
Shares held in Employee Benefit Trust (2.0) (2.3) (4.3)
------------------------------------------- ------------------ ------------------ --------------
Number of ordinary shares - basic 906.3 837.6 837.2
Employee share schemes 4.6 6.6 6.5
------------------------------------------- ------------------ ------------------ -----------------
Number of ordinary shares - fully diluted 910.9 844.2 843.7
------------------------------------------- ------------------ ------------------ -----------------
IFRS net asset value per share 176.3p 174.3p 171.0p
EPRA net tangible assets per share 175.5p 173.5p 170.3p
EPRA net disposal value per share 174.7p 172.7p 169.9p
EPRA net reinstatement value per share 193.8p 192.9p 189.3p
8. Investment properties
Unaudited Audited
30 September 31 March
Completed Under development 2020 Completed Under development 2020
GBPm GBPm GBPm GBPm GBPm GBPm
------------------ ------------- ----------------- ------------- ------------- ----------------- -------------
Opening balance 2,212.0 55.9 2,267.9 1,628.2 59.8 1,688.0
Acquisitions 105.0 9.1 114.1 634.2 31.9 666.1
Capital
expenditure 2.4 6.9 9.3 10.2 11.2 21.4
Disposals (74.6) - (74.6) (113.1) (0.3) (113.4)
Property transfers 28.3 (28.3) - 50.3 (50.3) -
Revaluation
movement 33.8 10.5 44.3 (7.3) 3.5 (3.8)
Tenant incentives 6.4 - 6.4 9.5 0.1 9.6
------------------ ------------- ----------------- ------------- ------------- ----------------- -------------
Property portfolio 2,313.3 54.1 2,367.4 2,212.0 55.9 2,267.9
Head lease and
right
of use assets 5.4 - 5.4 5.7 - 5.7
------------------ ------------- ----------------- ------------- ------------- ----------------- -------------
2,318.7 54.1 2,372.8 2,217.7 55.9 2,273.6
------------------ ------------- ----------------- ------------- ------------- ----------------- -------------
Investment properties are held at fair value as at 30 September
2020 based on external valuations performed by professionally
qualified valuers CBRE Limited ('CBRE'), Savills (UK) Limited
('Savills') and Cushman & Wakefield Debenham Tie Leung Limited
('Cushman & Wakefield').
The valuation of property held for sale at 30 September 2020 was
GBP79.5 million (30 September 2019: GBP5.9 million, 31 March 2020:
GBP67.8 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, Savills and Cushman &
Wakefield from the Company represent less than 5% of their total UK
revenues. CBRE and Savills have continuously been the signatory of
valuations for the Company since October 2007 and September 2010
respectively.
Long term leasehold values included within investment properties
amount to GBP154.2 million (30 September 2019: GBP180.3 million, 31
March 2020: GBP176.9 million). All other properties are
freehold.
Included within the investment property valuation is GBP78.5
million (30 September 2019: GBP69.0 million, 31 March 2020: GBP72.1
million) in respect of lease incentives and rent free periods.
The historical cost of all of the Group's investment properties
at 30 September 2020 was GBP1,933.7 million
(30 September 2019: GBP1,893.4 million, 31 March 2020:
GBP1,884.0 million).
Capital commitments have been entered into amounting to GBP42.3
million (30 September 2019: GBP38.9 million,
31 March 2020: GBP28.9 million) which have not been provided for
in the financial statements.
Internal staff costs of the development team of GBP1.1 million
(30 September 2019: GBP1.0 million, 31 March 2020: GBP2.1 million)
have been capitalised in the period, being directly attributable to
the development projects in progress.
Forward funded development costs of GBP9.1 million (30 September
2019: GBP3.6 million, 31 March 2020
GBP9.9 million) have been classified within investment property
as acquisitions.
At 30 September 2020, investment properties included GBP5.4
million for the head lease right of use assets in accordance with
IFRS 16 (30 September 2019: GBP6.0 million, 31 March 2020: GBP5.7
million).
9. Investment in joint ventures
At 30 September 2020 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%
LSP London Residential Investments
Limited Guernsey Residential 40.0%
----------------------------------- -------------------- ---------------- -----------
(1) The registered address for entities incorporated in England
is One Curzon Street, London, W1J 5HB. The registered address for
entities incorporated in Guernsey is Regency Court, Glategny
Esplanade, St Peter Port, Guernsey, GY1 3AP.
The principal activity of joint venture interests is property
investment in the UK in the sectors noted in the table above, which
complements the Group's operations and contributes to the
achievement of its strategy.
LSP London Residential Investments Limited disposed of four
residential flats at Moore House for GBP4.5 million (Group share:
GBP1.8 million) in the period, reducing the number held to
four.
At 30 September 2020, the freehold and leasehold investment
properties were externally valued by CBRE and Savills. There was no
property held for sale by joint ventures at 30 September 2020 (30
September 2019: GBPnil, 31 March 2020: GBP3.9 million (Group share:
GBP1.5 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
2020 2019 2020
GBPm GBPm GBPm
------------------------------ ------------- ------------- ------------
Opening balance 54.1 98.9 98.9
Additions at cost 4.7 0.3 0.3
Share of loss in the period (0.3) (4.0) (8.9)
Disposals - (20.5) (20.5)
Profit distributions received (4.6) (10.3) (15.7)
------------------------------ ------------- ------------- ------------
Closing balance 53.9 64.4 54.1
------------------------------ ------------- ------------- ------------
The Group's share of the profit after tax and net assets of its
joint ventures is as follows:
LSP
Metric London Unaudited Unaudited
Income Plus Residential 30 September 30 September
Partnership Investments 2020 2020
GBPm GBPm GBPm GBPm
---------------------------------------- ------------ ------------ ------------- -------------
Summarised income statement 100% 100% 100% Group share
Gross rental income 5.4 - 5.4 2.7
Property costs (0.1) - (0.1) (0.1)
---------------------------------------- ------------ ------------ ------------- -------------
Net rental income 5.3 - 5.3 2.6
---------------------------------------- ------------ ------------ ------------- -------------
Management fees (0.4) (0.1) (0.5) (0.2)
Revaluation (2.8) (1.0) (3.8) (1.8)
Net finance cost (1.4) - (1.4) (0.7)
Derivative movement (0.2) - (0.2) (0.1)
Loss on disposal - (0.2) (0.2) (0.1)
-------------
Profit/(loss) after tax 0.5 (1.3) (0.8) (0.3)
---------------------------------------- ------------ ------------ ------------- -------------
Group share of profit/(loss) after tax 0.2 (0.5) (0.3)
---------------------------------------- ------------ ------------ -------------
EPRA adjustments
Revaluation 2.8 1.0 3.8 1.8
Derivative movement 0.2 - 0.2 0.1
Debt and hedging early close out costs 0.1 - 0.1 -
Loss on disposal - 0.2 0.2 0.1
-------------
EPRA earnings 3.6 (0.1) 3.5 1.7
---------------------------------------- ------------ ------------ ------------- -------------
Group share of EPRA earnings 1.8 (0.1) 1.7
---------------------------------------- ------------ ------------ -------------
Summarised balance sheet
Investment properties 175.5 3.4 178.9 89.1
Other current assets 1.1 - 1.1 0.6
Cash 4.9 3.0 7.9 3.6
Current liabilities (2.8) (0.1) (2.9) (1.4)
Bank debt (74.9) - (74.9) (37.5)
Unamortised finance costs 0.6 - 0.6 0.3
Derivative financial instruments (1.6) - (1.6) (0.8)
---------------------------------------- ------------ ------------ ------------- -------------
Net assets 102.8 6.3 109.1 53.9
---------------------------------------- ------------ ------------ ------------- -------------
Group share of net assets 51.4 2.5 53.9
---------------------------------------- ------------ ------------ -------------
LMP LSP
Metric Retail London Unaudited Unaudited
Income Plus Warehouse Residential 30 September 30 September
Partnership JV PUT Investments 2019 2019
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Summarised income statement 100 % 100% 100% 100% Group share
Gross rental income 6.0 0.5 0.2 6.7 3.3
Property costs - - (0.2) (0.2) (0.1)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Net rental income 6.0 0.5 - 6.5 3.2
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Management fees (0.5) - (0.1) (0.6) (0.3)
Revaluation (6.6) - (0.4) (7.0) (3.5)
Net finance cost (1.4) (0.2) - (1.6) (0.8)
Derivative movement (0.6) - - (0.6) (0.3)
Loss on disposal (0.1) - (5.8) (5.9) (2.3)
-------------
(Loss)/profit after tax (3.2) 0.3 (6.3) (9.2) (4.0)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of (loss)/profit after tax (1.6) 0.1 (2.5) (4.0)
--------------------------------------- ------------ ---------- ------------ -------------
EPRA adjustments
Revaluation 6.6 - 0.4 7.0 3.5
Derivative movement 0.6 - - 0.6 0.3
Loss on disposal 0.1 - 5.8 5.9 2.3
-------------
EPRA earnings 4.1 0.3 (0.1) 4.3 2.1
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of EPRA earnings 2.0 0.1 - 2.1
LMP LSP
Metric Retail London Audited Audited
Income Plus Warehouse Residential 31 March 31 March
Partnership JV PUT Investments 2020 2020
GBPm GBPm GBPm GBPm GBPm
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Summarised balance sheet 100 % 100% 100% 100% Group share
Investment properties 177.7 - 8.9 186.6 92.4
Other current assets 0.9 - 0.1 1.0 0.5
Cash 5.6 - 5.7 11.3 5.1
Current liabilities (2.9) - (0.1) (3.0) (1.5)
Bank debt (84.3) - - (84.3) (42.1)
Unamortised finance costs 0.9 - - 0.9 0.4
Derivative financial instruments (1.3) - - (1.3) (0.7)
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Net assets 96.6 - 14.6 111.2 54.1
--------------------------------------- ------------ ---------- ------------ ------------- -------------
Group share of net assets 48.3 - 5.8 54.1
--------------------------------------- ------------ ---------- ------------ -------------
10. Trade and other receivables
Unaudited Unaudited Audited
30 September 30 September 31 March
2020 2019 2020
GBPm GBPm GBPm
--------------------------------------- ------------- ------------- ---------
Trade receivables 5.2 3.3 5.8
Amounts receivable from property sales - 0.1 -
Prepayments and accrued income 1.3 2.3 1.1
Other receivables 10.4 0.6 0.9
--------------------------------------- ------------- ------------- ---------
16.9 6.3 7.8
--------------------------------------- ------------- ------------- ---------
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 2020, trade receivables of GBP207,900 were
overdue and considered at risk (30 September 2019: GBP24,000, 31
March 2020: GBP69,800).
Based on the IFRS 9 expected credit loss model, an impairment
provision of GBP600,000 (30 September 2019: GBP151,000, 31 March
2020: GBP340,000) has also been made against trade receivables.
11. Cash and cash equivalents
Cash and cash equivalents include GBP6.2 million (30 September
2019: GBP10.5 million, 31 March 2020: GBP5.4 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
2020 2019 2020
GBPm GBPm GBPm
----------------------------------------- ------------- ------------- ---------
Trade payables 4.8 2.8 4.2
Amounts payable on property acquisitions
and disposals 0.2 0.9 0.4
Rent received in advance 21.6 21.6 19.8
Accrued interest 1.3 1.4 1.9
Other payables 1.4 6.2 4.1
Other accruals and deferred income 8.9 8.7 12.2
----------------------------------------- ------------- ------------- ---------
38.2 41.6 42.6
----------------------------------------- ------------- ------------- ---------
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
2020 2019 2020
GBPm GBPm GBPm
-------------------------- ------------- ------------- ---------
Secured Bank loans 192.6 192.8 192.7
Unsecured Bank loans 649.0 730.0 740.0
-------------------------- ------------- ------------- ---------
841.6 922.8 932.7
Unamortised finance costs (5.4) (6.0) (6.0)
-------------------------- ------------- ------------- ---------
836.2 916.8 926.7
-------------------------- ------------- ------------- ---------
Certain bank loans at 30 September 2020 are secured by fixed
charges over Group investment properties with a carrying value of
GBP554.3 million (September 2019: GBP544.5 million, 31 March 2020:
GBP529.7 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 2020 (unaudited) GBPm GBPm GBPm GBPm GBPm
------------------------------------ --------- ---------- ----------- ----------- -----
Bank loans 54.9 253.7 370.2 278.4 957.2
------------------------------------ --------- ---------- ----------- ----------- -----
Less than One to Two to More than
one year two years five years five years Total
As at 31 March 2020 (audited) GBPm GBPm GBPm GBPm GBPm
--------------------------------- --------- ---------- ----------- ----------- -------
Bank loans 24.4 120.5 588.0 332.8 1,065.7
Derivative financial instruments 1.6 1.6 - - 3.2
--------------------------------- --------- ---------- ----------- ----------- -------
26.0 122.1 588.0 332.8 1,068.9
--------------------------------- --------- ---------- ----------- ----------- -------
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.
The Group uses interest rate swaps, caps and fixed rates to
manage its interest rate exposure and hedge future interest rate
risk for the term of the bank loan. In April 2020, the Group
cancelled GBP350 million interest rate swaps that hedged its
unsecured facilities and were due to expire in 2022. At 30
September 2020, 45% of the Group's debt drawn was hedged, mainly
through fixed coupon debt arrangements.
Details of the fair value of the Group's derivative financial
instruments that were in place at 30 September 2020 are provided
below.
Average rate Notional amount Fair value
----------------------------- ----------------------------- -----------------------------
Audited Audited Audited
Unaudited 31 March Unaudited 31 March Unaudited 31 March
30 September 2020 2020 30 September 2020 2020 30 September 2020 2020
Interest rate caps - expiry % % GBPm GBPm GBPm GBPm
---------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
One to two years 2.0 2.0 19.6 19.6 - -
2.0 2.0 19.6 19.6 - -
---------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Average rate Notional amount Fair value
----------------------------- ----------------------------- -----------------------------
Audited Audited Audited
Unaudited 31 March Unaudited 31 March Unaudited 31 March
30 September 2020 2020 30 September 2020 2020 30 September 2020 2020
Interest rate swaps - expiry % % GBPm GBPm GBPm GBPm
----------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Two to five years - 1.1 - 350.0 - (4.7)
- 1.1 - 350.0 - (4.7)
----------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
Total fair value - (4.7)
----------------------------- ------------------ --------- ------------------ --------- ------------------ ---------
All derivative financial instruments are non-current interest
rate derivatives and are carried at fair value following a
valuation as at 30 September 2020 by Chatham Financial.
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
2020 2020 2020 2020
Number GBPm Number GBPm
---------------------------- ------------- ------------- ----------- ---------
Issued, called up and fully
paid
Ordinary shares of 10p each 908,332,443 90.8 841,498,022 84.2
---------------------------- ------------- ------------- ----------- ---------
On 7 May 2020, the Company issued 66,666,666 new ordinary shares
in connection with an equity placing that raised gross proceeds of
GBP120 million at an issue price of 180.0p per share. In addition,
the Company issued 167,755 ordinary shares under the terms of its
Scrip Dividend Scheme during the period.
In June 2020, the Company granted options over 1,914,457
ordinary shares under its Long Term Incentive Plan. In addition,
2,151,447 ordinary shares in the Company that were granted to
certain Directors and employees under the Company's Long Term
Incentive Plan in 2017 vested along with 252,915 ordinary shares in
the Director's Deferred Bonus Plan. The average share price on
vesting was 225.3p.
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, Metric Property Investments Plc and A&J
Mucklow Group 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
2020 31 March 2020
---------------------- ----------------- -------------------------- ----------------- ------------------------
Cash and Cash and
cash equivalents Borrowings Net debt cash equivalents Borrowings Net debt
GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ----------------- ------------ ------------ ----------------- ----------- -----------
Opening balance 81.8 926.7 844.9 20.6 558.9 538.3
Cash movement (43.0) (91.0) (48.0) 61.2 304.9 243.7
Debt acquired - - - - 60.0 60.0
Loan issue costs paid - (0.3) (0.3) - (1.5) (1.5)
Fair value of debt - (0.1) (0.1) - 2.9 2.9
Amortisation of loan
issue costs - 0.9 0.9 - 1.5 1.5
---------------------- ----------------- ------------ ------------ ----------------- ----------- -----------
Closing balance 38.8 836.2 797.4 81.8 926.7 844.9
---------------------- ----------------- ------------ ------------ ----------------- ----------- -----------
17. Related party transactions
a) Joint Ventures
Management fees and profit distributions receivable from the
Group's joint venture arrangements in which it had an equity
interest during the period 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 2020 30 September 2019 2020 2019
Group interest GBPm GBPm GBPm GBPm
---------------------------- -------------- ------------------ ------------------ -------------- --------------
LSP London Residential
Investments Ltd 40% - 0.1 2.8 8.2
Metric Income Plus
Partnership 50% 0.4 0.5 1.8 2.1
0.4 0.6 4.6 10.3
---------------------------- -------------- ------------------ ------------------ -------------- --------------
Transactions between the Company and its subsidiaries which are
related parties have been eliminated on consolidation.
b) Non-controlling interest
The Group's non-controlling interest ('NCI') represents an 18%
shareholding in LMP Retail Warehouse JV Holdings Limited, which
owns eight assets.
The Group's interest in LMP Retail Warehouse JV Holdings Limited
is 82%, requiring it to consolidate the results and net assets of
its subsidiary in these financial statements and reflect the
non-controlling share as a deduction in the consolidated income
statement and consolidated balance sheet.
As at the period end, the non-controlling interest share of
profit and net assets was GBP0.3 million and GBP6.0 million
respectively, with distributions of GBP1.4 million paid during the
period.
18. Events after the balance sheet date
Post period end, the Group has acquired an urban logistics unit
in Colliers Wood for GBP2.5 million and has sold two M&S
convenience food stores for GBP14.7 million, a Kwik Fit service
centre for GBP0.6 million and an urban logistics unit in Edinburgh
for GBP3.4 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
19 November 2020
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 2020 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 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 2020 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
19 November 2020
Supplementary information
i EPRA Summary table
30 September 30 September 31 March
2020 2019 2020
------------------------------------------- ------------ ------------ --------
EPRA earnings per share 4.75p 4.57p 9.26p
EPRA net tangible assets per share 175.5p 173.5p 170.3p
EPRA net disposal value per share 174.7p 172.7p 169.9p
EPRA net asset reinstatement value per
share 193.8p 192.9p 189.3p
EPRA vacancy rate 1.5% 1.8% 1.4%
EPRA cost ratio (including vacant property
costs) 13.7% 14.3% 14.2%
EPRA cost ratio (excluding vacant property
costs) 13.4% 13.6% 13.3%
EPRA net initial yield 4.5% 4.4% 4.3%
EPRA 'topped up' net initial yield 4.9% 4.9% 5.0%
------------------------------------------- ------------ ------------ --------
ii EPRA proportionally consolidated income statement
For the six NCI NCI
months to Group JV GBPm 2020 Group JV GBPm 2 019
30 September GBPm GBPm GBPm GBPm GBPm GBPm
---------------- ------ ----- ------- ------- ------ ----- ------ ------
G r o s s r
e n tal in c
ome 60.3 2.7 (0.9) 62.1 52.9 3.3 (0.6) 55.6
P r op er ty
c o s ts (0.7) (0.1) - (0.8) (0.6) (0.1) - (0.7)
---------------- ------ ----- ------- ------- ------ ----- ------ ------
N e t rental
in c ome 59.6 2.6 (0.9) 61.3 52.3 3.2 (0.6) 54.9
M a na g e m
e n t f e es 0.4 (0.2) - 0.2 0.6 (0.3) - 0.3
A d ministr
a ti ve c o
s ts (8.0) - - (8.0) (7.7) - 0.1 (7.6)
N e t fin a
n ce c o s ts (10.7) (0.7) 0.1 (11.3) (11.8) (0.8) 0.1 (12.5)
Ot h er - - 0.1 0.1 - - 0.1 0.1
================ ====== ===== ======= ======= ====== ===== ====== ======
EPRA e ar nings 41.3 1.7 (0.7) 42.3 33.4 2.1 (0.3) 35.2
---------------- ------ ----- ------- ------- ------ ----- ------ ------
iii EPRA proportionally consolidated balance sheet
30 September 31 March
Group JV NCI 2020 Group JV NCI 2020
As at GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
---------------------- ------- ------ ------ -------------- ------- ------ ------- ---------
Investment property 2,372.8 89.1 (11.3) 2,450.6 2,273.6 92.4 (14.9) 2,351.1
Trading property 1.1 - - 1.1 1.1 - - 1.1
---------------------- ------- ------ ------ -------------- ------- ------ ------- ---------
2,373.9 89.1 (11.3) 2,451.7 2,274.7 92.4 (14.9) 2,352.2
Gross debt (841.6) (37.5) - (879.1) (932.7) (42.1) - (974.8)
Cash 38.8 3.6 (0.2) 42.2 81.8 5.1 (0.8) 86.1
Other net liabilities (21.1) (0.5) 5.5 (16.1) (34.3) (0.6) 8.6 (26.3)
---------------------- ------- ------ ------ -------------- ------- ------ ------- ---------
EPRA net tangible
assets 1,550.0 54.7 (6.0) 1,598.7 1,389.5 54.8 (7.1) 1,437.2
---------------------- ------- ------ ------ -------------- ------- ------ ------- ---------
Derivatives - (0.8) - (0.8) (4.7) (0.7) - (5.4)
IFRS net assets 1,550.0 53.9 (6.0) 1,597.9 1,384.8 54.1 (7.1) 1,431.8
Loan to value 32.2% 38.0% - 32.4% 35.7% 40.0% - 35.9%
Cost of debt 2.5% 3.1% - 2.5% 2.9% 3.1% - 2.9%
Undrawn facilities 224.8 - - 224.8 133.8 - - 133.8
---------------------- ------- ------ ------ -------------- ------- ------ ------- ---------
iv EPRA cost ratio
2020 2019
For the six months to 30 September GBPm GBPm
------------------------------------------------------ ----- -----
Property operating expenses 0.7 0.6
Administrative costs 8.0 7.6
Share of joint venture property costs, administrative
costs and management fees 0.3 0.4
Less:
Property advisory fee income (0.4) (0.6)
Ground rents (0.1) -
------------------------------------------------------ ----- -----
Total costs including vacant property costs (A) 8.5 8.0
Group vacant property costs (0.2) (0.4)
Share of joint venture vacant property costs - (0.1)
------------------------------------------------------ ----- -----
Total costs excluding vacant property costs (B) 8.3 7.5
Gross rental income 60.3 52.9
Share of joint venture gross rental income 2.7 3.3
Share of non-controlling interest gross rental
income (0.9) (0.6)
------------------------------------------------------ ----- -----
62.1 55.6
Less: Ground rents (0.1) -
------------------------------------------------------ ----- -----
Total gross rental income (C) 62.0 55.6
Total EPRA cost ratio (including vacant property
costs) (A)/(C) 13.7% 14.3%
Total EPRA cost ratio (excluding vacant property
costs) (B)/(C) 13.4% 13.6%
------------------------------------------------------ ----- -----
v EPRA net initial yield and 'topped up' net initial yield
30 September 31 March
2020 2020
As at GBPm GBPm
------------------------------------------------- ------------ -------------
Investment property - wholly owned 2,367.4 2,267.9
Investment property - share of joint ventures 89.1 92.4
Trading property 1.1 1.1
Less development properties (55.1) (57.0)
Less residential properties (2.7) (4.9)
Less non-controlling interest (11.3) (14.9)
Completed property portfolio 2,388.5 2,284.6
Allowance for:
Estimated purchasers' costs 162.4 155.4
Estimated costs to complete 12.3 18.7
------------------------------------------------- ------------ -------------
EPRA property portfolio valuation (A) 2,563.2 2,458.7
------------------------------------------------- ------------ -------------
Annualised passing rental income 109.0 102.1
Share of joint ventures 6.1 6.0
Less development properties (0.5) (1.9)
Annualised net rents (B) 114.6 106.2
Contractual rental increase across the portfolio 11.1 16.0
'Topped up' net annualised rent (C) 125.7 122.2
------------------------------------------------- ------------ -------------
EPRA net initial yield (B/A) 4.5% 4.3%
------------------------------------------------- ------------ -------------
EPRA 'topped up' net initial yield (C/A) 4.9% 5.0%
------------------------------------------------- ------------ -------------
vi EPRA vacancy rate
30 September 31 March
2020 2020
As at GBPm GBPm
----------------------------------------------------- ------------ --------
Annualised estimated rental value of vacant premises 1.9 1.7
Portfolio estimated rental value(1) 127.1 124.4
----------------------------------------------------- ------------ --------
EPRA vacancy rate 1.5% 1.4%
----------------------------------------------------- ------------ --------
(1) Excludes residential and development properties
vii EPRA capital expenditure analysis
30 September 31 March
Group JV NCI 2020 Group JV NCI 2020
As at GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
======================= ======= ===== ====== ============ ======= ====== ====== ========
Opening valuation 2,274.7 92.4 (14.9) 2,352.2 1,688.0 158.2 - 1,846.2
Acquisitions(1) 105.0 - - 105.0 635.3 (41.2) (17.0) 577.1
Developments(2) 16.0 - - 16.0 43.1 - - 43.1
Capital expenditure(3) 2.4 0.2 (0.1) 2.5 10.2 0.3 (0.2) 10.3
Disposals (74.6) (1.8) 3.4 (73.0) (113.4) (15.1) 0.3 (128.2)
Revaluation 44.3 (1.8) 0.3 42.8 (3.8) (10.2) 2.0 (12.0)
Lease incentives 6.4 0.1 - 6.5 9.6 0.4 - 10.0
Head lease ROU
asset (0.3) - - (0.3) 5.7 - - 5.7
----------------------- ------- ----- ------ ------------ ------- ------ ------ --------
Closing valuation 2,373.9 89.1 (11.3) 2,451.7 2,274.7 92.4 (14.9) 2,352.2
======================= ======= ===== ====== ============ ======= ====== ====== ========
(1) Group acquisitions in the period reflect completed
investment properties in note 8 to the financial statements
(2) Group developments include acquisitions and capital
expenditure on properties under development as reflected in note
8
(3) Capital expenditure on completed properties
viii Total accounting return
30 September 30 September 31 March
2020 2019 2020
p/share p/share p/share
------------------------------------------- ------------ ------------ --------
EPRA n et tangible as s et value per share
- at end of period 175.5 173.5 170.3
- at s t a rt of period 170.3 173.7 173.7
------------------------------------------- ------------ ------------ --------
In c r e a se/(decrease) 5.2 (0.2) (3.4)
Dividend paid 4.3 4.4 8.4
Net in c r e a se 9.5 4.2 5.0
------------------------------------------- ------------ ------------ --------
T ot al a cc o u n ting r e t u rn 5.6% 2.4% 2.9%
------------------------------------------- ------------ ------------ --------
ix Portfolio split and valuation
31 March
30 September
2020 2020
As at GBPm % GBPm %
----------------------------------- ------- ------------ -------- --------
Mega distribution 329.8 13.5 349.6 14.9
Regional distribution 427.6 17.5 419.5 17.9
Urban logistics 865.1 35.3 824.6 35.1
Distribution 1,622.5 66.3 1,593.7 67.9
----------------------------------- ------- ------------ -------- --------
Long income 637.4 26.1 552.5 23.5
Retail parks 74.1 3.0 83.3 3.6
Offices 54.5 2.2 55.1 2.4
Investment portfolio 2,388.5 97.6 2,284.6 97.4
=================================== ======= ============ ======== ========
Development(1) 55.1 2.3 57.0 2.4
Residential 2.7 0.1 4.9 0.2
=================================== ======= ============ ======== ========
Total portfolio 2,446.3 100.0 2,346.5 100.0
Head lease and right of use assets 5.4 5.7
----------------------------------- ------- ------------ -------- --------
2,451.7 2,352.2
=================================== ======= ============ ======== ========
(1) Represents regional distribution GBP44.8 million (1.8%),
urban logistics GBP0.6 million (0.1%), long income GBP7.5 million
(0.3%), office and other land GBP2.2 million (0.1%) at 30 September
2020. Split of prior period comparatives was regional distribution
GBP38.1 million (1.6%), urban logistics GBP6.2 million (0.3%), long
income GBP10.5 million (0.5%), office and other land GBP2.2
million.
x Investment portfolio yields
30 September 31 March
EPRA 2020 EPRA 2020
topped up Equivalent topped up Equivalent
EPRA NIY NIY yield EPRA NIY NIY yield
As at % % % % % %
----------------- ---------- ---------- ------------ ---------- ---------- ---------------
Distr ib u tion 4.1 4.5 5.0 3.9 4.6 5.1
Long income 5.0 5.5 5.9 5.0 5.6 5.9
Retail parks 6.8 7.8 7.5 6.7 7.5 7.3
Offices 4.9 6.4 6.5 5.8 5.8 6.5
I n v e s tm
e nt p o rt fol
io 4.5 4.9 5.4 4.3 5.0 5.5
----------------- ---------- ---------- ------------ ---------- ---------- ---------------
xi Investment portfolio - Key statistics
WAULT Average
Area WAULT to first rent
'000 sq to expiry break Occupancy GBP per
As at 30 September 2020 ft years years % sq ft
========================= ======== ========== ========= =========== =========
Distribution 12,229 10.8 9.6 97.8 6.50
Long income 2,952 13.9 12.8 100.0 15.10
Retail parks 395 8.7 7.4 97.9 16.00
Offices 218 6.2 5.2 99.8 17.00
Investment portfolio 15,794 11.5 10.4 98.5 8.30
------------------------- -------- ---------- --------- ----------- ---------
xii Total property returns
All property All property All property
------------ ------------- ------------
30 September 30 September 31 March
2020 2019 2020
% % %
--------------- --- ------------ ------------- ------------
Capital return 2.3 1.0 -
Income return 2.6 2.5 5.1
-------------------- ------------ ------------- ------------
Total return 4.9 3.5 5.1
-------------------- ------------ ------------- ------------
xiii Contracted rental income
30 September 30 September 31 March
2020 2019 2020
As at GBPm GBPm GBPm
--------------------------- ------------ ------------ --------
Distribution 77.2 80.5 77.3
Long income 37.8 31.9 33.9
Retail parks 6.2 6.6 6.8
Offices 3.7 4.1 3.4
Investment portfolio 124.9 123.1 121.4
=========================== ============ ============ ========
Development - distribution - 1.3 1.3
Development - long income 0.5 0.3 0.6
--------------------------- ------------ ------------ --------
Commercial portfolio 125.4 124.7 123.3
--------------------------- ------------ ------------ --------
Residential - - -
--------------------------- ------------ ------------ --------
Total portfolio 125.4 124.7 123.3
--------------------------- ------------ ------------ --------
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
2020 % % % % % %
--------------------- -------- -------- --------- --------- --------- ---------
Distribution 9.7 22.6 48.2 74.7 93.8 100.0
Long income 1.3 4.6 31.0 58.9 83.2 100.0
Retail parks 2.1 15.8 74.8 85.7 100.0 100.0
Offices 18.1 37.3 100.0 100.0 100.0 100.0
Commercial portfolio 7.0 17.2 45.8 71.2 91.1 100.0
--------------------- -------- -------- --------- --------- --------- ---------
xv Contracted rent subject to RPI or fixed uplifts
30 September 31 March
2020 2020
As at GBPm % GBPm %
--------------------- ---- ------------ ---- --------
Distribution 44.2 57.3 46.1 58.7
Long income 23.7 61.9 19.7 57.2
Retail parks 0.8 12.4 1.1 15.7
Offices 0.6 15.7 0.3 8.5
Commercial portfolio 69.3 55.3 67.2 54.5
--------------------- ---- ------------ ---- --------
xvi Top ten assets (by value)
WAULT
Area Contracted WAULT to first
'000 Rent Occupancy to expiry break
As at 30 September 2020 sq ft GBPm % years years
------------------------ ------ ---------- ----------- ---------- ---------
Primark, T2, Islip 1,062 5.8 100.0 20.0 20.0
Eddie Stobart, Dagenham 454 4.1 100.0 23.0 23.0
Argos, Bedford 658 4.1 100.0 13.5 13.5
Primark, Thrapston 785 4.3 100.0 12.0 12.0
Tesco, Croydon 191 1.9 100.0 7.6 7.6
Amazon, Warrington 357 2.1 100.0 11.2 11.2
DHL, Reading 230 2.3 100.0 4.7 4.7
Ollerton, Clipper 364 2.0 100.0 17.0 17.0
Oak Furniture, Swindon 357 1.9 100.0 15.1 15.1
New Malden 51 1.9 100.0 11.1 6.5
xvii Top ten occupiers
Contracted rental Contracted rental
income income
As at 30 September 2020 GBPm %
------------------------
Primark 10.1 8.0
DFS 4.9 3.9
M&S 4.5 3.6
Argos 4.2 3.4
Eddie Stobart 4.1 3.2
DHL 3.6 2.9
Odeon 3.3 2.7
Waitrose 3.3 2.6
DSG 3.3 2.6
Amazon 2.6 2.1
Top ten 43.9 35.0
------------------------
Other commercial 81.5 65.0
------------------------
Total commercial 125.4 100.0
------------------------
Glossary
A&J Mucklow Group or EPRA Net Initial Yield Logistics
A&J Mucklow or Mucklow Annualised rental income The organisation and
A&J Mucklow Group Plc based on cash rents passing implementation of operations
acquired on 27 June 2019 at the balance sheet to manage the flow of
and re-registered as date, less non recoverable physical items from origin
A&J Mucklow Group Limited property operating expenses, to the point of consumption.
on 24 September 2019. expressed as a percentage Net Debt
Capital Return of the market value of The Group's bank loans
The valuation movement the property, after inclusion net of cash balances
on the property portfolio of estimated purchaser's at the period end.
adjusted for capital costs. Net Rental Income
expenditure and expressed EPRA Topped Up Net Initial Gross rental income receivable
as a percentage of the Yield after deduction for ground
capital employed over EPRA net initial yield rents and other net property
the period. adjusted for expiration outgoings including void
Commercial Portfolio of rent free periods costs and net service
The Group's property or other lease incentives charge expenses.
portfolio excluding residential such as discounted rent Occupancy Rate
properties. periods and stepped rents. The ERV of the let units
Contracted Rent Equivalent Yield as a percentage of the
The annualised rent excluding The weighted average total ERV of the Investment
rent free periods. income return expressed Portfolio.
Cost of Debt as a percentage of the Passing Rent
Weighted average interest market value of the property, The gross rent payable
rate payable. after inclusion of estimated by tenants under operating
Debt Maturity purchaser's costs. leases, less any ground
Weighted average period E s t im a t ed R ental rent payable under head
to expiry of debt drawn. Value (ER V) leases.
Distribution The external valuers' Property Income Distribution
The activity of delivering opinion of the open market (PID)
a product for consumption rent which, on the date Dividends from profits
by the end user. of valuation, could reasonably of the Group's tax-exempt
EPRA Cost Ratio be expected to be obtained property rental business
Administrative and operating on a new letting or rent under the REIT regulations.
costs (including and review of a property. The PID dividend is paid
excluding costs of direct European Public Real after deducting withholding
vacancy) as a percentage Estate Association (EPRA) tax at the basic rate.
of gross rental income. EPRA is the industry Real Estate Investment
EPRA Earnings per Share body for European Real Trust (REIT)
(EPS) Estate Investment Trusts A listed property company
Underlying earnings from (REITs). which qualifies for and
the Group's property Gross Rental Income has elected into a tax
rental business divided Rental income for the regime which is exempt
by the average number period from let properties from corporation tax
of shares in issue over reported under IFRS, on profits from property
the period. after accounting for rental income and UK
EPRA Net Disposal Value lease incentives and capital gains on the
per share rent free periods. Gross sale of investment properties.
Represents the shareholders' rental income will include, Total Accounting Return
value under a disposal where relevant, turnover (TAR)
scenario, where assets based rent, surrender The movement in EPRA
are sold and/or liabilities premiums and car parking Net Tangible Asset Value
are not held to maturity. income. per share plus the dividend
Therefore, this measure Group paid during the period
includes an adjustment LondonMetric Property expressed as a percentage
to mark to market the Plc and its subsidiaries. of the EPRA Net Tangible
Group's fixed rate debt. IFRS Asset Value per share
EPRA Net Reinstatement The International Financial at the beginning of the
Value per share Reporting Standards issued period.
This reflects the value by the International Total Property Return
of net assets required Accounting Standards (TPR)
to rebuild the entity, Board and adopted by Unlevered weighted capital
assuming that entities the European Union. and income return of
never sell assets. Assets Income Return the property portfolio
and liabilities, such Net rental income expressed as calculated by IPD.
as fair value movements as a percentage of capital Total Shareholder Return
on financial derivatives employed over the period. (TSR)
that are not expected Investment Portfolio The movement in the ordinary
to crystallise in normal The Group's property share price as quoted
circumstances, are excluded. portfolio excluding development, on the London Stock Exchange
Investment property purchasers' land holdings and residential plus dividends per share
costs are included. properties. assuming that dividends
EPRA Net Tangible Asset Investment Property Databank are reinvested at the
Value per share (IPD) time of being paid.
This reflects the value IPD is a wholly owned Weighted Average Interest
of net assets on a long subsidiary of MSCI producing Rate
term, ongoing basis assuming an independent benchmark The total loan interest
entities buy and sell of property returns and and derivative costs
assets. Assets and liabilities, the Group's portfolio per annum (including
such as fair value movements returns. the amortisation of finance
on financial derivatives Like for Like Income costs) divided by the
that are not expected Growth total debt in issue at
to crystallise in normal The movement in contracted the period end.
circumstances, are excluded. rental income on properties Weighted Average Unexpired
EPRA Vacancy owned through the period Lease Term (WAULT)
The Estimated Rental under review, excluding Average unexpired lease
Value (ERV) of immediately properties held for development term across the investment
available vacant space and residential. portfolio weighted by
as a percentage of the Loan to Value (LTV) Contracted Rent.
total ERV of the Investment Net debt expressed as
Portfolio. a percentage of the total
property portfolio value
at the period end, adjusted
for deferred completions
on sales.
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November 19, 2020 02:00 ET (07:00 GMT)
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