London & Stamford Property Limited Annual Report 2018

FY2018 Annual Report · London & Stamford Property Limited
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Real estate  
for modern  
shopping

Annual Report and Accounts 2018

Contents

Strategic report

Overview
Our story
Performance highlights
Chairman’s statement 
At a glance

Our strategy
Our strategic priorities
Chief Executive’s review

Our marketplace

Our business model

Performance review
Key performance indicators
Property review
Financial review

Responsible Business
Responsible Business review

Risk 
Risk management
Viability statement

Governance 

Introduction from the Chairman
Board of Directors
Governance at work
Leadership
Effectiveness
– Nomination Committee report
Accountability
– Audit Committee report
Remuneration
–  Remuneration Committee report
Report of the Directors
Directors’ responsibility statement

Financial statements

Independent Auditor’s report
Group ﬁnancial statements
Notes forming part of the  
Group ﬁnancial statements
Company ﬁnancial statements
Notes forming part of the Company  
ﬁnancial statements
Supplementary information
Glossary
Notice of Annual General Meeting
Financial calendar
Shareholder information

01 
10
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12

14
15

20

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24
26
34

40

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118
137

139
142
147
148
152
152

Alternative performance measures are ﬁnancial 
measures which are not speciﬁed under IFRS but 
are used as they highlight the performance of the 
Group’s property rental business. They are described 
in further detail in the Performance highlights section 
on page 10 and in the Financial review on page 34.

Financial performance

See page 34

IFRS reported  
proﬁt

Total accounting 
return

EPRA EPS 

Dividend 
per share

+195% +16 % +4 % +5 %

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anniversary since its merger in 2013. 
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Patrick Vaughan
Chairman

Property performance

See page 11

See page 26

WAULT

Total property return

LFL income growth

12.4 years +13.7 % +4.3%

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Andrew Jones
Chief Executive

See page 15

Marketplace review

Responsible Business review

See page 20

See page 40

(cid:55)(cid:93)(cid:90)(cid:8)(cid:88)(cid:93)(cid:90)(cid:88)(cid:87)(cid:91)(cid:77)

We provide desirable real estate 
for modern shopping

LondonMetric Property Plc 
Annual Report and Accounts 2018

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(cid:55)(cid:93)(cid:90)(cid:8)(cid:91)(cid:92)(cid:87)(cid:90)(cid:97)

Our portfolio is 
aligned to modern 
shopping habits 

We focus on 
sustainable and 
growing income

See page 02

See page 04

We manage, 
enhance and  
create property 
in a responsible  
way

Our expertise 
and relationships 
shape our 
decision making

See page 06

See page 08

 
 
 
 
 
 
 
02 LondonMetric Property Plc 

Annual Report and Accounts 2018

Our story

Our portfolio is 
aligned to modern 
shopping habits

Technological advancement continues to impact our daily lives 
and is causing signiﬁcant disruption to the retail landscape.

As an allocator of capital and a manager of risk, one of our main 
objectives is to own real estate that is structurally supported and aligned 
to modern shopping habits.

We have pivoted away from traditional retail into the distribution and 
convenience retail sectors where we believe that the prospects for superior 
returns are signiﬁcantly better. 

enience
Consumers continue to migrate online and towards convenience

Consumer shopping habits have 
changed signiﬁcantly driven by 
technological change. 

Today, consumers can engage with 
retailers in a number of different 
ways, not just through the store. 
This consumer environment makes 
it ever more crucial for retailers to 
adapt to keep up.

The UK is a leader in online shopping. 
18% of total retail sales are online 
in the UK compared to 12% for 
the US and 9% for Germany. 26% 
of all non food retail sales in the 
UK are expected to be online by 
2020 and parcel deliveries are 
growing at 16% per annum, with 
same day and next day delivery 
increasingly common.

Conversely, store portfolios are 
shrinking as occupiers prioritise 
investment in distribution and logistics 
capabilities. Convenience retail 
continues to perform strongly as 
online shoppers look to make 
smaller but more frequent 
purchases to supplement their larger 
shopping needs. 

Percentage of total retail sales 
made online in 2017

UK

US

Germany

France

Canada

Italy

18%

12%

9%

8%

8%

4%

UK online market share (non food)

26   %

in 2020 

(increase from 13% in 2011)

2011

2020

See Market review on pages 20 to 21

Online spend1

+13 %pa

In-store spend1

-1 %pa

Distribution take up2

+23m sq ft

Net stores closed in 20173

-1,772

1  Three month average, Barclaycard 
2  Over 12 months, CBRE
3  Local Data Company

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Our portfolio is aligned to sectors with the best prospects

Change in portfolio since Company’s merger in 2013

2013

2018

2013

2018

Distribution

21% 69%

Long Income

5% 12%

Convenience  
& Leisure

– 10%

Retail Parks

26%

7%

Residential 
and office

48%

2%

See Property review for more information on each sector

We have adapted to these 
structural shifts.

Our portfolio has pivoted away 
from traditional multi-let retail and 
legacy office and residential into 
our preferred sectors of distribution, 
long income, convenience retail and 
leisure. Distribution has grown from 
21% ﬁve years ago to 69% today.

This has driven a strong performance 
by the Company and the portfolio 
is well positioned for the future.

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Andrew Jones 
CEO

We have focused on growing our urban logistics portfolio

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Urban logistics – an attractive  
sub sector of distribution

The increasing delivery demands of consumers has 
attracted us to further invest within the urban logistics 
sector, where there is strong demand/supply dynamics 
as occupiers seek locations closer to major conurbations. 

We continue to build critical mass in major UK 
geographies, with attractive income yields, supported 
by compelling income growth metrics. 

During the year, we made investments of £178 million 
across 25 assets. Our urban logistics assets were valued 
at £367 million as at 31 March 2018, up from £161 million 
in 2017. Over 70% of these assets are located in the South 
East and the Midlands and their locations provide strong 
intrinsic value from alternative use of land.

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Cabot acquisition in August 2017

The Cabot portfolio was acquired at a 6.1% net initial 
yield and was our most signiﬁcant investment in the year. 
The assets are in established distribution locations with 
excellent motorway connectivity and strong occupier 
demand. Greater than 60% of income is from retailers 
and 3PLs including DHL, Howdens and Royal Mail. 

£117m

acquisition of 14 urban and 
regional distribution warehouses

See Property review on pages 26 to 33

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04 LondonMetric Property Plc 

Annual Report and Accounts 2018

(cid:55)(cid:93)(cid:90)(cid:8)(cid:91)(cid:92)(cid:87)(cid:90)(cid:97)

We focus on 
sustainable and  
growing income

Income remains central to our investment thesis in 
an environment where there is an almost desperate 
search for yield. 

Our ultimate priority is to pass on income generated 
from our assets to our shareholders in the form of a well 
covered and progressive dividend.

We believe strongly in the compounding attractions 
of sustainable, repetitive and growing income streams 
to deliver long term consistent outperformance. 

Over the last ﬁve years, we have more than doubled our 
EPRA earnings per share and our strong portfolio metrics 
give us good certainty of future earnings growth.

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Andrew Jones 
CEO

Delivered EPRA EPS growth of 118% since 2013, 
allowing dividend progression

+118 %

8.2

8.5

7.8

6.6

3.9

4.2

2013

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2015

2016

2017

2018

Dividend per share

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Strong investor demand for income generating assets 

The extended period of low economic growth and 
low interest rates is creating an almost desperate 
search for yield which is set to continue.

The search for income is being intensiﬁed by 
the increasing proportion of the UK’s population 
entering retirement age and longer life expectancy.

1.5 %

Ten year UK treasury

The focus on alternative investment sources for an 
acceptable income return has increased the attraction 
of real estate which can deliver a reliable, predictable, 
long and growing income stream.

LondonMetric’s dividend yield of 4.4% is almost 300 bps 
higher than UK government bonds and is delivering a real 
return above inﬂation. Our yield is more than fully covered 
by our earnings.

 4.4 %*

LondonMetric dividend yield
*  Based on 7.9p dividend per share and share price as at 31 March 2018

Income from our portfolio is long and sustainable 

The Company has sector 
leading portfolio metrics with 
12.4 years average lease lengths, 
98% occupancy and only 6% of 
income expiring over three years. 

Lease expiry proﬁle

Top 5 occupiers

>20 years  16%

0–3 years  6%

We have ﬁnancially strong occupiers, 
with the top ﬁve accounting for 35% 
of our rent and market capitalisations 
ranging from £2.4bn to £39.0bn.

16–20 
years
11%

The portfolio is focused on low 
operational assets, with many single 
let. Its low property costs result in only 
1.3% gross to net income leakage.

11–15 years
31%

4–10 years
  36%

Average:
12 years

…and our income has certainty of growth 

50.3 %

of income has ﬁxed 
uplifts or is inﬂation linked

+4.3 %

like for like income 
growth in 2018 

See Property review on pages 26 to 33

Approximately half of the portfolio is 
subject to contractual rental increases 
and we are capturing strong open 
market rental uplifts on the remainder.

This allows us to deliver annual like 
for like income growth on average 
of 3-4%.

Our development and other asset 
management activities provide further 
income growth potential.

As a consequence, we are conﬁdent 
in our ability to progress our dividend. 

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06 LondonMetric Property Plc 

Annual Report and Accounts 2018

(cid:55)(cid:93)(cid:90)(cid:8)(cid:91)(cid:92)(cid:87)(cid:90)(cid:97)

We manage, enhance 
and create property 
in a responsible way

We continue to improve the quality and attractiveness 
of our assets through de-risked asset management 
and short cycle developments to build a portfolio 
of desirable and ﬁt for purpose real estate. 

Managing our assets

An important driver of generating long term, reliable and 
repetitive income is working with occupiers to offer them 
real estate solutions that meet their business objectives. 

Over the year, our lettings and rent reviews delivered 
£3.1 million of rental uplift. Average lease lengths on 
lettings was 15.2 years demonstrating the attractiveness 
of our assets. 

See page 32 of the Property review

Creating fit for purpose assets

During the year, we completed 578,000 sq ft of 
developments which were delivered at a yield on cost of 
6.4%, mostly BREEAM Very Good rated. This activity has 
helped to further modernise our portfolio by adding new 
assets at yields materially above investment value. 

As part of our efforts to improve our assets sustainability 
credentials, and by working in conjunction with the 
occupier, we completed the UK’s largest landlord funded 
distribution solar installation at Newark. 

See page 33 of the Property review

Delivering wider benefits for occupiers 
and communities

Through our activities, we give proper consideration to the 
needs of our occupiers and stakeholders and the impact 
on the environment and local communities. This promotes 
good stakeholder relationships and helps our occupiers to 
achieve their own objectives.

Our sustainability and responsible business efforts were 
again recognised in our increased GRESB score of 69%. 

See page 40 of the Responsible Business review

58 

occupier transactions

28 %

of portfolio now rated 
BREEAM Very Good

69 % 

Green Star in latest  
GRESB* review

*  Global Real Estate Sustainability Benchmark

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Managing and developing at our 454,000 sq ft warehouse in Dagenham

180,000 sq ft new warehouse 

LondonMetric worked with 
its occupier, Eddie Stobart, 
to construct a 180,000 sq ft 
distribution warehouse with 
15 dock levellers, two level access 
doors and a 150 bay lorry park at 
a 5.7% yield on cost.

Attractive development yield

+75% pallet capacity

Local community involvement

•  Replaced two old buildings with poor 

•  Redevelopment created signiﬁcant 

•  Signiﬁcant local resident 

environmental credentials

•  Built in 12 months by McLaren, a local 
contractor, on time and within the 
£17m budget

•  Lease was extended by c.10 years 
to 26 years across the 454,000 sq 
ft estate

•  Rent increased by £0.9 million per 

annum generating a marginal yield 
on cost of 5.7%, signiﬁcantly higher 
than investment yield

operational improvements for 
the occupier and was phased 
to minimise disruption to the their 
live operations 

consultation pre-planning, 
including a walk in exhibition and, 
during development, at resident 
association meetings

•  It has increased pallet capacity by 

•  Supported local residents in 

25,000 and is expected to generate 
an additional 200 permanent jobs

•  At peak, there is a lorry movement 

every three minutes and the 
development signiﬁcantly improves 
vehicle circulation on site

pursuit of a better nearby traffic 
interchange and provided funding 
for a new local playground 

•  Over 100 temporary local workers 
employed; two are now full time 
employees of the contractor

Delivering a modern and environmentally sustainable building

BREEAM Very Good
The building achieved BREEAM “Very Good” and an EPC “A” rating. 
99% of non hazardous demolition waste was diverted from landﬁll and the 
project achieved an exemplary BREEAM score for diversion of waste. 

250 KW Solar PV installation and roof lights
The solar PV scheme is expected to fully cover all of the occupier’s energy 
needs at peak times. 10% of the building’s roof is covered by roof lights.

Electric Vehicle charge points
Four charge points were installed with enabling work undertaken for a further 
eight to be ﬁtted as required. 

External Lighting LED upgrade
The lorry park lighting was upgraded and is expected to generate a saving 
of 25,000 kWh per annum for the occupier.

On site vehicle servicing
A new facility to wash vehicles and tankers as well as a new fuel island is 
expected to save 3,900 lorry movements a year equating to 39,000 miles.

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08 LondonMetric Property Plc 

Annual Report and Accounts 2018

(cid:55)(cid:93)(cid:90)(cid:8)(cid:91)(cid:92)(cid:87)(cid:90)(cid:97)

Our expertise and 
relationships shape 
our decision making

The key to the Company’s success is employing a highly talented 
and motivated team that makes the right property decisions and 
has close relationships with its occupiers and other stakeholders. 

Our people and expertise

Making informed decisions

We take a disciplined, patient and 
rational approach to investing: 

•  We are highly conscious of the 
credit quality of our occupiers, 
security of our income, quality of 
the real estate and its opportunity 
for growth

•  Our internalised structure and 
the Board’s 3.5% equity in the 
Company ensures that our 
interests are aligned to those 
of our shareholders

See page 26 of the Property review

We have a highly focused team 
of 25 employees and 11 directors. 
Our employees are based in 
London covering investment, asset 
management, development and 
ﬁnance roles.

Since the merger in 2013, employee 
numbers have fallen 28% despite 
a 51% increase in our asset value, 
reﬂecting improved efficiencies and 
lower operational requirements of 
the portfolio. This has resulted in a low 
EPRA cost ratio.

Our future success is reliant 
on a diverse team with strong 
expertise. We promote a culture 
of empowerment, inclusion and 
development with remuneration 
aligned to personal and 
company performance.

The Company’s success at retaining 
and motivating staff is reﬂected in 
its low voluntary turnover rate which 
has averaged 6% over the last 
ﬁve years.

See page 45 of the 
Responsible Business review

25

focused team  
of employees

 +13.7 %(cid:88)(cid:73) 

total property return in 
the year, outperforming 
IPD All Property by 360 bps
IPD All Property by 360 bps

LondonMetric Property Plc 
Annual Report and Accounts 2018

09

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Our stakeholder relationships

Relationships across all of our 
activities are critical to the success 
of the Company. Our people and our 
occupiers are at the core of what we 
do but we are reliant on many other 
stakeholder relationships.

In particular, we interact closely 
with contractors, suppliers, local 
communities and authorities, our 
investors, joint venture partners and 
lenders. We seek to maintain and 
build these relationships and act in the 
best interests of all our stakeholders.

Occupier relationships

Our occupier led approach provides us with market knowledge to better 
understand future trends and make the right asset decisions. Our high 
average occupancy rate of over 99% since merger in 2013 demonstrates the 
strength and depth of these relationships.

Extending existing relationships and developing new contacts are key areas 
of focus for us. We look to engage with occupiers across all of our activities 
to provide real estate solutions that deliver mutually beneﬁcial outcomes 
and meet their requirements.

In 2018, we undertook our biennial customer satisfaction survey and scored 
highly with an average 8.5 out of 10 rating for how well we compared against 
other landlords. 

(cid:52)(cid:87)(cid:86)(cid:76)(cid:87)(cid:86)(cid:53)(cid:77)(cid:92)(cid:90)(cid:81)(cid:75)(cid:8)(cid:73)(cid:90)(cid:77)(cid:8)(cid:94)(cid:77)(cid:90)(cid:97)(cid:8)(cid:88)(cid:90)(cid:87)(cid:73)(cid:75)(cid:92)(cid:81)(cid:94)(cid:77)(cid:20)(cid:8)
(cid:84)(cid:87)(cid:87)(cid:83)(cid:81)(cid:86)(cid:79)(cid:8)(cid:92)(cid:87)(cid:8)(cid:91)(cid:93)(cid:88)(cid:88)(cid:87)(cid:90)(cid:92)(cid:8)(cid:87)(cid:93)(cid:90)(cid:8)(cid:74)(cid:93)(cid:91)(cid:81)(cid:86)(cid:77)(cid:91)(cid:91)(cid:22)(cid:8)
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Property Director at a key occupier 

99 %

Average occupancy 
rate since 2013

8.5(cid:1552)10

Landlord score in 2018 
customer survey 

See page 46 of the Responsible Business review

(cid:8)(cid:52)(cid:87)(cid:86)(cid:76)(cid:87)(cid:86)(cid:53)(cid:77)(cid:92)(cid:90)(cid:81)(cid:75)(cid:1524)(cid:91)(cid:8)(cid:88)(cid:90)(cid:87)(cid:78)(cid:77)(cid:91)(cid:91)(cid:81)(cid:87)(cid:86)(cid:73)(cid:84)(cid:8)(cid:73)(cid:88)(cid:88)(cid:90)(cid:87)(cid:73)(cid:75)(cid:80)(cid:8)(cid:80)(cid:77)(cid:84)(cid:88)(cid:77)(cid:76)(cid:8)(cid:93)(cid:91)(cid:8)(cid:92)(cid:87)(cid:8)(cid:73)(cid:75)(cid:80)(cid:81)(cid:77)(cid:94)(cid:77)(cid:8) 
(cid:73)(cid:8)(cid:74)(cid:93)(cid:81)(cid:84)(cid:76)(cid:81)(cid:86)(cid:79)(cid:8)(cid:91)(cid:88)(cid:77)(cid:75)(cid:81)(cid:1665)(cid:75)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:92)(cid:87)(cid:8)(cid:91)(cid:93)(cid:81)(cid:92)(cid:8)(cid:87)(cid:93)(cid:90)(cid:8)(cid:77)(cid:96)(cid:73)(cid:75)(cid:92)(cid:81)(cid:86)(cid:79)(cid:8)(cid:91)(cid:92)(cid:73)(cid:86)(cid:76)(cid:73)(cid:90)(cid:76)(cid:91)(cid:8) 
(cid:73)(cid:86)(cid:76)(cid:8)(cid:75)(cid:87)(cid:85)(cid:88)(cid:84)(cid:77)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:78)(cid:73)(cid:75)(cid:81)(cid:84)(cid:81)(cid:92)(cid:97)(cid:8)(cid:87)(cid:86)(cid:8)(cid:92)(cid:81)(cid:85)(cid:77)(cid:8)(cid:73)(cid:86)(cid:76)(cid:8)(cid:87)(cid:86)(cid:8)(cid:74)(cid:93)(cid:76)(cid:79)(cid:77)(cid:92)(cid:22)(cid:8) 
(cid:60)(cid:80)(cid:81)(cid:91)(cid:8)(cid:77)(cid:86)(cid:73)(cid:74)(cid:84)(cid:77)(cid:76)(cid:8)(cid:73)(cid:8)(cid:91)(cid:77)(cid:73)(cid:85)(cid:84)(cid:77)(cid:91)(cid:91)(cid:8)(cid:92)(cid:90)(cid:73)(cid:86)(cid:91)(cid:81)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:92)(cid:87)(cid:8)(cid:87)(cid:75)(cid:75)(cid:93)(cid:88)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:22)(cid:1528)
Jonathan Wright
Michelin

 Our 137,000 sq ft development 
for Michelin 

During the year, we completed 
our distribution development 
in Stoke. Michelin signed a new 
15 year lease on a 137,000 sq ft 
distribution warehouse. 

Our expertise helped Michelin to 
take occupation within 14 months 
of building work commencing. 

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Annual Report and Accounts 2018

10 LondonMetric Property Plc 
Performance highlights

IFRS net assets

£1,149.5m 

IFRS reported proﬁt

£186.0m 

+195% 

186.0

+14% 

1,149.5

870.2

898.2

1,006.9

159.5

Dividend 

7.9p 

7.00p

7.25p

7.50p

+5% 

7.90p

82.7

63.0

2015

2016

2017

2018

2015

2016

2017

2018

2015

2016

2017

2018

EPRA net asset value per share

EPRA EPS 

KPI

Net rental income (including JVs)

165.2p 

140.6p

147.7p

149.8p

+10% 

165.2p

8.5p 

6.6p

+4% 

£90.6m 

7.8p

8.2p

8.5p

77.7

81.8

70.9

+11% 

90.6

2015

2016

2017

2018

2015

2016

2017

2018

2015

2016

2017

2018

Total property return 

KPI

WAULT 

KPI

13.7 % 

17.5%

12.4 years 

13.1

12.8

12.8

12.4

13.7%

10.5%

7.4%

2015

2016

2017

2018

2015

2016

2017

2018

Financial highlights

Earnings per share

2018

26.9p

IFRS

2017

10.1p

Net asset value per share

165.7p

146.4p

EPRA triple net asset value per share

EPRA vacancy rate

EPRA cost ratio

EPRA net initial yield

EPRA ‘topped up’ net initial yield

The deﬁnition of each EPRA measure can be found in the Glossary on page 147

2018

8.5p

165.2p

165.7p

2.5%

15%

4.5%

4.9%

EPRA

2017

8.2p

149.8p

146.4p

0.4%

16%

4.5%

5.4%

Alternative performance measures

The Group ﬁnancial statements are 
prepared in accordance with IFRS where 
the Group’s interests in joint ventures are 
shown as a single line item on the income 
statement and balance sheet and all 
subsidiaries are consolidated at 100%. 

Management reviews the performance of 
the business principally on a proportionately 
consolidated basis which includes the 
Group’s share of joint ventures on a line by 
line basis. The key ﬁnancial performance 
indicators are also presented on this 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. 

Therefore, unless speciﬁcally stated, the 
performance metrics and ﬁnancial results 
reﬂected in the Strategic report reﬂect the 
Group’s wholly owned assets and its share 
of joint venture assets and the EPRA BPR 
reporting framework.

Further details and reconciliations between 
EPRA measures and IFRS equivalents 
can be found in the Financial review 
on page 34 and in note 8 to the Group 
ﬁnancial statements.

Chairman’s statement

This year marked LondonMetric’s ﬁfth 
anniversary since its merger in 2013 and 
I am extremely proud of its progress and 
achievements. Over this period, we have 
doubled net rental income and EPRA 
earnings per share and delivered a total 
shareholder return of 119%, of which 43% 
was generated from dividends.

The Company has delivered 
a particularly strong ﬁnancial 
performance in the year, resulting in a 
record reported proﬁt of £186.0 million. 
On a per share basis, EPRA earnings 
were 3.7% higher, dividends increased 
by 5.3%, our third year of progression, 
and EPRA NAV rose by 10.3%, beneﬁting 
from a £121.6 million revaluation surplus. 
Total accounting return was 15.5%. 

Critical to our long term success is our 
alignment to sectors supported by 
structural changes in shopping habits, 
which have been profound and, in our 
view, permanent. Distribution continues 
to beneﬁt signiﬁcantly from these 
changes and is one of the best 
performing real estate sectors. Over the 
year, our distribution assets increased 
by over £300 million to represent 69% 
of the portfolio, compared to 21% in 
2013. They have delivered another 
strong performance which, together 
with a good performance from 
our convenience, leisure and long 
income assets, helped to deliver a 
total property return of 13.7% for the 
year, a 360 bps outperformance of IPD 
All Property. 

As a REIT, our priority is to generate 
income returns and pass onto 
our shareholders in the form of a 
covered and progressive dividend. 
The portfolio’s alignment to strong 
sectors, assets and tenants and its 
unexpired lease term of 12 years 
provides highly reliable and repetitive 
income. Our disposal activity in the 
year, particularly the sale of shorter let 
and older distribution assets, reﬂects 
our disciplined approach to portfolio 
management and the value we attach 
to reliable income.

We ﬁrmly believe that income will be 
an increasingly important component 
of total returns. Therefore, our focus 
is on owning assets that can also 
generate rental growth. Through a 
combination of contractual and open 
market rent reviews as well as our asset 
management, we increased like for like 
income by 4.3% in the year. With half 
of the portfolio subject to contractual 
rental increases and strong prospects 
for organic rental growth, particularly 
from our growing urban logistics 
portfolio, we are conﬁdent in our ability 
to grow our earnings and continue to 
progress the dividend.

Our people remain fundamental to 
the ongoing success of the Company 
and I would like to take this opportunity 
to thank the Board and all of our 
employees for their hard work. I should 
also like to welcome Suzanne Avery as 
a Non Executive Director and to thank 
bution and 
Andrew Varley for his contribution and 
c following 
dedication to LondonMetric following 
year.
his retirement earlier in the year.

Our combined occupier and property 
nd property 
relationships continue to provide us 
ovide us 
with a competitive advantage and put 
age and put 
LondonMetric in a strong position for 
osition for 
the future.

ear 
I look forward to the next year 
with conﬁdence.

Patrick Vaughan
Chairman
30 May 2018

LondonMetric Property Plc 
Annual Report and Accounts 2018

11

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Total shareholder return  
over ﬁve years

+119 % 

Dividend increase in the year

+5 %

to 7.9p per share

The Company has 
delivered a particularly 
(cid:91)(cid:92)(cid:90)(cid:87)(cid:86)(cid:79)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)
performance in the 
year, resulting in a 
(cid:90)(cid:77)(cid:75)(cid:87)(cid:90)(cid:76)(cid:8)(cid:90)(cid:77)(cid:88)(cid:87)(cid:90)(cid:92)(cid:77)(cid:76)(cid:8)(cid:88)(cid:90)(cid:87)(cid:1665)(cid:92)(cid:8)
(cid:87)(cid:78)(cid:104)£(cid:25)(cid:32)(cid:30)(cid:104)(cid:85)(cid:81)(cid:84)(cid:84)(cid:81)(cid:87)(cid:86)(cid:22)(cid:1528)(cid:8)

Patrick Vaughan
Chairman

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Annual Report and Accounts 2018

12 LondonMetric Property Plc 
At a glance

We own real estate that has structural support from 
changing consumer shopping habits. Our distribution 
exposure has increased to 69% of the portfolio and the 
Company is delivering sustainable income growth and 
long term value growth.

Our focus is on distribution, long income, 
convenience and leisure1

Where our assets are located

Distribution –
Regional  22%

Distribution
Mega  27%

69%

Distribution

Distribution –
Urban  20%

Long income
  12%

Convenience
& Leisure  10%

Residential  2%

Retail parks  7%

As at 31 March 2018

NIY2

WAULT

Distribution

Long Income

Convenience  
& Leisure

Retail Parks

Investment portfolio

1  Including developments
2  EPRA topped up NIY

4.6%

5.9%

4.9%

5.6%

4.9%

12.1 yrs

11.0 yrs

17.2 yrs

11.1 yrs

12.4 yrs

Significant events in the year

 Distribution

  Retail and Leisure

Investment

Asset Management

Development

•  £384.9m invested in our preferred 

•  58 occupier transactions 

sectors of distributions, long 
income, convenience and leisure

generating additional income 
of £3.1m

•  Completion of ﬁve developments 

across 578,000 sq ft at an 
anticipated yield on cost of 6.4%

•  Largest investment was in the 
£116.6m Cabot portfolio of 
14 distribution warehouses 

•  £251.6m of disposals, including 

the disposal of our last remaining 
office in Marlow 

•  31 lettings at a WAULT of 15.2 years 

•  Acquisition of 40 acre site in 

and 22% above ERV

•  27 rent reviews at 12.3% above 

previous passing on a ﬁve yearly 
equivalent basis 

Bedford allowing us to commence 
development of up to 680,000 sq 
ft of distribution warehousing at an 
anticipated yield on cost of 7.0%

 
 
LondonMetric Property Plc 
Annual Report and Accounts 2018

13

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Portfolio value

WAULT

Total property return

Valuation uplift

ERV growth

£1,842m 12.4 years +13.7 % +7.1 % +3.1 %

Distribution portfolio

Mega distribution

Regional distribution

Urban distribution

• 7 Assets, 4.7m sq ft
• £24.9m rent (av £5.30 psf)
• NIY1 4.7%
• WAULT 13.2 years

• 15 Assets, 3.6m sq ft
• £18.3m rent (av £5.60 psf)
• NIY1 4.5%
• WAULT 14.2 years

• 45 Assets, 3.0m sq ft
• £17.9m rent (av £6.10 psf)
• NIY1 4.7%
• WAULT 8.5 years

Retail and leisure portfolio

Long income

Convenience and leisure

Retail parks

• 28 Assets, 1.2m sq ft
• £13.9m rent (av £19.70 psf)
• NIY1 5.9%
• WAULT 11.0 years

• 18 Assets, 0.6m sq ft
• £9.4m rent (av £16.70 psf)
• NIY1 4.9%
• WAULT 17.2 years

• 5 Assets, 0.4m sq ft
• £8.4m rent (av £18.90 psf)
• NIY1 5.6%
• WAULT 11.1 years

1  Topped up NIY

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Annual Report and Accounts 2018

14 LondonMetric Property Plc 
Our strategic priorities

Our portfolio is aligned to modern shopping habits

(cid:25)(cid:22)(cid:8)(cid:49)(cid:86)(cid:75)(cid:90)(cid:77)(cid:73)(cid:91)(cid:77)(cid:8)(cid:73)(cid:84)(cid:81)(cid:79)(cid:86)(cid:85)(cid:77)(cid:86)(cid:92)(cid:8)(cid:92)(cid:87)(cid:8)(cid:91)(cid:77)(cid:75)(cid:92)(cid:87)(cid:90)(cid:91)(cid:8)(cid:92)(cid:80)(cid:73)(cid:92)(cid:8)(cid:80)(cid:73)(cid:94)(cid:77)(cid:8)(cid:91)(cid:92)(cid:90)(cid:93)(cid:75)(cid:92)(cid:93)(cid:90)(cid:73)(cid:84)(cid:8)(cid:91)(cid:93)(cid:88)(cid:88)(cid:87)(cid:90)(cid:92)(cid:8)(cid:78)(cid:90)(cid:87)(cid:85)(cid:8)(cid:75)(cid:80)(cid:73)(cid:86)(cid:79)(cid:81)(cid:86)(cid:79)(cid:8)

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We focus on sustainable and growing income

3. Generate reliable income with income growth potential from  

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(cid:28)(cid:22)(cid:8)(cid:53)(cid:81)(cid:86)(cid:81)(cid:85)(cid:81)(cid:91)(cid:77)(cid:8)(cid:87)(cid:88)(cid:77)(cid:90)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:73)(cid:84)(cid:20)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:73)(cid:86)(cid:76)(cid:8)(cid:78)(cid:90)(cid:81)(cid:75)(cid:92)(cid:81)(cid:87)(cid:86)(cid:73)(cid:84)(cid:8)(cid:75)(cid:87)(cid:91)(cid:92)(cid:91)(cid:8)(cid:87)(cid:78)(cid:8)(cid:85)(cid:73)(cid:86)(cid:73)(cid:79)(cid:81)(cid:86)(cid:79)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:88)(cid:87)(cid:90)(cid:92)(cid:78)(cid:87)(cid:84)(cid:81)(cid:87)

We manage, enhance and create property in a responsible way

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Our expertise and relationships shape our decision making

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Chief Executive’s review

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Distribution assets

69 %

of the portfolio

Distribution assets owned

+33 %

in the year to £1.3bn

 Our portfolio is positioned around strong 
fundamentals of owning structurally 
supported real estate let to good tenants.” 

Andrew Jones
Chief Executive

Overview

Our objective is to deliver 
attractive and dependable 
income returns to our 
shareholders whilst preserving 
and enhancing capital through 
owning structurally supported 
real estate let to good tenants. 
In short, we aim to behave as a 
true REIT.

The advancement of technology 
continues to cause signiﬁcant 
disruption to many industries and 
those that fail to adapt to change 
face an increasingly uncertain 
future. Over the past ﬁve years, 
we have successfully positioned 
the portfolio to navigate this 
disruption by pivoting away 
from multi-let operational 
retail assets and office property. 

We have instead focused on 
ﬁt for purpose distribution, long 
income and convenience assets 
where changing consumer 
shopping habits are providing 
structural support. 

Our occupier and property 
relationships improve our 
decision making and allow us 
to maintain our sector leading 
portfolio metrics. Whilst we can 
never be totally immune from 
all headwinds, we believe that 
these relationships and our robust 
approach give us a competitive 
advantage that allows us to 
increase our earnings, progress 
our dividend and see the value 
of our assets increase ahead 
of the market.

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Annual Report and Accounts 2018

16 LondonMetric Property Plc 
Chief Executive’s review continued

Even after many years of 
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for new distribution and 
warehouse space remains well 
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Online retail sales (non food) 

26 %

by 2020 compared 
to 20% today

Our portfolio  
is aligned to modern 
shopping habits

Digital evolution continues to cause 
signiﬁcant disruption
Today’s world is complex and more 
dynamic than ever with technological 
innovation impacting every aspect 
of society. 

The rapid and permanent shift in 
consumer shopping habits has seen 
a material growth in pure online 
and omni-channel retailing. This has 
seen online non food retail sales hit 
20%, compared to 13% in 2011, and 
this is forecast to reach 26% by 2020. 
Traditional brands are being replaced 
by names which barely existed a 
decade ago, but are now considered 
very much part of retail’s New World 
Order: Amazon, eBay, boohoo, 
ASOS and Ocado to name a few. 
These retailers rely on their efficient 
and well located distribution network 
to service their customers’ demands 
with ever increasing speed. We are 
no longer a nation of shopkeepers.

Whilst the virtual tills are ringing, the 
physical ones aren’t. Physical retail sales 
are growing at their slowest rate since 
2012. The outlook for more traditional 
retailers is very challenging and they 
are having to adapt continuously to 
remain relevant. Recently, New Look, 
Mothercare and Carpetright admitted 
that their store portfolios no longer 
meet their needs and have sought to 
radically shrink the size and cost of their 
estates. We have also seen both Toys 
R Us and Maplin fall away altogether, 
and it is inevitable that they will not be 
the last victims and that the list of retail 
failures will grow.

The retail channel shift is real, material 
and permanent. Stores today are 
increasingly having to provide 
convenience, value or extraordinary 
entertainment. If they cannot, then 
what is their purpose?

Primark’s value and store only 
proposition continues to succeed 
whilst the likes of John Lewis, Next and 
Argos have successfully adapted their 
businesses for omni-channel retailing by 
actively managing their store portfolios 
and investing heavily in new distribution 
warehouses and technology systems; 
it is no coincidence that they report 
online sales well above 40% of 
total sales. 

In food retail, the disruption from 
convenience operators such as Aldi 
and Lidl is forcing the established 
grocery market to drive further 
pricing and cost efficiencies as well 
as preparing for an onslaught from 
online competition. We have, therefore, 
consciously avoided large format 
food stores and distribution, instead 
focusing on convenience stores where 
changing habits have seen the growth 
of ‘top up’ shopping.

Distribution has strong 
structural support 
Despite years of being unfashionable, 
the channel shift in retail spending is 
providing a signiﬁcant boost to the 
distribution property sector; and this 
is only expected to continue.

Even after many years of strong 
take up, occupier demand for new 
distribution and warehouse space 
remains well above long term 
averages. Retailers and logistics 
operators are constantly improving 
their distribution infrastructure and 
warehousing to increase speed of 
delivery and cost efficiencies through 
automation, better locations and 
higher quality space; and this cycle 
of improvement is happening at a 
faster rate than ever before. 

There remains a strong demand/
supply imbalance, which is propelling 
rental growth across most parts of 
the UK. The best distribution space 
is highly sought after and occupiers 
are consequently prepared to pay 
record rents and sign long leases, 
often with contractual rental uplifts 
at review, as they look to protect 
their signiﬁcant capital investments 
inside these warehouses. The search 
for greater efficiencies will, however, 
inevitably lead to the closure of some 
older, less ﬁt for purpose logistics 
warehousing, which is something that 
we continue to address through our 
disposal activities. 

 
LondonMetric Property Plc 
Annual Report and Accounts 2018

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these structural challenges. We no 
longer believe that it’s as simple as 
‘prime’ versus ‘secondary’. It feels more 
indiscriminate than that. 

Therefore, we have consciously 
avoided the most vulnerable sectors 
in retail and focused our retail 
exposure towards long income and 
convenience led assets let to the likes of 
Aldi, M&S, Wickes and B&M. As a result, 
our exposure to retail parks has fallen 
to only 7% and our retail and leisure 
portfolio is 100% let on leases with over 
12 years remaining. 

Our team has considerable experience 
in the retail market and our actions 
have allowed us to, so far, avoid the 
value destruction across the various 
sectors. This still has a long way to go, 
and whilst many in the property market 
want us to believe that we are entering 
the ﬁnal act, we are not!

See pages 28 to 31 of the 
Property review

The real estate fundamentals for 
urban logistics are strong and so 
we will continue to build critical 
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attracted by growing income 
streams and strong intrinsic land 
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alternative uses.” 

Urban logistics assets

29 %

of our distribution portfolio

Consumers’ expectations are always 
rising, meaning that yesterday’s 
‘wow’ quickly becomes tomorrow’s 
‘norm’. This is illustrated by increased 
expectations around speed of delivery, 
a trend which has underpinned our 
further investment within the urban 
logistics sector, particularly in assets 
close to large population centres. 
The real estate fundamentals are 
strong and so we will continue to build 
critical mass in major UK geographies, 
attracted by growing income streams 
and strong intrinsic land values, often 
supported by the added beneﬁt of 
more valuable alternative uses. 

Deﬂation and depreciation 
The continuing transfer of sales to 
online represents a permanent and 
profound structural change. Its impact 
is illustrated in Next’s latest results which 
listed 17 store closures and average 
rental falls of 25% on the 19 leases that 
it decided to renew. Similarly, New 
Look’s CVA will see 60 stores close as 
well as reducing rents across 393 stores 
of between 20% and 60%. Together, 
they represent over 75% of New Look’s 
UK store portfolio. Carpetright also 
conﬁrmed the closure of 93 stores and 
reducing rents of between 30% and 
50% on another 113, in aggregate 
representing over 50% of their UK estate. 

The headwinds facing legacy real 
estate is a clear and present danger to 
the value of many retail assets. As well 
as store closures and rent reductions, 
retailers are demanding shorter leases 
and more advantageous incentive 
packages. The average lease taken 
by Next on lease renewals fell to seven 
years and they expect this to reduce to 
just ﬁve years. Whilst the store network 
still retains critical importance for 
omni-channel retailers, at current rental 
levels they are for many an increasingly 
declining asset. It is not evident that the 
property market is fully appreciating 
or pricing in the negative impact of 

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Annual Report and Accounts 2018

18 LondonMetric Property Plc 
Chief Executive’s review continued

Focusing on income and income 
growth is a simple idea but in a 
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one that we strongly believe in and 
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We focus on 
sustainable and 
growing income

Our portfolio is in good shape 
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Demographic trends accentuating 
the search for income
The extended period of low economic 
growth and low interest rates continues 
to create an almost desperate search 
for yield. We believe that this search is 
unlikely to change any time soon as a 
lower growth environment is combined 
with a demographic wave, as the 
population ages and life expectancy 
increases. In the UK, according to the 
ONS, the percentage of the population 
deﬁned as old age dependent has 
risen from 24% ten years ago to 29% 
today and is forecast to increase to 
41% by 2036. 

Therefore, we believe that income 
will continue to be the deﬁning 
characteristic of this decade’s 
investment environment. The investing 
fraternity, including dedicated income 
funds, private investors, corporate 
and local authority pension funds are 
pivoting their approach more and 
more towards income returns that are 
reliable, predictable and growing. 

These are compelling arguments and 
some real estate sectors are ideally 
suited to meet this need. Indeed, this is 
essentially the role that REITs in the UK 
were created to provide, passing 90% 
of their net income to shareholders, 
without the burden of double taxation.

Dividend security and growth 
from our portfolio
Income remains central to our 
investment thesis. Our ultimate priority 
is to pass income generated by our 
assets to shareholders, which is why 
we consistently pay out 90%+ of our 
earnings in dividends, and why, with 
the beneﬁt of future rent reviews, 
ﬁnance and other corporate cost 
efficiencies, we are conﬁdent in our 
ability to progress our dividend. 

Receiving a meaningful proportion 
of your total return in income not only 
provides a margin of safety against 
short term price ﬂuctuations, it also 
helps compounding returns. Growth  
on growth is always underestimated. 

Following the repositioning of the 
portfolio, our investment strategy today 
is more patient. This is allowing us to 
collect and compound our income 
and reduce the frictional costs of 
buying and selling that can negatively 
impact total returns; after all, the ﬁrst 
rule of income compounding is to 
never interrupt it unnecessarily. 

Fortunately, our portfolio is in good 
shape with long leases of over 12 years, 
occupancy at 97.5%, only 1.3% gross 
to net income leakage and little 
defensive capex requirement. We have 
also beneﬁted from good like for like 
income growth over the year, and, 
going forward, we know that we have 
the certainty of future income growth 
through contractual rental increases 
across half of the portfolio. 

Focusing on income and income 
growth is a simple idea but in a world 
of very low growth, it is one that we 
strongly believe in and one that we are 
taking seriously. 

See pages 26 to 27 of the 
Property review

 
 
LondonMetric Property Plc 
Annual Report and Accounts 2018

19

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Outlook

In an uncertain economic and 
political environment we believe 
that our income compounding 
model is increasingly attractive, 
especially as investors pivot their 
investment approach for low 
growth and demographic changes. 
Our income focus allows us to be a 
little less obsessed about predicting 
exact market movements or the 
exact timing of cycles, although 
our thoughts on these will be 
reﬂected in the management 
of our capital structure.

We remain highly nervous on the 
outlook for the retail sector with the 
tectonic plates shifting so materially 
that it’s now a very difficult sector 
to navigate and deliver superior 
returns. For the best space in the 
best locations, this is cyclical; for the 
majority it is permanent disruption 
and for the weakest it will be 
highly problematic.

Conversely, distribution remains 
structurally supported by the 
fundamental changes in consumer 
shopping patterns with attractive 
demand/supply tension, especially 
for urban logistics where rental 
growth is strongest. This is providing 
reliable, sustainable and consistent 
rental income and a fantastic 
bedrock from which to grow our 
income and dividends.

Our returns over the year are a 
measure of the progress that 
we have made and reﬂect our 
longer term sector and property 
decisions. Looking forward, we 
seek to continually build a better 
company and believe that, despite 
an environment of profound political 
and economic change, our strategy 
positions us well to not only weather 
but also beneﬁt from short term 
ﬂuctuations in values.

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

Delivering enhanced returns 
from our property
We continue to grow our income and 
improve the quality and attractiveness 
of our assets through de-risked 
asset management and short cycle 
development activity. 

In the year, we completed the 
development of 0.6 million sq ft at a 
yield on cost of 6.4%, materially higher 
than the investment yield. As at the 
year end, we had 1.0 million sq ft of 
development underway or in the near 
term pipeline. This activity helps to 
further modernise our portfolio, with 
28% now rated BREEAM Very Good, 
and it has reduced the average age 
of our distribution assets to 15 years.

Our 58 lettings and rent reviews helped 
to deliver £3.1 million of additional 
income with lettings achieved at 22% 
above ERV on average lease lengths of 
15.2 years. 

Post year end, we have agreed and 
are in legals on further occupier 
transactions representing an additional 
£1.3 million of income. This includes four 
distribution lettings and rent reviews at 
28% above passing rent.

We expect our income to continue 
to grow, particularly as we let the 
remainder of our recently completed 
developments and continue to settle 
distribution rent reviews at levels which 
are materially above passing. 

See pages 32 to 33 of the Property 
review and pages 42 to 43 of the 
Responsible Business review

Disciplined decision making using 
our occupier intelligence
We take a disciplined, patient and 
rational approach to investing. We are 
obsessed about the credit quality of 
occupiers, the security of our income, 
quality of the real estate and its 
potential for income growth. 

Over the year, we were a signiﬁcant 
net investor in distribution and used 
our strong occupier and developer 
relationships to acquire over 
£300 million of distribution assets. 
Whilst we remain focused on growing 
our logistics exposure, that doesn’t 
prevent us from selling to ensure that 
our portfolio remains ﬁt for purpose. 
Therefore, we took advantage of the 
strong market to monetise £88.2 million 
of our older and shorter let distribution 
assets in geographies where we 
believe rental growth and occupier 
demand is less robust. 

Whilst the market remains very 
competitive, we have a highly 
talented and focused team with strong 
relationships which puts us in a strong 
position to ﬁnd new opportunities and 
make well-informed decisions.

Disciplined ﬁnancing
Our ﬁnancing remains aligned to our 
property strategy. Loan to value of 
35% provides us with ﬂexibility to make 
further acquisitions and build our 
developments. Debt maturity remains 
at ﬁve years and we have reduced 
our cost of debt to 2.8% following the 
cancellation and recouponing of 
interest rate swaps, the cost of which 
has already been accounted for and 
has a payback period of 2.5 to 4.0 
years. Our dividend is 108% covered 
and our EPRA cost ratio fell to 15% from 
16% last year.

See pages 26 to 31 of the Property 
review and pages 34 to 39 of the 
Financial review

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Annual Report and Accounts 2018

20 LondonMetric Property Plc 
Our marketplace

Real estate remains an attractive investment class supported 
by a resilient economic backdrop and an increasing 
need for real income returns. However, in a complex and 
highly dynamic world, real estate has to be ﬁt for purpose 
to navigate a rapidly evolving environment.

The need for income

 +60 %

Global population aged 65 
and older growth to 2030

Demographic shifts and longevity 
of life are having a profound 
impact on the search for income. 
Pension freedoms together with 
reduction in Annuity rates have led 
many to seek alternative sources 
of income.

Real income returns require an 
income ahead of the prevailing 
inﬂation rate. Many traditional 
investment classes (cash, bonds, 
equities) do not deliver this and, 
as a result we are seeing a rise of 
alternative investment classes.

Real Estate Investment Trusts (REITs) 
that invest in the right real estate are 
an attractive investment proposition 
in this environment providing 
reliable, sustainable and growing 
income with the potential for long 
term capital appreciation.

Economic backdrop

The UK economy remains relatively 
robust. GDP growth remains resilient 
and is forecast to be around 2% over 
the next few years. Interest rates remain 
at historic lows and inﬂation is set to fall 
back to around 2%. With evidence of 
real wage inﬂation and unemployment 
trending towards 4%, consumer 
spending is set to pick up.

 +2.0 %pa

GDP growth remains resilient 
over next two years 

There remains a lack of clarity on 
the UK’s future relationship with the 
European Union which could impact 
on near term investment decisions. 
The economy has remained resilient 
to this distraction and with greater 
clarity around Brexit, this could 
improve current uncertainty.

Real estate remains an attractive 
investment class in this economic 
environment, delivering a positive 
yield arbitrage and positive real 
returns. Overseas capital continues 
to be attracted to UK real estate.

Economic forecasts (%)

3.1

2.7

1.8

1.7

1.2

2.4

2.0

1.8

1.1

1.9

1.2

0.6

2.0

2.0

2.1

1.9

2.0

1.9

2.0

1.8

2016

2017

2018f

2019f

2020f

GDP

10 year gilt

CPI inﬂation

Household spending

Source: Capital Economics

Modern shopping habits and changes in technology

The compounding impact of 
technological change continues to 
empower the consumer. The structural 
shift in shopping habits continues 
to have a ripple effect through 
many businesses as ecommerce 
becomes an increasingly driving 
force of growth amongst traditional 

retailers and newly established 
ecommerce retailers.

Online is forecast to continue to grow 
with same store sales stagnating. 
Responding to these shifts, occupiers 
are upgrading their supply chains 
to meet consumer demands. 

 +13 %

Online sales year on year

-1 %

Store sales year on year

LondonMetric Property Plc 
Annual Report and Accounts 2018

21

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Real estate requirements

Technological advancements 
and changes in shopping habits 
are resulting in a need for ﬁt for 
purpose, modern real estate to 
maximise supply chain efficiencies. 
Retailers have two principle routes 
to market: retail stores and online. 
Modern and efficient logistics and 
fulﬁlment space is required to deliver 
to the consumer regardless of route 
and logistics has to seamlessly provide 
for both store and home delivery.

Increased parcel deliveries and 
rising retailer promises to deliver to 
your home, place of work and soon 
anywhere of your choice, is resulting in 

heightened demand for well located 
and speciﬁed logistics and fulﬁlment 
accommodation in or close to urban 
centres. Urban logistics property, 
however, is in short supply given the 
alternative use that these locations 
have and consequently there is a 
demand/supply imbalance.

The store network remains an 
integral part of a retailer’s business. 
However store portfolios need 
to shrink and reﬂect the way in 
which people choose to shop. 
Convenience-led retail remains a 
growing sector as top up shopping 
trips complement online shopping. 

The logistics and fulﬁlment real 
estate market is a direct beneﬁciary 
of the shifts in shopping habits. 
CBRE estimate that 18.5 million sq ft 
of Grade A distribution space was 
taken up in the 12 month period 
against the ﬁve year average of 
c.13.8 million sq ft. Q1 2018 was 
a record quarter with 10 million 
sq ft of take up across 28 deals 
dominated by online, 3PLs and Post 
& Parcel operators. Online retail led 
occupiers have accounted for 23.7% 
of total take up in the last two years 
compared to 0.6% and 0.9% in 2012 
and 2013 respectively.

The development market has 
responded with c.19.4 million sq ft 
of current development activity. 
However 64% is pre-let and 
developers remain risk adverse. 
Total supply of new and grade 
A stands at c.15 million sq ft, 
representing c.10 months supply 
based on the last 12 months take up.

23.7 %

Online retail occupiers have 
accounted for 23.7% of total 
take up in the last two years

Driving investment markets

Outlook 

The shift in consumer behaviour 
we have witnessed in recent years 
is accelerating. We believe it is 
critical to invest in real estate that is 
ﬁt for purpose, aligned to structural 
shifts and offers strong income 
characteristics. Our strong occupier 
relationships help shape our decision 
making to navigate a rapidly 
evolving market.

Prime retail yields v prime distribution

%
8

7

6

5

4

3

2002

2004

2006

2008

2010

2012

2014

2016

2018

Shopping centre – prime

Distribution – prime 

Retail Warehouse – prime

Source: CBRE

The structural shifts supporting 
accelerating growth, together with 
the favourable demand/supply 
dynamics, have attracted large 
inward real estate investment into 
the logistics and fulﬁlment sectors. 
Occupiers continue to sign up to long 

leases with contractual uplifts given 
the importance of distribution to their 
operations. This long dated income 
with bond like characteristics is very 
appealing and is delivering strong risk 
adjusted total returns for owners of 
distribution real estate.

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Annual Report and Accounts 2018

22 LondonMetric Property Plc 
Our business model

How we generate sustainable income  
and create value.

Our key stakeholders

How our story creates income and value

See pages 01 to 09

People

Our success is dependent on 
employing a talented, motivated 
and diverse team with strong 
property expertise.

Occupiers

We engage with occupiers across 
all of our activities to provide real 
estate solutions that deliver mutually 
beneﬁcial outcomes and assist them 
in meeting their business needs.

Contractors and suppliers

Delivering developments and asset 
services on time, on budget and in 
adherence with our standards is of 
high priority.

We select high quality and robust 
contractors who have a proven 
track record and we work in 
collaboration with them. 

Investors and Joint Ventures

We value our good relationships 
with investors and debt providers 
to ensure we have a wide access 
to capital markets.

We also work closely with our 
joint venture partners to fulﬁl their 
business objectives.

Local communities

We recognise the importance of 
supporting and properly engaging 
with local communities.

We work closely with local 
authorities, residents and businesses 
to ensure that our activities 
consider and bring beneﬁts to 
local communities. 

See the Responsible Business 
review on pages 45 to 47

We anticipate changes in shopping habits and pivot 
our portfolio to those sectors which beneﬁt from these 
changes. As a result of our actions, we are strongly 
positioned in distribution, retail and leisure property.

Distribution

69 %

of portfolio

Total property return in 2018

13.7 %

360 bps out performance 
of IPD All Property

Development activity in 2018

578,000 sq ft

Additional income

+£3.1m

from occupier transactions 
in 2018

Our portfolio is  
aligned to modern  
shopping habits 

See page 02

We manage, 
enhance and 
create property 
in a responsible 
way

See page 06

We improve the quality and attractiveness of 
our assets through de-risked asset management 
initiatives and short cycle developments.

LondonMetric Property Plc 
Annual Report and Accounts 2018

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In a yield starved environment, we are a true 
REIT adopter where we focus on sustainable and 
growing income. We believe that income will be an 
increasingly important component of total returns 
and we look to improve the quality and length of our 
income to maximise returns to shareholders.

WAULT

12.4 years 

Only 6% of income  
expires over 3 years

LFL income growth

+4.3%

+£384.9m

Occupancy

98 
%

We focus on 
sustainable and 
growing income

See page 04

Our expertise 
and relationships 
shape our 
decision making

See page 08

Our people are highly talented and have strong 
relationships with retailers and the property sector 
which have been built up over many years. This 
gives us unrivalled knowledge and we are a trusted 
partner. As a result, we are able to access attractive 
opportunities and make the right property decisions.

Value created

Total shareholder return (5 years)

+119 %

Total accounting return 

+15.5% 

EPRA EPS growth 

+3.7 %

Dividend growth

+5.3 %

28 %

of portfolio 
BREEAM Very Good

Community beneﬁts

345

permanent jobs created 
by our occupiers on our 
recent developments

Investment

Sustainable improvements

 
 
 
 
 
 
 
 
Annual Report and Accounts 2018

24 LondonMetric Property Plc 
Key performance indicators

We continue to track seven key performance indicators to monitor 
the performance of the business, which include our share of joint ventures. 
The KPIs are also used to determine how Executive Directors and senior 
employees are evaluated and remunerated.

Objective

Deliver long term 
shareholder returns

Maximise long term 
total accounting 
return

Maximise property 
portfolio returns

Deliver sustainable 
growth in EPRA 
earnings

Drive like for 
like income 
growth through 
management 
actions

Maintain a higher 
than market 
benchmark 
weighted average 
unexpired lease 
term (WAULT)

Maintain strong 
occupier 
contentment

KPI measure/numbers

Performance

Total shareholder return %

2018

2017

2016

Total accounting return %

2018

2017

2016

Total property return %

2018

2017

2016

EPRA earnings per share p

2018

2017

2016

Like for like income growth %

2018

2017

2016

WAULT years

2018

2017

2016

EPRA vacancy %

2018

2017

2016

16.6

4.4

5.9

15.5

6.4

11.5

13.7

7.4

10.5

8.5

8.2

7.8

4.3

4.6

3.1

12.4

12.8

12.8

2.5

0.4

0.7

Total Shareholder Return (‘TSR’), being the share 
price movement together with the dividend, 
in the ﬁve years post merger was 119%, more 
than twice the FTSE 350 Real Estate Super Sector 
movement of 58%.

12 month TSR delivered 16.6% compared to the 
FTSE 350 Super Sector return of 7.9%.

Total Accounting Return (‘TAR’) of EPRA NAV 
movement together with dividend paid in 
the year. 

12 month TAR delivered a return of 15.5%.

The full calculation can be found in 
Supplementary note viii on page 144

Unlevered Total Property Return (‘TPR’), including 
capital and income return, of the portfolio as 
calculated by IPD.

12 months TPR delivered a return of 13.7% 
compared to the IPD All Property benchmark 
of 10.1%.

EPRA earnings per share from core operational 
activities have grown by 3.7% over the last 
12 months. Underlying earnings have grown by 
15.9% to £59.1 million. The per share equivalent 
reﬂects last year’s equity placing. 

In the ﬁve years post merger, EPRA earnings 
per share has grown by 117.9% from 3.9p to 
8.5p per share.

The movement in the contracted rental income 
on properties owned through the period 
increased by 4.3%.

Weighted average unexpired lease term 
across the investment portfolio (excluding 
residential and development) of 12.4 years as 
at 31 March 2018.

Occupancy rate of investment portfolio at 
31 March 2018 was 97.5%. We expect this to revert 
back to above 99% as the remainder of our 
recently completed distribution developments 
are let.

Our portfolio is 
aligned to modern 
shopping habits 

We focus on 
sustainable and 
growing income

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

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25

Remuneration

Under the Remuneration Policy 37.5% of LTIP awards are 
subject to TSR growth compared with the FTSE 350 Real 
Estate sector excluding agencies and operators.

The TSR component of the 2014 LTIP award vested in 
full in the year and the TSR component of the 2015 LTIP 
award is expected to vest in full.

2018/19 ambition

Three year TSR performance 
to be in the upper quartile 
of the FTSE 350 Real Estate 
sector, excluding agencies 
and operators.

Under the Remuneration Policy 37.5% of LTIP awards 
granted since 2016 are subject to TAR growth 
compared with the FTSE 350 Real Estate sector 
excluding agencies and operators.

Three year total accounting 
return to be in the upper 
quartile of FTSE 350 Real 
Estate sector, excluding 
agencies and operators.

35% of annual bonus award is subject to TPR 
outperforming the IPD Quarterly Universe index.

This year TPR outperformed the IPD benchmark 
delivering a 40% bonus payout.

One year TPR 
outperformance 
against IPO Quarterly 
Universe index.

35% of annual bonus award is subject to an EPRA 
EPS growth target. This year EPRA EPS outperformed 
its growth target securing a full bonus payout.

Deliver and sustain EPRA 
earnings growth and 
dividend progression.

25% of LTIP awards vest after three years subject to 
an EPS growth target. The EPS component of the 
2014 LTIP award vested in full in the year and 76% 
of the EPS component of the 2015 LTIP award is 
expected to vest this year.

Forms part of EPRA earnings per share, which as noted 
above, is a key ﬁnancial performance measure for the 
Company’s variable incentive arrangements.

Deliver like for like income 
growth ahead of inﬂation 
plus 1.5%.

Financial performance indicators
We monitor other ﬁnancial 
performance indicators in respect 
of LTV, debt maturity and cost 
of borrowing. 

These are discussed in the Finance 
review on pages 38 to 39. 

Movements over the past ﬁve years are 
reﬂected in the charts on page 39.

See Finance review on page 34

Risk management
The achievement of our seven KPIs is 
inﬂuenced by the identiﬁcation and 
management of risks which might 
otherwise prevent the attainment of 
our strategic priorities. 

The relationship between our principal 
risks, strategic priorities and KPIs is 
reviewed in the Risk management 
section on pages 48 to 59.

See Risk management on page 48

Remuneration
The table on page 94 shows how our 
KPIs are reﬂected in and therefore 
aligned to remuneration and 
incentive arrangements.

See Remuneration on page 88

Linked to individual personal objectives, representing 
30% of the annual bonus performance conditions.

Maintain high weighted 
average unexpired lease 
term targeting >12 years.

Linked to individual personal objectives, representing 
30% of the annual bonus performance conditions.

Maintain high occupancy 
across the investment 
portfolio, targeting >99%.

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Annual Report and Accounts 2018

26 LondonMetric Property Plc 
Property review

We invest in real estate that delivers repetitive, 
dependable and growing income and that offers the 
best prospects for superior total returns. Our actions 
aim to strengthen our portfolio’s income metrics.

Strong portfolio metrics provide 
income security and growth
We continue to maintain strong income 
metrics through our activities. 

Average lease lengths of 12.4 years 
(11.3 years to break) provide a high 
level of income security with only 6% of 
income expiring over three years and 
nearly 60% with lease lengths of greater 
than 10 years. 

Occupancy remains high at 97.5% 
and will revert back to above 99% as 
we let the remainder of our recently 
completed distribution developments.

Gross to net income ratio of 98.7% 
compares very favourably against our 
peers and reﬂects the low operational 
requirements from owning single 
let assets.

50.3% of rental income beneﬁts from 
ﬁxed or inﬂation linked uplifts which 
provides certainty of income growth. 
Furthermore, through open market 
rental uplifts on distribution, we are 
delivering organic rental growth. 

The strength of our occupiers is critical 
to the quality of our income. Our top 
ﬁve occupiers consist of Primark, Dixons 
Carphone, M&S, DHL and Argos and 
represent 35% of our income.

Lease expiry profile

>20 years  16%

0–3 years  6%

4–10 years
  36%

16–20 
years
11%

11–15 years
31%

Our portfolio is further aligned to 
structurally supported real estate
Acquisitions in the year totalled 
£384.9 million as we continue to invest 
into our preferred sectors of distribution, 
long income, convenience retail 
and leisure. 

£306.4 million was invested into 
regional and urban distribution and 
further broadened our end to end 
logistics portfolio. 

Whilst competition for assets in 
these preferred sectors is strong, our 
acquisitions were at an attractive yield 
of 6.0% and a WAULT of 10.6 years.

Investment activity by sub sector

Distribution1,3

Long Income3

Convenience & Leisure2

Retail Parks

Office

Residential

Total

Cost at share
£m

306.4

40.5

38.0

–

–

–

384.9

Acquisitions

Disposals

NIY
%

5.9

6.7

5.6

–

–

–

6.0

Proceeds  
at share
£m

88.2

11.2

56.9

18.1

68.5

8.7

251.6

NIY
%

5.3

6.7

4.7

7.1

6.7

2.5

5.7

1  Includes costs relating to the site acquisition and full development of 680,000 sq ft at Bedford
2  Includes convenience disposal of Loughborough and regional distribution sale at South Elmsall that 

exchanged in the year with deferred completion post year end

3  Includes the investment value from an increase in our share of the DFS Joint Venture from 30.5% to 45.0%

Mark Stirling
Asset Director

Average unexpired lease length

 12.4 years

Valentine Beresford
Investment Director

Acquisitions 

£384.9m

 
LondonMetric Property Plc 
Annual Report and Accounts 2018

27

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As part of our disciplined portfolio 
management, we sold £156.3 million 
of assets within our preferred sectors 
at a yield of 5.2%. £88.2 million was in 
distribution where we monetised older 
assets that had a WAULT to ﬁrst break 
of less than ﬁve years. 

This investment activity delivered 
80 bps of positive yield arbitrage and 
provides greater certainty of income 
and income growth with alignment to 
superior assets.

The remainder of our sales related to 
assets outside of our preferred sectors, 
namely our last office asset in Marlow, 
two retail parks and 19 residential ﬂats 
at our only residential asset, Moore 
House, Chelsea. Including sales agreed 
or under offer since the year end, 
only 37 ﬂats remain of the original 149 
owned in a joint venture, where we 
have a 40% share. 

As a result of our investment and 
development activity, distribution 
increased to 69% of our total portfolio, 
up from 62% in 2017, with urban logistics 
representing nearly a third of our 
distribution portfolio. Conversely, retail 
parks exposure has fallen further to 7%.

Our actions are delivering 
strong returns
We have been a signiﬁcant beneﬁciary 
of our early move into distribution 
where strong demand/supply 
dynamics have pushed capital values 
and rents signiﬁcantly higher.

Over the year, the portfolio delivered 
a total property return of 13.7%, 
signiﬁcantly outperforming IPD All 
Property which returned 10.1%. 
This return reﬂects the portfolio’s 
sustainable and attractive income 
as well as a strong capital return. 

The revaluation gain over the year was 
£121.6 million, reﬂecting a 7.1% increase. 
The second half gain was £68.8 million, 
helped by our development assets, 
particularly at our Bedford distribution 
development where we completed 
on the land acquisition. 

The EPRA topped up net initial yield 
on the portfolio is now 4.9% and the 
equivalent yield is 5.3%, reﬂecting an 
equivalent yield compression of 28 bps 
over the year on a like for like basis. 

Our actions accounted for 
approximately 50% of the valuation 
gains through our strong exposure to 
superior ERV growth, which averaged 

Portfolio split1

Distribution weighting

Retail parks  7%

Residential  2%

Convenience
and leisure 
10%

Long 
income
12%

69%

Total property return

+13.7 %

Distribution
  69%

Urban logistics valuation uplift

+10.9 %

1  Includes assets in development

3.1% in the year, and successfully 
executed asset management and 
development initiatives, which 
generated like for like income growth 
of 4.3%. 

Distribution generated a capital uplift 
of £74.4 million, representing a 6.4% 
increase. The best performing segment 
was urban logistics which saw a 10.9% 
capital uplift driven by strong ERV 
growth of 6.6%. 

Retail and leisure saw a £40.0 million 
valuation increase representing 
an 8.1% uplift, helped by good ERV 
growth and our asset management 
activity. All subsectors performed well. 
Retail parks delivered a 4.0% uplift, 
convenience and leisure delivered an 
8.5% capital uplift, and our long income 
portfolio delivered 10.4%. 

At our last remaining residential 
property there was a £1.8 million fall in 
value, representing a 5.8% reduction. 

As income becomes an increasingly 
important component of total returns, 
we believe that our strong income 
focused portfolio metrics will continue 
to generate superior future total returns. 

Revaluation gain in the year

Distribution

Long Income

Convenience & Leisure

Retail Parks

Residential

Developments

Total portfolio

6.4%

10.4%

8.5%

4.0%

-5.8%

26.1%

7.1%

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Annual Report and Accounts 2018

28 LondonMetric Property Plc 
Property review continued

Distribution
We invest in the subsectors of distribution that offer 
the most compelling returns.

Overview
The value of our end to end 
distribution portfolio, including 
developments, increased by 33% over 
the year to £1,262.5 million.

Regional distribution
The investment market for regional 
distribution is also highly competitive as 
investors price in strong rental growth 
and leasing assumptions. 

These are high quality single let assets 
with a WAULT of 12.1 years, offering 
an attractive mix of guaranteed 
rental uplifts on mega and regional 
distribution, and strong organic rental 
growth prospects on urban logistics. 

Mega distribution continues to 
see strong investor demand and 
pricing remains highly competitive. 
Therefore, we have looked to 
increase our exposure to regional and 
urban logistics where we see more 
favourable pricing dynamics, greater 
income growth potential and more 
robust intrinsic value in the assets. 

In the year, we invested £306.4 million 
at an attractive blended yield of 5.9% 
and with average lease lengths of 
10.0 years.

Distribution portfolio

£1.3bn

Whilst we remain disciplined, we 
acquired four regional warehouses 
for £83.4 million at a net initial yield of 
5.6%. Three were acquired through 
the Cabot portfolio acquisition and 
the fourth was a warehouse let to 
Clipper Logistics. 

We have supplemented these 
acquisitions by investing into our 
development pipeline where 
we continue to access product 
at yields signiﬁcantly in excess of 
investment value. 

At Bedford, we acquired a 40 acre 
development site and the majority 
of the site will be used to build two 
regional warehouses at a cost of 
£45.4 million representing a yield 
of 7.3%. The balance of the site 
will be used to build three urban 
logistics warehouses.

The strength of the market has 
prompted us to sell three regional 
assets for £88.2 million at a yield of 5.3%. 
These were older assets, let on short 
leases, with a WAULT to ﬁrst break of 
4.8 years, where we were uncertain on 
the prospects for future rental growth.

Urban logistics 
Occupier demand for smaller 
distribution warehouses continues 
to grow as occupiers seek closer 
proximity to population centres to 
reduce their operational costs and 
delivery times. Urban logistics now 
represents 29% of our distribution 
portfolio, up from 17% in 2017. This has 
improved the balance of our end to 
end logistics platform signiﬁcantly. 

Over the year, we acquired 25 assets 
for £177.6 million, including three 
developments. The blended yield 
on the acquisitions was 5.7% with 
a WAULT of 9.3 years. These assets 
are let to strong occupiers in good 
locations and have attractive income 
growth potential. 

We ﬁrmly believe in the outlook 
for urban logistics. Tight supply 
and signiﬁcant occupier demand 
continue to drive material rental 
outperformance of urban logistics 
compared to regional or mega 
distribution. In addition, with over 70% 
of our urban assets in the south east 
and the Midlands, we beneﬁt from 
the strong underlying land values 
from alternative uses. 

Therefore, we are comfortable that 
our urban logistics portfolio has shorter 
average lease lengths and a lower 
level of contractual rental uplifts.

Distribution portfolio split

Urban logistics 
29%

As at 31 March 2018

Mega

Regional

Urban

Typical warehouse size

500,000+ sq ft  100–500,000 sq ft Up to 100,000 sq ft

Portfolio
split

Mega
40%

Value1

WAULT

Yield2

Contractual uplifts3

£501m

13.2 years

4.7%

74%

£395m

14.2 years

4.5%

59%

£367m

8.5 years

4.7%

28%

Regional
31%

1  Including developments 
2  Topped up Yield
3  Percentage of portfolio that beneﬁts from contractual rental uplifts

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Distribution 
Investment activity

Overview

Acquired 

£306.4m

NIY: 5.9%  
WAULT: 10.0 years

Disposed 

£88.2m

NIY: 5.3%  
WAULT: 5.8 years

Post period end

490,000 sq ft 

portfolio disposal

Disposal of six warehouses and a plot 
of land for £36.0 million, reﬂecting a 
blended NIY of 5.9%. The properties 
are located in the Midlands and North 
of England, with a WAULT to break of 
5.3 years. The disposal of three of the 
assets is conditional on the purchaser 
arranging suitable ﬁnancing.

Acquisitions

1,300,000 sq ft Cabot portfolio
£116.6 million acquisition of 
11 urban and 3 regional assets. 
Acquired at a NIY of 6.1% and 
with a WAULT of 5.6 years. 

680,000 sq ft in Bedford
The development site was 
unconditionally acquired at an 
anticipated development cost 
of £65.5 million and yield of 7.0%. 

181,000 sq ft in Leyton, Weybridge, 
Peterborough, Cheltenham 
and Haverhill
£25.6 million acquisition of ﬁve 
warehouses at a NIY of 5.0%, rising 
to 5.6% over ﬁve years, and with 
a WAULT of 16.0 years. 

364,000 sq ft in Ollerton
£37.4 million acquisition of a 
warehouse let to Clipper Logistics 
at a reversionary yield of 5.5%, 
with a WAULT of 19.8 years. 

132,000 sq ft in Speke
£10.2 million acquisition of 
a warehouse let to Gefco. 
Acquired with a WAULT of 14.8 years. 

120,000 sq ft in Huyton
£11.8 million acquisition of a forward 
funding development let to Antolin 
Interiors. Acquired at a yield of 6.1% 
and with a WAULT of 15.0 years. 

90,000 sq ft in Coventry
£5.7 million acquisition of a warehouse 
let to DHL. Acquired at a NIY of 7.0% 
and with a WAULT of 10.0 years. 

57,000 sq ft in Crawley
£6.9 million acquisition of six 
warehouses with a WAULT of 2.8 years. 
It is anticipated that the site will be 
redeveloped at a yield of c.6%.

62,000 sq ft in Frimley
Acquired a forward funding 
development for £13.1 million 
at an anticipated yield on cost of 
5.3%. 

51,000 sq ft in Crawley
£6.4 million acquisition of a 
warehouse let to TNT. Acquired at a 
NIY of 4.8% and a reversionary yield 
of 6.2%, with a WAULT of 6.4 years. 

42,000 sq ft in Warrington
£4.4 million acquisition of a warehouse 
let to Hovis. Acquired at a NIY of 5.6% 
and with a WAULT of 9.7 years. 

Disposals

290,000 sq ft in South Elmsall
The property let to Superdrug was 
sold for £15.0 million, reﬂecting a NIY 
of 6.2%. The disposal completed post 
year end and will be accounted for in 
the next ﬁnancial year. 

274,000 sq ft in Bolton
The property let to Tesco was sold for 
£24.4 million, reﬂecting a NIY of 5.4%. 

LondonMetric acquired it as part of 
the Cabot acquisition off a blended 
NIY of 6.1%. 

272,500 sq ft in Daventry
The property let to the Royal Mail 
was sold for £48.8 million reﬂecting 
a NIY of 5.0%.

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Annual Report and Accounts 2018

30 LondonMetric Property Plc 
Property review continued

Retail and leisure
We focus on long income and convenience led assets in strong 
locations that generate long term, attractive and reliable income. 

Retail & leisure split

Retail parks 
25%

Long income
42%

Portfolio
split

Convenience
and leisure
33%

Long income

Value1 

£229m

WAULT: 11.0 years  
NIY2: 5.9%  
Contractual uplifts3: 32%

Convenience & Leisure

Value1

£181m

WAULT: 17.2 years  
NIY2: 4.9%  
Contractual uplifts3: 73%

Retail Parks

Value1

£140m

WAULT: 11.1 years  
NIY2: 5.6%  
Contractual uplifts3: 13%

Portfolio overview
Over recent years, we have 
signiﬁcantly reduced our retail park 
exposure and shifted our retail 
exposure towards assets that have 
long leases, generate reliable income 
and/or are convenience-led. 

Investment overview
Working in partnership with our 
occupiers, we acquired £78.5 million of 
long income, convenience and leisure 
retail in the year at a yield of 6.2% 
and with an average lease length of 
12.1 years.

Our retail and leisure portfolio is 100% 
let with average lease lengths of 
12.9 years, let to strong retailers at 
affordable average rents of £18.50 psf. 
These assets are located in good 
geographies and valued at an 
attractive NIY of 5.5%. 

The investment market appetite for 
our retail and leisure assets is strong 
and we continue to see good liquidity. 
As a consequence, we disposed of 
£86.2 million in this sector. 

Long income represents 12% of the 
total portfolio and consist of properties 
held within our DFS and MIPP joint 
ventures and several wholly owned 
properties. They have very limited 
operational requirements, are let 
on average for 11.0 years, typically 
to single tenants such as Dunelm, 
Wickes and DFS. A third of income has 
contractual uplifts. 

During the year, we acquired 
£40.5 million of assets, principally one 
asset in New Malden. In addition, 
we sold two DFS stores and a B&Q unit 
for £11.2 million.

These assets represent 10% of the total 
portfolio, have an average lease 
length of 17.2 years and 73% of income 
is subject to contractual rental uplifts. 
They consist of 13 convenience-led 
stores let mainly to M&S, Aldi and LIDL, 
and ﬁve Odeon cinemas which were 
acquired as part of a portfolio of ten 
cinemas in November 2013, bought at 
an overall NIY of 7.2%. 

During the year, we purchased 
£38.0 million of assets in Newport 
(Isle of Wight), Kendal, Weymouth 
and Ringwood at a NIY of 5.6%, 
and we sold two cinemas and two 
convenience assets for £56.9 million 
at a NIY of 4.7%.

We continue to ﬁnd attractive 
convenience opportunities.

Over the last three years our retail 
park exposure has reduced from 15 to 
ﬁve today, representing just 7% of the 
overall portfolio. 

During the year we sold two assets in 
less attractive geographies in Milford 
Haven and Newcastle-under-Lyme at 
values in line with our book. 

The ﬁve remaining assets are in 
good locations with strong occupier 
contentment and average lease 
lengths of 11.1 years. All have recently 
been asset managed. 

We expect to further monetise our 
retail park exposure.

1  Including developments 
2  Topped up Yield
3  Percentage of portfolio that beneﬁts from contractual rental uplifts

Retail and leisure 
Investment activity

Overview

Acquired

£78.5m

NIY: 5.5%  
WAULT: 12.1 years

Disposed

£86.2m

NIY: 5.5%  
WAULT: 15.8 years

Post period end

£5.1m 

acquired

Our MIPP JV acquired two assets for 
£10.3 million (Group share: £5.1 million) 
at a blended yield of 5.4% and with a 
WAULT of 17.2 years. Wickes account 
for 60% of the income.

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Acquisitions

New Malden
£28.3 million acquisition of a 
51,500 sq ft long income asset at 
a yield of 6.1% and with a WAULT 
of 14.4 years let to Currys PC World.

Newport (Isle of Wight) and 
Kendall
£24.6 million acquisition of two 
convenience assets let to M&S. 
Acquired at a blended NIY of 5.5% 
with a WAULT of 9.6 years. 

DFS JV increase in equity share
An increase in our equity share of 
the DFS joint venture from 30.5% 
to 45.0%, represented £12.2 million 
of investment. 

Ringwood
£8.5 million (Group share: £4.3 million) 
acquisition by our MIPP JV of a 
35,000 sq ft leisure development 
pre-let to Premier Inn, at a yield of 
5.0% and a WAULT of 25.0 years.

Weymouth
Acquired a convenience-led 
development site with an initial 
development cost of £9.1 million, 
reﬂecting an anticipated yield 
on cost of 6.3%. 

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Disposals

Loughborough 
£32.5 million disposal of a 55,000 
sq ft Morrisons store at a NIY of 4.3%. 
The asset had been extended 
recently and a new 25 year 
lease was agreed with Morrisons. 
The disposal completed post year 
end and will be accounted for 
in the next ﬁnancial year.

Milford Haven
The 84,000 sq ft retail park was sold 
for £15.3 million at a NIY of 6.9% 
and a WAULT of 8.5 years. 

Derby
The 37,000 sq ft Odeon Cinema was 
sold for £12.6 million at a NIY of 4.7%.

Birkenhead
The 32,000 sq ft Vue Cinema was 
sold for £5.8 million at a NIY of 7.2%.

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Hull 
Our MIPP JV sold the 71,000 sq ft B&Q 
store for £11.6 million (Group Share 
£5.8 million), reﬂecting a blended NIY 
of 6.0%. 

Guisborough
The 26,000 sq ft convenience scheme 
let to Aldi and Iceland was sold for 
£6.0 million at a NIY of 5.0% and with 
a WAULT of 11.9 years. 

Swansea and Swindon
Two assets were sold by our DFS JV for 
£13.9 million (Group share: £5.4 million) 
at a blended yield of 7.5%.

Newcastle-under-Lyme
The 22,000 sq ft retail asset was 
sold for £2.8 million at a NIY of 8.0% 
and a WAULT of 9.0 years. 

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Annual Report and Accounts 2018

32 LondonMetric Property Plc 
Property review continued

Asset management
Our asset management activity is generating further income 
and capital growth and is enhancing our real estate.

Occupier transactions 

58

Additional income

£3.1m

WAULT on lettings

15.2 years

27 rent reviews

+12.3 %

above passing (on a 5 yearly 
equivalent basis)

We undertook 58 occupier transactions 
in the year and generated £3.1 million 
of additional income. Like for like 
income growth was 4.3%.

Lettings 
31 lettings were undertaken at 
22% above ERV and with a WAULT 
of 15.2 years. This delivered £2.2 million 
of additional income, 74% of which 
has contractual uplifts: 

•  £0.6 million related to lettings at our 
recently completed developments 
in Crawley and Ipswich with a WAULT 
of 13.6 years and at 15% above ERV

•  £0.8 million arose from the full 

letting of our M&S anchored asset 
in Matlock and a 15.0 year re-gear 
at our new asset in New Malden 

•  £0.5 million related to 21 retail 

lettings. These were undertaken at 
25% above ERV and with a WAULT 
of 11.6 years

•  £0.3 million related to regears at two 
Odeons where we are contributing 
towards internal refurbishment works 
and where the WAULT is 20.0 years

One of the lettings was a 15 year regear 
on a 119,000 sq ft urban distribution 
asset purchased as part of the Cabot 
acquisition and where six years 
remained previously.

Post year end, including at our Frimley 
development, we have exchanged 
or agreed terms on ﬁve lettings across 
0.3 million sq ft adding £1.1 million of 
income with an average lease length 
of 11.6 years. One of these lettings is an 
urban logistics regear where the rent 
has increased by 34% to £1.9 million 
and the term has been extended by 
7.5 years.

Rent reviews
27 rent reviews were agreed across 
3.0 million sq ft adding £0.9 million 
of income at 12.3% above passing 
on a ﬁve yearly equivalent basis and 
6.3% above ERV:

•  Nine distribution reviews at 9.5% 
above passing on a ﬁve yearly 
equivalent basis, four of which 
were urban logistics reviews where 
the average ﬁve yearly uplift 
was 10.5%  

•  18 retail and leisure reviews at 5.8% 

above passing (16.6% on a ﬁve yearly 
equivalent basis), predominantly 
inﬂation linked reviews on cinema 
and convenience assets

Post year end, we have settled or 
agreed three rent reviews which adds 
£0.2 million of income at 18.8% above 
passing on a ﬁve yearly equivalent 
basis. One of these is an urban logistics 
asset where the uplift was 42%.

Martlesham Heath 47,800 sq ft 
Retail Park

3 leases were signed with Shoezone, 
Mountain Warehouse and Card 
Factory in the year, adding to 
previous lettings to M&S, Hobbycraft 
and Poundland. 

The 47,800 sq ft park has been 
transformed, increasing income by 
73% and the WAULT to 12 years. It has 
generated an ungeared return of 12% 
per annum since purchase in 2013.

LondonMetric Property Plc 
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Short cycle developments improve the quality 
of our assets at attractive yields. 

We completed ﬁve developments 
in the year across 578,000 sq ft at an 
anticipated yield on cost of 6.4%.

generate a yield of 6.5% on total costs of 
£124 million, a third of which has already 
been spent.

Developments under construction and 
in the pipeline at the year end totalled 
1,031,000 sq ft and are expected to 

Since the year end, we have completed 
our Dagenham, Ipswich and Frimley 
developments across 273,000 sq ft.

Scheme

Sector

Completed in the year  

Tonbridge

Huyton

Stoke3

Crawley3

Retail

Distribution

Distribution

Distribution

Launceston 

Retail

Under construction and pipeline

Dagenham1

Distribution

Ipswich1

Frimley1,3

Retail

Distribution

Bedford (Regional)3  Distribution

Bedford (Urban)3 

Distribution

Ringwood

Weymouth3 

Derby3

Leisure

Retail

Retail

1  Completed post year end
2  Based on calendar quarters and years
3  Anticipated yield on cost and rents

Area sq ft 
’000

Additional 
Rent £m

Yield on 
cost % 

Practical 
completion2 

42

120

277

109

30

578

180

31

62

500

180

35

27

16

1,031

0.3

0.7

1.5

1.4

0.3

4.2

0.9

0.7

0.7

3.3

1.3

0.2

0.6

0.4

8.1

Q3 17

Q4 17

Q1 18

Q1 18

Q4 17

Q2 18

Q2 18

Q2 18

2019

2019

Q4 18

2019

2019

6.1

6.1

6.3

6.7

6.2

6.4

5.7

6.9

5.3

7.3

6.4

5.0

6.3

6.7

6.5

Developments under 
construction or in the pipeline 

1.0m sq ft

at a 6.5% yield on cost

Stoke – the 277,000 sq ft 
development completed recently. 
137,000 sq ft has been let to Michelin 
for 15 years and we are in advanced 
discussions on letting of the 
remaining unit.

Crawley – the 109,000 sq ft 
development completed 
recently and 32,000 sq ft is let 
to Boeing for 15 years. We are in 
advanced discussions on letting 
of the remainder.

Frimley – 38,000 sq ft of the 62,000 
sq ft development has been pre-let 
to BAE Systems for 15 years and terms 
are agreed on the remaining unit.

Derby – we have pre-let the 
development to M&S, Starbucks 
and Nandos at a WAULT of 16 years. 
The site acquisition is expected to 
occur in July 2018 following receipt 
of planning consent.

Weymouth – we have pre-let 
19,000 sq ft to Aldi and received 
offers on the letting of three small 
pods. The development is expected 
to have a WAULT of 18 years. The site 
has been purchased and planning 
consent is expected in Q4 2018.

Bedford – we acquired 40 acres 
of land in the year. The site is in an 
established distribution location 
where we also own an Argos 
warehouse. Planning consent has 
been received and we expect to 
commence construction of three 
smaller urban warehouses shortly. 
Construction of two larger regional 
warehouses is subject to pre-lets. 
Occupier interest is strong and 
detailed terms have been drawn up 
on pre-letting the largest warehouse 
of 350,000 sq ft.

Bedford 680,000 sq ft 
distribution 
development

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Annual Report and Accounts 2018

34 LondonMetric Property Plc 
Financial review

Our strong ﬁnancial returns this year are testament to sound 
property and ﬁnancing decisions. Our patient and disciplined 
investment strategy continues to focus on owning ﬁt for purpose 
real estate that delivers sustainable and growing income.

Overview
Our property portfolio is well positioned 
to support the advancement of 
technology and migration of consumer 
spending online and has delivered 
strong earnings and net asset growth 
this year.

IFRS reported proﬁt has increased 
by £123.0 million to £186.0 million, 
predicated on a signiﬁcant revaluation 
gain of £121.6 million in the year. 
IFRS net assets are £1,149.5 million or 
165.7p per share, an increase of 13.2% 
on a per share basis in the year.

EPRA earnings have increased by 15.9% 
to £59.1 million or 8.5p per share. On a 
per share basis earnings are up 0.3p 
or 3.7% from 8.2p last year, reﬂecting 
the impact of the equity placing 
of 62.8 million shares in March 2017. 
EPRA NAV is £1,146.6 million or 165.2p 
per share, an increase of 11.3% or 10.3% 
on a per share basis. 

The growth in underlying EPRA earnings 
has enabled us to increase our dividend 
for the year by 5.3% to 7.9p per share. 
The dividend continues to be fully 
covered by EPRA earnings at 108%. 
Three quarterly dividend payments 
totalling 5.55p per share have been 
made to date and a further 2.35p is 
proposed for payment on 11 July 2018. 
A scrip alternative to a cash dividend 
payment was offered to shareholders 
and 4.8 million shares were issued in the 
year. It is our intention to continue to 
offer shareholders this choice.

In July, we reﬁnanced our secured loan 
facility with Helaba and cancelled 
£128 million interest rate swaps. 
We re-couponed a further £190 million 
swaps in the second half of the year, 
reducing our average cost of debt 
to 2.8% at the year end (2017: 3.5%). 
We anticipate interest cost savings over 
the next 2.5 to 4.0 years which will pay 
back the total break cost of £19.0 million.

Our other ﬁnancing metrics remain 
strong, with loan to value of 35% 
and average loan maturity, despite 
the passing of a year, of 4.8 years 
(2017: 5.2 years). 

Presentation of ﬁnancial 
information
The Group ﬁnancial statements on 
pages 114 to 136 are prepared in 
accordance with IFRS where the 
Group’s interests in joint ventures are 
shown as a single line item on the 
consolidated income statement and 
balance sheet and all subsidiaries are 
consolidated at 100%. 

Management monitors the 
performance of the business principally 
on a proportionately consolidated 
basis, which includes the Group’s 
share of joint ventures on a line by 
line basis in the ﬁnancial statements. 
These measures, presented on a 
proportionately consolidated basis, 
are alternative performance measures, 
as they are not deﬁned under IFRS.

The ﬁgures and commentary in 
this review are consistent with our 
management approach, as we 
believe this provides a meaningful 
analysis of overall performance. 

Alternative performance measures
The Group uses alternative 
performance measures based on the 
European Public Real Estate (EPRA) 
Best Practice Recommendations (BPR) 
to supplement IFRS as they highlight the 
underlying performance of the Group’s 
property rental business. 

The EPRA measures are widely 
recognised and used by public real 
estate companies and seek to improve 
transparency, comparability and 
relevance of published results in the 
sector. EPRA earnings is one of the 
Group’s KPIs and supports the level of 
dividend payments. It is also one of the 
ﬁnancial performance targets under 
the variable incentive arrangements 
for Executive Directors.

Further details, deﬁnitions and 
reconciliations between EPRA 
measures and the IFRS ﬁnancial 
statements can be found in note 
8 to the ﬁnancial statements, 
Supplementary notes i to vii and 
in the Glossary on page 147.

Martin McGann
Finance Director

IFRS reported proﬁt

£186.0m 

2017: £63.0m

EPRA earnings per share

8.5p 

2017: 8.2p

IFRS net assets

£1,149.5m 

2017: £1,006.9m

EPRA net asset value per share

165.2p 

2017: 149.8p

Net rental income (including JVs)

£90.6m 

2017: £81.8m

LondonMetric Property Plc 
Annual Report and Accounts 2018

35

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Income statement
EPRA earnings for the Group and its share of joint ventures are detailed as follows:

For the year to 31 March

Gross rental income

Property costs

Net rental income

Management fees

Administrative costs

Net ﬁnance costs

EPRA earnings

Group
£m

82.0

(0.8)

81.2

1.7

(13.8)

(16.5)

52.6

JV
£m

9.8

(0.4)

9.4

(0.8)

(0.1)

(2.0)

6.5

2018
£m

91.8

(1.2)

90.6

0.9

(13.9)

(18.5)

59.1

Group
£m

73.9

(0.8)

73.1

1.7

(13.3)

(16.3)

45.2

JV
£m

9.1

(0.4)

8.7

(0.7)

(0.1)

(2.1)

5.8

2017
£m

83.0

(1.2)

81.8

1.0

(13.4)

(18.4)

51.0

The table below reconciles the 
movement in EPRA earnings in the year.

rents has increased marginally this year 
to 98.7%.

£18.5 million, a marginal increase of 
£0.1 million compared with last year. 

EPRA earnings 2017

Net rental income

Management fees

Administrative costs

Net ﬁnance costs

Other1

EPRA earnings 2018

£m

51.0

8.8

(0.1)

(0.5)

(0.1)

–

59.1

p

8.2

1.3

–

(0.1)

–

(0.9)

8.5

1  Opening earnings per share has been adjusted for 
the increased weighted average number of shares 
following the equity placing in March 2017

Net rental income 
One of our key strategic priorities has 
been to grow sustainable income to 
support growth in EPRA earnings and 
a progressive dividend. This year we 
have increased net rental income by 
£8.8 million or 10.8% to £90.6 million, 
up from £81.8 million last year. 
Movements in net rental income are 
reﬂected in the table below.

Net rental income 2017

Existing properties1

Developments2

Net acquisitions in 2018

Net disposals in 2017

Net rental income 2018

£m

81.8

4.4

4.2

3.8

(3.6)

90.6

1  Properties held throughout 2017 and 2018 
2  Developments completed in 2017 and 2018

Like for like income from our existing 
portfolio generated additional income 
of £4.4 million from lettings, rent 
reviews and regears and completed 
developments delivered a further 
£4.2 million. Net acquisitions this year 
increased income by £3.8 million. 

Our property cost leakage is minimal 
as vacancy levels are extremely low. 
Net income as a percentage of gross 

Administrative costs 
Administrative costs have increased 
by 3.7% to £13.9 million and are 
stated after capitalising staff costs of 
£1.8 million (2017: £1.8 million) in respect 
of time spent on development activity 
in the year. 

Headcount is only slightly reduced and 
the cost increase is primarily due to the 
£0.6 million increase in the share based 
payment charge, reﬂecting additional 
awards granted to Directors since 2017.

EPRA cost ratio
The Group’s cost base continues to 
be closely monitored and the EPRA 
cost ratio is used as a key measure of 
effective cost management. 

The ratio reﬂects total operating costs, 
including the cost of vacancy, as a 
percentage of gross rental income. 

EPRA cost ratio 
including direct 
vacancy costs

EPRA cost ratio 
excluding direct 
vacancy costs

2018
%

2017
%

15

15

16

15

The EPRA cost ratio for the year, 
including direct vacancy costs, 
has fallen 93 bps to 15.3% this year. 
The reduction is due to higher rents 
more than offsetting the increase in 
administrative expenses in the year. 

The full calculation is shown in 
Supplementary note iv on page 143.

Net ﬁnance costs 
Net ﬁnance costs, excluding the costs 
associated with repaying debt and 
terminating hedging arrangements on 
sales and reﬁnancing in the year, were 

This was due to decreases in 
interest receivable from forward 
funded developments that have 
completed and interest capitalised 
on developments of £1.3 million and 
£0.2 million respectively, offset by lower 
Group bank interest costs of £1.4 million. 
Group interest payable has fallen as a 
result of lower average rates following 
the cancellation of out of the money 
interest rate swaps in July and lower 
average debt balances this year. 
Further detail is provided in notes 5 and 
10 to the ﬁnancial statements.

Share of joint ventures 
EPRA earnings from joint venture 
investments were £6.5 million, an 
increase of £0.7 million over last year as 
reﬂected in the table below.

For the year to  
31 March

MIPP

Retail Warehouse 
(DFS)

Residential 
(Moore House)

2018
£m

3.7

2.7

0.1

6.5

2017
£m

3.4

2.2

0.2

5.8

In September 2017 we increased our 
shareholding in the DFS joint venture by 
14.5% to 45.0%. This resulted in a higher 
share of earnings in the second half 
of the year. At the same time, Atlantic 
Leaf Properties Limited acquired a 
45.0% interest in the joint venture from 
LVSII Lux S.A.R.L.

Income from our MIPP joint venture 
also increased as a result of prior 
period acquisitions contributing for 
the full year. 

In addition, the Group received net 
management fees of £0.9 million for 
acting as property advisor to each of 
its joint ventures (2017: £1.0 million).

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Annual Report and Accounts 2018

36 LondonMetric Property Plc 
Financial review continued

Taxation 
As the Group is a UK REIT, any 
income and capital gains from our 
qualifying property rental business 
are exempt from UK corporation tax. 
Any UK income that does not qualify 
as property income within the REIT 
regulations is subject to UK tax in the 
normal way.

The Group’s tax strategy is compliance 
oriented; to account for tax on an 
accurate and timely basis and 
meet all REIT compliance and 
reporting obligations.

We seek to minimise the level of tax risk 
and to structure our affairs based on 
sound commercial principles. We strive 
to maintain an open dialogue with 
HMRC with a view to identifying and 
solving issues as they arise. 

The tax risk identiﬁcation and 
management process is documented 
in the Risk Register and Internal Control 
Evaluation which is reviewed annually 
by the Audit Committee who reports 
its ﬁndings to the Board. The Board 
also considers risk at a high level at 
each meeting via a risk dashboard. 
The Finance Director has overall 
responsibility for the execution of the 
tax strategy.

We pay business rates on void 
properties and stamp duty land tax. 
In addition we collect VAT, employment 
taxes and withholding tax on dividends 
and pay these over to HMRC.

We continue to monitor and 
comfortably comply with the REIT 
balance of business tests and distribute 
as a Property Income Distribution 90% 
of REIT relevant earnings to ensure our 
REIT status is maintained. 

Our formal tax strategy has been 
published on the Group’s website 
at www.londonmetric.com.

For the year to  
31 March

EPRA earnings

Revaluation of investment property

Fair value of derivatives

Debt and hedging early close out costs

(Loss)/proﬁt on disposal

Other items1

IFRS reported proﬁt

Dividend
The Company has continued to 
declare quarterly dividends and 
has offered shareholders a scrip 
alternative to cash payments. In the 
year to 31 March 2018 the Company 
paid the third and fourth quarterly 
dividends for 2017 and the ﬁrst two 
quarterly dividends for 2018 at a total 
cost of £51.4 million or 7.6p per share 
as reﬂected in note 7 to the ﬁnancial 
statements. The Company issued 
4.8 million ordinary shares in the year 
under the terms of the Scrip Dividend 
Scheme, which reduced the cash 
dividend payment by £8.0 million to 
£43.4 million.

The ﬁrst two quarterly payments for the 
current year of 1.85p per share were 
paid as Property Income Distributions 
(PIDs) in the year. The third quarterly 
payment of 1.85p was paid as a PID 
in April 2018 and the Company has 
proposed a fourth quarterly payment 
of 2.35p payable on 11 July 2018, 
of which 1.7p per share will be a 
PID, to shareholders on the register 
on the record date of 8 June 2018. 
The total dividend payable for 2018 has 
increased 5.3% to 7.9p, comprising a 
PID of 7.25p and an ordinary dividend 
of 0.65p.

IFRS reported proﬁt
Management principally monitors 
the group’s underlying EPRA earnings 
which reﬂect earnings from core 
operational activities and excludes 
property and derivative valuation 
movements, proﬁts and losses on 
disposal of properties and ﬁnancing 
break costs. 

A full reconciliation between EPRA 
earnings and IFRS reported proﬁt 
is given in note 8(a) to the ﬁnancial 
statements and is summarised in 
the table below.

The Group’s reported proﬁt for the 
year was £186.0 million compared with 
£63.0 million a year ago. The increase 
was driven by the property revaluation 
gain of £121.6 million compared with 
just £21.0 million last year. 

Other movements in reported proﬁt 
include a favourable movement 
in the fair value of derivatives of 
£26.4 million, which is offset by break 
costs of £19.1 million. The net favourable 
movement of £7.3 million compares 
with a loss of £3.3 million last year. 

As part of the Helaba loan reﬁnancing, 
we cancelled £128.4 million out of the 
money interest rate swaps at a cost 
of £6.3 million. In the second half of 
the year we recouponed a further 
£190 million interest rate swaps hedging 
our unsecured RCF at an additional 
cost of £12.7 million. These transactions 
are earnings accretive with a payback 
period of 2.5 to 4.0 years.

For further details see the Financing 
section of this review on page 38.

The disposal of our non core office in 
Marlow contributed to the loss on sales 
in the year, generating a loss over book 
value of £3.6 million. This was partly 
mitigated by the retention of rent for 
the deferred completion period of 
£1.2 million. The corresponding proﬁt 
over original cost was £4.5 million. 

Proﬁt on other retail and distribution 
sales reduced the overall loss to 
£2.0 million which compares to a loss 
of £5.5 million in 2017.

The total proﬁt over original cost of sales 
in the period was £17.9 million or 9.8% 
(2017: £7.4 million or 3.8%). 

Disposals are discussed in detail in the 
Property review section of the Strategic 
report on pages 26 to 33. 

Group
£m

52.6

114.7

26.2

(19.0)

(2.1)

–

172.4

JV
£m

6.5

6.9

0.2

(0.1)

0.1

–

13.6

2018
£m

59.1

121.6

26.4

(19.1)

(2.0)

–

186.0

Group
£m

45.2

22.2

0.2

(3.5)

(4.5)

(0.2)

59.4

JV
£m

5.8

(1.2)

0.1

(0.1)

(1.0)

–

3.6

2017
£m

51.0

21.0

0.3

(3.6)

(5.5)

(0.2)

63.0

1  Other items in the prior year include amortisation of intangible assets

LondonMetric Property Plc 
Annual Report and Accounts 2018

37

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Balance sheet
IFRS reported net assets increased 
by £142.6 million or 14.2% in the year 
to £1,149.5 million. 

EPRA net asset value is a key measure 
of the Group’s overall performance, 
reﬂecting both income and capital 
returns. It excludes the fair valuation of 
derivative instruments that are reported 
in IFRS net assets. EPRA net assets have 
increased £116.1 million or 11.3% in the 
year to £1,146.6 million. On a per share 
basis EPRA net assets increased by 
15.4p, or 10.3% to 165.2p. 

A reconciliation between EPRA net 
assets and IFRS reported net assets is 
provided in the table opposite and in 
note 8 to the ﬁnancial statements.

The increase in both IFRS and EPRA net 
assets per share was principally due 
to the property revaluation of 17.6p. 
EPRA earnings of 8.5p covered the 
7.6p dividend charge.

The movement in EPRA net assets, 
together with the dividend paid 
in the year net of the scrip issue of 
shares of £43.4 million, results in a 
total accounting return of 15.5%. 
The full calculation can be found in 
supplementary note viii on page 144.

Portfolio valuation
Our property portfolio, including the 
share of joint venture assets, grew 
20.0% in the year to £1,842.0 million. 
This was a result of signiﬁcant net 
property investment and a strong 
valuation performance.

EPRA net assets for the Group and its share of joint ventures are as follows:

As at 31 March

Group
£m

JV
£m

2018
£m

Group
£m

JV
£m

2017
£m

Investment property

1,677.6

164.4

1,842.0

1,373.4

160.4

1,533.8

(650.0)

(58.9)

(708.9)

(473.2)

(54.5)

(527.7)

26.2

13.1

39.3

42.9

3.2

46.1

Gross debt

Cash

Other net  
(liabilities)/assets

(24.8)

(1.0)

(25.8)

EPRA net assets

1,029.0

117.6

1,146.6

Derivatives

2.8

0.1

2.9

IFRS net assets

1,031.8

117.7

1,149.5

(20.4)

922.7

(23.4)

899.3

(1.3)

(21.7)

107.8

1,030.5

(0.2)

(23.6)

107.6

1,006.9

EPRA net asset value (£m and pence per share)

1,030.5
149.8

59.1
8.5

121.6
17.6

(51.4)
(7.6)

(13.2)
(3.1)

1,146.6
165.2

2017

EPRA
earnings

Property
revaluation

Dividend
charge

Other
movements1

2018

1  Other movements include loss on sales (£2.0m), debt/hedging break costs (£19.1m), share based awards 

(£0.1m), offset by scrip share issues (£8.0m) 

urban logistics assets, that have 
seen the highest levels of rental and 
valuation growth. 

Huyton completed in the year and new 
development opportunities at Bedford 
and Weymouth were acquired. 

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We have increased our distribution 
exposure (including distribution 
developments) to 69% from 62% 
last year. 

The Group’s commitment to 
development activity is demonstrated 
by the signiﬁcant spend of £62.5 million 
in the year, which is reﬂected in the 
investment property movement table 
on page 38.

It has been another busy year 
with signiﬁcant investment into 
the distribution sector, particularly 

Investment in development assets 
remains at modest levels as short cycle 
opportunities at Crawley, Stoke and 

As at 31 March

Distribution

Convenience & leisure

Long income

Retail parks

Offices

Investment portfolio

Residential

Development1

Property value

£m

1,233.1

174.7

220.8

139.8

–

1,768.4

30.1

43.5

2018

%

66.9

9.5

12.0

7.6

–

96.0

1.6

2.4

£m

927.4

156.2

166.6

145.2

70.0

1,465.4

41.1

27.3

2017

%

60.4

10.2

10.8

9.5

4.6

95.5

2.7

1.8

1,842.0

100.0

1,533.8

100.0

1  Represents distribution of £29.4 million (1.6%), long income of £8.2 million (0.5%) and convenience and leisure of £5.9 million (0.3%). Split in March 2017 was distribution of 

£22.8 million (1.5%) and retail parks of £4.5 million (0.3%)

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Annual Report and Accounts 2018

38 LondonMetric Property Plc 
Financial review continued

Revaluation gain

£121.6m 

2017: £21.0m

Portfolio value

The movement in the investment portfolio 
is explained in the table below. 

Opening valuation 2017

Acquisitions

Developments

Capital expenditure on 
completed properties

Portfolio value1
£m

1,533.8

289.7

62.5

20.4

(191.0)

121.6

5.0

£1,842.0m 

Disposals

Revaluation

Lease incentives

2017: £1,533.8m

Distribution

69 % 

2017: 62%

Dividend

7.9p 

2017: 7.5p

Average debt cost

2.8 % 

2017: 3.5%

LTV

35 % 

2017: 30%

Average debt maturity

4.8 years 

2017: 5.2 years

All amounts except for dividend per share 
include the Group’s share of joint ventures

Closing valuation 2018

1,842.0

1  Further detail on the split between Group 

and joint venture movements and the EPRA 
capital expenditure analysis can be found in 
Supplementary note vii on page 144

The Group spent £289.7 million in the 
year acquiring 25 distribution and 3 
retail properties.

Non core assets including our last office 
in Marlow and 19 residential ﬂats at 
Moore House generated proceeds of 
£77.2 million. A further 10 commercial 
property sales generated additional 
proceeds of £126.9 million and reduced 
the total carrying value of property 
by £191.0 million, as reﬂected in the 
table above.

We exchanged to sell two further assets 
in the period, a distribution unit in South 
Elmsall let to Superdrug for £15.0 million 
and a Morrisons store in Loughborough 
for £32.5 million. Both had deferred 
completions and will be reﬂected as 
disposals in the ﬁnancial statements 
in 2019.

Property values have increased by 
£121.6 million, most signiﬁcantly in our 
urban logistics and development 
sectors and the portfolio has delivered 
a total property return of 13.7% 
compared to the IPD All Property index 
of 10.1%.

At the year end, the Group had 
capital commitments of £47.5 million 
as reported in note 9 to the ﬁnancial 
statements, relating primarily to 
committed developments in progress 
at Frimley, Bedford and Weymouth. 

Further detail on property acquisitions, 
sales, asset management and 
development can be found in the 
Property review on pages 26 to 33.

Financing 
The performance indicators that 
continue to be used to monitor the 
Group’s debt and liquidity position are 
shown in the table below.

As at 31 March

Gross debt

Cash

Net debt

Loan to value1

Cost of debt2

Undrawn facilities

Average debt 
maturity

Hedging3

2018 
£m

708.9

39.3

669.6

35%

2.8%

65.8

4.8  
years

73%

2017
£m

527.7

46.1

481.6

30%

3.5%

299.7

5.2  
years

87%

1  LTV at 31 March 2018 includes £47.5 million of 
deferred consideration receivable on sales 
at Loughborough and South Elmsall and 
excludes their £47.5 million property valuation 
(2017: £14.3 million)

2  Cost of debt is based on gross debt and includes 
amortised costs but excludes commitment fees
3  Based on the notional amount of existing hedges 

and total debt facilities

The Group and joint venture split is 
shown in Supplementary note iii on 
page 142.

In July 2017 we reﬁnanced our secured 
debt facility with Helaba and repaid 
£66.2 million by drawing additional 
unsecured debt. We extended the term 
by 2.7 years and reduced the average 
cost of debt. As part of the reﬁnancing 
we cancelled £128.4 million interest rate 
swaps at a cost of £6.3 million. 

In the second half of the year, we 
recouponed a further £190 million 
interest rate swaps which hedge our 
unsecured RCF at a cost of £12.7 million. 

Our MIPP joint venture increased and 
extended its debt facility with Deutsche 
Pfandbriefbank in September by 
£18.2 million and for a further three 
years to match the debt maturity to the 
duration of the joint venture agreement. 

As reﬂected in the balance sheet on 
page 37, the Group’s share of joint 
venture gross debt has increased 
by £4.4 million due to its additional 
investment in the DFS Retail Warehouse 
joint venture, which increased our 
share of debt by £7.4 million. This was 
offset by debt repaid following sales of 
£3.0 million.

LondonMetric Property Plc 
Annual Report and Accounts 2018

39

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These ﬁnancing transactions have 
strengthened our key ﬁnancial ratios 
with average debt cost falling to 2.8% 
(2017: 3.5%) and average debt maturity 
of 4.8 years (2017: 5.2 years).

We deployed our available undrawn 
facilities, partly generated following the 
equity placing in March 2017, to acquire 
assets in our preferred sectors and 
progress committed developments, 
reducing undrawn facilities at the year 
end to £65.8 million.

Loan to value, net of cash resources 
and deferred consideration on sales 
which complete and will be recognised 
next year, was 35% (2017: 30%). 

We intend to keep LTV below 40% to 
provide sufficient ﬂexibility to execute 
transactions and take advantage 
of investment opportunities whilst 
maintaining sufficient headroom under 
our gearing covenants.

The Group has comfortably complied 
throughout the year with the ﬁnancial 
covenants contained in its debt funding 
arrangements and has substantial levels 
of headroom. Covenant compliance 
is regularly stress tested for changes in 
capital values and income. 

The Group’s unsecured facility and 
private placement loan notes contain 
gearing and interest cover ﬁnancial 
covenants. At 31 March 2018, the 
Group’s gearing ratio as deﬁned within 
these funding arrangements was 56% 
compared with the maximum limit of 
125% and interest cover ratio was 5.0 
times compared with the minimum 
level of 1.5 times. 

The Group’s policy is to substantially 
de-risk the impact of movements in 
interest rates by entering into hedging 
arrangements. Independent advice is 
given by J C Rathbone Associates. 

At 31 March 2018, 73% of our exposure 
to interest rate ﬂuctuations was hedged 
by way of swaps and caps assuming 
existing debt facilities are fully drawn 
(2017: 87%). This has fallen as a result of 
the cancellation of £128 million interest 
rate swaps in the year. 

We continue to monitor our hedging 
proﬁle in light of forecast interest 
rate movements.

Cash ﬂow
During the year, the Group’s cash 
balances decreased by £16.8 million as 
reﬂected in the table below. 

Cost of debt

2.8 % 

4.0

3.9

3.7

3.5

3.5

2.8

2013

2014

2015

2016

2017

2018

2018 
£m

2017
£m

69.5

63.7

(1.1)

10.6

(16.4)

(17.2)

52.0

57.1

(178.1)

7.5

Loan to value ratio

109.3

(64.3)

35 % 

(16.8)

0.3

43

As at 31 March

Cash ﬂows from 
operations

Changes in working 
capital

Finance costs and 
taxation

Cash ﬂows from 
operating activities

Cash ﬂows from 
investing activities

Cash ﬂows from 
ﬁnancing activities

Net (decrease)/
increase in cash 

Cash inﬂows from operations were 
£5.8 million higher this year reﬂecting 
increases in net rental income. 

Cash ﬂows from operating activities 
have decreased by £5.1 million 
compared to last year due to changes 
in net working capital requirements. 

Cash ﬂows from investing activities 
reﬂect property acquisitions, including 
those classiﬁed as forward funded 
developments, of £306.2 million and 
capital expenditure and incentives of 
£59.3 million. 

These outﬂows were offset by 
net proceeds from disposals of 
£183.8 million and net distributions from 
joint ventures of £3.6 million.

Cash ﬂows from ﬁnancing activities 
reﬂect net new borrowings of 
£176.8 million, cash dividend payments 
of £43.4 million (which reﬂect the 
£8.0 million scrip saving), ﬁnancing 
costs of £21.6 million and share 
purchases of £2.5 million. 

New borrowings of £176.8 million and 
the cancellation of secured debt of 
£66.2 million reduced our available 
facilities in the year.

Further detail is provided in the Group 
cash ﬂow statement on page 117. 

36

38

32

35

30

2013

2014

2015

2016

2017

2018

Debt maturity 

4.8 years 

5.6

5.2

4.8

4.2

3.7

3.0

2013

2014

2015

2016

2017

2018

Interest cover ratio 

5.0x 

5.0

5.0

4.5

4.0

2.9

2.2

2013

2014

2015

2016

2017

2018

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Annual Report and Accounts 2018

40 LondonMetric Property Plc 
Responsible Business

Responsible Business addresses three key areas of 
environment, people and our other stakeholders. It is 
embedded into our investment, asset management, 
development and corporate activities.

We continue to build on our 
Responsible Business foundations 
and ensure that appropriate targets 
are set and aligned with our 
(cid:58)(cid:77)(cid:91)(cid:88)(cid:87)(cid:86)(cid:91)(cid:81)(cid:74)(cid:84)(cid:77)(cid:104)(cid:42)(cid:93)(cid:91)(cid:81)(cid:86)(cid:77)(cid:91)(cid:91)(cid:8)(cid:87)(cid:74)(cid:82)(cid:77)(cid:75)(cid:92)(cid:81)(cid:94)(cid:77)(cid:91)(cid:22)(cid:1528)(cid:8)
Martin McGann
Finance Director

Overview
We are committed to improving 
our Responsible Business disclosure, 
mitigating sustainability risks and 
capturing environmental and 
stakeholder related opportunities. 

Every year we set targets to meet our 
Responsible Business objectives.

Progress is monitored at Working 
Group meetings held several 
times a year and attended by key 
business representatives, one Board 
member and JLL, our external 
real estate sustainability advisor. 
Overall performance is reported to 
the Board at regular intervals.

A changing business
LondonMetric has changed 
signiﬁcantly, moving away from 
offices and multi-let retail parks into 
single let and modern distribution. 
Consequently, our carbon footprint 
has fallen signiﬁcantly, as has the 
portfolio’s operational requirements 
and our employee numbers.

Therefore, combined with our 
responsible activities, risks from 
Responsible Business have been 
reduced signiﬁcantly. However, we 
continue to monitor and address 
all potential risks and look at all 
opportunities that can beneﬁt our 
stakeholders and the Company.

New targets for 2019 have been 
set and are detailed in the full 
Responsible Business report for 2018.

Our approach is delivering Responsible Business benefits

Our Key Responsible Business risks and potential impact
Environment

Stakeholders

•  Quality, desirability 
and environmental 
standards of our assets 
deteriorate, leading 
to higher voids, loss of 
income and reduced 
liquidity for our assets

•  Management of our supply chain is insufficient 
leading to business interruption, accidents, 
reputational risk or breach of law

•  Reliance on a few employees, insufficient 

employee development and diversity reduces 
our competitive advantage

•  Poor external stakeholder relations impact 
negatively on our reputation and ability to 
undertake business activities

•  Poor Responsible Business focus reduces our 

access to capital and debt markets

Our Responsible Business objectives

Minimise the 
environmental 
impact of our business 
and maximise the 
efficiencies of our 
assets in conjunction 
with occupiers

Empower, develop and increase wellbeing and 
diversity of our people

Enhance our external stakeholder relationships, 
including those with occupiers, supply chains, 
investors and local communities

Responsible Business embedded in our activities

For the full Responsible 
Business report 2018 see 
www.londonmetric.com

Responsible 
Investment
Generating 
sustainable value

Responsible Business
Managing stakeholder 
relationships and 
risk well

Responsible 
Development
Future-prooﬁng 
our assets

Responsible 
Asset Management
Responding to 
occupier needs

 
 
 
 
 
 
 
 
 
(cid:51)(cid:77)(cid:97)(cid:8)(cid:73)(cid:75)(cid:80)(cid:81)(cid:77)(cid:94)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:73)(cid:86)(cid:76)(cid:8)(cid:78)(cid:93)(cid:90)(cid:92)(cid:80)(cid:77)(cid:90)(cid:8)(cid:90)(cid:77)(cid:75)(cid:87)(cid:79)(cid:86)(cid:81)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:87)(cid:78)(cid:8)(cid:87)(cid:93)(cid:90)(cid:8)(cid:88)(cid:90)(cid:87)(cid:79)(cid:90)(cid:77)(cid:91)(cid:91)

Our Responsible Business activities have delivered 
further improvements and have increased our 
GRESB score which we continue to view as our 
most applicable sustainability benchmark.

LondonMetric Property Plc 
Annual Report and Accounts 2018

41

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Awards

GRESB Green Star and
maintained EPRA sBPR  
Gold award

Targets 2016 to 2018

94 % targets achieved 

or progressed. 
New targets set 
for 2019

EPC rating of ‘E’ or above on 
assets for MEES purposes

100 %

See page 42 for further details

BREEAM Very Good certiﬁcation 
on completed developments

(cid:24)(cid:22)(cid:29)m sq ft

Annual carbon footprint

(cid:21)(cid:29)(cid:27)% absolute
-17 % like for like

For the full Responsible Business report 
2018 see www.londonmetric.com

Global Real Estate Sustainability Benchmark (GRESB)

•  Achieved 69% score in the 2017 

survey and maintained our green star 
status. This is up from 34% in 2014, 50% 
in 2015 and 66% in 2016

•  In 2017, we achieved further 

improvements particularly around 
management and monitoring
•  Further actions undertaken to 

maintain status in the upcoming 
2018 survey, particularly on 
stakeholder engagement 
and construction

Performance in 2017 GRESB Survey (%)

2017

2014

2017

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100

50

0

0 

50 
Implementation and measurement

100

LondonMetric  
Property

Peer group 

EPRA Sustainability Best Practice 
Recommendations (sBPR)

FTSE4Good  

•  Framework for  

reporting standardised 
environmental data
•  For ﬁrst time in 2015,  

we reported in a format  
required by the EPRA sBPR 
and received special 
commendation for 
improvements made

•  In 2017, we were one of only 

ten listed UK companies to receive 
a Gold award

Future reporting

As investor scrutiny of our Responsible 
Business activities and reporting 
grows further, we are expanding our 
reporting to external benchmarks. 

ISS launched their ﬁrst environmental 
and social survey this year and we 
responded recently to their questions. 

Furthermore, we are reviewing the 
framework introduced by the Task 
Force on Climate-related Financial 

•  Assessment for inclusion in the 

FTSE4Good Index

•  In 2017, our most recent assessment, 

we scored 2.7 out of 5.0

•  This is a signiﬁcant improvement 

on the 2015 score of 1.4

Disclosures (TCFD), established by the 
Financial Stability Board. 

While voluntary, it is designed to 
help companies report decision-
useful climate-related information. 
We intend to further align our 
reporting with TCFD guidance and 
report on the resilience of our business 
and portfolio to climate-related risks.

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Annual Report and Accounts 2018

42 LondonMetric Property Plc 
(cid:45)(cid:86)(cid:94)(cid:81)(cid:90)(cid:87)(cid:86)(cid:85)(cid:77)(cid:86)(cid:92)

Through our investment, asset management 
and development activities we look to minimise 
the environmental impact of our business and 
maximise the efficiencies of our assets. 

The environmental performance of our portfolio has signiﬁcantly reduced our 
energy consumption and greenhouse gas emissions. Our landlord controlled 
energy consumption for last year, excluding the contribution from our sold 
Marlow office asset, was 357,890 kWh. This equates to the consumption of 
around 20 mid-sized homes and compares against an equivalent of 722 
homes in 2015. Only 8% of the portfolio by area has landlord controlled energy 
supply and this limits our ability to further reduce our energy consumption. 
However, we continue to look at ways of reducing our consumption and the 
efficiency of our assets to reduce the energy consumption of our occupiers. 

Investing

Energy consumption reduction 
(MWh)

9,056

6,814

6,393

3,190

2015

2016

2017

2018

2018 energy consumption excluding Marlow asset

Our investment process involves the careful 
assessment of environmental risks. Our activities 
have shifted the portfolio into less operationally 
intensive, single let, newer and higher quality assets.

100% of assets are rated ‘E’ or above and, as shown 
opposite, assets with an EPC of ‘A’-’C’ have risen to 
78% of the portfolio up from 59% in 2015. 

One asset representing 0.4% of the portfolio is rated 
‘F’ and is related to a recent purchase where there 
is a clear near term action plan in place with the 
occupier for signiﬁcant energy improvements. 

% of portfolio with EPC rating 
of A-C

78%

74%

67%

59%

Asset Managing

2015

2016

2017

2018

We are delivering energy efficiencies and sourcing cleaner energy  
through various asset management initiatives:

•  Car park lighting: We upgraded LED lighting 

at two further retail assets in the year. 
Together with previous installations, this is 
helping our like for like energy reductions

•  Occupier Energy Audits: We have 

undertaken audits on six of our distribution 
assets which has so far resulted in ﬁve of our 
occupiers self funding internal LED lighting 
upgrades. A further four audits are planned 
or underway and we will look at further 
audits on a priority basis

•  Recharge points: We have installed electric 
vehicle recharge points on four assets and 
will add further installations in 2018

•  Smart metering and Green sourcing: For 

landlord consumption, we are investigating 
remote metering to improve the tracking of 
our energy usage. We will also increase the 
proportion of supply that has a green tariff. 
During the year, we put in place a green 
tariff at our office in Marlow, an asset that 
we have now sold

•  Renewable energy: Following ongoing 

•  Tenant Energy Data: We continue to 

engagement with our tenants and feasibility 
studies, 1.9 MW of solar PV capacity has 
been installed across 20% of our assets. 
We continue to engage on progressing 
further installations with our occupiers and 
will also look at generating renewable 
landlord supply

collect data on our occupiers’ energy 
consumption and have increased our 
energy data capture to cover 34% of 
our portfolio

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:28)(cid:27)

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Developing

Development is a signiﬁcant activity for us and 
we carry out our development work responsibly 
and give proper consideration to environmental, 
sustainable and social matters. We continued 
to integrate a range of sustainable features 
into our developments including solar PVs, roof 
lights, electric vehicle recharge points, water 
conservation and ecology.

BREEAM rating
The majority of our developments have a minimum 
certiﬁcation standard of BREEAM Very Good. In the 
year. We completed ﬁve developments totalling 
0.6m sq ft, 88% of which were BREEAM Very Good 
or better. The proportion of the portfolio rated at 
least BREEAM Very Good is now 28%. 

Percentage of portfolio rated 
BREEAM Very Good

28 %

Up from 10% in 2015

First BREEAM Excellent 
Development in Crawley

 109,000 sq ft

development

Our contractor requirements 
We have worked hard to implement robust processes to ensure that our 
contractors uphold our high standards and minimise the environmental 
impact from developments. 

All of our contractors adhere to 
our Responsible Development 
Requirements checklist, which 
sets minimum requirements for our 
developments on areas including:

•  Health & Safety management 
•  Compliance with the Considerate 

Constructors Scheme 

•  Environmental impact monitoring 
•  Management and reporting 

of progress 

•  Promoting local 

employment opportunities
•  Fair remuneration for workers 

We continue to monitor compliance 
and look at ways of improving our 
contractors’ performance. Next year, 
in addition to our four project health 
& safety audits per annum, we intend 
to fully review one project with a 
particular focus on local sourcing, 
modern slavery and minimum wage.

Contractor achievements 
on projects completed in year

Silver award 
from Considerate Constructors 
at our Ipswich development

100% compliance 
with our Checklist

Zero reportable accidents 
or incidents on 245,000 worked hours

93% of all waste diverted
from landﬁll

100% on time and on budget
for development

Solar PV installation 
in Dagenham 

(cid:26)(cid:29)(cid:24) kw

See page 07  
for the full case study

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Annual Report and Accounts 2018

44 LondonMetric Property Plc 
(cid:45)(cid:86)(cid:94)(cid:81)(cid:90)(cid:87)(cid:86)(cid:85)(cid:77)(cid:86)(cid:92)(cid:73)(cid:84)(cid:8)(cid:88)(cid:77)(cid:90)(cid:78)(cid:87)(cid:90)(cid:85)(cid:73)(cid:86)(cid:75)(cid:77)(cid:8)(cid:80)(cid:81)(cid:79)(cid:80)(cid:84)(cid:81)(cid:79)(cid:80)(cid:92)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:8)(cid:26)(cid:24)(cid:25)(cid:32)

In 2015, we established a baseline and benchmarks for 
measurement of our portfolio’s environmental performance. 
Since then, we have signiﬁcantly reduced our energy 
consumption and GHG emissions, enabling us to save over 
£0.5 million in energy costs and materially reduce our CRC costs.

Energy consumption

Greenhouse gas (GHG) emissions

(cid:27)(cid:20)(cid:25)(cid:33)(cid:24) MWh

Down 50% on an absolute basis

(cid:25)(cid:20)(cid:24)(cid:27)(cid:26) tCO(cid:1785)e

Down 53% on an absolute basis

This large reduction is due to the sale of our Marlow asset in the 
year and a reduction in like for like landlord controlled energy 
consumption1 (electricity and natural gas) by 7% compared to 2017.
We have met our annual target to reduce the portfolio’s energy 
consumption by 4% on a like for like basis, and therefore, continue 
to make good progress towards our longer term target to reduce 
energy intensity by 20% against a 2015 baseline, by 31 March 2022.

The sale of our office in Marlow has helped to reduce our absolute 
emissions by 53%. As a result, our CRC Energy Efficiency Scheme 
liabilities are estimated to have reduced by c.50% from last year’s 
cost of £38,748.

On a like for like basis1, GHG emissions were down by 17% as a result 
of energy consumption reductions on the portfolio and ongoing 
decarbonisation of the National Grid. We have exceeded our 
annual target to reduce our like for like GHG emissions by 4%. 
Therefore, we continue to make good progress towards our longer 
term target to reduce GHG emissions intensity by 20% against a 2015 
baseline, by 31 March 2022.

1  Like for like percentages exclude energy consumption of the office asset in Marlow which was sold in the year

Mandatory GHG emissions reporting

Direct greenhouse gas emissions in tonnes of CO2e  
(combustion of fuel and operation facilities)

Indirect greenhouse gas emissions in tonnes of CO2e  
(purchased electricity, heat, steam and cooling)

Total carbon footprint in tonnes of CO2e

Scope 1 and 2 intensity (tonnes of CO2e  
per £m net income after administration costs)

Data qualifying notes
We have reported on all of the emission sources required under 
the Companies Act 2006 (Strategic Report and Directors’ Reports) 
Regulations 2013. These include the emissions associated with the 
energy used by our corporate head office and the landlord-controlled 
energy from our entire investment portfolio. 

We have used the main requirements of ISO14064 Part 1 and the GHG 
Protocol Corporate Accounting and Reporting Standard (Revised 
Edition) for our methodology, using energy consumption data from 
our owned and occupied properties. We have chosen to report 
greenhouse gas emissions under our operational control. These sources 
fall within our consolidated ﬁnancial statements. We do not have 
responsibility for any emissions sources that are not included in our 
consolidated ﬁnancial statements.

The guidance on the reporting of Scope 2 GHG emissions under the 
Greenhouse Gas Protocol was updated in 2015 and we are now 
required to report two different values to reﬂect the ‘location-based’ 
and ‘market-based’ emissions resulting from purchased electricity.

For full environmental performance reporting 
see the Responsible Business 2018 report at
www.londonmetric.com

Scope 1

Scope 2 – location-based

Scope 2 – market-based

Total scope 1 & 2

Scope 1 and 2 intensity

2017/18

2016/17

195

811

881

1,006

15

432

1,687

1,937

2,119

34

The location-based method uses an average emission factor for 
the entire national grid on which electricity consumption occurs. 
Location-based emissions factors are taken from the latest UK 
Government (DEFRA) conversion factors for company reporting (2017).

The market-based method uses an emissions factor that is speciﬁc 
to the electricity which has been purchased, or where not available 
a national ‘residual-mix’ factor is applied. Market-based emissions 
factors are taken from the latest Association of Issuing Bodies European 
Residual Mixes (2016).

The total carbon footprint and emissions intensities have been 
calculated using location-based Scope 2 emissions.

Data for the year to 31 March 2017 has been restated, including 
associated intensity metrics, as additional energy consumption 
data has been obtained since the previous report was published.

Scope 1 data does not include refrigerant emissions as these have 
been determined to not be material (represent <2% of total emissions); 
owned ﬂeet does not apply. 

Stakeholders

We recognise the importance of retaining 
and attracting a diverse and knowledgeable 
group of employees. 

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:28)(cid:29)

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Our people

Our employees 
The Company is highly focused with 
25 employees, four Executive Directors 
and seven Non Executive directors. 
Since merger in 2013, employee and 
Director numbers have fallen by 28% 
despite a 51% increase in the value 
of our assets. This reﬂects improved 
efficiencies and lower operational 
requirements of our portfolio.

Culture and approach 
We have successfully attracted and 
retained a talented, hard working 
and loyal team, something which 
we recognise as vital to the business. 
This is reﬂected in our low annual 
voluntary staff turnover rate which 
has averaged 6% since merger. 
We believe this success is a result 
of our:

•  Culture of empowerment, inclusion, 

openness and teamwork

•  Fair and performance 
based remuneration

•  Small number of staff, which allows 
a ﬂexible and individual approach 
to addressing staffing needs 

How we are improving 
As a Company with a small number 
of employees, some policies and 
procedures that are applicable 
to larger organisations might not 
be appropriate for us. However, 
as the way people work continues 
to change, we recognise the 
importance of continually improving 
our approach to managing our 
people and attracting new people. 

Over the year, we have introduced 
various initiatives to focus on how we 
can provide more ﬂexible working, 
improve diversity and general 
wellbeing. The table opposite 
highlights key arrangements in 
place for our employees and the 
improvements that we have made 
and plan to make.

Inclusion & 
communicate

We have a ﬂat management structure with clear responsibilities. We strongly 
encourage input on decision making from all staff and wide participation 
in committee meetings. There is strong collaboration across teams which 
enables good sharing of information and ideas. There are regular strategy 
and performance updates to employees from Executive Directors. 

Modern 
working 
practices

Fair 
remuneration

Diversity 
and equal 
opportunity

Employee  
development 

Health & 
Safety

Wellbeing

During the year, we implemented more ﬂexible working arrangements 
covering dress code, holiday buy back, improved systems to enable home 
working and a core hours policy. 

Employee remuneration is aligned to personal and company performance 
with longer term incentivisation plans in place that replicate arrangements 
for Executive Directors. All employees receive a pension contribution of 10% of 
salary and access to advice on pensions, free medical insurance and advice, 
childcare and cycle to work vouchers.

We promote diversity across knowledge, experience, gender, age and 
ethnicity. Whilst overall female employee representation is good, we 
recognised that we needed to speciﬁcally promote greater gender diversity. 
With only one female board member we were pleased to appoint Suzanne 
Avery as a Non-Executive Director in the year, increasing our female board 
representation to 18%. 

Furthermore, and recognising the signiﬁcant diversity imbalance in the 
real estate sector, we joined the Real Estate Balance group to further our 
promotion of diversity both internally and externally. We intend to publish 
a diversity and inclusion policy. 

An annual appraisal process is undertaken where training needs and requests 
are discussed. We actively encourage training and, over the year, our staff 
undertook 758 hours of training, some of which related to a senior employee’s 
MBA programme. We also undertook Responsible Business training across 
all of our employees and encourage participation in Young Property 
Professionals groups.

We continued to offer secondment and work placement opportunities and, 
over the year, 7 people participated in this programme. 

In 2016, we formalised a policy to provide and maintain safe and healthy 
working conditions for all employees, providing appropriate equipment, 
operational processes and safe systems of work. During the year, we 
undertook workplace assessments and an external review of our office and 
four developments. 

During the year, we reviewed our office arrangements and have decided 
to reduce our office space and undertake a major refurbishment to improve 
employee facilities and wellbeing. As part of the refurbishment plans, a 
wellbeing study has been undertaken and we carried out a wider employee 
survey to identify other improvements as well as to gauge overall employee 
satisfaction. Once these works are complete, we will undertake another 
employee survey to measure improvements.

Employee gender diversity 

Directors
The number of persons of 
each sex who were Directors 
of the Company:

Senior managers
The number of persons of each 
sex who were senior managers 
of the Company (other than 
identiﬁed as Directors):

Employees
The number of persons 
of each sex who were 
employees of the Company:

2

9

2

6

15

21

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Annual Report and Accounts 2018

46 LondonMetric Property Plc 
Stakeholders

External relationships across all of our activities 
are critical to the success of our business.

Occupiers

(cid:52)(cid:87)(cid:86)(cid:76)(cid:87)(cid:86)(cid:53)(cid:77)(cid:92)(cid:90)(cid:81)(cid:75)(cid:8)(cid:73)(cid:90)(cid:77)(cid:8)(cid:94)(cid:77)(cid:90)(cid:97)(cid:8)
(cid:88)(cid:90)(cid:87)(cid:73)(cid:75)(cid:92)(cid:81)(cid:94)(cid:77)(cid:20)(cid:8)(cid:84)(cid:87)(cid:87)(cid:83)(cid:81)(cid:86)(cid:79)(cid:8)(cid:92)(cid:87)(cid:8)
(cid:91)(cid:93)(cid:88)(cid:88)(cid:87)(cid:90)(cid:92)(cid:8)(cid:87)(cid:93)(cid:90)(cid:8)(cid:74)(cid:93)(cid:91)(cid:81)(cid:86)(cid:77)(cid:91)(cid:91)(cid:22)(cid:8)
(cid:60)(cid:80)(cid:77)(cid:97)(cid:8)(cid:73)(cid:90)(cid:77)(cid:8)(cid:90)(cid:77)(cid:73)(cid:75)(cid:92)(cid:81)(cid:94)(cid:77)(cid:8)(cid:92)(cid:87)(cid:8)(cid:87)(cid:93)(cid:90)(cid:8)
needs and commercial 
in thinking, which sets 
(cid:92)(cid:80)(cid:77)(cid:85)(cid:8)(cid:73)(cid:88)(cid:73)(cid:90)(cid:92)(cid:22)(cid:1528)(cid:8)
Property Director 
A key LondonMetric occupier

Contractors & Suppliers

LondonMetric has a 
(cid:75)(cid:87)(cid:84)(cid:84)(cid:73)(cid:74)(cid:87)(cid:90)(cid:73)(cid:92)(cid:81)(cid:94)(cid:77)(cid:8)(cid:73)(cid:88)(cid:88)(cid:90)(cid:87)(cid:73)(cid:75)(cid:80)(cid:8)
with its supply chain 
and we were pleased to 
(cid:80)(cid:73)(cid:94)(cid:77)(cid:8)(cid:73)(cid:91)(cid:91)(cid:81)(cid:91)(cid:92)(cid:77)(cid:76)(cid:8)(cid:92)(cid:80)(cid:77)(cid:85)(cid:8)(cid:87)(cid:86)(cid:8)
(cid:90)(cid:77)(cid:94)(cid:81)(cid:77)(cid:95)(cid:81)(cid:86)(cid:79)(cid:8)(cid:87)(cid:86)(cid:77)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:81)(cid:90)(cid:8)
(cid:83)(cid:77)(cid:97)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:90)(cid:73)(cid:75)(cid:92)(cid:87)(cid:90)(cid:91)(cid:22)(cid:1528)(cid:8)
Duncan Berry
RPS Group

Developing our occupier relationships is a key focus for us. 

We engage with occupiers across all of our activities to provide real estate solutions 
that deliver mutually beneﬁcial outcomes. These relationships are more important than 
ever and, whilst occupancy of 98% suggests strong levels of occupier contentment, we 
continue to engage regularly through events, meetings and surveys to ensure we keep 
close to our customers.

Customer satisfaction survey 
In February 2018, we undertook our biennial 
survey across key occupiers. We received 
a response from nearly 70%, representing 
half of our income, which was a signiﬁcantly 
higher response than in 2016. We scored 
an average of 8/10 for satisfaction with 
our properties and 8.5/10 for how well we 
compared against other landlords. 

Whilst scoring methodology was different 
to our 2016 survey, the results suggested a 
broadly similar overall scoring with a good 
level of satisfaction. 

We engaged with several occupiers to 
discuss their feedback and have met face 
to face with one of those occupiers.

Future plans 
We expect to increase the frequency 
of our customer survey and will look to 
further enhance our customer relationship 
management and monitoring processes. 
Recognising that all survey responses noted 
a desire to work on sustainable property 
solutions, we will continue to engage 
with occupiers on energy efficiency 
and renewable solutions. 

Delivering developments and asset services on time, on budget and in adherence  
with our high standards is a key priority.

Our procurement policy 
In 2015, we implemented a policy to ensure 
appropriate supply chain and procurement 
standards on areas such as labour; human 
rights; health and safety; resource; pollution 
risk and community. Our contractors are 
required to adhere to our Responsible 
Development Requirements (as detailed on 
page 43) and, for suppliers of asset services, 
through our Managing Agents’ policies. 

Modern Slavery
Our exposure to human rights risks – 
including modern slavery and human 
trafficking – is deemed limited given our 
UK only activities. Our procurement policy 
requires our supply chain to adhere to 
numerous standards including: paying 
a fair wage, complying with Human 
Rights and Labour Rights Legislation, 
and investigating their supply chains. 
For developments, contractors are 
expected to demonstrate adherence to 
these requirements. Our Modern Slavery 
Act Statement is available on our website 
and no human rights concerns arose 
within the year. 

Contractors
In conjunction with our external project 
managers, our development team ensures 
that we select high quality and robust 
contractors who have a proven track 
record. We regularly review the ﬁnancial 
robustness of these contractors and their 
performance on our projects. 

Our development team monitors progress 
of developments and tracks all elements 
of the projects including sub contracted 
works. We stay close to our contractors and, 
for example, during the year we visited 
one of our main contractors to undertake 
a more detailed review of their systems 
and processes. 

Suppliers
Whilst spend on asset services is small, we 
monitor the compliance of our suppliers 
against our Managing Agents’ policies. 
During the year, we undertook a high level 
review of our top ﬁve suppliers and were 
satisﬁed that they were compliant. 

 
 
LondonMetric Property Plc 
Annual Report and Accounts 2018

47

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Local communities

Permanent jobs created

(cid:27)(cid:28)(cid:29)

by occupiers on our 
recent developments

Community donations

£110k

Charitable donations 
and local community 
spend in 2018

We recognise the importance of supporting 
our local communities and engaging with 
all local stakeholders. Over the last few 
years, we have established a Communities 
Policy and a Charity and Communities 
Working Group. We aim to maximise 
the local beneﬁts that our activities 
bring through:

•  Investment into the infrastructure of those 

communities, typically involving the 
regeneration of land and derelict sites
•  Creation of construction and ﬁt out jobs 
during our developments. We typically 
use local contractors

•  Creation of modern buildings and facilities 

ﬁt for the future needs of shopping
•  Long term commitments from our 

occupiers, who typically sign leases for 
periods of 10-15 years

•  Creation of permanent jobs by our 
occupiers, most of which are local 

•  Our ongoing involvement at our 

properties by funding of local events 
and facilities. For example, we arranged 
several community days in Leeds during 
the year

•  Charitable giving, where we support a 

number of local causes. We also support 
other organisations such as LandAid, 
and match employee charity giving and 
events. In the year, charitable donations 
totalled £25,170 

Local community stakeholders
Authorities: We work hard to develop our 
local authority relationships. For example, 
we have worked in partnership with 
Bedford Council for over three years 
on our Bedford development which is 
estimated to create 1,000 permanent jobs.

Residents: As necessary, and as carried 
out recently at our Aldi development 
in Weymouth, we undertake public 
consultations to inform local residents 
of our plans.

Throughout our developments, we 
communicate project progress through 
contractor newsletters and we task our 
contractors to minimise local disruption. 

Post development, we maintain active 
dialogue with residents to address any 
of their concerns. 

Businesses: We actively engage with local 
business and look to support events in 
conjunction with local authorities. 

For example, we presented at a recent 
event held at our new distribution 
warehouse in Stoke. The “Make it” event 
was organised by the local authority where 
they presented to businesses on their 
Local Plan for the area’s long term growth. 
Over 90 people attended the event. 

Community day at our asset in Leeds

See case study on page 07 for local community 
involvement at our Dagenham development

Investors and joint ventures

We value our good relationships with 
investors and debt providers to ensure full 
access to capital markets. Over the year, as 
covered in detail on pages 72 to 73, we met 
with over 200 investors. 

As shareholder expectations on corporate 
governance and sustainability increase, 
we undertook our ﬁrst Responsible Business 
survey of investors and met with members 
of the 30% Club Investor Group on diversity 
matters. We have incorporated feedback 
from the survey into setting of our 2019 
sustainability targets. We will also look at 
green ﬁnancing solutions.

In addition, we enjoy strong relationships 
with our JV partners, principally at our MIPP 
and DFS Joint Ventures, and continue to 
work closely with our partners.

2018 Responsible Business 
investor survey
•  Undertaken across half of our share 

holders with feedback received from 
20% of the register

•  Responsible Business disclosure, targets 
and activities were considered good 
and of an appropriate standard 

•  Recognition that CSR expectations for 
a company of our size are lower than 
is expected of larger corporates 
•  There was particular emphasis on 

ensuring that we have good supply 
chain monitoring, continue to perform 
well against GRESB and that we continue 
to value and improve our human 
capital and develop a diverse group 
of employees

Investors seen

209

Investor survey on 
Responsible Business

Good standard

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Annual Report and Accounts 2018

48 LondonMetric Property Plc 
Risk management

Our risk management procedures reduce the negative 
impact of risk on the business. They are critical to 
maintaining our sustainable, progressive earnings and 
long term capital growth whilst operating in a socially 
responsible manner. Although risk cannot be eliminated 
completely the Board’s risk tolerance is low where it 
prejudices these objectives. 

Risk management structure and processes 

The table below illustrates our risk management structure.

Board

Audit Committee

Executive Committee

•  Has ultimate responsibility for risk management and internal controls
•  Considers the long term viability of the business 
•  Sets strategic objectives and considers risk as part of this process
•  Determines risk appetite
•  Sets delegated authority limits for the Executive Committee

•  Responsible for detailed assurance on risk 

management, internal controls and viability

•  Reports to the Board

•  Identiﬁes risks 
•  Assesses and quantiﬁes risks 
•  Implements and monitors risk mitigation processes

Senior Management

•  Assist the Executive Committee 

The Board recognises its overall 
responsibility for undertaking a robust 
risk assessment and the extent to 
which it is willing to accept some 
level of risk in achieving its strategy. 
It considers risk at a high level at 
each meeting via a risk dashboard 
which enables material issues to 
be monitored so that key risks can 
be managed and emerging risks 
identiﬁed early with appropriate 
action taken to remove or reduce 
their likelihood and any potential 
negative impact. 

The responsibility for detailed 
assurance on the risk management 
process has been delegated by 
the Board to the Audit Committee. 
The Audit Committee reviews the 
Company’s risk register and internal 
controls in detail to consider the 
effectiveness of risk management and 
internal control processes and reports 
its ﬁndings to the Board. The Audit 

Committee last considered the register 
at its March 2018 meeting following a 
comprehensive review of the register. 

The Executive Committee is responsible 
for the ongoing identiﬁcation of risk 
and the design, implementation 
and maintenance of robust internal 
control systems assisted by senior 
management. Appropriate mitigation 
plans are developed based on 
an assessment of the impact 
and likelihood of a risk occurring. 
Executive Committee members are 
closely involved in day to day matters. 
The Company has a small number 
of employees and operates from 
one office. This and the relatively ﬂat 
management structure enable risks 
to be swiftly identiﬁed so appropriate 
responses can be put in place. 

Within the risk register, speciﬁc risks are 
identiﬁed and their probability rated 
by management as having either a 
high, medium or low impact. A greater 

weighting is applied the higher 
the signiﬁcance and probability 
of a risk. These weightings are then 
mathematically combined to 
produce an overall gross risk rating 
which is colour coded using a traffic 
light system. Risk speciﬁc safeguards 
are identiﬁed, detailed in the register 
and rated as strong, medium or 
weak. The stronger the safeguard, 
the greater the weighting applied. 
The gross risk rating and strength of the 
safeguards against that risk are then 
combined to produce a resultant 
overall net risk. Consideration is given 
to the implementation of further 
action to reduce risk where necessary. 
Finally, every risk is allocated an owner 
and details of how the safeguards are 
evidenced is noted. The risk register 
is comprehensively reviewed at least 
once a year. 

LondonMetric Property Plc 
Annual Report and Accounts 2018

49

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Our three risk areas

We consider risks under three main headings but recognise that they are often inextricably interlinked.

Corporate risks

Property risks

These relate to the Group as a whole 

These focus on the Group’s core business

Financing risk

These focus on how the business 
operations are funded 

Strategy, market, systems, employees, wider stakeholders, 
regulatory, social and environmental responsibilities

Portfolio composition and management, developments, 
valuation and occupiers

Investors, joint ventures, debt and cash management

Principal risks
Principal risks and uncertainties are 
those that affect our business with 
the potential to cause material 
harm, impact our ability to execute 
our strategic priorities or exceed 
the Board’s risk appetite. They are 
identiﬁed and reported on in pages 
50 to 59.

No new principal risks have been 
identiﬁed and at a corporate level 
there has been no signiﬁcant increase 
or decrease in any principal risk during 
the year. 

Corporate governance and 
reporting bodies are increasing their 
focus on environmental, social and 
governance (“ESG”) issues and how 
companies take into account wider 
stakeholder interests. These priorities 
have been broadly repeated in 
recent public statements from large 
institutional investors. To provide 
greater clarity and acknowledge that 
ESG concerns have become more 
mainstream we have split out non 
compliance with responsible business 
practices from non compliance with 
legal and regulatory obligations. 
We do not however consider that the 
overall risk has changed materially.

The chart below illustrates the 
probability and post mitigation 
residual risk level of the principal risks 
which have been identiﬁed. They are 
categorised in a manner consistent 
with the Board’s risk dashboard which 
it considers at each meeting. 

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Post mitigation residual risk

Corporate risks

1  Strategy
2  Economic and political factors
3  Human resources
4  Regulatory and tax framework
5  Responsible Business approach
6 

 Systems, processes and 
ﬁnancial management

Property risks

7 
Investment risk
8  Development risk
9  Valuation risk
10  Transaction and tenant risk

Financing risk

11  Capital and ﬁnance risk

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Medium

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Annual Report and Accounts 2018

50 LondonMetric Property Plc 
Risk management continued

Corporate risks

1 Strategy

Risk

Impact

Mitigation

Our strategic objectives may be: 

•   Suboptimal returns for 

•  Our strategy and objectives are regularly 

•   Inappropriate for the current 

economic climate or market cycle

•   Not achieved due to poor 

implementation

Appetite

The Board view the Company’s 
strategic priorities as fundamental 
to its business and reputation. 

shareholders

•   Missed opportunities
•   Ineffective threat 
management

•   Wrong balance of 

skills and resources for 
ongoing success 

reviewed by the Board to adapt to change
•   We commission retail and logistics related 
research to assist strategic decision making

•   Senior management have extensive ﬁnancial and 
real estate experience with strong, longstanding 
retailer relationships

•   We have a UK only portfolio in a world leading 

online shopping market

Impact on strategy

•   We undertake regular and rigorous portfolio 

reviews which take into account considerations 
such as sector weightings, tenant and 
geographical concentrations, perceived threats 
and market changes, balance of income 
to non-income producing assets and asset 
management opportunities

•   Our three year forecast is regularly ﬂexed 

and reported

•   The Executive Directors are closely involved in 
day to day management and a relatively ﬂat 
organisational structure operating from one office 
makes it easier to identify market changes and 
monitor operations

•   Management’s interests are aligned with 

external shareholders through their substantial 
shareholdings

2 Economic and political factors

Risk

Impact

Mitigation

Economic and political factors may 
lead to a market downturn or speciﬁc 
sector turbulence.

Appetite

Market conditions are outside of the 
Company’s control. 

•  Suboptimal returns for 

•  We commission economic and market research 

shareholders 

•  Occupier demand 

and solvency may be 
impacted

•  Asset liquidity may reduce 
•  Debt markets may be 

and monitor market volatility

•  We have limited exposure to the London market
•  The majority of our portfolio is in resilient 

asset classes

•  We maintain a high weighted average unexpired 

lease term reducing re-letting risk

impacted 

•  We have a low vacancy rate due to our strict 

Impact on strategy

•  Our occupier base is diverse. Acquisition due 

investment and development criteria 

diligence considers tenant covenant strength, 
which is then monitored on an ongoing basis. 
Strong retailer relationships help to provide 
market intelligence

•  We have limited exposure to speculative 

development which is only undertaken where 
a researched supply/demand imbalance exists

•  We have medium term, ﬂexible funding with 

signiﬁcant headroom in covenant levels

Our portfolio is 
aligned to modern 
shopping habits

We focus on 
sustainable and 
growing income

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

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LondonMetric Property Plc 
Annual Report and Accounts 2018

51

Commentary

Change

Read more

•  91% of the portfolio is now in our preferred sectors of 

distribution, long income and convenience retail. These 
sectors have proved to be resilient and have real prospects 
for rental and capital growth driven by structural changes 
in consumer shopping habits. Logistics space is still heavily 
undersupplied. Having successfully anticipated the 
migration of consumer spending online, our sector choices 
have resulted in like for like rental growth of 4.3% this year 

•  Executive Directors hold 10.7 million shares 

and comfortably meet the Company’s high 
shareholding targets

   No signiﬁcant  
change in risk

 There has been no signiﬁcant 
change in this risk during 
the year.

See Our Story on 
pages 01 to 09
See Chief Executive’s 
review on pages 15 
to 19
See Remuneration 
on page 102

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Commentary

Change

Read more

See Chief Executive’s 
review on pages 15 
to 19
See Property review 
on pages 26 to 33

•  Our portfolio metrics continue to be strong. Our average 

unexpired lease length is 12.4 years and occupancy 97.5%, 
both high within the industry. Only 6% of our income expires 
within three years 

•  We have further diversiﬁed our tenant base this year. 

Our top ﬁve tenants, which account for 35% of rent, are 
ﬁnancially strong 

•  Our exposure to the stagnated London residential market 
through our 40% interest in Moore House has reduced. 
As at today’s date only 37 units remain unsold

•  We exited our last remaining, non core office asset at 

Marlow during the year

•  Although our portfolio is UK only, we acknowledge that 
Brexit uncertainty could impact occupier near term 
decision making

   No signiﬁcant  
change in risk

While there has been no 
signiﬁcant change in this risk 
at a corporate level during 
the year, a ﬁnely balanced 
UK General Election result 
and lack of clarity on 
Brexit arrangements mean 
continuing political and 
economic uncertainty. The 
Board has limited controls 
over such external factors 
but will continue to monitor 
them. Our strategy to closely 
align our portfolio to rapidly 
changing consumer shopping 
habits mean structural drivers 
in demand for our assets 
continue to outweigh these 
uncertainties at present.

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Annual Report and Accounts 2018

52 LondonMetric Property Plc 
Risk management continued

Corporate risks (continued)

3 Human resources

Risk

Impact

Mitigation

There may be an inability to attract, 
motivate and retain high calibre 
employees.

Appetite

The Board believes it is vitally 
important that the Company has 
the appropriate level of leadership, 
expertise and experience to deliver 
its objectives and adapt to change. 

The business may lack 
the skill set to establish 
and deliver strategy and 
maintain a competitive 
advantage. 

•   We maintain an organisational structure with 

clear responsibilities and reporting lines
•   Our remuneration structure and incentive 
arrangements are aligned with long term 
performance targets for the business
•   Senior management have signiﬁcant 

Impact on strategy

shareholdings in the business

•   Annual appraisals identify training requirements 

and assess performance

•   Specialist support is contracted 

where appropriate 

•   Our staffing plan focuses on experience and 

expertise necessary to deliver strategy
•   There is a phased refreshment plan for 

Non Executive Directors

4 Regulatory and tax framework 

Risk

Impact

Mitigation

Non compliance with legal or 
regulatory obligations. 

Appetite

The Board has no appetite where non 
compliance risks injury or damage to 
its broad range of stakeholders, assets 
and reputation. 

•  Reputational damage
•  Potential loss of REIT status
•  Increased costs
•  Reduced access to debt 

and capital markets

•  Fines, penalties, sanctions 

Impact on strategy

•   We monitor regulatory changes that impact 

our business with support from specialist 
consultants, on issues such as health and safety, 
employment, data protection and anti-corruption 
related legislation

•   We have allocated responsibility for speciﬁc 
obligations to individuals with Executive 
Committee oversight 

•   Our health and safety handbook is regularly 

updated and health and safety audits are carried 
out on developments 

•   Our procurement and supply chain policy sets 

standards for areas such as labour, human rights, 
pollution risk and community

•  Staff training is provided on wide ranging issues 

such as those identiﬁed above

•   We use external tax specialists to provide advice
•   Our REIT compliance is monitored
•   We consider the impact of legislative changes 

on strategy

Our portfolio is 
aligned to modern 
shopping habits

We focus on 
sustainable and 
growing income

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

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LondonMetric Property Plc 
Annual Report and Accounts 2018

53

Commentary

Change

Read more

   No signiﬁcant  
change in risk

 There has been no signiﬁcant 
change in perceived risk 
from 2017.

See Responsible 
Business on page 45
See Remuneration 
report on pages 88 
to 103
See Nomination 
Committee report 
on pages 74 to 79

•   During the year the Board undertook an externally 

facilitated performance evaluation; its ﬁndings were 
extremely positive 

•  The Chairman’s letter of appointment has been extended 
for a further three years with a mutual six month rolling 
break option

•   We have diversiﬁed the Board’s skill base through the 
appointment of Suzanne Avery who has extensive 
ﬁnancial, banking and real estate experience. Succession 
planning and diversity remain high on the Board’s agenda 
for 2019

•   A number of ﬂexible working initiatives have been 

introduced to improve employee wellbeing

•   The Executive Directors have signiﬁcant unvested share 

awards in the Company to incentivise performance and 
retention providing stability to the management structure 

•  Senior managers are incentivised in a similar way to the 

Executive Directors

Commentary

Change

Read more

•  During the year a ﬁre risk assessment was undertaken 

on our entire portfolio. This included a cladding review. 
All properties were rated as low risk

•  In response to the introduction of new legislation against 

the criminal facilitation of tax evasion and GDPR we 
have undertaken detailed mapping and risk assessment 
exercises, made changes to some of our policies 
and processes with assistance from Jones Day, our 
legal advisors

See Financial review 
on page 36
See Responsible 
Business on pages 45 
and 46

   No signiﬁcant  
change in risk

The Board considers this risk to 
have remained broadly similar 
during the year. There has 
however been an increase in 
management time diverted 
to new regulations and 
evolving best practice due 
to the ﬂow of recent changes 
which impact the business. 

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Annual Report and Accounts 2018

54 LondonMetric Property Plc 
Risk management continued

Corporate risks (continued)

5 Responsible Business approach 

Risk

Impact

Mitigation

Non compliance with responsible 
business practices.

Appetite

The Board has a low tolerance for non 
compliance with risks which impact 
reputation and stakeholder sentiment 
towards the Company.

•  Reputational damage.
•  Suboptimal returns for 

shareholders

•  Asset liquidity may be 

impacted

•  Reduced access to debt 

and capital markets 

Impact on strategy

•   We monitor changes in law, stakeholder 
sentiment and best practice in relation 
to responsible business practices such as 
sustainability, environmental matters and our 
societal impact and receive advice and support 
from specialist consultants

•   We consider the impact of changes on strategy
•   We give proper consideration to the needs of 

our occupiers and shareholders by maintaining 
a high degree of engagement and also 
consider our impact on the environment and 
local communities

•   Responsibility for speciﬁc obligations has been 
allocated to individuals and is overseen by the 
Executive Committee. A Responsible Business 
Working Group meets at least three times a year 
and reports to the Board 

•   Staff training is provided
•   EPC rating benchmarks are set to ensure 

compliance with Minimum Energy Efficiency 
Standards (MEES) that could otherwise impact 
the quality and desirability of our assets leading 
to higher voids, lost income and reduced liquidity

•   Sustainability targets are set, monitored 

and reported

•   Contractors are required to conform to our 
responsible development requirements

6 Systems, processes and ﬁnancial management

This risk category was previously included within ‘Regulatory and tax framework’.

Risk

Impact

Mitigation

Controls for safeguarding assets and 
supporting strategy may be weak.

•  Compromised asset 

security

•   The Company has a strong control culture
•   We have IT security systems in place with back 

Appetite

The Board’s appetite for such risk is low 
and management continually strives 
to monitor and improve processes. 

•  Suboptimal returns for 

up supported and tested by a specialist advisor 

shareholders

•   Our property assets are safeguarded by 

•  Decisions made on 

inaccurate information 

Impact on strategy

appropriate insurance 

•   We have safety and security arrangements 
in place on our developments, multi-let and 
vacant properties

•   Appropriate data capture procedures ensure the 
accuracy of the property database and ﬁnancial 
reporting systems

•   We maintain appropriate segregation of duties 

with controls over ﬁnancial systems

•   Management receive timely ﬁnancial information 

for approval and decision making

•   Cost control procedures ensure expenditure is 

valid, properly authorised and monitored

Our portfolio is 
aligned to modern 
shopping habits

We focus on 
sustainable and 
growing income

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

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LondonMetric Property Plc 
Annual Report and Accounts 2018

55

Commentary

Change

Read more

See Responsible 
Business on pages 40 
to 47

   No signiﬁcant  
change in risk

There has been no signiﬁcant 
change in perceived risk from 
2017, however focus on how 
companies take into account 
wider stakeholder interests 
has increased. 

•   During the year we met with over 200 investors and carried 

out an investor survey targeting 50% of our register on 
responsible business matters. Feedback was positive and 
will be incorporated into our 2019 sustainability targets

•   We met with the 30% Club Investor Group and joined Real 
Estate Balance which aims to promote greater gender 
diversity within the industry

•   The appointment of Suzanne Avery will add a fresh 

perspective to the Board on responsible business matters. 
Suzanne was formerly Managing Director of Real 
Estate Finance Group and Sustainability at RBS and is a 
co-founder of Real Estate Balance with keen interests in 
governance, responsible business practices and a number 
of societal issues 

•   We supplemented direct meetings with our tenants with 

our biennial customer satisfaction survey of key occupiers. 
Tenant responses representing half our income scored 
us 8.5/10. Feedback has been discussed with several 
occupiers. We propose to increase the frequency of the 
survey to further improve processes 

•  We have increased the green credentials of our 

portfolio over recent years through development and 
modernisation. 28% of our portfolio is now rated BREEAM 
Very Good, our GRESB score has improved to 69% and we 
have maintained our green star rating. 78% of our portfolio 
has an EPC of C or above

•   During the year we undertook numerous green initiatives. 
At Newark, for example we completed the UK’s largest 
landlord funded distribution solar panel installation to 
provide a proportion of the tenants power requirements 
from renewable sources 

•   Our Communities Policy and Charity and Communities 

Working Group aim to maximise the local beneﬁts 
of our activities, for example urban regeneration 
and employment 

Commentary

Change

Read more

•  During the course of the year we have improved 

our IT security and back up systems

•  We have also made improvements to our ﬁnancial 

reporting processes and have further integrated our 
property database and our accounting system

   No signiﬁcant  
change in risk

There has been no signiﬁcant 
change in perceived risk 
from 2017.

See Audit Committee 
report on pages 82 
to 83

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Annual Report and Accounts 2018

56 LondonMetric Property Plc 
Risk management continued

Property risks

7 Investment risk

Risk

We may be unable to source 
affordable investment opportunities. 

Appetite

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. 

8 Development risk

Impact

Mitigation

Ability to implement strategy 
and deploy capital into 
value and earnings accretive 
investments is at risk. 

Impact on strategy

•   Management’s extensive experience and their 

strong network of relationships provide insight into 
the property market and opportunities.

Risk

Impact

Mitigation

•  Excessive capital may be allocated 
to activities with development risk
•  Developments may fail to deliver 

expected returns due to inconsistent 
timing with the economic and 
market cycle, adverse letting 
conditions, increased costs, 
planning or construction delays 
resulting from contractor failure or 
supply chain interruption

Appetite

The Board is willing to take some 
speculative development and 
planning risk if it represents a relatively 
small proportion of the total property 
portfolio and is supported by robust 
research in respect of demand and a 
high likelihood of planning approval. 

9 Valuation risk

Risk

Investments may fall in value.

Appetite

There is no certainty that property 
values will be realised. This is an 
inherent risk in the industry. 

•   Poorer than expected 

•   We only undertake short cycle and relatively 

performance

•   Reputational damage 

uncomplicated developments on a pre-let basis 
or where there is high occupier demand

•   Development exposure as a percentage of our 

Impact on strategy

total portfolio is limited with larger projects phased

•   Development sites are acquired with planning 

consent where possible

•   Management have signiﬁcant experience 

of complex development

•   We use standardised appraisals and cost budgets 

and monitor expenditure against budget to 
highlight potential overruns early

•   External project managers are appointed 
•   Our procurement processes include tendering 

and the use of highly regarded ﬁrms with proven 
track records

•   We review and monitor contractor 

covenant strength

Impact

Mitigation

Pressure on NAV growth and 
potentially loan covenants. 

•   Our core portfolio is pivoted to structural changes in 

shopping patterns with a signiﬁcant supply imbalance 
in available distribution space

Impact on strategy

•   Our focus is on sustainable income with lettings to high 

quality tenants within a diversiﬁed portfolio of well 
located assets with a high weighted average unexpired 
lease term reducing the risk of negative movements 
in a downturn

•   The property cycle is continually monitored with 

investment and divestment decisions made strategically 
in anticipation of changing conditions

•   Property portfolio performance is regularly reviewed 

and benchmarked on an asset by asset basis

•   We monitor tenant covenants and trading performance

Our portfolio is 
aligned to modern 
shopping habits

We focus on 
sustainable and 
growing income

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

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Annual Report and Accounts 2018

57

Commentary

Change

Read more

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•   We used our strong occupier and developer 
relationships to acquire over £300 million of 
distribution assets and deployed all the equity 
we raised in March 2017

•  Distribution assets now represent 69% of the 

portfolio, up from 62% last year

•  We made a strong valuation gain of 

£74.4 million on our distribution assets alone

   No signiﬁcant  
change in risk

There has been no signiﬁcant change 
in perceived risk from 2017. 

See Property review 
on pages 26 to 27

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Change

Read more

   No signiﬁcant  
change in risk

There has been no signiﬁcant change 
in perceived risk from 2017. 

See Property review 
on page 33
See Responsible 
Business review on 
page 43

•   Developments represent 2.4% of the portfolio 

at the year end. No developments completed 
in the year were late or over budget

•   Development activity this year has added rent 
of £4.2 million per annum. Of this 43% was built 
speculatively. We are in advanced discussions 
on the remaining unlet space

•   Assets under construction and in our 

development pipeline of 1.0 million sq ft, 
predominantly at our Bedford site, are 
expected to add a further £8.1 million of 
rental income. The Bedford development will 
be phased with the ﬁrst phase commencing 
this year

Commentary

Change

Read more

•   50.3% of our income has contractually ﬁxed 

or index linked uplifts 

•   Our valuation gain this year was £121.6 million, 
with the largest increase in our urban logistics 
distribution and development sectors
•  A high average WAULT of 12.4 years was 

maintained

•  We have substantial headroom under our 

ﬁnancial loan covenants

   No signiﬁcant  
change in risk

There has been no signiﬁcant change in 
perceived risk from 2017. Technological 
advances continue to cause signiﬁcant 
disruption in the retail landscape. The 
Company’s preferred asset classes are 
however aligned to modern shopping 
habits where the prospects for valuation 
preservation and growth are signiﬁcantly 
better than traditional retail. 

See Property review 
on pages 26 to 27
See Financial review 
on page 39
See Audit Committee 
report on pages 84 
to 85

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Annual Report and Accounts 2018

58 LondonMetric Property Plc 
Risk management continued

Property risks (continued)

10 Transaction and tenant risk

Risk

Impact

Mitigation

Pressure on NAV, earnings 
and potentially loan 
covenants. 

Impact on strategy

•   We undertake thorough due diligence on all 

acquisitions including legal and property, tenant 
covenant strength and trading performance

•   Tenant concentration within the portfolio is 
considered for all acquisitions and leasing 
transactions. We have a diversiﬁed tenant base 
and limited exposure to individual occupiers 
in bespoke properties

•   Asset management initiatives undergo 

cost-beneﬁt analysis prior to implementation

•   We use external advisors to benchmark 

lease transactions and advise on acquisition 
due diligence

•   Our experienced asset management team 

work closely with tenants to offer them real estate 
solutions that meet their business objectives. 
This proactive management approach helps 
to reduce vacancy risk

•   We monitor rent collection closely to identify 

potential issues

•  Property purchases and asset 

management initiatives may be 
inconsistent with strategy 
•  Due diligence may fail to 

highlight risks 

•  Lettings may be made to 
inappropriate tenants

•  Tenant failure risk 

Appetite

The Board’s appetite to risks arising 
out of poor due diligence processes 
on acquisitions, disposals and 
lettings is low. The Board is willing 
to accept a higher degree of risk 
in relation to tenant covenant 
strength and unexpired lease term 
on urban logistics assets where 
there is high occupational demand, 
redevelopment opportunity or 
alternative site use. 

Financing risk

11 Capital and ﬁnance risk

Risk

Impact

Mitigation

The Company may have insufficient 
funds and available credit.

Strategy implementation 
is at risk. 

Appetite

Impact on 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. 

The Board has some appetite for 
interest rate risk, loans are not fully 
hedged. This follows cost beneﬁt 
assessment and takes into account 
that not all loans are fully drawn all 
the time. 

•   We maintain a disciplined investment approach 
with competition for capital. Assets which have 
achieved target returns and strategic asset plans 
are sold

•   Cash ﬂow forecasts are closely monitored
•   Relationships with a diversiﬁed range of lenders 

are nurtured and loan facilities regularly 
reviewed. The availability of debt and the terms 
on which it is available is considered as part 
of the Company’s long term strategy

•   Loan facilities incorporate covenant headroom, 

appropriate cure provisions and ﬂexibility
•  Headroom and non-ﬁnancial covenants 

are monitored

•   We maintain a modest level of gearing
•   The impact of disposals on secured loan facilities 
covering multiple assets is considered as part 
of the decision making process

•   Interest rate derivatives are used to ﬁx or cap 
exposure to rising rates. A specialist hedging 
advisor is used

Our portfolio is 
aligned to modern 
shopping habits

We focus on 
sustainable and 
growing income

We manage, enhance 
and create property 
in a responsible way

Our expertise and 
relationships shape 
our decision making

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LondonMetric Property Plc 
Annual Report and Accounts 2018

59

Commentary

Change

Read more

•   Our tenant default rate within the industry is very low 

and we have no signiﬁcant arrears. The impact of recent 
retailer collapses and CVAs has had a negligible impact 
on earnings 

•   We maintain a high occupancy level within the industry 
despite a number of smaller speculative developments 
completing recently. Our EPRA vacancy rate at the year 
end was 2.5%

See Chief Executive’s 
review on pages 15 
to 19
See Property review 
on page 32

   No signiﬁcant  
change in risk

There has been no signiﬁcant 
change in perceived risk from 
2017 despite a number of 
high proﬁle retail casualties 
and more retailers looking 
to restructure their physical 
store portfolios through a 
CVA process. Retail occupiers 
continue to invest heavily 
in distribution and logistics 
and convenience retail 
fulﬁls a top up function for 
online shoppers. 

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Change

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•   The majority of our debt is diversiﬁed, unsecured and 

extremely ﬂexible. Headroom on our revolving credit facility 
and proceeds from forecast capital recycling are sufficient 
to fund our forecast investment programme

•   During the year we reduced our secured loan with Helaba 
but extended its term to seven years and incorporated 
greater ﬂexibility

•   We recouponed £190 million of swaps and cancelled 

£128 million in excess of our requirements. The cost of doing 
this has a 2.5 to 4.0 year payback period

•  73% of facilities are hedged by way of interest rate swaps 

and caps

   No signiﬁcant  
change in risk

See Financial review 
on pages 38 to 39

There has been no signiﬁcant 
change in perceived risk 
from 2017. 

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Annual Report and Accounts 2018

60 LondonMetric Property Plc 
Viability statement

In accordance with provision C.2.2 of the UK Corporate 
Governance Code, the Board has assessed the future viability 
and prospects of the Group over a period longer than the 
12 months required by the ‘Going Concern’ provision. 

The Directors conducted this review taking account of 
the Group’s current position, longer term strategy, principal 
risks and future plans.

Assessment of review period
The viability review was conducted 
over a three year period of 
assessment as in previous years, 
which the Board considered 
appropriate for the following reasons:

•   The Group’s ﬁnancial business plan 

and detailed budgets cover a 
rolling three year period

•   It reﬂects the short cycle nature 
of the Group’s developments 
and asset management 
initiatives. The average time taken 
from commitment of funds to 
practical completion of the ﬁve 
developments that completed in 
the year at Huyton, Stoke, Crawley, 
Tonbridge and Launceston was 
15 months 

•   The average length of asset 

management initiatives involving 
signiﬁcant reconﬁguration of retail 
parks is under one year

•   The Group’s weighted average 
debt maturity at 31 March 2018 
was 4.8 years

•   Three years is considered to be the 
optimum balance between long 
term property investment and the 
inability to accurately forecast 
ahead given the cyclical nature 
of property investment

Assessment of prospects
The Group’s business model consists 
of a rolling three year proﬁt and cash 
ﬂow forecast, with both a base case 
scenario, which only includes deals 
under offer, and also an assumed 
case which factors in reinvestment 
and development. The business 
model considers investment plans, 
capital commitments, dividend 
cover, loan covenants and REIT 
compliance metrics.

The Executive Committee provides 
regular strategic input to the ﬁnancial 
forecasts covering investment, 
divestment and development plans, 
capital allocation and hedging. 

Executive Directors and senior 
managers receive regular 
presentations from external advisors 
on the macroeconomic outlook and 
retail market which assist with the 
development of strategy and forecasts.

Forecasts are updated at least 
quarterly, reviewed against actual 
performance and reported to the 
Board. At least one Board meeting 
each year focuses on strategy 
and presentations are given by 
senior managers.

Assessment of viability
A sensitivity analysis was carried out 
which involved ﬂexing a number of 
key assumptions individually and 
collectively to consider the impact 
of changes to the Group’s principal 
risks affecting the viability of the 
business, including:

•   Changes to macro-economic 

conditions impacting rental income 
levels and property values

•   Changes in the retail environment 

impacting occupancy levels 
and lettings

•   Changes in the availability of funds 
impacting committed expenditure 
and investment transactions
•   Changes in property market 

conditions impacting disposal 
and reinvestment assumptions

The business model was stress tested 
to validate its resilience to property 
valuation and rental income decline, 
as well as increases in future LIBOR 
and swap rates. It assessed the 

impact of these movements on 
future performance, liquidity and 
the ability to ﬁnance forecast 
transactions, committed capital 
expenditure and reﬁnance maturing 
debt. It took into account the ﬂexibility 
of capital expenditure and disposal 
plans and hedging in place.

In addition, further stress testing 
assessed the limits at which key 
ﬁnancial covenants and ratios 
would be breached or deemed 
unacceptable. Property values 
would need to fall by approximately 
40% and rental income fall by 59% to 
breach the loan to value and interest 
cover covenants under the existing 
debt facilities.

The Directors have taken into account 
the strong ﬁnancial position at 
31 March 2018, available cash and 
undrawn debt facilities, headroom 
under existing loan facilities and the 
Group’s ability to raise new ﬁnance. 

The Directors also noted that in the 
event of a severe threat to liquidity, 
other options existed to maintain 
viability including deferring non 
committed expenditure and 
selling assets.

Conclusion

Based on the results of their review, 
the Directors have a reasonable 
expectation that the Company will 
be able to continue in operation 
and meet its liabilities as they fall 
due over the three year period 
of their assessment. 

Governance

Inside this section

Introduction from the Chairman

Board of Directors

Governance at work

Leadership

Effectiveness

– Nomination Committee report

Accountability

– Audit Committee report

Remuneration

– Remuneration Committee report

Report of the Directors

Directors’ responsibility statement

62

64

66

67

74

74

80

80

88

88

104

107

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Annual Report and Accounts 2018

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Annual Report and Accounts 2018

62 LondonMetric Property Plc 
Introduction from the Chairman

At LondonMetric 
we recognise that 
maintaining the high 
standards of corporate 
governance we have 
developed over the 
years is critical to 
(cid:92)(cid:80)(cid:77)(cid:104)(cid:91)(cid:93)(cid:75)(cid:75)(cid:77)(cid:91)(cid:91)(cid:78)(cid:93)(cid:84)(cid:8)(cid:76)(cid:77)(cid:84)(cid:81)(cid:94)(cid:77)(cid:90)(cid:97)(cid:8)
of our strategy.” 
Patrick Vaughan
Chairman

The Corporate Governance report which follows 
provides insight into our governance processes 
and activities in the year and demonstrates 
our commitment to upholding the principles 
and provisions of the UK Corporate Governance 
Code (the ‘Code’).

Good governance is embedded into 
our day to day business operations and 
underpins the way we manage our 
business. It guides our ability to operate 
in a way that is both legally compliant 
and also responsible and supports 
the successful delivery of our strategy. 
We strive to operate in a transparent 
and responsible way and foster a 
culture of appropriate decision making 
at all levels in the organisation. 

Through the close involvement of 
the Executive Directors, our culture 
permeates through the wider 
organisation, promoting good 
governance practices beyond 
the boardroom.

Performance evaluation
I am pleased to report the ﬁndings 
of the external board performance 
evaluation that was undertaken by 
Independent Audit this year. The Board 
was praised for its exceptional 
cohesion and culture of openness. 
The mutual respect and conﬁdence 
of individual members and the strong 
and supportive relationships formed 
over many years working together 
were noted as particular strengths and 
I thank my colleagues for engaging in 
open and constructive conversations. 
However, in seeking continued 
improvement to our performance, 
we welcome suggestions for 
improvements to Board processes to 
enhance boardroom debate and 
challenge, including varying the 
pace of discussion and agenda, by 
involving other managers and staff and 
occasionally changing the format and 
location of meetings.

Diversity
The Board believes in the beneﬁts 
of diversity and strives to operate 
in a working environment of equal 
opportunity. This year we met 

members of the 30% Club Investor 
group to consider and share our 
diversity aspirations and to discuss 
the challenges we face. We support 
initiatives to promote gender diversity 
in the real estate sector and have 
recently become a member of the 
Real Estate Balance group whose 
objective is to improve gender 
diversity by promoting and supporting 
the development of a female talent 
pipeline. Low staff turnover at senior 
levels signiﬁes a loyal, content and 
motivated workforce and something 
we are proud of. However it also 
constrains the pace of change as 
opportunities are dependent upon 
staff vacancies arising. 

To the extent that we have the 
opportunity and as evidenced by 
our most recent Board appointment, 
we will seek to improve our gender 
diversity throughout the Company.

Succession planning
Succession planning and developing 
talent continues to be a key area of 
focus for the Nomination Committee 
to support the Company’s long term 
plans. Two years ago we instigated 
a phased refreshment of the Non 
Executive Board in light of members’ 
tenure and the best practice 
recommendations of the Code. 

This year we are delighted to 
welcome Suzanne Avery to the 
Board and as a member of the 
Audit Committee. Suzanne brings 
a fresh perspective and wealth of 
complementary ﬁnancial, banking, 
sustainability and real estate 
experience and expertise to the 
Board as former Managing Director 
of Real Estate Finance Group and 
Sustainability at RBS. 

LondonMetric Property Plc 
Annual Report and Accounts 2018

63

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Stakeholders
Our approach to business builds 
and maintains the trust of our key 
stakeholders including investors, 
business partners, customers, suppliers 
and employees. Furthermore we are 
committed to enhancing the business 
environments in which we operate as 
discussed in detail in the Responsible 
Business section of the Strategic report.

We have a comprehensive investor 
relations programme and regular 
communication with investors 
continues to be a key priority for the 
Executive Directors. Understanding the 
views of shareholders is fundamental 
to the Company’s strategic direction 
and ultimate success. This year 
we commissioned our ﬁrst investor 
Responsible Business survey and 
were reassured by the positive results. 
The Executive Directors met with over 
200 shareholders, fund managers, 
private wealth investors and other 
interested parties during the year to 
discuss the Company’s performance 
and plans.

The Board is aware of its responsibility 
to other stakeholders when making 
business decisions and actively 
engages with and welcomes 
feedback from suppliers, tenants 
and employees. During the year we 
undertook our biennial customer 
satisfaction survey and our ﬁrst 
employee satisfaction survey to better 
understand our key stakeholders’ 
views. In addition we have introduced 
ﬂexible working practices for staff to 
help improve employees’ work/life 
balance. The success of the Company 
is dependent upon the hard work and 
dedication of a small team here at 
LondonMetric and on behalf of the 
Board I would like to thank each and 
every employee for their contribution 
and commitment.

Accountability
The Audit Committee continues to 
play a key oversight and assurance 
role, assisting the Board and ensuring 
shareholder and other stakeholder 
interests are protected by monitoring 
the processes that support ﬁnancial 
reporting and control. 

The Committee has undertaken 
its annual comprehensive review 
of principal risks and the internal 
control framework and no signiﬁcant 
weaknesses were identiﬁed. The risk 
dashboard continues to be a standing 

agenda item at each Board meeting, 
highlighting changes in the Group’s 
exposure to risks and prompting 
further debate. 

We are mindful of the need to ensure 
that evolving risks are considered which 
this year included cyber risk and the 
impact of Brexit.

The Audit Committee has challenged 
the going concern principal underlying 
the preparation of these accounts and 
considered the Company’s longer term 
viability. It has reviewed the processes 
in place followed by management to 
ensure that the ﬁnancial statements 
are fair, balanced and understandable 
and has scrutinised and challenged 
the signiﬁcant accounting judgements 
made by management, including 
those concerning the valuation 
of property. The Committee also 
considered the likely impact of 
adopting new accounting standards 
on revenue, ﬁnancial instruments and 
leasing that become mandatory over 
the next two years.

This year we welcomed a new lead 
audit partner, Georgina Robb, to 
replace the previous partner who 
retired by rotation and was no longer 
considered independent, given her 
prior role as audit partner to Metric. 
Given that 2019 will be Deloitte’s sixth 
consecutive year in office, we will 
consider whether to re-tender the audit 
during the next two ﬁnancial years.

The Company received a letter from 
the Financial Reporting Council (FRC) 
concerning its review of its 2017 Annual 
Report. I am very pleased to report that 
no questions or queries were raised. 
A few improvements to disclosures 
were noted and have been taken into 
consideration in the preparation and 
review of this year’s Annual Report. 

Remuneration
The Board remains committed to 
attracting and retaining talented 
individuals to deliver outstanding 
results. The Remuneration Committee 
continues to promote a fair reward 
structure that adequately incentivises 
and retains the executive team to 
deliver long term growth and success 
and is advised by PwC. This year the 
Committee reviewed the variable 
elements of remuneration and has 
recommended annual bonuses for 
the Executive Directors at 71% to 79% 
of their maximum levels. 

As advised to the market on 
9 November 2017, Valentine Beresford, 
Investment Director, has taken a 
leave of absence from the Company 
following an operation. He continues to 
make a good recovery and we expect 
him to return to the office towards the 
end of the summer.

Whilst Valentine’s day to day 
responsibilities have been covered 
by other members of the Company’s 
executive team and senior colleagues, 
he has remained in close contact with 
the Company and we have been 
able to beneﬁt from his wide skills 
and experience. 

Looking ahead
We look forward to another busy 
and rewarding year ahead whilst 
remaining mindful of the ever 
changing economic and political 
challenges. We will seek to ensure 
the business remains resilient to such 
challenges and adapts to regulatory 
and legislative changes including the 
impact of Brexit and implementation 
of the EU Withdrawal Bill as well as 
the proposed revised UK Corporate 
Governance Code. 

Succession planning and diversity 
remain high on the Board’s agenda 
for 2019 and we will endeavour to 
implement the recommendations 
from this year’s external 
performance evaluation.

Patrick Vaughan
Chairman
30 May 2018

Statement of Compliance

The Board has considered the 
Company’s compliance with the 
provisions of the UK Corporate 
Governance Code (the ‘Code’) 
published by the Financial Reporting 
Council in 2016, publicly available 
at www.frc.org.uk. 

The Board considers that the 
Company has complied with the 
main provisions set out in the Code 
throughout the year under review 
and to the date of this report.

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Annual Report and Accounts 2018

64 LondonMetric Property Plc 
Board of Directors

Patrick Vaughan
Chairman

Andrew Jones
Chief Executive

Martin McGann
Finance Director

Appointed  13 January 2010

Appointed  25 January 2013

Appointed  13 January 2010

Skills and experience  Patrick has been 
involved in the UK property market since 
1970. He was a co-founder and CEO 
of Arlington, of Pillar, and of London 
& Stamford, leading all three of the 
companies to successful listings on the FTSE 
main market. Upon completion of London 
& Stamford’s merger with Metric in January 
2013, he was appointed Chairman, 
becoming Non Executive Chairman on 
1 October 2014. Patrick also served as an 
Executive Director of British Land 2005 to 
2006, following its acquisition of Pillar.

Other appointments  None

Board Committees 
 Nomination Committee

Skills and experience  Andrew was a 
co-founder and CEO of Metric from its 
inception in March 2010 until its merger 
with London & Stamford in January 2013. 
On completion of the merger, Andrew 
became Chief Executive of LondonMetric. 
Andrew was previously Executive 
Director and Head of Retail at British 
Land. Andrew joined British Land in 2005 
following the acquisition of Pillar where 
he served on the main Board. 

Other appointments  Non Executive 
Director of The Unite Group Plc

Board Committees  Executive Committee

Skills and experience  Martin joined 
London & Stamford as Finance Director 
in September 2008 until its merger with 
Metric in January 2013, when he became 
Finance Director of LondonMetric. 
Between 2005 and 2008, Martin was 
a Director of Kandahar Real Estate. 
From 2002 to 2005 Martin worked for Pillar, 
latterly as Finance Director. Prior to joining 
Pillar, Martin was Finance Director of the 
Strategic Rail Authority. Martin is a qualiﬁed 
Chartered Accountant, having trained 
and qualiﬁed with Deloitte.

Other appointments  None

Board Committees  Executive Committee

A balanced board 

Non Executive 
Chairman  9%

Executive
36%

Composition

Non
Executive
  55%

Female  18%

Gender
diversity

Male  82%

1  All charts reﬂect the composition of the Board 

as at 31 March 2018

Valentine Beresford
Investment Director

Appointed  3 June 2014

Mark Stirling
Asset Director

Appointed  3 June 2014

Skills and experience  Valentine was co-
founder and Investment Director of Metric 
from its inception in March 2010 until its 
merger with London & Stamford in January 
2013. He joined the Board of LondonMetric 
on 3 June 2014 as Investment Director. 
Prior to setting up Metric, Valentine was 
on the Executive Committee of British 
Land and was responsible for all their 
European retail developments and 
investments. Valentine joined British Land 
in July 2005, following the acquisition of 
Pillar, where he also served on the Board 
as Investment Director.

Other appointments  None

Board Committees  Executive Committee

Skills and experience  Mark was co-
founder and Asset Management Director 
of Metric from its inception in March 2010 
until its merger with London & Stamford 
in January 2013. He joined the Board of 
LondonMetric on 3 June 2014 as Asset 
Management Director. Prior to the setting 
up of Metric, Mark was on the Executive 
Committee of British Land and as Asset 
Management Director was responsible 
for the planning, development and 
asset management of the retail portfolio. 
Mark joined British Land in July 2005 
following the acquisition of Pillar where he 
was Managing Director of Pillar Retail Parks 
Limited from 2002 until 2005.

Other appointments  None

Board Committees  Executive Committee

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Philip Watson
Senior Independent Director

Appointed  25 January 2013

James Dean
Independent Director

Appointed  29 July 2010

Suzanne Avery
Independent Director

Appointed 22 March 2018

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Skills and experience  James is a 
Chartered Surveyor and has worked with 
Savills plc since 1973, serving as a Director 
from 1988 to 1999.

Other appointments  James is a Non 
Executive Director of Branston Holdings 
and Chairman of London & Lincoln 
Properties Ltd and Patrick Dean Ltd

Board Committees  Remuneration 
Committee (Chairman) and 
Nomination Committee

Skills and experience  Philip joined 
the Board of Metric at the Company’s 
inception in March 2010. He is a Non 
Executive Director of Mirabaud Asset 
Management Limited. Philip joined Hill 
Samuel in 1971 and then Robert Fleming in 
1972 on the UK desk, where he worked as 
an investment analyst and fund manager. 
Philip left Robert Fleming in 1982 to found 
TWH Asset Management Limited (now 
Mirabaud Asset Management Limited) 
in which he and his partners sold a 
controlling interest to Mirabaud Pereire 
Holdings Limited in 1991. 

Other appointments  A Non 
Executive Director of Mirabaud Asset 
Management Limited

Board Committees  Nomination 
Committee and Remuneration Committee

Skills and experience  Suzanne was 
appointed to the Board of LondonMetric 
in March 2018. Suzanne has 25 years’ 
experience in corporate banking, holding 
various Managing Director roles at RBS, 
including Managing Director of Real 
Estate Finance Group & Sustainability, 
where she was responsible for REITs, 
Funds and London based private 
property companies. 

Other appointments Church 
Commissioner, senior advisor to Centrus 
Advisors, Non Executive Director of 
Richmond Housing Partnership Limited, 
trustee of LandAid and co-founder of 
Real Estate Balance.

Board Committees  Audit Committee

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Rosalyn Wilton
Independent Director

Appointed  25 March 2014

Alec Pelmore
Independent Director

Appointed  25 January 2013

Andrew Livingston
Independent Director

Appointed  31 May 2016

Skills and experience  Rosalyn was 
appointed to the Board of LondonMetric 
in March 2014, becoming Chairman 
of the Audit Committee in March 2015. 
She has held a number of Non Executive 
Directorship positions, most recently 
with AXA UK Limited, until September 
2015, where she acted as Chair of the 
Risk Committee and Optos Plc, where 
she was Chair of Remuneration. She has 
previously served as Senior Advisor to 
3i Investments and Providence Equity 
Partners, Chairman of Ipreo Holdings LLC, 
the US-based ﬁnancial data and solutions 
group, and has worked for Reuters 
Group where she was a member of the 
Executive Committee. 

Other appointments  Trustee of the 
University of London, Vice Chair of the 
Harris Federation and Chair of Governors 
of Harris Academy Bromley.

Board Committees  Audit Committee 
(Chairman) and Remuneration Committee

Skills and experience  Alec joined the 
Board of Metric at the Company’s 
inception in March 2010. He has been 
a member of the Supervisory Board 
of Unibail-Rodamco SE, Europe’s 
largest property company, since 2008 
and is currently a member of its Audit 
Committee. Alec held positions as an 
equity investment analyst specialising in 
property companies from 1981 to 2007. 
The majority of his career as an investment 
analyst was spent at Dresdner Kleinwort 
Benson and Merrill Lynch, where his teams 
were voted number one for property 
in Europe by the Institutional Investor 
European Property Research Survey for 
12 out of 13 years from 1995 to 2007. 

Other appointments  Member of the 
Supervisory Board of Unibail-Rodamco SE

Skills and experience  Andrew was 
appointed to the Board on 31 May 2016. 
On 2 April 2018, Andrew was appointed 
Chief Executive of Howden Joinery Group 
Plc, having been the Chief Executive of 
Screwﬁx since 2013 and previously the 
Commercial and Ecommerce Director 
from 2009 to 2013. Before joining Screwﬁx, 
Andrew was Commercial Director at 
Wyevale Garden Centres between 2006 
and 2008 and then Chief Operating 
Officer between 2008 and 2009. 
Andrew has worked previously at Marks 
& Spencer, CSC Index and B&Q where he 
was Showroom Commercial Director from 
2000 to 2005.

Other appointments  Chief Executive 
of Howden Joinery Group Plc and Director 
of Vedoneire Limited

Board Committees  Nomination 
Committee and Audit Committee

Board Committees  Audit Committee 
and Remuneration Committee

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Annual Report and Accounts 2018

66 LondonMetric Property Plc 
Governance at work

Your Board remains committed to maintaining the high 
standards of corporate governance that are embedded 
in the culture and day to day running of our business and 
which drive the achievement of strategy and long term 
success of the Company. 

Corporate governance code

Leadership

The Board provides leadership and 
direction to the business as a whole, 
having due regard to the views of its 
stakeholders and the environment within 
which it operates.

•  Role of the Board and its Committees
•  Division of responsibilities
•  Non Executive Directors
•  Purpose and culture

  See pages 67 to 73

Effectiveness

The Board sets the key processes to ensure 
the Board and its Committees operate 
effectively.

Accountability

  See pages 74 to 79

The Board establishes and maintains the 
Group’s system of risk management and 
internal controls and ensures the integrity 
of ﬁnancial reporting.

•  Nomination Committee report
•  Composition and independence
•  Diversity
•  Board appointments and succession planning
•  Board induction, development and 

time commitments

•  This year’s external Board evaluation

•  Audit Committee report
•  Financial reporting and signiﬁcant judgements
•  Oversees external audit process
•  Assessment of principle and emerging risks, risk 

management and internal control

•  Viability statement and going concern
•  Ensuring a ‘fair, balanced and understandable’ 

  See pages 80 to 87

Annual Report

Engagement 
with shareholders 
and stakeholders

The Chief Executive and Executive 
Directors prioritise an open dialogue with 
shareholders.

•  Engagement with shareholders – 209 meetings 

and presentations in the year

•  Portfolio tours arranged for investors 

and advisors 

•  AGM is attended by the whole Board

  See pages 72 to 73

Remuneration

The Remuneration Committee determines 
and implements a fair reward structure to 
incentivise Executive Directors to deliver 
the Group’s strategic objectives whilst 
maintaining stability in the management 
of its long term business.

•  Remuneration Committee report
•  Remuneration Policy
•  Annual bonus and LTIP achievement 

against targets

  See pages 88 to 103

Leadership

LondonMetric Property Plc 
Annual Report and Accounts 2018

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The Board

Chairman: Patrick Vaughan

Comprises: 4 Executive and 6 Non Executive Directors

•  Responsible for leading, directing and controlling the 

Company and the overall success of the business

•  Establishes culture and ethics of the organisation

•  Fosters wider stakeholder relationships

•  Sets and implements long term strategy

•  Manages human resources and succession planning

•  Sets risk appetite and determines principle risks

•  Corporate governance

Board Committees

Audit Committee

Remuneration Committee

Nomination Committee

Chairman: Rosalyn Wilton

Chairman: James Dean

Chairman: Patrick Vaughan

Comprises: 4 Non Executive Directors

Comprises: 4 Non Executive Directors

Comprises: 4 Non Executive Directors

•   Oversees ﬁnancial and 

narrative reporting

Remuneration Policy

•   Determines and implements 

•   Recommends Board appointments

•   Scrutinises signiﬁcant judgements 

•   Sets Executive Directors 

made by management

•   Monitors effectiveness of risk 
management systems and 
internal control

•   Evaluates the external audit process

remuneration packages and 
incentives

•   Approves bonus and LTIP targets 

and outcomes

•   Succession planning and Board & 

Committee composition

•   Diversity

•   Performance evaluation

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Audit Committee report see page 80

Remuneration Committee report 
see page 88

Nomination Committee report 
see page 74

Executive Committee

Management Committees

Chairman: Andrew Jones

•   Implementation of strategy

•   Day to day management 

•   Employee remuneration 

Comprises: 4 Executive 
Directors; 1 Senior Executive

•   Sets budgets and manages 
operational and ﬁnancial 
performance

of the business and its 
principle risks

•   Succession planning 
below Board, people 
development 

and wellbeing

•   Manages allocation 

of capital

Investment Committee

Asset Management Committee

Finance Committee

Chairman: Valentine Beresford

Chairman: Mark Stirling

Chairman: Martin McGann

Comprises: 4 Executive Directors 
and senior management

Comprises: 4 Executive Directors 
and senior management

•   Reviews investment and divestment 

opportunities and allocation 
of capital

•   Reviews value enhancing 
operational activities and 
development opportunities

Comprises: 4 Executive Directors 
and senior management

•   Reviews budgets and forecasts, 
achievement of targets, funding 
requirements and liquidity

The framework reﬂects the composition of the Board as at 31 March 2018

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Annual Report and Accounts 2018

68 LondonMetric Property Plc 
Leadership continued

Division of responsibilities

A balanced board 

The following table sets out the key responsibilities of Board members:

Role

Chairman
Patrick Vaughan

Responsibilities

•  Leads the Board and ensures it operates effectively

•  Sets Board culture, style and tone of discussions to 

promote boardroom debate and openness

Executive
36%

Chief Executive
Andrew Jones

Non Executive Directors
Suzanne Avery 
James Dean
Andrew Livingston
Alec Pelmore
Philip Watson
Rosalyn Wilton

•  Promotes Company purpose, values and ethics

•  Builds relationships between Executive and Non 

Executive Directors

•  Monitors progress against strategy and 
performance of the Chief Executive

•  Manages dialogue and communication with 
shareholders and key stakeholders and relays 
views to the Board

•  Develops and recommends strategy to the Board 

and is responsible for its implementation

•  Day to day management of the business 
operations and personnel assisted by the 
Executive team

•  Support and constructively challenge the 
Executive Directors in determining and 
implementing strategy

•  Bring independent judgement and scrutiny 

to decisions recommended by the Executive 
Directors and approve decisions reserved for the 
Board as a whole

•  Contribute a broad range of skills and experience

•  Monitor delivery of agreed strategy within the risk 

and control framework set by the Board

•  Review the integrity of ﬁnancial information 

and risk management systems

Senior Independent Director
Philip Watson

•  Acts as a sounding board for the Chairman 

and trusted intermediary for the other Directors

Non Executive 
Chairman  9%

Composition

Non
Executive
  55%

Female  18%

Male  82%

6–9 years 
27%

Gender
diversity

Tenure1

0–3 years 
18%

3–6 years 
55%

Executive Directors
Valentine Beresford
Martin McGann
Mark Stirling

•  Available as a communication channel for 

shareholders if other means are not appropriate

•  Leads performance evaluation of Chairman

•  Manage business operations within area 

Risk management  9%

of expertise

•  Assist Chief Executive in the implementation 

Retail  9%

of strategy

•  Identify, assess and quantify risks in operating the 
business and implement risk mitigation processes

•  Manage, appraise and develop staff below 

Board level

Company Secretary
Jadzia Duzniak

•  Advises the Board and is responsible to the 

Chairman on corporate governance matters

•  Ensures good ﬂow of information to the Board, 

its Committees and senior management

•  Promotes compliance with statutory and 

regulatory requirements and Board procedures

•  Provides guidance and support to Directors, 

individually and collectively

Expertise2

Property
64%

Finance 
36%

1  Tenure has been reﬂected from the date of 
appointment to the LondonMetric Board
2  Some Directors are represented in more than 

one category in terms of their expertise

3  All charts reﬂect the composition of the Board 

as at 31 March 2018

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Board activities in 2018

The key areas of focus for the Board during the year were as follows:

•  Strategy presentation from senior managers to the 
whole Board with continued focus on sustainable 
income and portfolio repositioning into urban logistics 
and divestment of non core assets

•  Debated the property and retail market outlook, 

shopping patterns and competitor activity

•  Considered the economic, legislative and political 

landscape including the impact of Brexit

•  Approved all property acquisitions and disposals in 
excess of £10 million including a portfolio acquisition 
of 14 logistics assets and the sale of the last remaining 
office in Marlow

•  Approved major capital expenditure and 

development projects including at Stoke, Crawley, 
Dagenham and Bedford
•  Executive Directors and 

•  Approved the interim and annual ﬁnancial statements 

and results presentations 

•  Reviewed the three year ﬁnancial forecasts
•  Scrutinised the interim and annual property valuations 
•  Discussed ﬁnancing arrangements, available debt 

facilities, LTV and ﬁnancial covenants

•  Received reports from the Finance Director on 

debt reﬁnancing and hedging and approved the 
cancellation and recoupon of interest rate swaps
•  Considered dividend policy, quarterly scrip dividend 

payments and annual PID

•  Executive Directors and senior managers received 

presentations from tax advisors and external auditors 
following legislative changes 

senior managers  
attended quarterly 
economic and  
market update 
presentations from  
external advisors

•  Met with members of the 
30% Club Investor group 
to discuss diversity in 
the organisation

•  Joined the Real Estate 

Balance group to promote 
and foster diversity in the 
sector and Company at 
all levels

Strategy

Financial

Board

Governance

Stakeholders

•  Risk register and dashboard 
update, including debate 
of signiﬁcant and emerging risks

•  Considered impact of new 

accounting standards 
on revenue, ﬁnancial 
instruments and leases

•  Appointed new Non 
Executive Director, 
Suzanne Avery 

•  Reviewed Executive 

Directors’ remuneration 
and performance 
against targets 

•  Succession planning and 
tenure and extended 
Chairman’s letter of 
appointment for a further 
three years

•  Reviewed the effectiveness of the internal control 

•  Reviewed and began implementation of ﬂexible 

framework to manage risks

working practices for staff

•  Received brieﬁngs from the Finance Director and 
external auditors on regulatory and governance 
issues including consideration of S172 Companies 
Act compliance 

•  External Board and Committee performance 

evaluation review 

•  Viability statement and going concern review and 

approval of statements thereon

•  Participated in Hampton Alexander review
•  Received Responsible Business update from senior 
management including a ﬁre risk and cladding 
assessment following the Grenfell Tower tragedy

•  Extended commitment to joint ventures and partners, 
extending commitment to MIPP and increasing stake 
in DFS JV

•  Considered shareholder relations, liaison and feedback 

from roadshows and results presentations 

•  Staff received a presentation on the auto enrolment 

pension scheme implemented in the year

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Annual Report and Accounts 2018

70 LondonMetric Property Plc 
Leadership continued

Membership and attendance

The number of Board and Committee members and their attendance during the year was as follows:

Title

Date appointed

Tenure5 
(years)

Independent

Board

Audit 
Committee

Remuneration 
Committee

Nomination 
Committee

Chairman
Patrick Vaughan
Executive Directors
Andrew Jones
Martin McGann
Valentine Beresford4
Mark Stirling
Non Executive Directors
Suzanne Avery
James Dean
Andrew Livingston
Alec Pelmore
Andrew Varley3
Philip Watson
Rosalyn Wilton
Percentage independent1

13/1/2010

25/1/2013
13/1/2010
3/6/2014
3/6/2014

22/3/2018
29/7/2010
31/5/2016
25/1/2013
25/1/2013
25/1/2013
25/3/2014

8

5
8
4
4

0
8
2
5
n/a
5
4

n/a1

No
No
No
No

Yes
Yes
Yes
Yes
n/a
Yes
Yes
60%

6 (6)

6 (6)
6 (6)
4 (6)
6 (6)

1 (1)
6 (6)
6 (6)
6 (6)
3 (3)
6 (6)
6 (6)

3 (3)

3 (3)

3 (3)

3 (3)

0 (0)

5 (5)
5 (5)
2 (2)

5 (5)

4 (4)
1 (2)

2 (2)
4 (4)
4 (4)

1  Provision B.1.1 of the Code regarding independence is not appropriate in 
relation to the Chairman. Calculation is based on Board members as at 
31 March 2018

2  Bracketed numbers indicate the number of meetings the member was 

eligible to attend

3  Resigned with effect from 30 September 2017 
4  Valentine Beresford was unable to attend two Board meetings due to a leave 

of absence to undergo and recuperate from an operation

5  Tenure is measured from the date of appointment to the LondonMetric Board 

and as at 31 March 2018, rounded to the nearest whole year

The role of the Board
The Board is collectively responsible 
to the members of the Company for 
the long term success of the business, 
having due regard to the views and 
interests of all stakeholders. 

It operates in an open and transparent 
way, engaging and fostering 
relationships with shareholders, 
customers, suppliers, employees 
and the communities within which 
it operates.

The Board establishes the culture, 
values and ethics of the organisation, 
sets and implements strategy and 
provides leadership and direction 
within a sound framework of risk 
management and internal controls. 

The Board’s collective experience 
and skill set covers a range of relevant 
sectors including property, ﬁnance, 
banking and retail as reﬂected in the 
chart on page 68 and as described in 
their individual biographies on pages 
64 and 65.

There is a division of responsibility 
between the Chairman and Chief 
Executive which has been approved 
by the Board. 

The Chairman is responsible for 
leading the Board and monitoring its 
effectiveness and the Chief Executive, 
supported by the Executive Directors, 
is responsible for the day to day 
management of the Group and the 
implementation and delivery of the 
Board’s agreed strategic objectives.

The Chairman is responsible for 
ensuring a constructive relationship 
between Executive and Non Executive 
Directors and for encouraging and 
fostering a culture of boardroom 
challenge and debate. He maintains 
regular contact with the Executive 
Directors and senior management 
outside of formal Board meetings 
which ensures he is kept abreast of 
individual Directors’ views and issues as 
they arise. 

During the year the Board 
recommended the extension of the 
Chairman’s appointment for a further 
three years to 31 March 2021, with a six 
month mutual break option.

As reported in the table above, each 
of the Non Executive Directors, other 
than the Chairman, is considered by 
the Board to be independent from 
management and has no commercial 
or other connection with the Company. 

In considering independence, the 
Board concluded that tenure should 
be measured from the date of election 
to the LondonMetric Board. 

The Board’s composition throughout 
the year met the Code’s requirement 
that at least half of its members, 
excluding the Chairman, are 
independent Non Executive Directors. 
It would still meet this requirement 
under the current new Code proposals 
to include the Chairman within 
the calculation.

The Board has a schedule of matters 
reserved for its attention which includes 
approval of strategy, budgets, ﬁnancial 
reports, signiﬁcant acquisitions and 
disposals, major capital expenditure, 
funding and dividend policy.

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Annual Report and Accounts 2018

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Board meetings
The Board has a regular schedule of 
meetings, timed around the ﬁnancial 
calendar, together with further ad 
hoc meetings as required to deal with 
transactional matters. 

Whilst strategy is considered at every 
Board meeting encompassing topics 
such as market conditions and outlook, 
investment opportunities, capital 
allocation and emerging risks, one 
meeting each year is dedicated to 
this topic. 

In September 2017 two senior 
managers were invited to present to 
the Board on the Company’s longer 
term strategy in light of market and 
economic conditions including Brexit, 
changes in technology and consumer 
shopping patterns and investment 
opportunities. The session considered 
implications for resources and skills, 
ﬁnancing and liquidity.

The Executive Committee has regular 
off site meetings to discuss business 
strategy and performance in a less 
formal environment. External advisors 
and senior managers are invited to 
present and the focus is reviewing 
the appropriateness of and progress 
against agreed strategy in light of 
the retail and investment market, 
investment opportunities and the wider 
macroeconomic environment.

All Directors are expected to attend 
all meetings of the Board and of the 
Committees on which they serve, 
and to devote sufficient time to the 
Company’s affairs to enable them to 
fulﬁl their duties as Directors. On the 
rare occasion that a Director is unable 
to attend a meeting, papers will still 
be provided in advance and their 
comments and apologies for absence 
are provided to the Board prior to 
the meeting.

Board changes
Andrew Varley retired from the Board 
and its Committees in September 
2017 as announced last year. 
Andrew Livingston was appointed 
as a member of the Remuneration 
Committee in July 2017 replacing 
Andrew Varley.

Following a review led by the 
Nomination Committee of the 
Board size and structure, Suzanne 
Avery was appointed as a new Non 
Executive Director and member of 
the Audit Committee in March 2018. 
The Nomination Committee report 
includes details of the recruitment 
process, selection procedure and 
induction programme for the 
appointment on page 77.

Board culture and values
The Chairman sets and fosters the 
culture and values of the Board and 
wider organisation, broadly deﬁned as 
a balanced approach to business and 
a willingness to take considered risks to 
achieve strategic goals within an open, 
inclusive and respectful environment 
which encourages constructive 
challenge and debate. 

This culture and thinking permeates 
through the organisation through 
the close interaction of Directors 
and staff in day to day activities. 
Individual Directors and senior 
managers have formed strong 
relationships over several years of 
working together and processes are 
well understood and adhered to after 
many years of consistent application.

Board Committees
The Board has three Committees of 
Non Executive Directors to which 
it has delegated a number of its 
responsibilities; the Audit, Remuneration 
and Nomination Committees. 

The Committees ensure a strong 
governance framework for decision 
making and each operates within 
deﬁned terms of reference which 
are reviewed annually by each 
Committee and the Board and which 
are available on written request 
and on the Company’s website at 
www.londonmetric.com.

The Audit and Remuneration 
Committees are composed entirely of 
independent Non Executive Directors. 
The Nomination Committee includes 
the Chairman who is not considered to 
be independent but his attendance is 
permitted by the Code. 

The Chairman of each Committee 
provides a verbal update on the 
matters discussed at each meeting to 
the Board.

The Executive Committee meets 
monthly to discuss ﬁnancial and 
operating targets and performance, 
property transactions and the 
management of the business and 
its staff. There are informal meetings 
between the Executive Directors at 
other times and due to the size of 
the organisation they are involved 
in all signiﬁcant business discussions 
and decisions.

The Executive Committee is 
supported by three sub Committees, 
each focusing on different areas 
of the business; the Investment, 
Asset Management and Finance 
Committees. These Committees 
comprise Executive Directors and 
members of the senior management 
team and meet at least monthly.

Non Executive Directors
The Non Executive Directors are a 
diverse group with a wide range of 
business experience encompassing 
property, ﬁnance, fund management, 
banking, risk management, 
sustainability and retailing.

They provide a valued role by 
independently challenging and 
scrutinising aspects of executive 
decisions and monitoring the 
delivery of the agreed strategy, 
adding insight from their varied 
commercial backgrounds. 

Many either currently or have previously 
served on other listed Boards, bringing 
different views and perspectives to 
Board operations and debates. 

The Senior Independent Director acts 
as an intermediary to the Executive 
Directors for the Non Executive 
Directors and shareholders as 
required. He is available to meet with 
shareholders at their request to address 
concerns or, if other communication 
channels fail, to resolve queries raised. 
No such requests were received from 
shareholders in the year. 

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Annual Report and Accounts 2018

72 LondonMetric Property Plc 
Leadership continued

On appointment Non Executive 
Directors are advised of the likely time 
commitment to fulﬁl the role. The ability 
of individual Directors to allocate 
sufficient time to discharge their 
responsibilities is considered as part 
of the annual evaluation process led 
by the Nomination Committee. 

The Board is satisﬁed that each of 
the Non Executive Directors devoted 
sufficient time to the Company’s 
business during the year and has 
capacity to continue to do so.

Non Executive Directors are 
encouraged to communicate directly 
and openly with the Executive Directors 
and senior management between 
scheduled Board meetings to explore 
and challenge large and complex 
transactions and as part of each 
Director’s contribution to the delivery 
of strategy. 

This ad hoc communication is often 
supplemented by site visits and 
provides further opportunity to mix 
with senior management.

Information ﬂow
The Chairman, supported by the 
Company Secretary, ensures that 
the Directors receive clear and timely 
information on all relevant matters.

Comprehensive reports and brieﬁng 
papers are circulated one week prior 
to Board and Committee meetings 
to give the Directors sufficient time 
to consider their content prior to the 
meeting and to promote an informed 
boardroom discussion and debate.

The Board papers contain market, 
property, ﬁnancial and risk updates 
as well as other speciﬁc papers 
relating to agenda items. 

The Board receives other ad hoc 
papers of a transactional nature at 
other times, circulated by email, for 
their review and approval which are 
ratiﬁed at the next Board meeting. 

In addition, the Chairmen of the 
Audit and Remuneration Committees 
communicate regularly and 
independently with relevant staff 
and external advisors including the 
Company’s external auditors and 
remuneration advisors.

Independent advice
All Directors and Committees have 
access at all times to the advice and 
services of the Company Secretary, 
who is responsible for ensuring that 
Board procedures are followed and 
that governance regulations are 
complied with and high standards 
maintained. The Directors may, in 
the furtherance of their duties, take 
independent professional advice at the 
expense of the Company. None of the 
Directors sought such advice in 
the year.

Conﬂicts of interest
Directors are required and have a 
duty to notify the Company of any 
potential conﬂicts of interest they may 
have. Any conﬂicts are recorded and 
reviewed at each Board meeting. 
There have been no conﬂicts of interest 
noted this year.

Investor relations
Communication with investors remains 
a top priority of the Board who believes 
that understanding the views of 
shareholders is key to the Company’s 
strategic direction and success. 

The Company places considerable 
emphasis on maintaining an 
open dialogue with investors, in 
particular institutions and private 
wealth managers and brokers 
through a comprehensive investor 
relations programme.

The Chief Executive and Finance 
Director are the Company’s principal 
representatives and, along with 
the other Executive Directors and 
the Head of Investor Relations, hold 
meetings throughout the year to 
communicate the Company’s strategy 
and performance. These include results 
presentations, one to one meetings, 
group meetings, panel discussions, 
conferences and site visits.

Investor meetings
The framework of investor relations 
is set around the ﬁnancial reporting 
calendar, speciﬁcally announcement 
of half and full year results. In addition, 
signiﬁcant shareholder engagement 
occurs outside these periods and 
primarily consists of UK regional and 
overseas roadshows and responses 
to ad hoc requests for meetings. 

Investor meetings

UK regional  22%

Overseas  17%

Site visit
7%

By location

London
  54%

Generalist 
institution  31%

Specialist
institution  28%

By type
of investor

Broker
  5%

Private 
wealth  36%

These meetings and roadshows seek 
to keep investors informed of the 
Company’s performance and plans, 
answer questions they may have and 
understand their views.

Topics discussed include the 
development and implementation 
of strategy, performance, property 
transactions, quality of underlying 
occupiers, strength of the Company’s 
income, debt structure and the real 
estate market in general.

Investor site visits
Two investor site visits were arranged in 
the year, at several of the Company’s 
distribution warehouses and 
developments in:

•  Dagenham, occupied by 

Eddie Stobart

•  Crawley and Croydon, where four 
sites were visited in total, three of 
which are occupied by TNT, Barker 
& Stonehouse and Tesco

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Investor activity
During the ﬁnancial year, the Company 
met with over 200 shareholders, 
analysts and potential investors. 

A breakdown by type of investor seen 
and location of meeting are shown 
in the charts opposite. Meetings were 
held predominantly in the UK with over 
50% of investors seen in London.

As the importance of retail/private 
wealth shareholders continues to 
grow, the Company maintained its 
high level of roadshow activity in UK 
regions. Regional roadshows included 
visits to Leeds, Birmingham, Edinburgh, 
Liverpool, Southampton, Chichester 
and Manchester. In total, private 
wealth meetings accounted for 36% 
of investors seen and the Company 
continues to place great importance 
on engaging with its private 
wealth shareholders.

17% of investor meetings were held 
overseas in Holland, Canada and 
the United States. The Company will 
continue to engage with overseas 
investors to broaden its investor 
base further.

The Company also presented at a 
number of conferences during the 
year including participating on panel 
discussions organised by various brokers 
including Green Street, Wells Fargo, 
Kempen and Societe Generale.

In addition, the Company met with 
a number of corporate governance 
representatives from approximately 
ten of its main shareholders to update 
them on corporate governance 
developments of the Company. 

Investor feedback
Investor feedback is presented to the 
Board at scheduled meetings, together 
with published analyst comments.

Public communication
Shareholders are kept informed of the 
Company’s progress through results 
statements and other announcements 
released through the London 
Stock Exchange. 

Company announcements are 
made available on the website 
affording all shareholders full access 
to material information.

The website is an important source 
of information for shareholders and 
includes a comprehensive investor 
relations section containing all 
RNS announcements, share price 
information, investor presentations, 
half year results and Annual Reports 
available for downloading. 

A live and on demand webcast of 
results and a CEO interview is posted 
twice a year. Individual shareholders 
can raise questions directly with the 
Company at any time through a facility 
on the website.

Annual General Meeting
Shareholders are encouraged to 
participate in the Annual General 
Meeting of the Company, which 
provides a forum for communication 
with both private and institutional 
shareholders alike. The whole Board 
attends and is available to answer 
shareholder questions.

The Senior Independent Director is 
available for shareholders to contact 
if other channels of communication 
with the Company are not available 
or appropriate.

The Annual Report is sent to all 
shareholders at least 20 working days 
before the AGM and details of the 
resolutions to be proposed can be 
found in the Notice of Meeting on 
pages 148 to 151. 

Feedback received is very supportive 
of the Company’s strategy, 
performance, management and 
future direction. 

Shareholders are able to lodge their 
votes through the CREST system or by 
returning the Proxy Card sent with the 
Annual Report. 

As part of its ongoing shareholder 
engagement, the Company 
conducted its ﬁrst biennial investor 
Responsible Business survey during 
the year. The survey was sent to the 
Company’s top shareholders covering 
half of the register. Further detail on the 
survey is contained on page 47. 

Details of the number of proxy 
votes for, against and withheld for 
each resolution will be disclosed 
at the meeting and in the AGM 
RNS announcement.

Key shareholder events 
throughout the year

Q1 

•  Full year 2017 results presentation
•  Investor full year roadshow held 

post results

•  Site visit to Dagenham
•  Regional investor meetings in 

Edinburgh and Leeds

Q2 

•  Annual General Meeting 

of Shareholders

•  US investor roadshow
•  Investor meetings in Liverpool
•  Site visit to Crawley and Croydon

Q3 

•  Half year results presentation
•  Half year investor roadshow 

post results

•  Investor roadshow in 

London, Toronto, Edinburgh 
and Amsterdam

•  Investor meeting on corporate 
governance developments at 
the Company

Q4 

•  Investor meetings in London, 

Birmingham, Leeds, Chichester, 
Southampton, Manchester and 
New York

•  Investor Responsible Business 

survey sent to major shareholders 

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Annual Report and Accounts 2018

74 LondonMetric Property Plc 
Effectiveness

Nomination Committee report

Patrick Vaughan
Chairman, 
Nomination Committee

I am pleased to present the Nomination 
Committee’s report for the year to 
(cid:27)(cid:25)(cid:104)(cid:53)(cid:73)(cid:90)(cid:75)(cid:80)(cid:104)(cid:26)(cid:24)(cid:25)(cid:32)(cid:22)(cid:8)

This year the Committee’s main focus 
has been the composition and diversity 
of the Board and succession planning 
for the Non Executive Directors 
which led to the appointment in 
(cid:53)(cid:73)(cid:90)(cid:75)(cid:80)(cid:8)(cid:26)(cid:24)(cid:25)(cid:32)(cid:8)(cid:87)(cid:78)(cid:8)(cid:59)(cid:93)(cid:98)(cid:73)(cid:86)(cid:86)(cid:77)(cid:8)(cid:41)(cid:94)(cid:77)(cid:90)(cid:97)(cid:8)(cid:73)(cid:91)(cid:8)(cid:73)(cid:8)
(cid:54)(cid:87)(cid:86)(cid:104)(cid:45)(cid:96)(cid:77)(cid:75)(cid:93)(cid:92)(cid:81)(cid:94)(cid:77)(cid:8)(cid:44)(cid:81)(cid:90)(cid:77)(cid:75)(cid:92)(cid:87)(cid:90)(cid:8)(cid:73)(cid:86)(cid:76)(cid:8)(cid:85)(cid:77)(cid:85)(cid:74)(cid:77)(cid:90)(cid:8)
(cid:87)(cid:78)(cid:104)(cid:92)(cid:80)(cid:77)(cid:8)(cid:41)(cid:93)(cid:76)(cid:81)(cid:92)(cid:104)(cid:43)(cid:87)(cid:85)(cid:85)(cid:81)(cid:92)(cid:92)(cid:77)(cid:77)(cid:22)(cid:1528)

Membership & Attendance

Member

Patrick Vaughan

Alec Pelmore

Philip Watson

James Dean

Date appointed

Tenure 
(years)

Meetings 
attended

1/11/2012

25/1/2013

25/1/2013

14/7/2016

5

5

5

2

3 (3)

3 (3)

3 (3)

3 (3)

Bracketed numbers indicate the number of meetings the member was eligible to attend. 
Tenure is measured from date of appointment to the Committee and as at 31 March 2018, 
rounded to the nearest whole year.

Highlights this year

•  Considered Board composition, succession and diversity
•  Led the appointment process for a new Non Executive 

Director and recommended Suzanne Avery to the Board and 
Audit Committee

•  Recommended the extension of the Chairman’s appointment 
for a further three years, with a six month mutual break option
•  Led external Board and Committee performance evaluation 
•  Recommended the election and re-election of Directors 

to the Board at the AGM

Responsibilities of the Committee

The principal responsibilities of the Committee are to:
•  Review and evaluate the size, structure and composition of the 
Board and its Committees, including the diversity and balance 
of skills, knowledge and experience of each

•  Make recommendations to the Board regarding Board and 

Committee membership changes

•  Consider succession planning for Directors and other 

senior executives

•  Lead the process for new Board and Committee appointments 

to ﬁll Board vacancies

•  Promote the Company’s policy on diversity at Board level and 

in the wider organisation

•  Lead the Board and Committee performance evaluation  

exercise

•  Assess the time commitment required from Non Executive  

Directors

•  Consider the annual election and re-election of Directors to 

the Board

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Chairman’s Introduction
It has been another busy year for the 
Committee, whose main focus has 
been the composition and diversity 
of the Board.

In March 2018, following a rigorous 
recruitment process, we were 
delighted to welcome Suzanne 
Avery to the Board and Audit 
Committee. The appointment improves 
the balance of Board skills and 
gender diversity.

Suzanne brings complementary 
and relevant ﬁnancial, banking, 
sustainability and real estate skills as 
former Managing Director of Real 
Estate Finance Group and Sustainability 
at RBS.

The appointment and induction 
process for Suzanne are discussed 
in detail on page 77.

The Committee also led the 
Company’s three yearly externally 
facilitated evaluation of Board and 
Committee performance in the year. 

The Committee concluded following 
the review that the Board continued 
to operate as an effective and 
cohesive team, led by knowledgeable 
and respected Executive Directors who 
created an inclusive and collegiate 
atmosphere of transparency and trust. 

Further details of the Board evaluation 
ﬁndings and recommendations can 
be found on pages 78 to 79.

Composition of the Committee
Throughout the year the Committee 
comprised of four Non Executive 
Directors and was chaired by Patrick 
Vaughan as set out in the table on 
page 74. 

Role of the Committee
The Committee’s role is to ensure the 
Board and its Committees continue 
to have the right balance of skills, 
experience and knowledge to 
independently carry out their duties 
and provide strong and effective 
leadership to enable the Company to 
deliver its strategy, having due regard 
to the interest of its shareholders and 
other key stakeholders and to the 
beneﬁts of diversity.

It is responsible for identifying and 
recommending candidates to ﬁll Board 
vacancies and leads the selection 
process ensuring it is formal, rigorous 
and transparent.

During the year the Committee 
continued its review of Board 
composition and succession in light 
of Non Executive Directors’ tenure 
and diversity aspirations. 

The Committee drives succession 
planning for Directors and other 
senior executive positions and 
ensures that the refreshment process 
is properly planned and managed 
to maintain stability and mitigate 
business disruption.

Meetings and activities
The Committee met three times 
during the year to consider and make 
recommendations to the Board in 
respect of:

•  The appointment and 

reappointment of Non Executive 
Directors to the Board and 
its Committees

•  The externally led performance 
evaluation of the Board and 
its Committees

•  The election and re-election of 

Directors at the forthcoming AGM

•  Its own terms of reference

Succession planning
The Committee continues to focus 
on succession planning and talent 
development at Board and senior 
management levels to ensure there is 
a pipeline of experienced and suitable 
people in the organisation to support 
the Company’s longer term plans. 

It ensures that the ongoing refreshment 
of Board members is properly 
planned and managed to maintain 
stability in its operations and avoid 
business disruption.

In reviewing succession planning for 
both Executive and Non Executive 
Directors, the Committee considers 
the leadership needs of the Company 
and the balance and diversity of 
Board skills and experience It is mindful 
of the Code requirements that a 
rigorous review of any Non Executive 
appointment whose term exceeds six 
years be undertaken. 

This led to the appointment in March 
2018 of Suzanne Avery as a Non 
Executive Director of the Board and 
member of the Audit Committee.

The remaining balance of 
independent Non Executive Directors 
continues to meet the requirements 
of the Code and proposed changes 
recommended by the FRC and has 
the correct balance of skills and 
knowledge to lead the Company 
going forward. 

The Committee also reappointed 
Patrick Vaughan for a further three year 
term with a six month mutual break 
option, as they value his leadership, 
contribution and commitment to 
the business.

The Board is committed to a phased 
refreshment of the Non Executive 
Directors and this will be considered 
further next year by the Committee as 
the length of service of some members 
and Committee chairs approaches 
the best practice limit. 

The Executive Directors consider 
succession planning below Board 
level and are committed to nurturing, 
developing and retaining high 
performing individuals to ensure 
a clear talent pipeline of future 
leaders exists for Board and senior 
management positions. 

Staff appraisals are undertaken on 
an annual basis and provide a forum 
to discuss targets, progress and 
future prospects. 

Although there are no immediate 
vacancies at Board level and 
execution of the Company’s strategy 
is not dependent on any one individual, 
we recognise the need to develop our 
internal talent and for contingency 
plans for unforeseen absences. 

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Annual Report and Accounts 2018

76 LondonMetric Property Plc 
Effectiveness continued

Gender Diversity

Female  42%

Employees

Male  58%

Senior
management

Male  75%

Female  25%

Female  18%

Directors

Male  82%

All charts reﬂect the composition of the
Company and Board as at 31 March 2018

Diversity
The Board recognises the importance 
of a diverse and balanced Board 
and the beneﬁts this brings to 
the organisation in terms of skills, 
knowledge and experience. 

The Board strives to operate in a 
working environment of equal 
opportunity and promotes a culture 
of mutual respect and inclusion 
throughout the organisation. 

Diversity on the Board, and in senior 
teams, brings wider perspectives and 
enables more effective discussions and 
better decision-making. 

During the year, we appointed one 
female Non Executive Director and two 
members of staff, one male and one 
female reinforcing our commitment.

Diversity is promoted at every level 
of recruitment and across a range of 
criteria including skills, knowledge, 
experience, gender, age, disability, 
sexual orientation, educational 
background and ethnicity. However, 
over the last ﬁve years staff numbers 
have fallen by nearly 30% which, along 
with high retention rates in key roles, 
has reduced our ability to shift the 
diversity balance. We are proud of our 
low level of staff turnover which signiﬁes 
a loyal and content workforce, but 
recognise that this constrains the pace 
of change.

During the year the Chairman, Finance 
Director and senior managers met 
with members of the 30% Club Investor 
group to discuss the importance of 
diversity considerations for Board 
and executive appointments and 
succession planning. 

The Chairman conﬁrmed the 
Board’s support for greater female 
representation on listed company 
boards and the aspirational targets 
of the Hampton Alexander review and 
supports the 30% Club which aims to 
achieve a minimum of 30% of women 
on boards and senior leadership teams 
by 2020. 

Although it does not deem quotas 
appropriate given the size of the 
Company and has not set targets, 
there is an ongoing commitment to 
strengthen female representation 
at Board level and within the senior 
management team. We will continue 
to monitor carefully our diversity 
going forward.

Ultimately, all appointments to the 
Board and senior management 
team are based on merit as an 
appointment on any other basis would 
not be in the best long term interests of 
the Company. 

The Board acknowledges the 
challenges faced by the real estate 
sector in improving gender diversity 
as recruitment is dependent on the 
availability of suitable candidates and 
there continues to be fewer female 
applications to join the sector. 

The Board supports initiatives to 
promote gender diversity in the real 
estate sector and during the year has 
become a member of the Real Estate 
Balance group whose objective is to 
improve gender diversity at Board and 
senior management level by promoting 
and supporting the development of a 
female talent pipeline. 

Gender diversity at Board, senior 
management and in the Company 
as a whole is reﬂected in the charts 
opposite. At the date of this report, 
female representation at Board level 
was 18%, up from 9% last year.

The Board is also mindful of the 
Parker Review regarding ethnic and 
cultural diversity on UK boards and its 
recommendation that each FTSE 250 
board should have at least one director 
from an ethnic minority background 
by 2024. 

The Committee will take this into 
consideration when making 
future appointments. 

Further information on the Company’s 
commitment to developing and 
supporting employees and to 
promoting diversity and inclusion at 
LondonMetric is contained on page 45. 

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Board appointment 
Following the review of Board 
composition and refreshment, and 
with particular focus on diversity, the 
Committee began the search for a 
new Non Executive Director. In the 
past, the Company has employed 
search agencies to assist with Board 
appointments, however having 
identiﬁed the required skills and 
attributes, it decided to explore internal 
recommendations which had the 
right cultural ﬁt in the ﬁrst instance and 
to only approach a search ﬁrm to 
facilitate the search if no candidates 
could be identiﬁed. Estimated cost 
savings of £50,000 were made by not 
using a third party search agency.

All Directors were asked to nominate 
candidates, with a strong preference 
for a female candidate and with 
ﬁnancial experience to improve 
the gender diversity and relevant 
skills of the Board. However it was 
acknowledged that ultimately 
the search should be for the best 
candidate irrespective of gender. 

A shortlist of four candidates was 
created and reviewed by the 
Nomination Committee. Suzanne Avery 
was chosen following an extensive 
interview process including the 
Chairman, Executive and Non 
Executive Directors, as the preferred 
appointee given her personal 
attributes, values, skills and experience. 

Suzanne brings complementary 
and relevant ﬁnancial, banking, 
sustainability and real estate skills as 
former Managing Director of Real 
Estate Finance Group and Sustainability 
at RBS.

Board induction 
On appointment, the Company 
arranges a tailored induction 
programme for all new Directors to help 
them develop an understanding of the 
business including its culture, strategy, 
governance structure, stakeholders, 
portfolio, ﬁnances, risks and controls. 
The induction includes the provision of 
a detailed Company information pack, 
site visits, introductions and one to one 
meetings with senior management 
and advisors.

Details of the Induction Programme 
for Suzanne Avery is given in the case 
study above.

Induction Programme

Suzanne Avery
Non Executive Director and member 
of the Audit Committee

A comprehensive induction 
programme was arranged for 
Suzanne Avery, who joined as a new 
Non Executive Director in the year.

Professional development
Oversight of the training needs of 
individual Directors is the responsibility 
of the Nomination Committee 
Chairman. However, Directors are also 
expected to identify and develop their 
own individual training needs, skills 
and knowledge and ensure they are 
adequately informed about the Group’s 
strategy, business and responsibilities. 
They are encouraged to attend relevant 
seminars and conferences and receive 
technical update material from advisors 
and are offered training and guidance 
at the Company’s expense.

During the year, training and 
information updates were provided 
through presentations at Board 
and Committee meetings by senior 
management and the external 
auditors. Speciﬁc brieﬁng papers were 
provided on the Group’s hedging 
strategy and interest rate swap 
recoupon, reﬁnancing of the Helaba 
and unsecured debt facilities, ﬁre risk 
assessments, Responsible Business 
update, stakeholder engagement and 
the likely impact of new accounting 
standards on revenue, ﬁnancial 
instruments and leases.

Non Executive Directors are 
encouraged to familiarise themselves 
with the Group’s business through 
regular communications with the 
Executive Directors and senior 
management between formal 
meetings and site visits. 

Key induction events included 
the following:

•  One to one meetings with the 

Executive Committee, Company 
Secretary and senior managers 
from property and ﬁnance to 
understand the day to day 
operations of the business, risk 
appetite and culture

•  Provision of past Board and 

Committee papers, minutes and 
ﬁnance reports

•  Guidance and information 

on annual Board timetables, 
governance processes and 
regulatory procedures including 
share dealing

•  One to one meeting with the 

Company’s external audit partner

•  Property tours to be arranged 

Staff are encouraged to develop and 
broaden their experience and skills 
and to engage with Board members 
by way of presentations, property 
tours or one to one discussions on 
speciﬁc issues.

Further details of employee 
development including sponsorship 
of MBAs and participation in Young 
Property Professionals groups can 
be found in the People section of 
the Responsible Business review 
on page 45.

Time commitment
The Committee considers the time 
commitment required of the Directors 
and other external appointments they 
have. Before taking on any additional 
external commitments Directors must 
seek the prior agreement of the Board 
to ensure possible conﬂicts of interest 
are identiﬁed and to conﬁrm they 
will continue to have sufficient time 
available to devote to the business 
of the Company and fulﬁl their duties.

Executive Directors are required 
to devote almost all their working 
time to their executive role at 
LondonMetric although certain 
external appointments are permitted. 
All Directors are expected to attend 
all meetings of the Board and of the 
Committees on which they serve 
and the Annual General Meeting.

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Annual Report and Accounts 2018

(cid:31)(cid:32) LondonMetric Property Plc 
Effectiveness continued

Board performance and evaluation
The Board committed to undertaking 
an external review of its performance 
and that of its Committees. 

The Nomination Committee appointed 
Independent Audit Limited (IAL) in 
December to undertake this review 
following a tender process in which 
three ﬁrms were shortlisted. IAL has no 
connection with the Company. 

The process involved a comprehensive 
review of Board, Committee and 
other ﬁnancial documents and 
reports followed by a series of one 
to one meetings with the Directors, 
Executive Committee and Company 
Secretary and the observation of a full 
Board meeting. 

A detailed report of IAL’s ﬁndings was 
sent to the Chairman and presented 
at the Board meeting in March 2018. 
IAL discussed their ﬁndings, proposals 
and implementation plans with 
the Board.

Overall the results were extremely 
positive. The review concluded 
that the Board has many strengths 
and continues to operate to a 
high standard. 

The Chairman was praised for 
creating an inclusive and collegiate 
atmosphere and for his experience, 
business acumen and judgement. 

The Directors agreed that the 
Chairman and Chief Executive had a 
very strong, supportive and respectful 
working relationship and promoted a 
culture of transparency and trust.

Not withstanding these strengths, the 
review guarded against complacency 
and recommended that the Directors 
continued to improve its processes.

The Board welcomed IAL’s 
recommendations for continued 
development to its practices 
and procedures and will 
continue the implementation of 
those recommendations.

Outcome of 2018 externally facilitated performance evaluation

The key ﬁndings and recommendations from the 2018 external Board 
evaluation review are listed below. The Board discussed and agreed the 
recommendations and progress will be reported at future meetings.

Key ﬁndings

•  Most Board members have worked together, in various guises, for a number 

of years and Directors are engaged and passionate about the business

•  The Board beneﬁts from a knowledgeable group of Non Executive Directors 

who provide relevant and complementary skills in property, investment, 
ﬁnance and retail

•  There is a high calibre and motivated executive team, led by a respected 
Chief Executive who has the conﬁdence of the Non Executive Directors

•  The Non Executive Chairman is greatly respected and praised by 
his colleagues for his skill in running meetings, creating an inclusive 
and collegiate atmosphere and for his extensive experience and 
business acumen

•  The relationship between the Chairman and Chief Executive is particularly 

strong, supportive and mutually respectful. Together they promote a culture 
of trust and openness and are not afraid to bring both good and bad news 
to the Board. Non Executive Directors show a high degree of conﬁdence 
in the Executive Directors

•  There is notably frequent interaction between all Directors outside of the 

boardroom, maintaining a culture of ongoing dialogue

•  The Executive Directors keep the Non Executives informed of developments 
and the Non Executives provide frequent input and challenge in one to 
one meetings

Recommendations

•  To facilitate a more balanced debate in the boardroom, variations to 
the format, agenda, seating arrangements, attendees and location 
of meetings could be explored. The Board is encouraged to foster 
more debate in the boardroom to complement the extensive debate 
among individuals

•  Consider holding one off site meeting each year, ensuring the length, 

format and location are conducive to good discussions

•  Encourage Non Executive Directors to stay in touch with the wider 

organisation by arranging more meetings with senior managers and 
mentoring those senior managers identiﬁed as having high potential

•  Consider if more could be done to help the Non Executive Directors have 
contact with a range of stakeholders, for instance by attending more site 
visits to customers

LondonMetric Property Plc 
Annual Report and Accounts 2018

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Progress against the recommendations from last year’s internally facilitated 
review is set out below.

Recommendation

Progress

Consideration of 
Board size, skills and 
experience given 
changes to Code

Continued focus on 
Board refreshment 
and diversity to 
complement culture

Continue to promote 
diversity at all levels

•  Review of Board composition undertaken in the 
year leading to the appointment of a second 
female Non Executive Director with ﬁnancial, 
banking, sustainability and real estate experience 
to complement the existing skill set

•  After consideration and debate, it was decided 
not to reduce the complement of Non Executive 
Directors at present as all members of the Board 
continue to make a valuable individual contribution, 
bringing complementary skills and knowledge 

•  Recruitment of Suzanne Avery as a Non Executive 
Director recognised the beneﬁts of diversity and 
complementary skill sets

•  18% of Board members are female (up from 9% 

last year)

•  25% of senior management positions are ﬁlled 

by women 

Succession planning 
for the Chairman

•  The Chairman’s letter of appointment has been 

extended for a further three years to 31 March 2021 
with a six month mutual break option

More time devoted 
to strategy debate

•  One Board meeting in the year devoted to strategy 

with presentations from two senior managers

The review of individual Directors 
was outside the scope of the 
external review. 

The Chairman will undertake one 
to one meetings with each of the 
Directors and the Senior Independent 
Director will lead a review of the 
Chairman’s performance in the 
coming year.

The Company is committed to 
undertaking a further external 
review in three years’ time with internal 
reviews in the intervening years.

Re-election of Directors
Following the Board evaluation and 
appraisal process the Committee 
concluded that each of the Directors 
seeking election and re-election 
continues to make an effective 
contribution to the Board and has 
the necessary skills, knowledge, 
experience and time to enable them 
to discharge their duties properly 
in the coming year. 

Therefore the Board, following 
the advice of the Committee, 
recommends the election and 
re-election of all Directors at the 
forthcoming AGM.

Patrick Vaughan
Chairman of the Nomination Committee
30 May 2018

 
 
 
 
 
 
 
Annual Report and Accounts 2018

(cid:32)(cid:24) LondonMetric Property Plc 
(cid:41)(cid:75)(cid:75)(cid:87)(cid:93)(cid:86)(cid:92)(cid:73)(cid:74)(cid:81)(cid:84)(cid:81)(cid:92)(cid:97)

Audit Committee report

Rosalyn Wilton
Chairman, 
Audit Committee

(cid:49)(cid:8)(cid:73)(cid:85)(cid:8)(cid:88)(cid:84)(cid:77)(cid:73)(cid:91)(cid:77)(cid:76)(cid:8)(cid:92)(cid:87)(cid:8)(cid:88)(cid:90)(cid:77)(cid:91)(cid:77)(cid:86)(cid:92)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:41)(cid:93)(cid:76)(cid:81)(cid:92)(cid:8)
Committee’s report for the year to 
(cid:27)(cid:25)(cid:104)(cid:53)(cid:73)(cid:90)(cid:75)(cid:80)(cid:8)(cid:26)(cid:24)(cid:25)(cid:32)(cid:22)(cid:8)

(cid:60)(cid:80)(cid:77)(cid:104)(cid:43)(cid:87)(cid:85)(cid:85)(cid:81)(cid:92)(cid:92)(cid:77)(cid:77)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:91)(cid:8)(cid:92)(cid:87)(cid:8)(cid:88)(cid:84)(cid:73)(cid:97)(cid:8)(cid:73)(cid:8)(cid:83)(cid:77)(cid:97)(cid:8)
oversight and assurance role, assisting 
the Board and ensuring shareholder and 
(cid:87)(cid:92)(cid:80)(cid:77)(cid:90)(cid:8)(cid:91)(cid:92)(cid:73)(cid:83)(cid:77)(cid:80)(cid:87)(cid:84)(cid:76)(cid:77)(cid:90)(cid:8)(cid:81)(cid:86)(cid:92)(cid:77)(cid:90)(cid:77)(cid:91)(cid:92)(cid:91)(cid:8)(cid:73)(cid:90)(cid:77)(cid:8)(cid:88)(cid:90)(cid:87)(cid:92)(cid:77)(cid:75)(cid:92)(cid:77)(cid:76)(cid:8)
by monitoring the processes that support 
(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:90)(cid:77)(cid:88)(cid:87)(cid:90)(cid:92)(cid:81)(cid:86)(cid:79)(cid:8)(cid:73)(cid:86)(cid:76)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:90)(cid:87)(cid:84)(cid:22)(cid:1528)

Membership & Attendance

Member

Date appointed

Tenure 
(years)

Meetings 
attended

Rosalyn Wilton

Andrew Livingston

Andrew Varley  
(retired 30 September 2017)

Alec Pelmore

Suzanne Avery

25/3/2014

31/5/2016

25/1/2013

25/1/2013

22/3/2018

4

2

n/a

5

0

5 (5)

5 (5)

2 (2)

5 (5)

0 (0)

Bracketed numbers indicate the number of meetings the member was eligible to attend. 
Tenure is measured from date of appointment to the Committee and as at 31 March 2018, 
rounded to the nearest whole year.

Highlights this year

•  Review of signiﬁcant issues, accounting judgements and 

estimates including six monthly property valuations

•  Ongoing review of risk management and internal control 
processes including consideration of Brexit and cyber risk 
•  Review of going concern, viability and longer term prospects 

of the Company

•  Considered likely impact of adopting new IFRSs on revenue, 

ﬁnancial instruments and leasing

•  Assessed the Directors’ duty under S172 Companies Act 
2016 to promote the success of the Company for the 
beneﬁt of its members as a whole whilst having regard to 
wider stakeholders

•  Oversight of the effectiveness of the audit process 
•  External evaluation of its own performance and review 

of its terms of reference

Responsibilities of the Committee

•  Monitors the integrity of the ﬁnancial reporting process and 

scrutinises the full and half year ﬁnancial statements

•  Considers and challenges the key ﬁnancial judgements made 

by management

•  Reviews the risk management framework and ensures risks are 

carefully identiﬁed, assessed and mitigated

•  Reviews the performance, independence and effectiveness 

of the external auditor and audit process

•  Reviews the viability statement and going concern basis 

of preparation

•  Considers whether the Annual Report is ‘fair, balanced 

and understandable’ 

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:32)(cid:25)

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Chairman’s introduction
The role of the Audit Committee is to 
review and report to the Board on 
ﬁnancial reporting, internal control and 
risk management and the external 
audit process.

This year we welcomed Suzanne 
Avery to the Committee. Suzanne has 
extensive ﬁnancial, banking and 
property experience, serving previously 
as Managing Director of Real Estate 
Finance Group and Sustainability 
at RBS, and brings diversity and a 
fresh approach.

The Committee has continued to 
focus on risk management and has 
undertaken its annual comprehensive 
review of principal risks and the internal 
control framework as discussed on 
page 82. We are mindful of the need 
to ensure that emerging and evolving 
risks are considered. This year we 
considered speciﬁc risks relating to 
cyber security, political uncertainty and 
the impact of Brexit on the Company. 
I can conﬁrm that no signiﬁcant 
weaknesses in the control processes 
were identiﬁed this year.

This year, we considered the Directors’ 
duty to its wider stakeholders under 
S172 Companies Act 2016 having 
received a report from the Finance 
Director. The Company has undertaken 
its ﬁrst investor Responsible Business and 
employee satisfaction surveys along 
with its biennial tenant satisfaction 
survey. It has introduced ﬂexible 
working arrangements for staff, 
increasing its focus and commitment to 
its wider stakeholders. 

The Committee challenged the 
signiﬁcant ﬁnancial judgements made 
by management, including those 
concerning the largest balance sheet 
item being the valuation of investment 
property. Our review is described on 
pages 83 to 85.

We received a report from the Finance 
Director on the potential impact of 
new accounting standards on revenue, 
ﬁnancial instruments and leasing and 
are satisﬁed that management are 
fully prepared to comply with the 
new standards.

We have also considered the 
independence and effectiveness 
of the external audit process and 
have recommended that Deloitte 
be reappointed at the AGM in July. 
This year we welcome a new lead audit 
partner, Georgina Robb, to replace the 

previous partner who was no longer 
considered independent and retired.

The Committee has considered the 
provisions of the Code concerning 
going concern and longer term 
viability and has advised the Board on 
the statements made in the Report of 
the Directors on page 106 and in the 
Risk management section of this report 
on page 60. 

We have also scrutinised the processes 
in place to ensure that, taken as 
a whole, the Annual Report is fair, 
balanced and understandable and 
have advised the Board to make its 
statement on page 107. Our review 
process is described on page 87.

During the year the Company received 
a letter from the Financial Reporting 
Council (FRC) concerning its review 
of the 2017 Annual Report. The object 
of the FRC’s review was not to verify 
that the information in the Annual 
Report was correct but rather to 
consider compliance with reporting 
requirements. I am very pleased to 
report that no questions or queries were 
raised. However a few improvements to 
disclosures on alternative performance 
measures and IFRS 13 fair value 
measurements were noted and have 
been taken into consideration in the 
preparation and review of this year’s 
Annual Report. 

All Committee members will be 
attending this year’s Annual General 
Meeting and engagement with and 
feedback from investors is welcomed 
and encouraged.

Membership
During the year the Committee 
comprised of four Non Executive 
Directors until Andrew Varley retired 
on 30 September 2017, as previously 
announced. For the remainder of the 
year until March 2018 it comprised 
the remaining three Non Executive 
Directors, chaired by Rosalyn Wilton. 
Suzanne Avery was appointed to the 
Board and Committee on 22 March 
2018. Members have no day to day 
involvement with the Company or links 
with the external auditor.

Biographies of the Committee 
members which set out the relevant 
skills, knowledge and sector 
experience they bring can be found on 
pages 64 and 65.

The Board is satisﬁed that Rosalyn 
Wilton brings recent and relevant 

ﬁnancial experience as a former 
Chairman of the Risk Committee at 
AXA UK Limited. It considers that the 
Committee as a whole has the relevant 
property and ﬁnancial competence 
to enable it to discharge its duties and 
the appointment of Suzanne Avery 
brings complementary ﬁnancial, 
banking, sustainability and real estate 
experience through the senior positions 
she has held.

Meetings
The Committee follows an annual 
programme to ensure it gives full 
consideration to matters of particular 
importance and its terms of reference.

The Committee met ﬁve times last 
year, with meetings aligned to the 
Company’s ﬁnancial reporting 
timetable. Meetings are attended 
by the Committee members and, 
by invitation, the Group’s external 
auditor, independent property 
valuers (CBRE Ltd and Savills Advisory 
Services Limited), the Finance 
Director and senior management. 
Time is allocated for the Committee 
to meet the external auditor and 
property valuers independently of 
management. In addition to formal 
Committee meetings, the Chairman 
has regular contact and meetings 
with the Audit Partner and Finance 
Director. This is considered more helpful 
and effective than waiting for the 
scheduled meetings.

The May and November meetings are 
scheduled to precede the approval 
and issue of the full and half year 
ﬁnancial reports. Separate meetings 
are held with the Company’s 
property valuers to challenge 
the valuation process and review 
their independence. At the March 
meeting, the Committee reviewed 
risk management and internal control 
processes and considered the year 
end audit plan. 

The Chairman of the Committee 
reports to the Board on the matters 
considered and conclusions reached 
after each Committee meeting.

The Committee is satisﬁed that it 
receives sufficient, reliable and 
timely information and support from 
management and the Company’s 
external auditor to allow it to fulﬁl 
its obligations.

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Annual Report and Accounts 2018

(cid:32)(cid:26) LondonMetric Property Plc 
(cid:41)(cid:75)(cid:75)(cid:87)(cid:93)(cid:86)(cid:92)(cid:73)(cid:74)(cid:81)(cid:84)(cid:81)(cid:92)(cid:97)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

Activities during 2018

During the year, the work undertaken by the Committee has included the consideration, review and approval 
of the following:

Financial reporting 

Risk management 

External audit 

•   Interim and year end results 

announcement and Annual Report
•   Accounting treatment of signiﬁcant 

transactions and areas of 
judgement which could have a 
material impact on the ﬁnancial 
statements

•   Developments in new accounting 
standards on revenue, ﬁnancial 
instruments and leasing

•   Processes undertaken to ensure that 
the ﬁnancial statements are fair, 
balanced and understandable

•   Directors’ duty under S172 

Companies Act 2016
•   Audit Committee report

•  Annual assessment of the Group’s 
principal risks including Brexit and 
cyber risk and comprehensive 
review of the risk register

•   Risk appetite and dashboard 

reviewed at each Board meeting
•   The adequacy and effectiveness of 
the Group’s internal control and risk 
management systems

•   The appropriateness of the going 
concern assumption and the level 
of stress testing undertaken

•   The Viability statement and longer 

term forecast

•   Scope of the external audit plan
•   The independence and objectivity 

of Deloitte LLP

•   Performance of the external 

auditor and effectiveness of the 
audit process

•   Evaluation of key audit ﬁndings
•   Auditor’s fee proposal
•   Reappointment of external auditor
•   External audit tenure 
•   Review of non audit services and 

ratio of fees

Property valuation 

Other 

•   The property valuation process and 
the appropriateness of the interim 
and year end individual valuations

•   The independence and 

competence of the external valuers

•  Committee’s composition and member changes
•   Annual review of Committee’s own terms of reference and constitution
•  External performance evaluation
•   Annual review of the need for an internal audit function
•   The Group’s whistle blowing arrangements and anti-bribery and 

corruption policies

Risk management 
and internal controls
The Company has a culture of 
risk awareness and management 
embedded into its decision 
making processes. 

The Board is ultimately responsible 
for establishing and maintaining 
the Company’s framework of risk 
management and internal control and 
for determining the nature and extent 
of the principal risks which may affect 
its strategic objectives. It recognises 
that risk is inherent in running the 
business and understands that effective 
risk management is critical to the 
decision making process and ultimate 
success of the Company.

The risk framework and ongoing 
processes in place to identify, evaluate 
and manage the principal risks and 
uncertainties facing the Group are 
described in the Risk management 
section on pages 48 to 59.

The system is designed to give the Board 
conﬁdence that the risks are managed 
or mitigated as far as possible. However, 
it should be noted that no system can 
eliminate the risk of failure to achieve 
the Company’s objectives entirely and 
can only provide reasonable but not 
absolute assurance against material 
misstatement or loss.

The Board undertakes a robust 
assessment of the principal and 
emerging risks facing the business at 
each meeting, including those that 
could threaten the business model, 
future performance, solvency and 
liquidity. It has adopted a risk dashboard 
as a standing agenda item which 
highlights changes in the Company’s 
exposure to current and emerging risks 
and the mitigation thereof.

The Board has delegated responsibility 
for reviewing the effectiveness of the risk 
management framework and internal 
control environment and compliance 
with the Code to the Audit Committee.

The Audit Committee carries out an 
annual review of the risk register and 
reports its ﬁndings to the Board. 

The risk register was last updated in 
March 2018 and presented to the Audit 
Committee at their planning meeting. 

Risk register

The risk register identiﬁes the 
following for each key strategic, 
economic, transactional and 
ﬁnancial risk facing the business:

•  Signiﬁcance and probability of 

each risk

•  Controls and safeguards in place 
to manage and minimise each risk

•  Movements in the Group’s 

exposure to the risk since the 
last review

•  Allocated owner of the risk and 
management of safeguards

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:32)(cid:27)

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Management conﬁrmed that they 
were not aware of any material 
misstatements and the auditor 
conﬁrmed they had not found any 
material misstatements in the course 
of their work.

After reviewing reports from 
management and following its 
discussions with the auditor and 
valuers, the Committee is satisﬁed that 
the key ﬁnancial judgements have 
been appropriately and adequately 
addressed by the Executive Directors, 
reviewed by the external auditor and 
reported in these ﬁnancial statements. 

The Committee is also satisﬁed that the 
processes used to determine the value 
of the assets and liabilities have been 
appropriately reviewed, challenged 
and are sufficiently robust.

The signiﬁcant matters considered by 
the Committee during the year are 
set out in the table on pages 84 to 85 
should be read in conjunction with 
the Independent Auditor’s report on 
pages 109 to 113 and the signiﬁcant 
accounting policies disclosed in 
note 1 to the ﬁnancial statements on 
page 118.

A key part of the risk management 
process is the identiﬁcation 
and assessment of risks which 
are the responsibility of the 
Executive Committee assisted by 
senior management. 

Short reporting lines and operating 
from one office ensures the Executive 
Directors have close involvement in 
day to day matters allowing early 
identiﬁcation of risks and development 
of mitigation strategies.

The Audit Committee monitors and 
reviews the effectiveness of the 
Group’s internal controls including all 
material, ﬁnancial, operational and 
compliance controls. 

It receives an annual internal control 
evaluation questionnaire which is 
completed by senior management 
and other reports provided by the 
external auditor.

Based on its review and assessment, the 
Audit Committee is satisﬁed that there 
are no signiﬁcant weaknesses in the 
Group’s internal control structure and 
an effective risk management system 
is in place, and has reported these 
ﬁndings to the Board.

It concluded that risks were properly 
categorised, understood and acted 
upon as necessary.

Internal control framework

Signiﬁcant ﬁnancial judgements
The Committee monitors the integrity 
of the ﬁnancial information published 
in the interim and annual statements 
and considers the extent to which 
suitable accounting policies have 
been adopted, consistently applied 
and disclosed.

It pays particular attention to 
matters it considers to be important 
by virtue of their size, complexity, 
level of judgement and potential 
impact on the ﬁnancial statements 
and remuneration. 

The signiﬁcant matters considered by 
the Committee, discussed with the 
external auditor and addressed during 
the year are set out in the table on 
pages 84 to 85. 

Further details can be found in note 1 
to the ﬁnancial statements.

The Committee has considered a 
number of other judgements made 
by management, none of which were 
material in the context of the Group’s 
results or net assets. 

These included judgements 
concerning the recoverability of 
ﬁnancial assets, the valuation of 
derivative instruments, the disclosure of 
alternative performance measures and 
compliance with REIT legislation.

The key elements of the Group’s internal control framework are as follows:

•  A deﬁned schedule of matters reserved for the Board’s attention
•  A documented appraisal and approval process for all signiﬁcant 

capital expenditure

•  A comprehensive and robust system of ﬁnancial budgeting, forecasting 

and reporting

•  Short term cash ﬂow forecasting that is considered weekly by the 

Executive Committee

•  An integrated ﬁnancial and property management system
•  An organisational structure with clearly deﬁned roles, responsibilities and 
limits of authority that facilitates effective and efficient decision making
•  Close involvement of the Executive Directors in day to day operations 

including regular meetings with senior management on all operational 
aspects of the business

•  Disciplined monthly meetings of the Executive, Investment, Asset 

Management and Finance Committees

•  The maintenance of a risk register and risk dashboard highlighting 

movements in principal and emerging risks and mitigation strategies

•  A formal whistle blowing policy

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Annual Report and Accounts 2018

(cid:32)(cid:28) LondonMetric Property Plc 
(cid:41)(cid:75)(cid:75)(cid:87)(cid:93)(cid:86)(cid:92)(cid:73)(cid:74)(cid:81)(cid:84)(cid:81)(cid:92)(cid:97)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

Signiﬁcant ﬁnancial judgements

Property valuations

Area of focus

 Reporting Issue

The Committee’s role

The property valuation is a signiﬁcant 
part of the Group’s reported 
performance being the largest 
line item on the balance sheet at 
£1,842.0 million including share of 
joint ventures.

It is a key determinant of the Group’s 
proﬁtability, net asset value, total 
property return, and drives an element 
of variable remuneration and is 
therefore a key area of focus.

It is an ongoing business risk, as 
reﬂected within Risk management 
on pages 56 to 57 of this report.

For further details on property 
valuations refer to notes 1 and 9 
of the ﬁnancial statements.

Revenue recognition

Property valuations are inherently 
subjective as they are based on 
assumptions and judgements made 
by the external valuers which are 
underpinned by recent market 
transactions and may not prove 
to be accurate.

These include future rental growth 
and yield assumptions, committed 
expenditure on developments, letting 
and vacancy assumptions, rent free 
periods and lease incentives.

All of the Group’s investment properties 
and those held in joint ventures are 
externally valued by two independent 
property valuers, CBRE and Savills.

The Committee met twice during the 
year with the property valuers, as part 
of the interim and year end reporting 
process, to challenge and assess the 
integrity of the valuation process, 
methodologies and outcomes.

The key judgements applied to each 
property valuation and any issues raised 
with management were considered 
and discussed, to ensure that undue 
inﬂuence had not been placed on 
the valuation process and the valuers 
remained independent and objective. 

Area of focus

 Reporting Issue

The Committee’s role

Total revenue for the year, which 
primarily consists of rental income 
generated from the investment 
property portfolio, was £92.7 million 
including share of joint ventures.

Certain transactions are non standard 
in nature and include unusual or 
complex terms requiring management 
to make judgements as to whether, 
and to what extent, revenue should 
be recognised in the year.

There is a risk of overstatement or 
deferral of income in order to meet 
performance and remuneration targets 
or expectations.

Complex items include the accounting 
for rent free periods and capital 
incentives, which vary between 
lease contracts and are considered 
when property is acquired, sold or as 
developments complete as well as 
when existing leases are regeared.

The Committee received reports from 
management and the external auditor 
on the timing of revenue recognition 
for property and lease transactions 
completing in the year, lease incentives 
and surrender payments. Consistency 
of accounting treatment with previous 
years was considered, including in 
relation to the following:

Significant transactions

Area of focus

 Reporting Issue

The Committee’s role

During the year, the Group transacted 
on £636.5 million of property 
acquisitions and sales, as discussed in 
detail in the Property review on pages 
26 to 33.

Some transactions were large and/
or complex in nature and required 
management to make judgements 
when considering the appropriate 
accounting treatment including 
how and when a transaction should 
be recognised and the fair value of 
the consideration.

Complexities considered this year 
included corporate acquisitions 
and sales, rental top up payments, 
conditionality and deferred 
completion arrangements.

Signiﬁcant property acquisitions 
and disposals were reviewed by the 
Committee to the extent that there 
were unusual terms and conditions 
or judgement in relation to timing.

The Committee, in conjunction with 
the external auditor, received and 
challenged management’s accounting 
proposals in relation to:

 
 
 
 
 
 
 
 
 
LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:32)(cid:29)

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Supporting market evidence was 
provided to enable the Committee to 
benchmark assets and conclude that the 
assumptions applied were appropriate.

This year the Committee probed and 
debated any valuations which required 
a greater level of judgement or particular 
issues with the valuers, including property 
under development and valuation 
movements that were not broadly in line 
with the IPD benchmark.

The Committee challenged yield and ERV 
assumptions and discussed the impact 
on values of committed expenditure 
on developments, letting assumptions, 
vacant space, rent free periods and 
lease incentives.

As part of their audit work, Deloitte 
use valuation specialists to assess and 
challenge the valuation approach, 
assumptions and judgements. They 
meet independently with the valuers 
and report their ﬁndings and conclusions 
to the Committee.

Conclusion

The Committee conﬁrmed to the 
Board that the external property 
valuation included within the ﬁnancial 
statements had been carried out 
appropriately, independently 
and in accordance with industry 
valuation standards.

•   The timing of recognising rental income 

•   The accounting for surrender premium 

arising on developments at Stoke, 
Crawley, Huyton, Tonbridge and 
Launceston that completed in the year

•   The accounting for rent free periods and 
lease inducements including at Speke, 
Coventry and Launceston

received at Leicester

Conclusion

The Committee considered the 
options available, challenged 
the judgements made and were 
satisﬁed that revenue had been 
appropriately recognised in the 
ﬁnancial statements.

•   The corporate acquisition of 

14 distribution assets for £117 million

•  The corporate disposals of a retail park 

in Milford Haven and an office in Marlow 
for £84 million

All transactions were considered in 
substance to be property acquisitions and 
disposals and not business combinations 
under IFRS 3

•   The timing of recognition of acquisitions 
and disposals based on the transfer 
of risks and rewards of ownership, 
including the disposal of the Morrisons 
store at Loughborough which 
exchanged before the year end with 
a deferred completion

Conclusion

The Committee concurred with the 
approach adopted by management 
in each case.

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Annual Report and Accounts 2018

(cid:32)(cid:30) LondonMetric Property Plc 
(cid:41)(cid:75)(cid:75)(cid:87)(cid:93)(cid:86)(cid:92)(cid:73)(cid:74)(cid:81)(cid:84)(cid:81)(cid:92)(cid:97)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

External audit
Deloitte LLP was appointed as 
external auditor following a formal 
tender process in 2013. Current UK 
regulations require rotation of the 
lead audit partner every ﬁve years, a 
formal tender of the auditor every ten 
years and a change of auditor every 
20 years. 

A new lead partner, Georgina 
Robb, was appointed following the 
conclusion of last year’s audit during 
which she shadowed the team and 
former partner.

Oversight
Deloitte presented their audit plan for 
the year at the planning meeting in 
March. The key audit risks and area of 
judgement were highlighted and the 
level of audit materiality agreed.

Deloitte presented detailed reports 
of their ﬁndings to the Committee 
before the interim and full year results. 
The Committee questioned and 
challenged the work undertaken and 
the key assumptions made in reaching 
their conclusions.

Effectiveness
The Committee has assessed the 
performance, independence, 
objectivity and fees of the external 
auditor through discussions with 
the Finance Director and senior 
management team and through a 
review of the audit deliverables.

In making its assessment, the 
Committee considers the qualiﬁcations, 
expertise and resources of the audit 
partner and team as well as the quality 
and timeliness of the audit deliverables. 

It reviewed the extent to which 
the audit plan was met, the level 
of independent challenge and 
scrutiny applied to the audit and 
the depth of understanding of key 
accounting judgements. 

It considered the interaction with and 
feedback from senior management 
on the audit process, focusing on the 
early identiﬁcation and resolution 
of issues and judgements and the 
quality and timely provision of audit 
clearance reports for review. The results 
of the audit debrief meeting held 
between senior management and 
the audit team are relayed to the 
Audit Committee along with any areas 
identiﬁed for improvement.

Non audit services

The Company’s policy on non audit 
services stipulates that they are 
assessed on a case by case basis by 
the Executive Directors who observe 
the following guidelines:

•  Pre approval of fees by the 

Executive Directors up to a limit 
of £100,000 or referral to the 
Audit Committee for review 
and approval

•  Proposed arrangements to 

maintain auditor independence

•  Conﬁrmation from the 
auditors that they are 
acting independently

•  Certain services are prohibited 
from being undertaken by the 
external auditors including 
bookkeeping, preparing 
ﬁnancial statements, design 
and implementation of ﬁnancial 
information systems, valuation, 
remuneration and legal services

Having undertaken its review, in the 
opinion of the Audit Committee, the 
2018 audit was appropriately planned, 
executed and of a high quality. 

There continues to be a good working 
relationship between management 
and Deloitte, who remain independent 
and objective. 

Independence
The Committee recognises the 
importance of auditor objectivity and 
independence and understands that 
this could be compromised by the 
provision of non audit services. 

All taxation services and remuneration 
advice is provided separately by 
PwC and corporate due diligence 
is undertaken by BDO LLP. This year 
BDO LLP has also been appointed 
to undertake the external audit of 
a number of the Group’s subsidiary 
company accounts.

However, there may be certain 
circumstances where, due to Deloitte’s 
expertise and knowledge of the 
Company or real estate sector, it is 
appropriate for them to undertake non 
audit work.

The table below sets out the fees 
payable to Deloitte for each of the past 
three years. The three year average 
ratio of non audit fees (including the 
cost of the interim review) to audit 
fees is less than 20%, supporting the 
Committee’s conclusion that Deloitte 
remains independent and that the 
level on non audit fees is not material.

Deloitte has conﬁrmed to the 
Audit Committee that they remain 
independent and have maintained 
internal safeguards to ensure the 
objectivity of the engagement partner 
and audit staff is not impaired. 

They have also conﬁrmed that they 
have internal procedures in place to 
identify any aspects of non audit work 
which could compromise their role as 
auditors and to ensure the objectivity of 
their audit report.

Audit and non audit fees to Deloitte

Year to 31 March 

Audit fees 

Review of interim results

Other non audit fees

Total

2018
£000

115

27

2

144

2017
£000

153

26

–

179

2016
£000

153

26

–

179

Ratio of non audit fees (including interim review)
to audit fees

25%

17%

17%

Audit fees paid to the external auditor in respect of joint ventures totalled £47,000 at share  
(2017: £17,000 at share).

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:32)(cid:31)

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•   The report was written in 

straightforward language and 
without unnecessary repetition 

•  The use of any alternative 

performance measures had 
been adequately explained 
and reconciled to the ﬁnancial 
statements and had not been 
given more prominence than a 
corresponding measure under IFRS

The Audit Committee is satisﬁed 
that the Annual Report met 
this requirement.

Committee effectiveness
During the year the Board, led by the 
Nomination Committee, carried out 
an externally facilitated evaluation 
of its performance and that of 
its Committees. 

The Directors felt the Audit Committee 
continued to run smoothly, at a high 
standard and was very well supported 
by the Finance Director, senior ﬁnance 
team and the external auditors. 

The Chairman was commended 
for her ability to probe and provide 
the appropriate level of challenge 
and scrutiny.

Terms of reference
The Committee considers its own terms 
of reference on an annual basis taking 
into account changes to legislation. 

They were last reviewed and updated 
in March 2018 and can be found on the 
Company’s website.

Rosalyn Wilton
Chairman of the Audit Committee
30 May 2018

Auditor reappointment
The external audit was last tendered 
in 2013 and in accordance with the 
current regulation the Company is 
required to re-tender the audit at least 
every 10 years. The Committee believes 
Deloitte remains effective in its role 
and has recommended to the Board 
that they be appointed for another 
year. A resolution to this effect will be 
proposed at the AGM in July.

There are no immediate plans to re-
tender the audit. However, given that 
2019 will be Deloitte’s sixth consecutive 
year in office, the Committee will 
consider whether to re-tender the audit 
over the next two ﬁnancial years.

The Company has complied with 
the provisions of the Statutory Audit 
Services for Large Companies Market 
Investigation (Mandatory Use of 
Competitive Tender Processes and 
Audit Committee Responsibilities) Order 
2014 during the year.

Internal audit
The requirement for a dedicated 
internal audit function was reviewed 
by the Audit Committee during the 
year and was not felt to be necessary 
or appropriate given the size and 
relatively simple structure of the Group, 
the close day to day involvement of 
the Executive Directors and the internal 
control procedures in place. This is kept 
under regular review.

Going concern and viability
Although the statements on going 
concern and viability are a matter for 
the whole Board, the Audit Committee 
reviewed the appropriateness of 
preparing the ﬁnancial statements on a 
going concern basis and whether the 
business was viable in accordance with 
the Code. 

Its assessment included a review of 
the principal risks and risk appetite, 
the chosen period of assessment, 
headroom under loan covenants, 
undrawn debt facilities and the 
level of stress testing of ﬁnancial 
forecasts undertaken. 

Particular attention was paid to the 
time horizon chosen to assess the 
Company’s viability and its longer 
term prospects. 

Following their review, the Committee 
was satisﬁed that the going concern 
basis of preparation remained 
appropriate and recommended the 
Viability statement be approved by 
the Board. 

The Board’s conﬁrmation on going 
concern is set out on page 106 and 
its Viability Statement is set out on 
page 60.

Fair, balanced and understandable
At the request of the Board, the Audit 
Committee considered whether the 
2018 Annual Report was fair, balanced 
and understandable and whether it 
provided the necessary information 
for shareholders to assess the Group’s 
position, performance, business model 
and strategy. 

In reaching this decision the 
Committee received a report from the 
Finance Director on the procedures in 
place and adopted by management 
in the preparation of the Annual 
Report, which, as in previous years, 
included the following:

•   The establishment of a team of senior 

managers drawn from ﬁnance, 
investor relations and property with 
clear responsibilities for preparation 
and review of relevant sections of 
the report

•   Regular team meetings were held 

during the drafting stages to ensure 
consistency of tone and message, 
balanced content and appropriate 
linking of the various sections

•   Regulatory and technical updates 
were provided by and discussed 
with the external auditor as part 
of a technical brieﬁng workshop 
attended by relevant staff in 
February 2018

•   The Chief Executive provided early 
input to and agreed the overall 
message and tone of the report

•   The Executive Directors were closely 
involved in the initial drafting process 
and reviewed their respective 
draft sections

•   An extensive veriﬁcation exercise 
was undertaken to ensure factual 
accuracy and consistency 
throughout the report

•   The ﬁnal draft report was reviewed by 
the Audit Committee and discussed 
with the Finance Director and 
senior management before being 
presented for Board approval

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Annual Report and Accounts 2018

88 LondonMetric Property Plc 
Remuneration

Remuneration Committee report

James Dean
Chairman, 
Remuneration Committee

I am pleased to present the 
Remuneration Committee’s report on 
(cid:44)(cid:81)(cid:90)(cid:77)(cid:75)(cid:92)(cid:87)(cid:90)(cid:91)(cid:1524)(cid:8)(cid:90)(cid:77)(cid:85)(cid:93)(cid:86)(cid:77)(cid:90)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:78)(cid:87)(cid:90)(cid:104)(cid:92)(cid:80)(cid:77)(cid:8)(cid:97)(cid:77)(cid:73)(cid:90)(cid:8)(cid:92)(cid:87)(cid:8)
31 March 2018. 

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Membership & Attendance

Member

James Dean

Philip Watson

Andrew Varley  
(retired 30 September 2017)

Rosalyn Wilton

Andrew Livingston

Date appointed

Tenure 
(years)

Meetings 
attended

1/10/2010

25/1/2013

30/5/2013

14/7/2016

11/7/2017

8

5

n/a

2

1

4 (4)

4 (4)

2 (2)

4 (4)

1 (2)

Bracketed numbers indicate the number of meetings the member was eligible to attend.
Tenure is measured from date of appointment to the Committee and as at 31 March 2018, 
rounded to the nearest whole year.

Highlights this year

•  Appointment of Andrew Livingston following the AGM in July 
replacing Andrew Varley who retired from the Board and 
Committee on 30 September 2017

•  Reviewed and approved the extension to the Chairman’s 

letter of appointment for three years, with a six month mutual 
break option, and fees of £230,000 for the year to 31 March 
2019, reducing to £215,000 and £200,000 for the following two 
years respectively

•  Considered a Remuneration Benchmarking report and 

Corporate Governance update from PwC

•  Set challenging targets for the annual bonus and LTIP 

Responsibilities of the Committee

•  Setting and reviewing the Group’s overall Remuneration Policy 

and strategy

•  Determining and reviewing individual remuneration packages 
•  Determining and reviewing the rules for the Long Term 

Incentive Plan (LTIP) and the Annual and Deferred Bonus 
Plan arrangements

•  Approving salaries, bonuses and share awards for the 

Executive Directors

This report is structured as follows:

Chairman’s introduction

Directors’ Remuneration at a glance

Directors’ Remuneration Policy

Annual Report on Remuneration

page 89

page 90

page 94

page 96

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:32)(cid:33)

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Chairman’s introduction
The primary role of the Remuneration 
Committee is to determine and 
recommend to the Board a fair 
reward structure that incentivises 
the Executive Directors to promote 
and deliver the Group’s strategic 
objectives whilst maintaining stability 
in the management of its long 
term business.

Our Annual Report on Remuneration 
contains details of our payouts during 
the ﬁnancial year being reported on 
and how we intend to implement 
the Remuneration Policy for the year 
ending 31 March 2019. This part of the 
report is subject to an advisory vote at 
the forthcoming AGM.

Remuneration aligned to strategy
The performance metrics which 
underpin the variable elements of 
remuneration are EPRA earnings per 
share (EPS), total property return (TPR), 
total accounting return (TAR) and total 
shareholder return (TSR). Three of these 
are KPIs used to monitor performance 
of the business against strategic 
priorities as reﬂected on pages 24 to 25.

Performance during the year
The Company has delivered another 
very strong set of results this year. 
Its successful deployment of the 
proceeds generated from the equity 
placing in March 17 into the logistics 
sector and the disposal of non core 
assets, including the last remaining 
office in Marlow, has secured both 
earnings and NAV growth.

We continue to reposition the portfolio 
towards the logistics market to reﬂect 
the change in consumer shopping 
patterns and have increased our 
exposure in this sector to 69%. 
This is supported by a proﬁtable 
development programme that has 
delivered property completions at 
Huyton, Stoke and Crawley to schedule 
and within budget. 

Our strategy has delivered strong 
ﬁnancial performance, underpinned 
by robust portfolio metrics, supporting 
the commitment to a progressive and 
well covered dividend. This year the 
Directors have increased the dividend 
by 5.3% to 7.9p.

EPRA earnings per share has increased 
by 3.7% to 8.5p and EPRA net assets 
per share by 10.3% to 165.2p. Like for 
like income grew by 4.3% and the 
Group’s total property return of 13.71% 
outperformed the IPD Quarterly 
Universe Index for the Group’s 
portfolio of assets of 12.95% by 76 bps. 
Total accounting return for the year 
was 15.5%.

Given the strength of the Company’s 
performance and the returns enjoyed 
by its shareholders, the Committee 
considers it appropriate to reward the 
Executive Directors with the variable 
elements of remuneration calculated 
this year. It has also considered pay 
increases, bonuses and LTIP awards of 
the wider workforce when determining 
Executive Directors’ pay.

Annual bonus 
The Executive Directors have delivered 
successfully against a large number of 
operational and strategic objectives 
including income quality and growth, 
portfolio repositioning, optimising the 
funding structure, the development 
pipeline and relationships with  
stakeholders. 

This strong ﬁnancial and non ﬁnancial 
performance has been taken into 
account when considering the 
variable elements of remuneration. 

The Committee has calculated annual 
bonuses for the Executive Directors 
to be at 71 – 79% of their respective 
maximum levels. This year the Directors 
have decided to opt out of the annual 
bonus deferral provision in accordance 
with the Remuneration Policy, as they 
have met the minimum shareholding 
requirement of 700% of salary. 
Their annual bonuses will be paid 
in full in cash in June 2018.

LTIP vesting 
Vesting of the LTIP awards granted 
to Executive Directors in 2015 is 
dependent on Company performance 
over the three year period to 
31 March 2018. 

Performance is measured by reference 
to TSR versus the FTSE 350 Real Estate 
Super Sector and EPRA EPS growth. 

The Committee assessed performance 
and based on actual EPRA EPS of 
8.5p and TSR performance of 30.4%, 
94% of awards granted are expected 
to vest in June 2018, subject to 
continued service.

The Committee is satisﬁed that the level 
of payout under the variable incentive 
plans is appropriate and no discretion 
was exercised by the Committee in 
relation to these outcomes. 

LTIP awards
Delivery of long term growth in 
shareholder value is rewarded through 
the Group’s LTIP arrangements. 
Awards over 1,661,282 shares were 
granted to the Executive Directors 
in the year. LTIP and deferred bonus 
shares amounting to 2,333,997 shares 
vested in the year. The Directors 
disposed of 1,178,416 shares to 
settle tax liabilities and retained the 
remaining 1,155,581 shares. 

Salary increases
The Committee approved salary 
increases of 2.5% for the Executive 
Directors, effective from 1 June 2018 
which are lower than the increases 
for employees generally of 4.8%.

Looking forward
Following an extensive Policy review 
and update last year, the Committee 
believes the current remuneration 
arrangements are fair and ﬁt 
for purpose. 

However we are mindful of the 
changing economic and political 
landscape and of the proposed 
legislative changes to the UK Corporate 
Governance Code extending the 
remit of Remuneration Committees, 
strengthening the employee voice and 
reporting the pay ratio between the 
CEO and the average UK workforce. 
We have committed to publishing the 
pay ratio once there is clarity over the 
appropriate calculation methodology.

As such, we will continue to review 
the policy to ensure it meets our 
objective of incentivising and 
motivating management to deliver 
the Company’s strategy.

James Dean
Chairman of the Remuneration Committee
30 May 2018

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Annual Report and Accounts 2018

(cid:33)(cid:24) LondonMetric Property Plc 
Remuneration continued

Directors’ Remuneration at a glance

What we awarded during the financial year and why

Total remuneration for Executive Directors

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

Salary
£000

Beneﬁts
£000

Pension
£000

Bonus
£000

520

342

360

360

24

25

24

25

78

51

54

54

679

378

360

398

LTIP
£000

1,023

537

566

566

Total
2018
£000

2,324

1,333

1,364

1,403

Total
2017
£000

2,506

1,415

1,488

1,488

Illustrative change 
in value of shares 
owned and 
outstanding 
share awards1
£000

574

362

410

360

1  Based on an illustrative swing in share price of 10p. For reference, the highest closing share price during the year was 188.40p and the lowest closing price was 155.65p. 

The number of shares and share awards was calculated based on the year end total 

Actual total remuneration compared  
to the 2018 potential
The following charts show the actual remuneration earned 
by the Executive Directors against the minimum, on target 
and maximum scenarios for the year.

The elements of remuneration have been categorised into 
three components: (i) Fixed; (ii) Annual Bonus (including 
Deferred Bonus); and (iii) LTIP. 

The target scenarios assume 50% payout of the maximum 
opportunity under the annual bonus and 25% (being 
threshold vesting) of the LTIP. For the purposes of comparison 

we have included the single ﬁgure remuneration for the year 
ending 31 March 2018. 

In line with the expected changes to the regulations on 
policy scenarios, we have also included additional reference 
points to show indicative share price growth scenarios at 
target (50% growth over three years) and maximum (100% 
growth over three years) levels.

Actual remuneration is between the on target and maximum 
scenarios reﬂecting the strong performance in the year.

Andrew Jones £000

Martin McGann £000

3,538

1,027

2,511

1,027

1,027

862

622

862

622

2,324

1,333

1,975

539

539

479

418

1,436

539

479

418

792
135
239

418

67

859

135
239

418

418

1,310
257
431

622

622

1,438

128

257
431

622

Minimum

On target

Maximum

Actual

Minimum

On target

Maximum

Actual

Fixed

Bonus

LTIP

Share price growth

Fixed

Bonus

LTIP

Share price growth

Valentine Beresford £000

Mark Stirling £000

2,078

568

1,510

568

568

504

504

438

438

1,364

1,403

2,079

568

1,511

568

568

504

504

439

439

833
142
252

439

71

904

142
252

439

439

832
142
252

438

71

903

142
252

438

438

Minimum

On target

Maximum

Actual

Minimum

On target

Maximum

Actual

Fixed

Bonus

LTIP

Share price growth

Fixed

Bonus

LTIP

Share price growth

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:33)(cid:25)

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Annual bonus plan – targets and outcomes

Performance measure

EPRA EPS

TPR

Payout target

25%

7.93p

50%

8.07p

100%

8.50p

Actual

8.54p

Combining these outcomes 
with the personal objectives 
gives the following payouts:

Andrew Jones

%  
awarded

100%

Martin McGann

12.95%

14.24%

15.54%

13.71%

40%

Valentine Beresford

Mark Stirling

£000

679

378 

360 

398 

% of 
maximum

79

79

71

79

2015 LTIPs vesting in the year – targets and outcomes

Performance measure

TSR

EPRA EPS

Payout target

25%

1.7%

100%

2.6%

8.29p

8.66p

Actual

30.4%

8.54p

%  
awarded

The estimated number of shares 
vesting are as follows:

Andrew Jones

100%

Martin McGann

76%

Valentine Beresford

Mark Stirling

Number

574,189

301,450

317,438

317,438

The level of LTIP vesting in 2018 demonstrates the successful performance of the Company over the longer term performance 
period with strong absolute earnings growth and a resulting comparative return performance in excess of the Company’s 
direct competitors.

LTIPs granted in the year

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

Basis of award
(% of salary)

200%

165%

165%

165%

Date of grant

16 June 2017

16 June 2017

16 June 2017

16 June 2017

Share awards
number

Face value
per share

Face value of award
£000

619,500

335,402

353,190

353,190

168.6p

168.6p

168.6p

168.6p

1,044

565

595

595

Shareholding of the Executive Directors

% of salary

Andrew
Jones

Martin
McGann

Valentine
Beresford

Mark
Stirling

0%

250%

500%

Shareholding requirement

Beneﬁcially owned shares

Unvested interests over shares

Shareholding requirement

Beneﬁcially owned shares

Unvested interests over shares

Shareholding requirement

Beneﬁcially owned shares

Unvested interests over shares

Shareholding requirement

Beneﬁcially owned shares

Unvested interests over shares

1,000%

1,250%

750%

700%

700%

700%

700%

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Annual Report and Accounts 2018

(cid:33)(cid:26) LondonMetric Property Plc 
Remuneration continued

Summary of Policy and operation next year

Elements and operation

Base salary

Implementation in the year to 31 March 2019

An Executive Director’s basic salary is set on appointment and 
reviewed annually with changes taking effect from 1 June or 
when there is a change in position or responsibility.

The Committee decided to increase base salaries for the 
Executive Directors by 2.5%. The average increase across the 
Group was 4.8%.

When determining an appropriate level of salary, the 
Committee considers multiple factors including pay increases 
to other employees, remuneration within comparable 
property companies, and the general performance of the 
Company and individual.

Executive Director

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

Base salary from 
1 June 2018

Base salary from
1 June 2017

535,167

351,204

369,831

369,831

522,115

342,638

360,811

360,811

Pension

The maximum contribution is 15% of salary which is payable as 
a monthly contribution to the Executive Director’s individual 
personal pension plan or taken as a cash equivalent. Salary 
sacriﬁce arrangements can apply.

Beneﬁts

The Committee recognises the need to maintain suitable 
ﬂexibility in the beneﬁts provided to ensure it is able to support 
the objective of attracting and retaining personnel in order to 
deliver the Group strategy.

Annual bonus

Annual performance targets are set by the Committee at 
the start of the ﬁnancial year linked to the Group’s long term 
strategy of growth in EPRA EPS and TPR. 

At least half of the bonus will be linked to the key property 
and ﬁnancial metrics. 

Non ﬁnancial targets are set to measure individual strategic 
performance and contribution to the achievement of 
portfolio management initiatives and other operational 
management objectives.

The payout for on target performance is 50% of the 
maximum and the payout for threshold performance is 25% 
of the maximum.

Executive Directors who have met their minimum 
shareholding requirement have the option to receive the 
annual bonus paid in cash. 

For those who are yet to meet the minimum shareholding 
requirement, up to 100% of the annual bonus will be paid in 
deferred shares vesting after three years.

Executive Directors will receive the 15% of salary supplement in 
lieu of pension this year.

In line with the Policy, each Executive Director receives:

•  Car allowance

•  Private medical insurance

•  Life insurance

•  Permanent health insurance

The maximum bonus opportunity will remain at 165% of 
salary for the Chief Executive and 140% of salary for the other 
Executive Directors. The performance conditions and their 
weightings for the annual bonus are as follows: 

Performance 
measure

Growth in  
EPRA EPS

Growth in 
total property 
return (TPR)

Personal  
objectives

Weighting Description of targets

35% Growth in Company’s EPRA 
EPS against a range of 
challenging targets

35% Growth in Company’s TPR against 

IPD Quarterly Universe Index; Full 
payout if growth is 120% of the 
Index; 50% payout if growth is 
110% of the Index; 25% payout if 
growth matches the Index; Straight 
line interpolation between limits; 
No payout if TPR is negative

30% Vary between individuals and 

include portfolio management 
metrics, ﬁnancial and people 
management, investor relations 
and regulatory compliance

The Committee believes that the EPRA EPS target and details of 
the personal objectives for the coming year are commercially 
sensitive and accordingly these are not disclosed. These will be 
reported and disclosed retrospectively next year in order for 
shareholders to assess the basis for any payouts.

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:33)(cid:27)

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Summary of Policy and operation next year (continued)

Elements and operation

Long Term Incentive Plan

Implementation in the year to 31 March 2019

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Annual awards of up to 200% of salary for the Chief Executive 
and 165% of salary for the other Executive Directors. 

Performance 
measures

Weighting

Threshold 
(25% vesting)

Maximum1
(100% vesting)

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Awards for the year to 31 March 2019 will be made in line with 
these levels.

Awards will normally vest at the end of a three year period 
subject to:

•  The Executive Director’s continued employment at the date 

Total shareholder 
return (TSR)

37.5% Equal to index Equal to upper quartile 
ranked company

Total accounting 
return (TAR)

37.5% Equal to index Equal to upper quartile 
ranked company

EPRA EPS growth

25%

RPI plus 0%  
over three years

RPI plus 4%  
over three years

of vesting

•  Satisfaction of the performance conditions

Vested awards will be subject to a further two year holding 
period during which Executive Directors cannot dispose of 
shares other than for tax purposes.

The Committee may award dividend equivalents on awards 
that vest.

Shareholding requirement

Executive Directors are encouraged to build up and hold a 
shareholding equivalent to a percentage of base salary.

Executive Directors will be required to retain at least 50% of 
the post tax amount of vested shares from incentive plans 
until this requirement is met and maintained.

The Committee has introduced a post leaving shareholding 
requirement for the Executive Directors, who must retain 
shares equivalent in value to one year’s salary for 12 months 
post cessation.

Key elements and time period

1  Straight line interpolation between threshold and maximum

TSR and TAR are relative measures measured against the 
FTSE 350 Real Estate Sector excluding agencies and operators 
(the Index). Under the TSR element, there will be no payout if 
TSR is negative. The Committee determined that the indices 
would not be weighted.

The Committee has determined to reduce the EPRA EPS growth 
target range from RPI plus 3% and RPI plus 8% to RPI plus 0% 
and RPI plus 4%. The rationale for this change was as follows:

•  The Company has now substantially completed its 

repositioning of the portfolio to logistics; therefore the 
opportunity to increase EPS over the next period, as a result 
of the yield arbitrage on disposals of non core assets, has 
been materially reduced

•  The majority of the Group’s leases contain ﬁxed or RPI linked 
rent review clauses which limit the ability of the Executive 
Directors to grow earnings materially ahead of the index 

•  The Company has had a long run of very strong EPS 

performance as it repositioned itself which has resulted 
in a high base point from which to generate future growth 
in an increasingly challenging external market

The shareholding requirement for 2019 is:

•  Chief Executive – 700% of salary

•  Other Executive Directors – 700% of salary

•  Newly appointed Executive Directors – 400% of salary

Year ending March

Base salary

Pension

Beneﬁts

Annual bonus 

Cash

Deferred shares

LTIP

Non Executive Directors’ fees

2019

2020

2021

2022

2023

Key: Performance period: 

Vesting period: 

Holding period: 

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Annual Report and Accounts 2018

(cid:33)(cid:28) LondonMetric Property Plc 
Remuneration continued

Directors’ 
Remuneration Policy
The Group’s Remuneration Policy 
is designed to align Executive pay 
and incentives with the Company’s 
goals and encourage and 
reward exceptional overall and 
individual performance. 

The Remuneration Policy for 
the Group was approved by 
shareholders at the 2017 AGM 
on 11 July 2017 for a period of 
three years. 

The following section is an extract 
from the full Remuneration 
Policy which can be found 
on the Company’s website at 
www.londonmetric.com. 

Overview of our Policy
The overriding objective is to operate 
a fair and transparent Remuneration 
Policy which motivates and retains 
individuals of the highest calibre and 
rewards the delivery of the Group’s key 
strategic priorities, long term growth 
and attractive shareholder returns. 
As well as motivating, remuneration 
plays a key role in retaining highly 
regarded individuals and needs to 
be competitive.

The principles which underpin the 
Policy ensure that Executive Directors’ 
remuneration:

•   Is aligned to the business strategy 

and achievement of business goals

•   Is aligned with the interests of 

shareholders by encouraging high 
levels of share ownership

•   Attracts, motivates and retains high 

calibre individuals

•   Is competitive in relation to other 

comparable property companies

•   Is set in the context of pay and 
employment conditions of 
other employees 

•   Rewards superior performance 
through the variable elements 
of remuneration that are linked 
to performance

Strategy Link to Remuneration Policy

The Committee’s remuneration decisions are heavily steered by the Group’s strategic direction and corporate objectives. 
It is important that the incentive arrangements operated by the Company are directly linked to the achievement of 
the Company’s strategy and overall corporate objectives. It is the Committee’s belief that the incentive elements of the 
Remuneration Policy align with these objectives. 

The following table demonstrates how the Company’s strategic objectives and key performance indicators (KPIs) are 
aligned to its variable incentive arrangements of the annual bonus and LTIP. Further details of these KPIs can be found 
on pages 24 to 25 of this Annual Report.

Annual Bonus  
cash

Annual Bonus  
deferred shares

LTIP

Strategic objective and key performance indicator

Deliver long term shareholder returns
Total shareholder return 

Maximise long term total accounting return
Total accounting return

Maximise property portfolio returns
Total property return

Deliver sustainable growth in EPRA earnings
EPRA earnings per share

Drive like for like income growth through management actions
Like for like income growth

Maintain a higher than market benchmark WAULT 
WAULT

Maintain strong occupier contentment
EPRA vacancy

Key remuneration objective
Encourage the build-up and retention of shares

The table on pages 92 to 93 provides a summary of the core elements of the Directors’ Remuneration Policy, as well as its 
implementation in the coming year.

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:33)(cid:29)

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Shareholding guidelines
Minimum shareholding requirement
In line with the Group’s remuneration 
principles, the Remuneration Policy 
places signiﬁcant importance on 
aligning the long term interests 
of shareholders with those of 
management by encouraging the 
Executive Directors to build up over a 
ﬁve year period and then subsequently 
hold a shareholding equivalent 
to a percentage of base salary. 
Adherence to these guidelines is a 
condition of continued participation in 
the equity incentive arrangements.

In addition, Executive Directors will be 
required to retain at least 50% of the 
post tax amount of vested shares from 
the Company incentive plans until the 
minimum shareholding requirement 
is met and maintained. The following 
table sets out the minimum 
shareholding requirements.

Role

Chief Executive 

Other Executive Directors

Newly appointed 
Executive Directors

Shareholding 
requirement 
(% of salary)

700%

700%

400%

The Committee has set the requirement 
at 400% of salary for the Policy period 
for newly appointed Executive Directors 
to reﬂect the practical maximum that 
could be achieved if all incentives were 
earned over the Policy period and paid 
in shares.

Post leaving shareholding requirement
There is a post leaving shareholding 
requirement for the Executive Directors, 
who must retain shares equivalent in 
value to one year’s salary, for 12 months 
post cessation.

This requirement provides further long 
term alignment with shareholders 
and ensures a focus on successful 
succession planning.

Non Executive Directors’ fees

The fees for Non Executive Directors and the Chairman are broadly set at a 
competitive level against the comparator group.

In general the level of fee increase for the Non Executive Directors and 
the Chairman will be set taking account of any change in responsibility. 
The aggregate fee for Non Executive Directors and the Chairman will not 
exceed £1 million.

The current fees for the Non Executive Director roles are:

Chairman

Base Non Executive Director fee

Senior Independent Director additional fee

Additional fee for Audit/Remuneration Committee Chairmanship

Additional fee for Audit/Remuneration Committee membership

£230,000

£48,500

£5,000

£10,000

£5,000

Other directorships
Executive Directors are permitted 
to accept external, non executive 
appointments with the prior approval 
of the Board where such appointments 
are not considered to have an 
adverse impact on their role within 
the Group. Fees earned may be 
retained by the Director. There were 
no new appointments in the year. 
Andrew Jones is a Non Executive 
Director of Unite Plc and earned fees of 
£46,130 in the year to 31 March 2018.

The other Executive Directors did not 
hold external appointments during 
the year.

Employee considerations
The Company applies the same 
principles to the remuneration of 
all employees as it applies to the 
Executive Directors, namely that:

•  Any incentive compensation is 

aligned to the business strategy and 
achievement of business goals
•  The remuneration encourages 

employees to become shareholders

Employee considerations

•  The remuneration attracts, motivates 
and retains high calibre individuals

•  The remuneration is competitive 
in relation to other comparable 
property companies 

•  The incentive elements reward 

superior performance through the 
variable elements of remuneration 
that are linked to performance

The Committee is mindful of the internal 
pay relativities when setting pay for the 
Executive Directors. 

The diagram below illustrates the 
cascade of pay structures throughout 
the business for the Chief Executive, 
other Executive Directors and 
senior management for the year to 
31 March 2018.

The Committee believes this 
demonstrates a fair and transparent 
progression of remuneration 
throughout the Company which is in 
line with one of its core pay principles 
that variable performance based pay 
increases with seniority.

Element of pay

Chief Executive

Participation

Other Executive 
Directors

LTIP

200% of salary

165% of salary

Annual bonus

165% of salary

140% of salary

Pension

Salary

15% of salary

15% of salary

£522,115

£342,638  
to £360,811

Senior 
Management

40% to 125%  
of salary

50% to 100%  
of salary

10% to 15%  
of salary

£100,000  
to £200,000

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Annual Report and Accounts 2018

(cid:33)(cid:30) LondonMetric Property Plc 
Remuneration continued

Annual Report 
on Remuneration
Set out below is the Annual 
Report on Remuneration for 
the year ending 31 March 2018 
which provides details of how the 
Remuneration Policy was applied 
and how we intend to apply the 
proposed policy for the year to 
31 March 2019. It is subject to an 
advisory vote at the forthcoming 
AGM and complies with UK 
Corporate Governance Code, 
Listing Rules and The Large and 
Medium Sized Companies and 
Groups (Accounts and Reports) 
(Amendment) Regulations 
2013. The areas of the report 
which are subject to audit have 
been highlighted. 

The role of the Remuneration Committee
The Committee determines Directors’ 
remuneration in accordance with 
the approved policy and its terms 
of reference, which are reviewed 
annually by the Board and are 
available on the Company’s website 
at www.londonmetric.com.

Group other than in the provision of 
advice on executive and employee 
remuneration matters and taxation 
advice. Total fees paid to PwC in 
respect of remuneration advice to the 
Committee were £98,500 calculated 
on both hourly and ﬁxed fee bases.

The Board recognises that it is 
ultimately accountable for executive 
remuneration but has delegated 
this responsibility to the Committee. 
All Committee members are Non 
Executive Directors of the Company, 
which is an important pre-requisite to 
ensure Executive Directors’ pay is set by 
Board members who have no personal 
ﬁnancial interest in the Company other 
than as potential shareholders. 

The Committee meets regularly without 
the Executive Directors being present 
and is independently advised by 
PwC, a signatory of the Remuneration 
Consultants’ Code of Conduct and 
which has no connection with the 

No Executive Director is involved in the 
determination of his own remuneration 
and fees for Non Executive Directors 
are determined by the Board as 
a whole.

The Company Secretary acts as 
secretary to the Committee and the 
Chief Executive and Finance Director 
attend meetings by invitation but are 
not present when their own pay is 
being discussed. 

The Chairman of the Committee 
reports to the Board on proceedings 
and outcomes following each 
Committee meeting. 

Meetings and activities

The Committee met on four occasions during the year.

The main activities of the Committee during the year and to the date of this report were as follows:

•  Set a base EPS target for the 2017 LTIP awards and annual bonus for the year to 31 March 2018

•  Approved Executive Directors’ share awards under the LTIP following the announcement of the Company’s results 

for the year ended 31 March 2017

•  Approved the Deferred Bonus Shares vesting in the year for Executive Directors

•  Assessed the performance of Executive Directors against targets set at the beginning of the year and determined 

annual bonuses for the year

•  Reviewed and approved annual salary increases effective from 1 June 2018 and reviewed against pay increases 

within the wider workplace

•  Reviewed and approved the Chairman’s annual fee to be ﬁxed at £230,000 per annum until 31 March 2019, 

reducing to £215,000 and £200,000 for the following two years respectively

•  External evaluation of its own performance and review of its terms of reference

•  Reviewed and approved the Remuneration Committee Report

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:33)(cid:31)

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Single total figure of remuneration for each Director (audited)

Director

Executive
Andrew Jones
Martin McGann
Valentine 
Beresford5
Mark Stirling
Non Executive
Patrick Vaughan6
Charles Cayzer
James Dean
Andrew Livingston
Alec Pelmore
Andrew Varley
Philip Watson
Rosalyn Wilton
Suzanne Avery

Salary and fees

2018
£000

2017
£000

Beneﬁts1

Pension2

Annual bonus3

2018
£000

2017
£000

2018
£000

2017
£000

2018
£000

2017
£000

2018
£000

LTIP4

2017
£000

Total

2017
£000

2018
£000

520
342

360
360

250
–
63
56
53
29
58
68
–

510
335

353
353

320
31
62
43
52
57
55
65
–

24
25

24
25

9
–
–
–
–
–
–
–
–

24
25

25
25

9
–
–
–
–
–
–
–
–

78
51

54
54

–
–
–
–
–
–
–
–
–

77
50

53
53

–
–
–
–
–
–
–
–
–

679
378

360
398

751
418

441
441

1,023
537

1,144
587

2,324
1,333

2,506
1,415

566
566

616
616

1,364
1,403

1,488
1,488

–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–

–
–
–
–
–
–
–
–
–

259
–
63
56
53
29
58
68
–

329
31
62
43
52
57
55
65
–

1  Taxable beneﬁts include the provision of a car allowance for Executive Directors 

and private medical insurance 

2  Pension contribution is 15% of salary (excluding any salary sacriﬁce) and may be 

taken partly or entirely in cash

3  Annual bonus payable in respect of the ﬁnancial year ending 31 March 2018 

paid fully in cash as minimum shareholding requirements met

The estimated ﬁgures disclosed in the previous Annual Report for 2017 vesting has 
been restated to reﬂect ﬁnal vesting ﬁgures and the share price on the date of 
vesting. The estimated share price used was 152.0p and the actual share price 
on vesting was 171.65p. The differences in value were : Andrew Jones £144,000, 
Martin McGann £74,000, Valentine Beresford £76,000 and Mark Stirling £76,000.
5  The bonus payable to Valentine Beresford has been adjusted to take account of 

4  2015 LTIP awards expected to vest in June 2018 for the performance period to 

his leave of absence

31 March 2018. The value of the award has been calculated by multiplying the 
estimated number of shares that will vest, including the dividend equivalent, 
by the average share price for the three months to 31 March 2018.  

6  Private Medical Insurance beneﬁt has continued at the discretion of the 
Remuneration Committee since becoming a Non Executive Chairman

The Committee believes it is important 
to take a holistic view of the Executive 
Directors’ total wealth when considering 
the single ﬁgure of remuneration. 
The Executive Directors have very 
large shareholdings in the Company 
and are exposed to relatively small 
changes in the share price signiﬁcantly 
affecting their overall wealth. In the 
Committee’s opinion, the impact of 
share price movements on the total 
wealth of the Director is more important 
than the single ﬁgure. The signiﬁcant 
shareholding encourages Directors to 
take a long term view of the sustainable 
performance of the Company, 
which is critical in a cyclical business. 
The Directors’ signiﬁcant exposure to 
share price movements is a key facet of 
the Company’s Remuneration Policy.

Annual bonus outcome for the year ended 31 March 2018
The annual bonus performance targets set for the year to 31 March 2018 and 
the assessment of actual performance achieved is set out in the table below. 

Bonus awards are based 70% on the Company’s ﬁnancial performance 
and 30% on the individual’s contribution in the year. 

The ﬁnancial performance element measures growth in EPRA EPS and Total 
Property Return relative to the IPD Quarterly Universe Index for the Group’s 
portfolio of assets. In determining the base EPRA EPS target, the Committee looks 
to maintain consistency with longer term incentive targets but is mindful of shorter 
term strategic priorities and changing market conditions. The 2018 annual bonus 
outcome is set out in the table below. 

Financial 
objectives

Individual
objectives

Bonus %
of maximum

Bonus %
of salary

Total bonus
£000

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

49%

49%

49%

49%

30%

30%

22%

30%

79%

79%

71%

79%

130%

110%

100%

110%

679

378

360

398

Group ﬁnancial targets
Performance 
measure

Weighting

EPRA EPS

35%

Total property 
return (TPR)

35%

Basis of
calculation

Growth in EPRA 
EPS against 
a challenging 
base target

Growth in TPR 
against IPD 
Quarterly Universe 
index

(0%)

Base 
target
7.80p

Positive 
growth

Range
(25%)

7.93p

(50%)

8.07p

Maximum 
(100%)

Actual 
performance

% awarded

8.50p

8.54p

100%

TPR 
matches 
index
12.95%

TPR is  
1.1 times 
index
14.24%

TPR is  
1.2 times 
index
15.54%

13.71%

40%

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Annual Report and Accounts 2018

(cid:33)(cid:32) LondonMetric Property Plc 
Remuneration continued

Individual non ﬁnancial targets
Executive Directors’ non ﬁnancial 
targets accounted for 30% of 
the maximum bonus award. 
Personal objectives were aligned to 
the delivery of the Group’s key strategic 
objectives. The Committee felt that 
all Executive Directors had achieved 

their individual personal objectives 
and approved a full payout for all 
Directors except Valentine Beresford 
who was awarded a 75% payout of the 
maximum level, which was adjusted to 
take account of his leave of absence.

The table below outlines the 
key personal objectives set and 
the Committee’s assessment of 
performance for each of the Executive 
Directors for the annual bonus 
awarded in the year to 31 March 2018.

Objective

Assessments

Andrew 
Jones

•  Portfolio focus to maximise both EPS 

•  Increase in EPRA EPS of 3.7% from 8.2p to 8.5p, providing cover for a 5.3% increase 

and NAV growth

in dividend in the year

•  Strong increase in EPRA NAV per share of 10.3% from 149.8p to 165.2p

•  Recycling capital with sell down of non core assets

•  Investment in preferred sectors increased to 91% of the overall portfolio from 83% 

•  Focus on income quality to deliver growth in 

sustainable earnings

•  Lengthen and strengthen relationships with 
key stakeholders: institutional shareholders, 
private client wealth managers (PCM), 
occupiers and analysts

last year, with distribution at 69% of the portfolio

•  Growth in earnings in the year and projected 5.3% increase in dividend
•  WAULT maintained at 12.4 years (2017: 12.8 years) despite a year passing 
•  Like for like income growth at 4.3%

•  209 investor meetings in the year and strong share price performance
•  Continuing focus on PCMs which now account for 40% of the register
•  Continuation of strong portfolio metrics
•  Occupancy remains in excess of 97% (retail portfolio 100%) and strong 

like for like growth

•  Strengthened relationships with top tenants, including Amazon
•  Focused programme in support of key analysts. Strong feedback from FTI analyst 

survey ahead of results announcement

•  Continue to review the team in line with our 

•  Further team realignment and headcount reduction ensures continuing focus on 

evolving portfolio strategy

right team with right skills

•  Reinforce the position of the company as leading 

•  Reinforcement of ‘end to end’ logistics is well received in the market. Increased 

investor/partner of choice in logistics

emphasis on urban logistics well received by stakeholders

Martin 
McGann

•  Optimising the funding structure to support the real 

estate strategy

•  Modiﬁcation to Helaba facility to reduce quantum and extend maturity to 7 years
•  Focus on building relationships with future potential PP investors

•  Deliver risk management/corporate governance 
agenda to increasing satisfaction of stakeholders

•  Focus on Board diversity leading to appointment of Suzanne Avery to the Board
•  Continued focus on risk dashboard/register at Board/Audit Committee

•  Focus on income quality to deliver growth in our 

sustainable earnings

•  Growth in earnings in the year and projected 5.3% increase in dividend
•  WAULT maintained at 12.4 years (2017: 12.8 years) despite a year passing
•  Like for like income growth at 4.3% (2017: 4.6%)

•  Improve our ranking in the EPRA/GRESB 

sustainability rankings

•  Enhanced ranking in sustainability benchmark
•  GRESB Green Star, EPRA sustainability Gold Award
•  All responsible business targets met

•  Improve EPRA cost ratio

•  Improved cost ratio of 15.3% (2017: 16.3%)

•  Maintain LTV at less than 40%

•  LTV at 35% (2017: 30%)

Valentine 
Beresford

•  Continue to reposition portfolio with the objective of 
increasing distribution to c.70% and reducing retail 
parks bias to 10% in the year

•  Logistics portfolio now 69% (2017: 62%) and the retail park portfolio reduced to 7% 

(2017: 9.5%)

•  Sell down non-core, ex-growth and 

underperforming assets

•  Sale of last office at Marlow in the year
•  Residential portfolio reduced to 51 units at the year end

•  Continue to strengthen team and integrate whole 
Investment team into broader Company business

•  Continued strong performance and ﬁne tuning of team to ensure right people 

with right skills

•  Promote Company as ‘partner of choice’ with 

•  Evidence of ‘off market’ opportunities testament to strong reputation amongst 

developers, vendors and agents

developers and agents

Mark 
Stirling

•  Portfolio focus to deliver both income and 

•  Strong portfolio metrics with like for like growth at 4.3% and total property return 

capital growth

exceeding the IPD benchmark

•  Continuing focus on asset management to lengthen 

•  Asset management activity delivered 58 deals in the year. 31 lettings achieved 

and strengthen our rent roll

as ERV uplift of 22%. Average lease lengths on new lettings over 15 years

•  Continuing to increase and improve our 

•  Additional development schemes at Bedford, Weymouth, Huyton and Frimley 

development pipeline through new opportunities 
and new planning consents

in the year

•  Continued focus on funding and development opportunities

•  Maintain our high occupancy

•  Occupancy remains in excess of 97% (Retail portfolio at 100%)

•  Retain our position as partner of choice amongst 

•  Continued focus on real estate needs of retailers leading to 73% of the logistics 

key retailers

portfolio being let to retailers

LondonMetric Property Plc 
Annual Report and Accounts 2018

(cid:33)(cid:33)

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Deferred Bonus Plan 
For previous years up to and including 
last year’s bonus award, 50% of the 
annual bonuses of the Executive 
Directors were deferred and payable 
by way of shares in three equal 
instalments over three years, subject 
only to continued employment. 
The Remuneration Policy approved 
in July 2017 allows the Directors to opt 
out of bonus deferral if the minimum 
shareholding requirement is met.

At the date of this report, each 
Executive Director’s shareholding 
exceeds the minimum requirement.

Dividend equivalents accrue on 
deferred shares held. Income tax and 
employees’ national insurance liabilities 
are payable on release based on the 
market value of the shares at that date.

One third of the deferred shares 
granted on 19 June 2014, 11 June 2015 
and 8 June 2016 and held at 31 March 
2017, vested on 19 June 2017. 

Further shares representing one third 
of the June 2015, June 2016 and June 
2017 awards are expected to vest 
in June 2018. 

Deferred shares are held in an 
Employee Beneﬁt Trust which at 
31 March 2018 held 3,323,482 shares.

Outstanding deferred bonus shares 
held by the Executive Directors are set 
out in the table below.

Entitlement to Ordinary shares

Awarded
in the year

Notional 
dividend
shares

Released
in the year

At 31 March
2018

Andrew Jones

Martin McGann

Date of grant

19 June 2014

11 June 2015

8 June 2016

16 June 2017

19 June 2014

11 June 2015

8 June 2016

16 June 2017

Valentine Beresford

19 June 2014

Mark Stirling

11 June 2015

8 June 2016

16 June 2017

19 June 2014

11 June 2015

8 June 2016

16 June 2017

Face value 
on grant1
£000

360

290

291

376

166

158

159

209

197

167

168

220

197

167

168

220

At 1 April
2017

101,423

128,446

187,804

–

–

–

–

222,852

46,778

70,243

102,706

–

–

–

–

124,088

55,466

73,969

108,152

–

–

–

–

130,670

55,466

73,969

108,152

–

–

–

–

130,670

171

3,744

6,506

7,250

78

2,048

3,558

4,037

93

2,157

3,750

4,251

93

2,157

3,750

4,251

(101,594)

(65,037)

(63,395)

–

(46,856)

(35,567)

(34,669)

–

(55,559)

(37,454)

(36,508)

–

(55,559)

(37,454)

(36,508)

–

–

67,153

130,915

230,102

–

36,724

71,595

128,125

–

38,672

75,394

134,921

–

38,672

75,394

134,921

1  Face value is the weighted average share price over the ﬁve business days immediately preceding the date of the award. For 2014 this was 136.9p, for 2015 this was 

168.2p, for 2016 this was 160.7p and for 2017 this was 168.6p

Long Term Incentive Plan 
Awards granted in the year to 31 March 2018 are summarised in the table below.

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

Basis of award
(% of salary)

200%

165%

165%

165%

Date of grant

16 June 2017

16 June 2017

16 June 2017

16 June 2017

Share awards
number

Face value
per share

Face value of 
award
£000

619,500

335,402

353,190

353,190

168.6p

168.6p

168.6p

168.6p

1,044

565

595

595

The face value is based on a weighted average price per share, being the average share price over the ﬁve business days 
immediately preceding the date of the award. Awards will vest after three years subject to continued service and the 
achievement of performance conditions.

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Annual Report and Accounts 2018

100 LondonMetric Property Plc 
Remuneration continued

Performance condition

Vesting level

TSR measured against FTSE 350 Real Estate Super Sector 
excluding agencies and operators (37.5% of Award)
TSR less than index over 3 years
TSR equals index over 3 years1
TSR between index and upper quartile ranked company  
in the index1
TSR equal or better than the upper quartile ranked company 
in the index1
Total Accounting Return (TAR) measured against FTSE 350 
Real Estate Super Sector excluding agencies and operators 
(37.5% of Award)
TAR less than index over 3 years
TAR equals index over 3 years
TAR between index and upper quartile ranked company  
in the index
TAR equal or better than the upper quartile ranked company 
in the index
EPRA EPS growth against a base target plus RPI (25% of award)
Less than base plus RPI plus 3% over 3 years
Base plus RPI plus 3% over 3 years
Base plus RPI plus between 3% and 8% over 3 years
Base plus RPI plus 8% over 3 years

1  TSR must be positive over 3 years

0%
25%
Pro rata on a straight line basis between 25% and 100%

100%

0%
25%
Pro rata on a straight line basis between 25% and 100%

100%

0%
25%
Pro rata on a straight line basis between 25% and 100%
100%

The adjusted EPRA EPS base target for the three year performance periods commencing 1 April 2015, 1 April 2016 and 
1 April 2017 has been set at 7.45p, 7.77p and 8.16p respectively. The Group’s three year ﬁnancial forecast was taken into 
account when setting these targets along with consideration of strategic goals and priorities, proposed investment and 
development plans, gearing levels and previous years’ results. Targets are considered challenging yet achievable in order 
to adequately incentivise management and are in line with the Company’s strategic aim of delivering long term growth 
for shareholders.

Awards expected to vest in the year to 31 March 2019 in relation to the three year performance period commencing 
1 April 2015 are summarised below.

Performance measure

Weighting

Basis of calculation

Total shareholder return (TSR)

75%

EPRA EPS

25%

Growth in TSR against 
FTSE 350 Real Estate 
Index

Growth in EPRA EPS 
against a challenging 
base target

(0%)

<1.7%

Range

(25%)

1.7%

(100%)

2.6%

Actual 
performance

%  
awarded

30.4%

100%

<8.29p

8.29p

8.66p

8.54p

76%

Director

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

LTIP
% of maximum

Estimated
number of shares

94%

94%

94%

94%

574,189

301,450

317,438

317,438

Estimated face
value of award1
£000

1,023

537

566

566

1  The face value is based on the average share price for the three months to 31 March 2018 of 178.3p

 
 
 
LondonMetric Property Plc 
Annual Report and Accounts 2018

101

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Outstanding LTIP awards held by the Executive Directors are set out in the table below.

Number of shares under award1

Notional 
dividend 
shares

Vested
in year

At 31 March 
2018

Performance 
Period

8,345

(666,483)

–

Director

Andrew Jones

Date of
grant

Face value
on grant

At
1 April 2017

Granted
in year

19.6.2014

136.9p

658,138

11.6.2015

168.2p

584,186

8.6.2016

160.7p

659,957

–

–

–

16.6.2017

168.6p

–

619,500

20,153

Martin McGann

19.6.2014

136.9p

337,422

11.6.2015

168.2p

306,698

8.6.2016

160.7p

357,306

–

–

–

4,281

(341,703)

–

16.6.2017

168.6p

–

335,402

10,912

Valentine Beresford

19.6.2014

136.9p

355,320

11.6.2015

168.2p

322,964

8.6.2016

160.7p

376,256

–

–

–

4,506

(359,826)

–

16.6.2017

168.6p

–

353,190

11,490

Mark Stirling

19.6.2014

136.9p

355,320

11.6.2015

168.2p

322,964

8.6.2016

160.7p

376,256

–

–

–

4,506

(359,826)

–

26,653

30,111

13,993

16,302

14,735

17,166

14,735

17,166

–

–

–

610,839

690,068

639,653

–

–

–

320,691

373,608

346,314

–

–

–

337,699

393,422

364,680

–

–

–

337,699

393,422

364,680

1.4.2014 to 
31.3.2017

1.4.2015 to 
31.3.2018

1.4.2016 to 
31.3.2019

1.4.2017 to 
31.3.2020

1.4.2014 to 
31.3.2017

1.4.2015 to 
31.3.2018

1.4.2016 to 
31.3.2019

1.4.2017 to 
31.3.2020

1.4.2014 to 
31.3.2017

1.4.2015 to 
31.3.2018

1.4.2016 to 
31.3.2019

1.4.2017 to 
31.3.2020

1.4.2014 to 
31.3.2017

1.4.2015 to 
31.3.2018

1.4.2016 to 
31.3.2019 

1.4.2017 to 
31.3.2020

16.6.2017

168.6p

–

353,190

11,490

1  Awards granted as nil cost options

Directors’ shareholdings and share interests (audited)
The beneﬁcial interests in the ordinary 
shares of the Company held by the 
Directors and their families who were 
in office during the year and at the 
date of this report are set out in the 
table on page 102.

There were no movements in Directors’ 
shareholdings between 31 March 2018 
and the date of this report. 

The shareholding guidelines 
recommend Executive Directors build 
up a shareholding in the Company 
at least equal to seven times salary. 
All Executive Directors complied with 
this requirement at 31 March 2018 
and as at the date of this report. 
No Director had any interest or contract 
with the Company or any subsidiary 
undertaking during the year.

The Executive Directors have 
entered into individual personal 
loan arrangements with J P Morgan 
International Bank Limited and granted 
pledges over ordinary shares in the 
Company as security in connection 
with the loans. The loans were used 
to repay debt secured against various 
residential investment properties held 
personally. The number of shares 
pledged by each of the Directors is 
reﬂected in the table on page 102.

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Annual Report and Accounts 2018

102 LondonMetric Property Plc 
Remuneration continued

Overall 
beneﬁcial 
Interest
31 March 2018 
Ordinary shares 
of 10p each

Overall 
beneﬁcial 
Interest
31 March 2017 
Ordinary shares 
of 10p each

LTIP shares 
subject to 
performance 
conditions

Deferred 
bonus  
shares

Total 
interests 
as at 
31 March 
2018

Share 
ownership  
as % of
salary1

Shareholding 
guideline  
met

Number 
of shares 
pledged as 
at 31 March 
2018

Executive Directors

Andrew Jones

Martin McGann

Valentine Beresford

Mark Stirling

Non Executive Directors

3,371,802

2,341,585

2,757,059

2,250,721

2,897,922

1,940,560

428,170

5,740,532

2,603,148

1,040,613

236,444

3,618,642

2,498,400

1,095,801

248,987

4,101,847

1,992,062

1,095,801

248,987

3,595,509

1151%

1218%

1362%

1112%

Yes

Yes

Yes

Yes

3,026,802

2,341,585

2,343,183

1,782,017

Patrick Vaughan2

12,854,000

13,277,500

Suzanne Avery

James Dean

Andrew Livingston

Alec Pelmore

Philip Watson

Rosalyn Wilton

2,750

20,000

68,898

145,500

264,000

50,000

–

20,000

68,898

145,500

264,000

50,000

1  Based on the Company’s share price at 31 March 2018 of 178.2p and the beneﬁcial interests of the Directors
2  Beneﬁcial interest includes shares held in a family trust (123,000) and by spouse (15,500)

Performance graph 
The ﬁrst graph below shows the Group’s 
total shareholder return (TSR) for the 
period from 1 October 2010, when the 
Company listed on the Main Market 
of the London Stock Exchange, to 
31 March 2018, compared to the FTSE 
All Share REIT Index, the FTSE 350 Real 
Estate Index and the FTSE 350 Real 
Estate Super Sector index. These have 
been chosen by the Committee as in 
previous years as they are considered 
the most appropriate and relevant 
benchmarks against which to assess 
the performance of the Company. 

The starting point required by the 
remuneration regulations was 
close to the bottom of the property 
cycle where a number of property 
companies launched rights issues while 
the Company did not. The Company’s 
share price had not fallen as much as 
the average share price of the FTSE 
Real Estate sector prior to this starting 
point, thereby setting a higher initial 
base price for this graph. 

Total shareholder return measures share 
price growth with dividends deemed to 
be reinvested on the ex-dividend date.

The Company’s total shareholder return 
over the period since merger in 2013 
has outperformed all indices as shown 
in the second graph below.

240

220

200

180

160

140

120

100

220

200

180

160

140

120

100

Oct
2010

Apr
2011

Oct
2011

Apr
2012

Oct
2012

Apr
2013

Oct
2013

Apr
2014

Oct
2014

Apr
2015

Oct
2015

Apr
2016

Oct
2016

Apr
2017

Oct
2017

Apr
2018

Apr
2013

Oct
2013

Apr
2014

Oct
2014

Apr
2015

Oct
2015

Apr
2016

Oct
2016

Apr
2017

Oct
2017

Apr
2018

LondonMetric Property Plc
FTSE All Share REIT Index
FTSE 350 Real Estate Index
FTSE 350 Real Estate Super Sector Index

LondonMetric Property Plc
FTSE All Share REIT Index
FTSE 350 Real Estate Index
FTSE 350 Real Estate Super Sector Index

LondonMetric Property Plc 
Annual Report and Accounts 2018

103

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Chief Executive’s remuneration table 
The table below details the remuneration of the Chief 
Executive for the period from the Company’s listing on the 
main market of the London Stock Exchange on 1 October 
2010 to 31 March 2018.

Year to 31 March

Total 
remuneration 
£000

Annual bonus
(as a % of the 
maximum 
payout)

LTIP vesting
(as a % of the 
maximum 
opportunity)

2018

2017

2016

2015

2014

2013 (Andrew Jones)1

2013 (Patrick Vaughan)1

2012

20112

2,324

2,506

2,792

1,167

1,296

166

583

664

323

79

89

77

78

100

100

100

100

100

94

100

100

–

–

–

–

–

–

1  Andrew Jones became Chief Executive and Patrick Vaughan became Chairman 
on 25 January 2013 following the merger of the Company with Metric Property 
Investments plc

2  For the six months from the Company’s listing on 1 October 2010 to 31 March 2011

Percentage change in Chief Executive’s remuneration 
The percentage change in the Chief Executive’s 
remuneration from the previous year compared to the 
average percentage change in remuneration for all other 
employees is as follows:

% change

Salary  
and fees

Taxable 
beneﬁts

Annual 
bonus

Statement of voting at AGM 
At the AGM on 11 July 2017, the Annual Report on 
Remuneration was approved with votes from shareholders 
representing 71% of the issued share capital of the Company. 

The Directors’ Remuneration Policy was approved with 
votes from shareholders representing 71% of the issued share 
capital at the time. The details of these outcomes are below.

2017 Annual Report on 
Remuneration

2017 Directors’ 
Remuneration Policy

Votes cast

%

Votes cast

490,941,362

97.60

492,623,371

12,049,738

2.40

5,370,453

%

98.92

1.08

56,157

503,047,257

5,053,433

503,047,257

For

Against

Withheld

Total

On the basis of strong shareholder support for the Policy, 
no changes were made this year.

Statement of implementation of Remuneration Policy 
for the year ending 31 March 2019
The table on pages 92 to 93 illustrates how we intend to 
implement our policy over the next ﬁnancial year and gives 
details of remuneration payments and targets.

I am always available to shareholders to discuss the 
Remuneration Policy and its implementation and can be 
contacted through the Company Secretary.

I look forward to the support of shareholders for this year’s 
Annual Report on Remuneration.

Chief Executive

2.5%

0.2%

-9.6%

Other employees  
(excluding Chief Executive) 

4.8%

0.6%

-4.9%

James Dean
Chairman of the Remuneration Committee
30 May 2018

Payments to past Directors and for loss of office 
There have been no payments made to retiring Directors or 
for loss of office in the year.

Relative importance of spend on pay 
The table below shows the expenditure and percentage 
change in spend on employee remuneration compared to 
other key ﬁnancial indicators.

Employee costs1

Dividends2

2018
£000

9,425

2017
£000

9,716

%
change

-3.0%

51,372

45,904

+11.9%

1  Figures taken from note 4 Administration expenses on page 124 and are stated 

before any amounts capitalised and exclude share scheme costs

2  Figures taken from note 7 Dividends on page 126

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Annual Report and Accounts 2018

104 LondonMetric Property Plc 
Report of the Directors

Report of the Directors

Martin McGann
Finance Director

I am pleased to present the Report of 
the Directors together with the audited 
(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:97)(cid:77)(cid:73)(cid:90)(cid:8)(cid:77)(cid:86)(cid:76)(cid:77)(cid:76)(cid:8)
(cid:27)(cid:25)(cid:104)(cid:53)(cid:73)(cid:90)(cid:75)(cid:80)(cid:104)(cid:26)(cid:24)(cid:25)(cid:32)(cid:22)(cid:8)

The Corporate Governance report 
(cid:87)(cid:86)(cid:8)(cid:88)(cid:73)(cid:79)(cid:77)(cid:91)(cid:104)(cid:30)(cid:26)(cid:8)(cid:92)(cid:87)(cid:8)(cid:25)(cid:24)(cid:27)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:91)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)
(cid:92)(cid:80)(cid:81)(cid:91)(cid:104)(cid:90)(cid:77)(cid:88)(cid:87)(cid:90)(cid:92)(cid:22)(cid:1528)

Annual General Meeting
The Annual General Meeting (‘AGM’) of the Company will be 
held at the Connaught, Carlos Place, Mayfair, London W1K 2AL 
at 10 am on 11 July 2018.

The Notice of Meeting on pages 148 to 151 sets out the proposed 
resolutions and voting details.

The Board considers that the resolutions promote the success 
of the Company, and are in the best interests of the Company 
and its shareholders. The Directors unanimously recommend 
that you vote in favour of the resolutions as they intend to do 
in respect of their own beneﬁcial holdings, which amount in 
aggregate to 24,126,315 shares representing approximately 3.5% 
of the existing issued ordinary share capital of the Company as 
at 29 May 2018.

Additional information which is incorporated into this report by 
reference, including information required in accordance with 
the Companies Act 2016 and Listing Rule 9.8.4R can be found 
on the following pages:

Review of business and 
future developments

Throughout the Strategic report 
on pages 01 to 60

Principle risks

Risk management section of Strategic 
report on pages 48 to 59

Viability statement

Page 60

Directors’ details 

Directors’ biographies on pages 64 
and 65

Directors’ interests

Remuneration report on page 102

Employee involvement 
and engagement

Responsible Business report on page 45

Greenhouse gas emissions Responsible Business report on page 44

Financial instruments

Note 14 on page 134

Financial risk 
management policies

Note 14 and Risk management on 
pages 132 to 133

Interest capitalised

Note 5 on page 125

Details of long term 
incentive schemes

Shareholder waivers 
of dividends

Remuneration report on pages 99 to 101 
and on page 93

 Report of the Directors on page 105

Related party transactions Note 19 on page 136

Post balance sheet events Note 20 on page 136

All other subsections of LR 9.8.4R are not applicable.

LondonMetric Property Plc 
Annual Report and Accounts 2018

105

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Company status and branches
LondonMetric Property Plc is a Real 
Estate Investment Trust (‘REIT’) and 
the holding company of the Group, 
which has no branches. It is listed 
on the London Stock Exchange with 
a premium listing.

Principal activities and 
business review
The principal activity of the Group 
continues to be property investment 
and development, both directly and 
through joint venture arrangements. 

The purpose of the Annual Report is to 
provide information to the members of 
the Company which is a fair, balanced 
and understandable assessment of the 
Group’s performance, business model 
and strategy. A detailed review of the 
Group’s business and performance 
during the year, its principal risks 
and uncertainties, its business 
model, strategy and its approach to 
responsible business is contained in the 
Strategic report on pages 01 to 60 and 
should be read as part of this report.

The Annual Report contains certain 
forward looking statements with respect 
to the operations, performance and 
ﬁnancial condition of the Group. By their 
nature, these statements involve risk 
and uncertainty because they relate to 
future events and circumstances which 
can cause results and developments 
to differ from those anticipated. 
The forward looking statements reﬂect 
knowledge and information available 
at the date of preparation of this Annual 
Report. Nothing in this Annual Report 
should be construed as a proﬁt forecast.

Results and dividends
The Group reported a proﬁt for the year 
of £186.0 million (2017: £63.0 million). 
The ﬁrst two quarterly dividends for 2018 
totalling 3.7p per share were paid in the 
year as Property Income Distributions 
(PIDs). 

The third quarterly dividend of 1.85p 
was paid following the year end on 
19 April 2018 as a PID. The Directors 
have approved a fourth quarterly 
dividend of 2.35p per share payable 
on 11 July 2018 to shareholders on the 
register at the close of business on 
8 June 2018, of which 1.7p will be paid 
as a PID. 

The total dividend charge for the year 
to 31 March 2018 was 7.9p per share, 
an increase of 0.4p or 5.3% over the 
previous year. 

Of the total dividend for 2018 of 7.9p, 
7.25p was payable as a PID as required 
by REIT legislation, after deduction 
of withholding tax at the basic rate 
of income tax. The balance of 0.65p 
was payable as an ordinary dividend 
which is not subject to withholding tax. 

Investment properties
A valuation of the Group’s investment 
properties at 31 March 2018 was 
undertaken by CBRE Limited and 
Savills Advisory Services Limited on the 
basis of fair value which amounted 
to £1,842.0 million including the 
Group’s share of joint venture property 
as reﬂected in notes 9 and 10 to 
these accounts.

Share capital
As at 31 March 2018, there were 
697,216,196 ordinary shares of 10p in 
issue, each carrying one vote and 
all fully paid. The Company issued 
4,833,765 ordinary shares under the 
terms of its Scrip Dividend Scheme 
in the year. Since the year end the 
Company issued a further 218,858 
ordinary shares in relation to the third 
quarterly dividend scrip alternative.

There is only one class of share in issue 
and there are no restrictions on the 
size of a holding or on the transfer 
of shares. None of the shares carry 
any special rights of control over the 
Company. There were no persons with 
signiﬁcant direct or indirect holdings in 
the Company other than those listed 
as substantial shareholders opposite.

The rules governing appointments, 
replacement and powers of Directors 
are contained in the Company’s 
Articles of Association, the Companies 
Act 2006 and the UK Corporate 
Governance Code. These include 
powers to authorise the issue and 
buy back of shares by the Company. 
The Company’s Articles can be 
amended by Special Resolution in 
accordance with Companies Act 2006.

Purchase of own shares
The Company was granted authority 
at the Annual General Meeting in 
2017 to purchase its own shares up 
to an aggregate nominal value of 
10% of the issued nominal capital. 
That authority expires at this year’s AGM 
and a resolution will be proposed for 
its renewal. No ordinary shares were 
purchased under this authority during 
the year.

Shares held in the Employee 
Beneﬁt Trust
The Trustees of the LondonMetric Long 
Term Incentive Plan hold 3,323,482 
shares in the Company in trust to satisfy 
awards under the Company’s Long 
Term Incentive and Deferred Bonus 
plans. The Trustees have waived their 
right to receive dividends on shares 
held in the Company.

Substantial shareholders
The Directors have been notiﬁed 
that the following shareholders 
have a disclosable interest of 3% or 
more in the ordinary shares of the 
Company at the date of this report: 

Shareholder

Number 
of shares

BlackRock Inc

52,983,154

Rathbones 

48,754,039

34,654,720

%

7.60

6.99

4.97

Troy Asset 
Management

Standard Life 
Aberdeen

Cohen & Steers 
Inc

Ameriprise 
Financial Inc

The Vanguard 
Group Inc

Woodford 
Investment 
Management

33,109,728

4.75

31,064,082

4.45

25,676,634

3.68

24,900,197

3.57

22,481,579

3.22

Directors
The present membership of the Board 
and biographical details of Directors 
are set out on pages 64 and 65.

The interests of the Directors and their 
families in the shares of the Company 
are set out in the Remuneration 
Committee report on page 102.

The Board appointed Suzanne Avery 
as a Director on 22 March 2018. 
In accordance with the UK Corporate 
Governance Code and in line with 
previous years, all of the Directors 
will offer themselves for election and 
re-election by the shareholders at the 
forthcoming AGM on 11 July 2018.

The powers of Directors are described 
in their Terms of Reference, which are 
available on request.

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Annual Report and Accounts 2018

(cid:25)(cid:24)(cid:30) LondonMetric Property Plc 
Report of the Directors continued

Directors’ and Officers’ liability 
insurance
The Company has arranged Directors’ 
and Officers’ liability insurance cover 
in respect of legal action against 
its Directors, which is reviewed and 
renewed annually and remains in force 
at the date of this report.

Employees
At 31 March 2018 the Group had 
36 employees including all Directors. 
The Company promotes employee 
involvement and consultation and 
invests time in ensuring staff are 
informed of the Group’s transactions, 
activities and performance through 
internal email communication of 
corporate announcements and 
periodic updates by the Chief 
Executive. The Group’s interim and 
annual results are presented to all staff 
by the Executive Directors. Staff receive 
regular brieﬁngs, presentations and 
email communication on other 
relevant matters affecting them as 
employees, including this year’s 
pension auto enrolment, ﬂexible 
working practices, responsible business 
activities and health and safety. 

Certain employees are eligible to 
participate in the annual bonus and 
LTIP arrangements, helping to develop 
an interest in the Group’s performance 
and align rewards with Directors’ 
incentive arrangements. 

The Company operates a non-
discriminatory employment policy and 
full and fair consideration is given to 
applications for employment made by 
people with disabilities, having regard 
to their skills and abilities, and to the 
continued employment and training of 
staff who become disabled.

The Company encourages the 
continuous development and 
training of its staff. It is the policy 
of the Company that the training, 
career development and promotion 
of disabled persons should, as far 
as possible, be identical to that of 
other employees. 

The Company provides retirement 
beneﬁts for its employees excluding 
Non Executive Directors and complied 
on 1 October 2017 with its auto 
enrolment obligations. 

Further information relating to 
employees can be found on 
page 45 of the Strategic report.

The environment
Details of our approach to responsible 
business and its aims and activities can 
be found on the Company’s website 
www.londonmetric.com, where a 
full version of the annual Responsible 
Business report can be downloaded. 
An overview of our responsible business 
activity can be found on pages 40 to 
47 of this report.

The Group recognises the importance 
of minimising the adverse impact of its 
operations on the environment and the 
management of energy consumption 
and waste recycling.

The Group strives to improve its 
environmental performance and 
regularly reviews its management system 
and policy to ensure it maintains its 
commitment to environmental matters.

Greenhouse gas reporting
In accordance with Schedule 7 of the 
Large and Medium-Sized Companies 
and Groups (Accounts and Reports) 
Regulations 2008, information regarding 
the Company’s greenhouse gas 
emissions can be found on page 44.

Suppliers
The Group aims to settle supplier 
accounts in accordance with their 
individual terms of business.

The number of creditor days 
outstanding for the Group at 31 March 
2018 was 15 days (2017: 15 days).

Charitable and political 
contributions
During the year, the Group made 
charitable donations of £25,170 
(2017: £35,695). No political donations 
were made during the year (2017: £nil). 

Provisions on change of control
Under the Group’s credit facilities, the 
lending banks may require repayment 
of the outstanding amounts on any 
change of control. 

The Group’s Long Term Incentive Plan 
and Deferred Share Bonus Plan contain 
provisions relating to the vesting of 
awards in the event of a change of 
control of the Group.

There are no agreements between 
the Company and its Directors or 
employees providing for compensation 
for loss of office or employment that 
occurs speciﬁcally because of a 
takeover bid, except for the provisions 
within the Company’s share schemes 
as noted above.

Going concern
The principal risks and uncertainties 
facing the Group’s activities, future 
development and performance are 
on pages 48 to 59. 

The Group’s ﬁnancial position, cash 
ﬂows and liquidity, borrowings, 
undrawn facilities and hedging are 
described in note 14 to the accounts 
and in the Financial review on pages 
38 to 39. 

The Directors have reviewed the 
current and projected ﬁnancial position 
of the Group, making reasonable 
assumptions about future trading 
performance, property valuations and 
planned capital expenditure. As part of 
this review, the Group has considered 
its cash balances and undrawn 
facilities, future capital commitments, 
its debt maturity proﬁle and the 
long term nature of tenant leases.

On the basis of this review, and after 
making due enquiries, the Directors 
have a reasonable expectation that 
the Company and the Group have 
adequate resources to continue 
in operational existence for the 
foreseeable future. Accordingly, 
they continue to adopt the going 
concern basis in preparing the 
ﬁnancial statements for the year to 
31 March 2018.

Disclosure of information to auditor
So far as the Directors who held office 
at the date of approval of this Directors’ 
report are aware, there is no relevant 
audit information of which the auditor 
is unaware and each Director has 
taken all steps that he or she ought 
to have taken as a Director to make 
himself or herself aware of any relevant 
audit information and to establish that 
the auditor is aware of that information.

Auditor
Deloitte LLP is willing to be reappointed 
as the external auditor to the Company 
and Group. Their reappointment 
has been considered by the Audit 
Committee and recommended to the 
Board. A resolution will be proposed 
at the AGM on 11 July 2018.

On behalf of the Board

Martin McGann
Finance Director
30 May 2018

(cid:44)(cid:81)(cid:90)(cid:77)(cid:75)(cid:92)(cid:87)(cid:90)(cid:91)(cid:1524)(cid:8)(cid:90)(cid:77)(cid:91)(cid:88)(cid:87)(cid:86)(cid:91)(cid:81)(cid:74)(cid:81)(cid:84)(cid:81)(cid:92)(cid:97)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)

LondonMetric Property Plc 
Annual Report and Accounts 2018

107

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The Directors are responsible for preparing the 
Annual Report and the ﬁnancial statements in 
accordance with applicable law and regulations.

Company law requires the Directors 
to prepare ﬁnancial statements for 
each ﬁnancial year. Under that law 
the Directors are required to prepare 
the Group ﬁnancial statements 
in accordance with International 
Financial Reporting Standards (IFRSs) 
as adopted by the European Union 
and Article 4 of the IAS Regulation 
and have elected to prepare the 
Company ﬁnancial statements 
in accordance with Financial 
Reporting Standard 101 (FRS101) 
‘Reduced Disclosure Framework’. 
Under Company law the Directors 
must not approve the accounts unless 
they are satisﬁed that they give a true 
and fair view of the state of affairs of 
the Company and of the proﬁt or loss 
of the Company for that period. 

In preparing the Company ﬁnancial 
statements, the Directors are 
required to:

•   Select suitable accounting policies 
and then apply them consistently
•   Make judgements and accounting 

estimates that are reasonable 
and prudent

•   State whether applicable 

Financial Reporting Standard 
101 (FRS101) ‘Reduced Disclosure 
Framework’ has been followed, 
subject to any material departures 
disclosed and explained in the 
ﬁnancial statements

•   Prepare the ﬁnancial statements on 
the going concern basis unless it is 
inappropriate to presume that the 
Company will continue in business

In preparing the Group ﬁnancial 
statements, International Accounting 
Standard 1 requires that Directors:

Responsibility statement 
We conﬁrm that to the best of 
our knowledge:

•   Properly select and apply 

accounting policies

•   Present information, including 

accounting policies, in a 
manner that provides relevant, 
reliable, comparable and 
understandable information
•   Provide additional disclosures 

when compliance with the speciﬁc 
requirements in IFRSs are insufficient 
to enable users to understand the 
impact of particular transactions, 
other events and conditions on 
the entity’s ﬁnancial position and 
ﬁnancial performance

•   Make an assessment of the 

Company’s ability to continue 
as a going concern

The Directors are responsible for 
keeping adequate accounting 
records that are sufficient to show and 
explain the Company’s transactions 
and disclose with reasonable 
accuracy at any time the ﬁnancial 
position of the Company and to 
enable them to ensure that the 
ﬁnancial statements comply with 
the Companies Act 2006. They are 
also responsible for safeguarding the 
assets of the Company and hence 
for taking reasonable steps for the 
prevention and detection of fraud 
and other irregularities.

The Directors are responsible for the 
maintenance and integrity of the 
corporate and ﬁnancial information 
included on the Company’s website. 
Legislation in the UK governing the 
preparation and dissemination of 
ﬁnancial statements may differ from 
legislation in other jurisdictions.

•   The ﬁnancial statements, prepared 
in accordance with the relevant 
ﬁnancial reporting framework, give 
a true and fair view of the assets, 
liabilities, ﬁnancial position and 
proﬁt or loss of the Company and 
the undertakings included in the 
consolidation taken as a whole
•   The Strategic report includes a fair 
review of the development and 
performance of the business and 
the position of the Company and 
the undertakings included in the 
consolidation taken as a whole, 
together with a description of the 
principal risks and uncertainties that 
they face

•   The Annual Report and ﬁnancial 

statements, taken as a whole, are 
fair, balanced and understandable 
and provide the information 
necessary for shareholders to assess 
the Company’s performance, 
business model and strategy

By order of the Board

Martin McGann
Finance Director
30 May 2018

Andrew Jones
Chief Executive
30 May 2018

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108 LondonMetric Property Plc 

Annual Report and Accounts 2018

Financial statements

Inside this section

Independent Auditor’s report

Group ﬁnancial statements

Notes forming part of the
Group ﬁnancial statements

Company ﬁnancial statements

Notes forming part of the Company
ﬁnancial statements

Supplementary information

Glossary

Notice of Annual General Meeting

Financial calendar

Shareholder information

109

114

118

137

139

142

147

148

152

152

Independent Auditor’s report to the members 
(cid:87)(cid:78)(cid:104)(cid:52)(cid:87)(cid:86)(cid:76)(cid:87)(cid:86)(cid:53)(cid:77)(cid:92)(cid:90)(cid:81)(cid:75)(cid:8)(cid:56)(cid:90)(cid:87)(cid:88)(cid:77)(cid:90)(cid:92)(cid:97)(cid:8)(cid:56)(cid:84)(cid:75)

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LondonMetric Property Plc 
Annual Report and Accounts 2018

109

Report on the audit of the ﬁnancial statements

Opinion
In our opinion:

•   the ﬁnancial statements give a 

true and fair view of the state of the 
Group’s and of the Company’s affairs 
as at 31 March 2018 and of the Group’s 
proﬁt for the year then ended
•   the Group ﬁnancial statements 

have been properly prepared in 
accordance with International 
Financial Reporting Standards (IFRSs) 
as adopted by the European Union
•   the Company ﬁnancial statements 
have been properly prepared in 
accordance with United Kingdom 
Generally Accepted Accounting 
Practice, including FRS 101 “Reduced 
Disclosure Framework” 

•   the ﬁnancial statements have been 
prepared in accordance with the 
requirements of the Companies 
Act 2006 and, as regards the Group 
ﬁnancial statements, Article 4 of the 
IAS Regulation

We have audited the ﬁnancial 
statements of LondonMetric Property Plc 
(the ‘Company’) and its subsidiaries (the 
‘Group’) which comprise:

•   the Group income statement 

•   the Group and Company 

balance sheets 

•   the Group and Company statements 

of changes in equity 

•   the Group cash ﬂow statement 

•   the Statement of accounting 

policies and the related notes 1 to 
20 for the Group notes and i to vii for 
the Company 

The ﬁnancial reporting framework that 
has been applied in the preparation 
of the Group ﬁnancial statements is 
applicable law and IFRSs as adopted 
by the European Union. The ﬁnancial 
reporting framework that has been 
applied in the preparation of the 
Company ﬁnancial statements is 
applicable law and United Kingdom 
Accounting Standards, including FRS 
101 “Reduced Disclosure Framework” 
(United Kingdom Generally Accepted 
Accounting Practice).

Basis for opinion
We conducted our audit in accordance 
with International Standards on 
Auditing (UK) (ISAs (UK)) and applicable 
law. Our responsibilities under those 
standards are further described in the 
auditor’s responsibilities for the audit 
of the ﬁnancial statements section of 
our report. 

We are independent of the Group and 
the Company in accordance with the 
ethical requirements that are relevant 
to our audit of the ﬁnancial statements 
in the UK, including the FRC’s Ethical 
Standard as applied to listed public 
interest entities, and we have fulﬁlled 
our other ethical responsibilities in 
accordance with these requirements. 
We conﬁrm that the non audit services 
prohibited by the FRC’s Ethical Standard 
were not provided to the Group or 
the Company.

We believe that the audit evidence 
we have obtained is sufficient and 
appropriate to provide a basis for 
our opinion.

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Summary of our audit approach

Key audit matters

The key audit matters that we identiﬁed in the current year were:

•  Valuation of investment property

•  Property transaction accounting

•  Revenue recognition

Materiality

Scoping

The materiality that we used for the Group ﬁnancial statements was £22.9 million 
which was determined on the basis of 2% of equity. For testing balances that 
impacted EPRA earnings we used a lower materiality of £3.0 million, which is based 
on 5% of that measure. 

The Group is subject to a full scope audit on 100% of net assets, revenue and proﬁt 
before tax.

Signiﬁcant changes  
in our approach

There has been no change to the basis upon which materiality is determined, our 
identiﬁed key audit matters or our approach in scoping the audit from the prior year.

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Annual Report and Accounts 2018

110 LondonMetric Property Plc 
Independent Auditor’s report to the members  
(cid:87)(cid:78)(cid:8)(cid:52)(cid:87)(cid:86)(cid:76)(cid:87)(cid:86)(cid:53)(cid:77)(cid:92)(cid:90)(cid:81)(cid:75)(cid:8)(cid:56)(cid:90)(cid:87)(cid:88)(cid:77)(cid:90)(cid:92)(cid:97)(cid:8)(cid:56)(cid:84)(cid:75)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

Conclusions relating to going 
concern, principal risks and 
viability statement
Going concern
We have reviewed the Directors’ 
statement in note 1 to the ﬁnancial 
statements about whether they 
considered it appropriate to adopt the 
going concern basis of accounting in 
preparing them and their identiﬁcation of 
any material uncertainties to the Group’s 
and Company’s ability to continue to 
do so over a period of at least 12 months 
from the date of approval of the 
ﬁnancial statements.

We are required to state whether we 
have anything material to add or draw 
attention to in relation to that statement 
required by Listing Rule 9.8.6R(3) and 
report if the statement is materially 
inconsistent with our knowledge obtained 
in the audit.

We conﬁrm that we have nothing 
material to report, add or draw attention 
to in respect of these matters.

Principal risks and viability statement
Based solely on reading the Directors’ 
statements and considering whether 
they were consistent with the knowledge 
we obtained in the course of the audit, 
including the knowledge obtained in the 
evaluation of the Directors’ assessment 
of the Group’s and the Company’s 
ability to continue as a going concern, 
we are required to state whether we 
have anything material to add or draw 
attention to in relation to:

•   the disclosures on pages 49 to 59 

that describe the principal risks and 
explain how they are being managed 
or mitigated

•   the Directors’ conﬁrmation on page 

48 that they have carried out a robust 
assessment of the principal risks facing 
the Group, including those that would 
threaten its business model, future 
performance, solvency or liquidity

•  the Directors’ explanation on page 
60 as to how they have assessed 
the prospects of the Group, over 
what period they have done so and 

why they consider that period to be 
appropriate, and their statement as 
to whether they have a reasonable 
expectation that the Group will be able 
to continue in operation and meet its 
liabilities as they fall due over the period 
of their assessment, including any 
related disclosures drawing attention 
to any necessary qualiﬁcations 
or assumptions

We are also required to report whether 
the Directors’ statement relating to the 
prospects of the Group required by Listing 
Rule 9.8.6R(3) is materially inconsistent 
with our knowledge obtained in the audit.

We conﬁrm that we have nothing 
material to report, add or draw attention 
to in respect of these matters.

Key audit matters
Key audit matters are those matters 
that, in our professional judgement, 
were of most signiﬁcance in our audit of 
the ﬁnancial statements of the current 
period and include the most signiﬁcant 
assessed risks of material misstatement 

(whether or not due to fraud) that we 
identiﬁed. These matters included those 
which had the greatest effect on: the 
overall audit strategy, the allocation of 
resources in the audit; and directing 
the efforts of the engagement team.

These matters were addressed in the 
context of our audit of the ﬁnancial 
statements as a whole, and in forming 
our opinion thereon, and we do 
not provide a separate opinion on 
these matters.

Property transaction accounting 

Key audit matter description

How the scope of our audit responded to the key audit matter

Key observations

In the period the Group has undertaken 
a large number of property acquisitions 
for a total consideration of £306.6 million 
(2017: £141.9 million) and disposals for a total 
of £172.0 million (£2017: 175.6 million).

Our key audit matter is focused on 
transactions which include complexities 
such as conditionality, deferred completion 
arrangements and joint venture contractual 
obligations, which require judgement as to 
the appropriate accounting to be applied. 
There is therefore a potential fraud risk in the 
assessment of when the transfer of risks and 
rewards of ownerships are met.

Refer to page 84 (Audit Committee report), 
page 118 (accounting policy) and note 9 on 
pages 128 to 129 (ﬁnancial disclosures).

•  For all signiﬁcant transactions and a sample of non 

signiﬁcant transactions, we assessed the fair value of 
consideration and conﬁrmed key transaction terms by 
reference to acquisition or disposal agreements and 
other external evidence for all signiﬁcant acquisitions 
and disposals in the year

•  We considered the date at which the transactions 

completed based on the timing of the transfer of risks 
and rewards of ownership per the acquisition or disposal 
agreements, and considered the impact of these 
transactions on revenue recognition

•  We considered the adequacy of the disclosure of 

the transactions in the ﬁnancial statements

•  We recalculated the proﬁt or loss on disposals based 

on the terms of the transaction

We concluded 
that all material 
property 
transactions 
had been 
appropriately 
accounted for.

LondonMetric Property Plc 
Annual Report and Accounts 2018

111

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Valuation of Investment Property 

Key audit matter description

How the scope of our audit responded to the key audit matter

Key observations

We concluded 
that the 
assumptions 
applied in arriving 
at the fair value 
of the Group’s 
property portfolio 
by the external 
valuers were 
appropriate.

The Group owns a portfolio of largely retail 
and distribution property assets, which is 
valued at £1,677.6 million (2017: £1,373.4 million) 
as at 31 March 2018. The valuation of the 
portfolio is a signiﬁcant judgement area and 
is underpinned by a number of assumptions 
including capitalisation yields, future lease 
income and with reference to development 
properties, costs to complete.

The Group uses professionally qualiﬁed external 
valuers to fair value the Group’s portfolio at 
six-monthly intervals. The valuers are engaged 
by the Directors and performed their work 
in accordance with the Royal Institution of 
Chartered Surveyors (‘RICS’) Valuation – 
Professional Standards. The valuers used by 
the Group have considerable experience in 
the markets in which the Group operates.

The valuation exercise also relies on the 
accuracy of the underlying lease and 
ﬁnancial information provided to the valuers 
by management. Therefore, due to this 
and the high level of judgement in the 
assumptions, we have determined that there 
is a potential fraud risk in the balance.

Refer to page 84 (Audit Committee report), 
page 118 (accounting policy) and note 9 on 
pages 128 to 129 (ﬁnancial disclosures).

•  We assessed management’s process for reviewing 
and assessing the work of the external valuer and 
development appraisals

•  We assessed the competence, objectivity and 

integrity of the external valuer and read their terms of 
engagement with the Group to determine whether 
there were any matters that might have affected their 
objectivity or may have imposed scope limitations on 
their work

•  We obtained the external valuation reports and assessed 
and challenged the valuation process, performance 
of the portfolio and signiﬁcant assumptions and critical 
judgement areas, including lease incentives, future lease 
income and yields. We benchmarked these assumptions 
to relevant market evidence including speciﬁc property 
sales and other external data

•  We met with the external valuers of the portfolio 
to discuss the results of their work. For a sample of 
properties of audit interest we further challenged the 
assumptions and valuation with the valuers

•  We performed audit procedures to assess the integrity 
of a sample of the information provided to the external 
valuer by agreeing that information to underlying 
lease agreements 

•  We tested a sample of the costs to complete in relation 
to the development properties via challenging the 
assumptions or agreeing to supporting documentation 
such as construction contracts

Revenue Recognition 

Key audit matter description

How the scope of our audit responded to the key audit matter

Key observations

•  As part of our audit of revenue, we focused on 

any unusual and complex adjustments to revenue, 
agreeing the lease incentives for a sample of items 
to the underlying leases, with our sample covering 
both existing and new leases

•  We recalculated the required adjustment to the 

annual rent in relation to these items to determine 
whether the correct amount of revenue had been 
recognised in the year

We concluded 
that revenue was 
appropriately 
accounted for.

ISA 240 (UK) states that when identifying and 
assessing the risks of material misstatement 
due to fraud, the auditor shall, based on a 
presumption that there are risks of fraud in 
revenue recognition, evaluate which types 
of revenue, revenue transactions or assertions 
give rise to such risks.

Revenue for the Group primarily consists 
of rental income earned on its investment 
property portfolio. Total gross rental income 
for the year to 31 March 2018 was £82.0 million 
(2017: £73.9 million). Within revenue, there are 
certain transactions which warrant additional 
audit focus and have an increased inherent 
risk of error due to their non-standard nature, 
for example deferred completion dates. Our 
key audit matter is focused on the identiﬁcation 
of the point where the risks and rewards of 
ownership of the property transfers, and the 
related cut-off of recognition of rental income 
on these assets. This includes the recognition or 
write off of any related lease incentives.

Refer to page 84 (Audit Committee report), 
page 118 (accounting policy) and note 3 on 
page 124 (ﬁnancial disclosures).

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Annual Report and Accounts 2018

112 LondonMetric Property Plc 
Independent Auditor’s report to the members  
(cid:87)(cid:78)(cid:8)(cid:52)(cid:87)(cid:86)(cid:76)(cid:87)(cid:86)(cid:53)(cid:77)(cid:92)(cid:90)(cid:81)(cid:75)(cid:8)(cid:56)(cid:90)(cid:87)(cid:88)(cid:77)(cid:90)(cid:92)(cid:97)(cid:8)(cid:56)(cid:84)(cid:75)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

Our application of materiality
We deﬁne materiality as the magnitude of misstatement in the ﬁnancial statements that makes it probable that the economic 
decisions of a reasonably knowledgeable person would be changed or inﬂuenced. We use materiality both in planning the 
scope of our audit work and in evaluating the results of our work. 

Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows:

Group ﬁnancial statements

Company ﬁnancial statements

Materiality

Basis for determining materiality

Rationale for the benchmark applied

NAV
£1,149.5m

NAV

Group materiality

We determined materiality for the Group 
to be £22.9 million (2017: £20.1 million). 
We consider EPRA Earnings as a critical 
performance measure for the group 
and we applied a lower threshold 
of £3.0 million (2017: £2.6 million) for 
testing of all balances and classes of 
transaction which impact that measure, 
primarily transactions recorded in the 
income statement other than fair value 
movements on investment property, 
development property and derivatives.

Materiality for the Group is based on 
2% (2017: 2%) of shareholders’ equity. 
For EPRA Earnings the basis used is 5% 
(2017: 5%) of that measure.

As an investment property company, 
the main focus of management is to 
generate long term capital value from 
the investment property portfolio and, 
therefore, we consider equity to be the 
most appropriate basis for materiality. 

Group materiality £22.9m

Company materiality £17.4m

EPRA materiality £3.0m

Audit Committee reporting 
threshold £1.14m

We determine Company materiality to 
be £17.4 million (2017: £16.7 million).

Materiality for the Company is based 
on 2% of net assets (2017: 2%). 

The Company has a signiﬁcant number 
of investments in subsidiaries which are 
property companies. These companies 
have a focus on generating long term 
capital value. Therefore, we consider 
equity to be the most appropriate basis 
for materiality. 

We agreed with the Audit Committee 
that we would report to the Committee 
all audit differences in excess of 
£1.1 million (2017: £1.0 million) for the 
Group, as well as differences below that 
threshold that, in our view, warranted 
reporting on qualitative grounds. We 
also report to the Audit Committee on 
disclosure matters that we identiﬁed 
when assessing the overall presentation 
of the ﬁnancial statements.

An overview of the scope of our audit
Our group audit was scoped by 
obtaining an understanding of the 
Group and its environment, including 
group-wide controls, and assessing 
the risks of material misstatement at the 
group level. 

Based on that assessment, and 
consistent with our conclusion on 
scoping in the prior year, our full scope 
audit is performed on 100% (2017: 100%) 
of the Group’s net assets, revenue and 
proﬁt before tax. 

The Group is audited by one audit 
team, led by the Senior Statutory 
Auditor, responsible for the audit of 
the Company, joint ventures and 
certain subsidiaries. Our audit work on 
subsidiaries and joint ventures is carried 
out to a materiality which is lower than, 
and in most cases substantially lower 
than, group materiality as set out above. 
Our audit also included testing of the 
consolidation process and group-
wide controls. 

The Company is located in London, 
UK and audited directly by the Group 
audit team.

Other information
The Directors are responsible for the 
other information. The other information 
comprises the information included 
in the Annual Report other than the 
ﬁnancial statements and our auditor’s 
report thereon.

Our opinion on the ﬁnancial statements 
does not cover the other information 
and, except to the extent otherwise 
explicitly stated in our report, we do 
not express any form of assurance 
conclusion thereon.

In connection with our audit of the 
ﬁnancial statements, our responsibility 
is to read the other information and, in 
doing so, consider whether the other 
information is materially inconsistent 
with the ﬁnancial statements or 
our knowledge obtained in the 
audit or otherwise appears to be 
materially misstated.

If we identify such material inconsistencies 
or apparent material misstatements, we 
are required to determine whether there 
is a material misstatement in the ﬁnancial 
statements or a material misstatement 
of the other information. If, based on the 
work we have performed, we conclude 
that there is a material misstatement of 
this other information, we are required 
to report that fact.

In this context, matters that we are 
speciﬁcally required to report to you as 
uncorrected material misstatements of 
the other information include where we 
conclude that:

•  Fair, balanced and understandable 

– the statement given by the Directors 
that they consider the Annual Report 
and ﬁnancial statements taken 
as a whole is fair, balanced and 
understandable and provides the 
information necessary for shareholders 
to assess the Group’s position and 
performance, business model and 
strategy, is materially inconsistent with 
our knowledge obtained in the audit

•  Audit Committee reporting – the 

section describing the work of the Audit 
Committee does not appropriately 
address matters communicated by us 
to the Audit Committee

•  Directors’ statement of compliance 
with the UK Corporate Governance 
Code – the parts of the Directors’ 
statement required under the Listing 
Rules relating to the company’s 
compliance with the UK Corporate 
Governance Code containing 
provisions speciﬁed for review by the 
auditor in accordance with Listing Rule 
9.8.10R(2) do not properly disclose a 
departure from a relevant provision of 
the UK Corporate Governance Code

We have nothing to report in respect 
of these matters.

Responsibilities of Directors
As explained more fully in the Directors’ 
responsibilities statement, the Directors 
are responsible for the preparation of 
the ﬁnancial statements and for being 
satisﬁed that they give a true and fair 

view, and for such internal control as 
the Directors determine is necessary 
to enable the preparation of ﬁnancial 
statements that are free from material 
misstatement, whether due to fraud 
or error.

In preparing the ﬁnancial statements, the 
Directors are responsible for assessing the 
Group’s and the Company’s ability to 
continue as a going concern, disclosing 
as applicable, matters related to going 
concern and using the going concern 
basis of accounting unless the Directors 
either intend to liquidate the Group or the 
Company or to cease operations, or have 
no realistic alternative but to do so.

Auditor’s responsibilities for the 
audit of the ﬁnancial statements
Our objectives are to obtain reasonable 
assurance about whether the ﬁnancial 
statements as a whole are free from 
material misstatement, whether due 
to fraud or error, and to issue an auditor’s 
report that includes our opinion. 
Reasonable assurance is a high level 
of assurance, but is not a guarantee 
that an audit conducted in accordance 
with ISAs (UK) will always detect a 
material misstatement when it exists. 
Misstatements can arise from fraud 
or error and are considered material 
if, individually or in the aggregate, 
they could reasonably be expected 
to inﬂuence the economic decisions 
of users taken on the basis of these 
ﬁnancial statements.

A further description of our responsibilities 
for the audit of the ﬁnancial statements 
is located on the Financial Reporting 
Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description 
forms part of our auditor’s report.

Use of our report
This report is made solely to the 
Company’s members, as a body, in 
accordance with Chapter 3 of Part 16 
of the Companies Act 2006. Our audit 
work has been undertaken so that we 
might state to the Company’s members 
those matters we are required to state 
to them in an auditor’s 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 and the Company’s 
members as a body, for our audit work, 
for this report, or for the opinions we 
have formed.

Report on other legal and 
regulatory requirements
Opinions on other matters prescribed by 
the Companies Act 2006
In our opinion, the part of the Directors’ 
remuneration report to be audited has 
been properly prepared in accordance 
with the Companies Act 2006.

In our opinion, based on the work 
undertaken in the course of the audit:

•  the information given in the Strategic 

report and the Directors’ report for the 
ﬁnancial year for which the ﬁnancial 

LondonMetric Property Plc 
Annual Report and Accounts 2018

113

statements are prepared is consistent 
with the ﬁnancial statements

•  the Strategic report and the Directors’ 

report have been prepared in 
accordance with applicable 
legal requirements

In the light of the knowledge and 
understanding of the Group and the 
Company and their environment 
obtained in the course of the audit, 
we have not identiﬁed any material 
misstatements in the Strategic report 
or the Directors’ report.

Matters on which we are required 
to report by exception
Adequacy of explanations received 
and accounting records
Under the Companies Act 2006 we are 
required to report to you if, in our opinion:

•  we have not received all the 

information and explanations we 
require for our audit

•  adequate accounting records have 
not been kept by the Company, or 
returns adequate for our audit have 
not been received from branches not 
visited by us

•  the Company ﬁnancial statements are 
not in agreement with the accounting 
records and returns

We have nothing to report in respect 
of these matters.

Directors’ remuneration
Under the Companies Act 2006 we 
are also required to report if in our 
opinion certain disclosures of Directors’ 
remuneration have not been made or the 
part of the Directors’ remuneration report 
to be audited is not in agreement with the 
accounting records and returns.

We have nothing to report in respect 
of these matters.

Other matters
Auditor tenure
Following the recommendation of the 
Audit Committee, we were appointed 
by the Board of LondonMetric Property 
Plc on 19 September 2013 to audit the 
ﬁnancial statements for the year ending 
31 March 2014 and subsequent ﬁnancial 
periods. The period of total uninterrupted 
engagement including previous 
renewals and reappointments of the ﬁrm 
is ﬁve years, covering the years ending 
31 March 2014 to 31 March 2018.

Consistency of the audit report with 
the additional report to the 
Audit Committee
Our audit opinion is consistent with 
the additional report to the Audit 
Committee we are required to provide 
in accordance with ISAs (UK).

Georgina Robb, FCA (Senior statutory auditor)
For and on behalf of Deloitte LLP  
Statutory Auditor  
London, United Kingdom

30 May 2018

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Annual Report and Accounts 2018

114 LondonMetric Property Plc 
 Group income statement

For the year ended 31 March

Gross revenue

Gross rental income

Property operating expenses

Net rental income

Property advisory fee income

Net income

Administrative costs

Amortisation of intangible asset

Total administrative costs

Proﬁt on revaluation of investment properties 

Loss on sale of investment properties

Share of proﬁts of joint ventures

Operating proﬁt

Finance income

Finance costs

Proﬁt before tax

Taxation

Proﬁt for the year and total comprehensive income 

Earnings per share

Basic and diluted

EPRA 

All amounts relate to continuing activities.

The notes on pages 118 to 136 form part of these ﬁnancial statements.

Note

3

4

9

10

5

6

8

8

2018 
£000

83,709

81,988

(828)

81,160

1,721

82,881

2017 
£000

75,618

73,905

(814)

73,091

1,713

74,804

(13,800)

(13,268)

–

(13,800)

114,723

(2,139)

13,655

195,320

415

(9,685)

186,050

(32)

186,018

(182)

(13,450)

22,200

(4,503)

3,560

82,611

1,740

(21,340)

63,011

(13)

62,998

26.9p

8.5p

10.1p

8.2p

 Group balance sheet

As at 31 March

Non current assets

Investment properties

Investment in equity accounted joint ventures

Derivative ﬁnancial instruments

Other tangible assets

Current assets

Trade and other receivables

Cash and cash equivalents

Total assets

Current liabilities 

Trade and other payables

Non current liabilities

Borrowings

Derivative ﬁnancial instruments

Total liabilities

Net assets

Equity

Called up share capital

Share premium 

Capital redemption reserve

Other reserve

Retained earnings

Equity shareholders’ funds

Net asset value per share

EPRA net asset value per share

LondonMetric Property Plc 
Annual Report and Accounts 2018

115

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Note

2018 
£000

2017 
£000

9

10

14

11

12

13

14

14

16

1,677,555

1,373,400

117,646

2,836

73

107,567

–

310

1,798,110

1,481,277

2,344

26,162

28,506

18,758

42,944

61,702

1,826,616

1,542,979

33,576

33,576

643,551

–

643,551

677,127

46,395

46,395

466,319

23,350

489,669

536,064

1,149,489

1,006,915

69,722

96,079

9,636

222,502

751,550

69,238

88,548

9,636

221,374

618,119

1,149,489

1,006,915

8

8

165.7p

165.2p

146.4p

149.8p

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The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 30 May 2018 and were signed 
on its behalf by:

Martin McGann
Finance Director

Registered in England and Wales, No 7124797

The notes on pages 118 to 136 form part of these ﬁnancial statements.

 
 
 
 
 
 
 
Annual Report and Accounts 2018

116 LondonMetric Property Plc 
 Group statement of changes in equity

For the year ended 31 March

At 1 April 2017

Proﬁt for the year and total 
comprehensive income

Purchase of shares held in trust

Vesting of shares held in trust

Share based awards

Dividends 

At 31 March 2018

At 1 April 2016

Proﬁt for the year and total 
comprehensive income

Equity placing

Purchase of shares held in trust

Vesting of shares held in trust

Share based awards

Dividends 

At 31 March 2017

Note

Share 
capital 
£000

69,238

Share
premium
£000

88,548

Capital 
 redemption 
reserve 
£000

9,636

Other 
reserve 
£000

221,374

Retained 
earnings 
£000

Total 
£000

618,119

1,006,915

–

–

–

–

–

–

–

–

7

484

69,722

7,531

96,079

–

–

–

–

–

(2,783)

3,911

–

–

9,636

222,502

–

186,018

Share
premium 
£000

Capital 
redemption 
reserve 
£000

Other 
reserve 
£000

Note

Share 
capital 
£000

62,804

–

6,280

–

–

–

–

–

86,492

–

–

–

7

154

69,238

2,056

88,548

9,636

222,936

–

–

–

–

–

–

–

–

(5,195)

3,633

–

–

9,636

221,374

–

(3,635)

2,420

(51,372)

751,550

Retained 
earnings 
£000

602,821

62,998

–

–

(3,629)

1,833

(45,904)

618,119

186,018

(2,783)

276

2,420

(43,357)

1,149,489

Total 
£000

898,197

62,998

92,772

(5,195)

4

1,833

(43,694)

1,006,915

The notes on pages 118 to 136 form part of these ﬁnancial statements.

(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:75)(cid:73)(cid:91)(cid:80)(cid:8)(cid:1666)(cid:87)(cid:95)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)

For the year ended 31 March

LondonMetric Property Plc 
Annual Report and Accounts 2018

117

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Cash ﬂows from operating activities

Proﬁt before tax

Adjustments for non cash items:

Proﬁt on revaluation of investment properties

Loss on sale of investment properties 

Share of post tax proﬁt of joint ventures

Movement in lease incentives

Share based payment

Amortisation of intangible asset

Net ﬁnance costs

Cash ﬂows from operations before changes in working capital

Change in trade and other receivables

Change in trade and other payables

Cash ﬂows from operations

Interest received

Interest paid

Tax paid

Cash ﬂows from operating activities

Investing activities

Purchase of investment properties

Capital expenditure on investment properties

Lease incentives paid

Sale of investment properties

Investments in joint ventures

Distributions from joint ventures

Cash ﬂows from investing activities

Financing activities

Dividends paid

Proceeds from issue of ordinary shares

Purchase of shares held in trust

Vesting of shares held in trust

New borrowings and amounts drawndown

Repayment of loan facilities

Financial arrangement fees and break costs

Cash ﬂows from ﬁnancing activities

Net (decrease)/increase in cash and cash equivalents

Opening cash and cash equivalents

Closing cash and cash equivalents

The notes on pages 118 to 136 form part of these ﬁnancial statements.

2018
£000

2017
£000

186,050

63,011

(114,723)

(22,200)

2,139

(13,655)

(1,975)

2,420

–

9,270

69,526

1,730

(2,859)

68,397

52

(16,409)

(17)

52,023

4,503

(3,560)

293

1,833

182

19,600

63,662

902

9,686

74,250

64

(17,149)

(34)

57,131

(306,245)

(147,348)

(56,199)

(3,049)

(19,387)

(6,495)

183,780

165,035

(12,662)

16,238

(178,137)

(43,357)

–

(2,783)

276

(450)

16,109

7,464

(43,694)

92,772

(5,195)

4

397,237

226,181

(220,407)

(328,000)

(21,634)

109,332

(16,782)

42,944

26,162

(6,340)

(64,272)

323

42,621

42,944

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Annual Report and Accounts 2018

118 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)

For the year ended 31 March 2018

1 Signiﬁcant accounting policies
a) General information
LondonMetric Property Plc is a company incorporated in 
the United Kingdom under the Companies Act. The address 
of the registered office is given on page 152. The principal 
activities of the Company and its subsidiaries (‘the Group’) 
and the nature of the Group’s operations are set out in the 
Strategic report on pages 01 to 60.

b) Statement of compliance
The consolidated ﬁnancial statements have been prepared 
in accordance with International Financial Reporting 
Standards (‘IFRS’) as adopted by the European Union.

c) Basis of preparation
The ﬁnancial statements are prepared on a going concern 
basis, as explained in the Report of the Directors on 
page 106.

The functional and presentational currency of the 
Group is sterling. The ﬁnancial statements are prepared 
on the historical cost basis except that investment 
and development properties and derivative ﬁnancial 
instruments are stated at fair value.

The accounting policies have been applied consistently 
in all material respects. 

i) Signiﬁcant judgements, key assumptions and estimates
The preparation of ﬁnancial statements in conformity with 
IFRS requires management to make judgements, estimates 
and assumptions that affect the application of accounting 
policies and the reported amounts of assets, liabilities, 
income and expenses.

The estimates and associated assumptions are based on 
historical experience and other factors that are considered 
to be relevant. Actual results may differ from these estimates.

Revisions to accounting estimates are recognised in the 
period in which the estimate is revised if the revision affects 
only that period. If the revision affects both current and 
future periods, the change is recognised over those periods.

The accounting policies subject to signiﬁcant judgements 
and estimates are considered by the Audit Committee on 
pages 83 to 85 and are as follows:

Signiﬁcant areas of estimation uncertainty
Property valuations
The valuation of the property portfolio is a critical part of 
the Group’s performance. The Group carries the property 
portfolio at fair value in the balance sheet and engages 
professionally qualiﬁed external valuers to undertake six-
monthly valuations.

The determination of the fair value of each property 
requires, to the extent applicable, the use of estimates 
and assumptions in relation to factors such as future lease 
income, lease incentives, current market rental yields, 
future development costs and the appropriate discount 
rate. In addition, to the extent possible, the valuers make 
reference to market evidence of transaction prices for 
similar properties. 

The fair value of a development property is determined 
by using the ‘residual method’, which deducts all 
estimated costs necessary to complete the development, 
together with an allowance for development risk, proﬁt 
and purchasers’ costs, from the fair valuation of the 
completed property.

Signiﬁcant areas of judgement
Revenue recognition
Certain transactions require management to make 
judgements as to whether, and to what extent, revenue 
should be recognised and the appropriate cut off for 
property transactions. Management consider whether the 
signiﬁcant risks and rewards of ownership of assets have 
been transferred between buyer and seller and the point 
at which developments reach practical completion.

Other complexities include accounting for rent free periods 
and capital incentive payments.

Signiﬁcant transactions
Some property transactions are complex and require 
management to assess whether the acquisition of property 
through a corporate vehicle represents an asset acquisition 
or a business combination under IFRS 3.

Where there are signiﬁcant other assets and liabilities 
acquired in addition to property, the transaction 
is accounted for as a business combination. Where 
there are not it is accounted for as an asset purchase.

Other complexities include conditionality inherent in 
transactions and deferred property completions.

ii) Adoption of new and revised standards
Standards and interpretations effective in the current period
During the year, the following new and revised Standards 
and Interpretations have been adopted and have not  
had a material impact on the amounts reported in these 
ﬁnancial statements:

Name

Description

IAS 7 (amendments)

Disclosure Initiative

IAS 12 (amendments)

Annual Improvements  
to IFRSs: 2014 – 2016 cycle

Recognition of Deferred Tax Assets 
for Unrealised Losses

Amendments to IFRS 12

LondonMetric Property Plc 
Annual Report and Accounts 2018

119

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1 Signiﬁcant accounting policies (continued)
Standards and interpretations in issue not yet adopted
The IASB and the International Financial Reporting 
Interpretations Committee have issued the following 
standards and interpretations that are mandatory for 
later accounting periods and which have not been 
adopted early:

Name

Description

IFRS 2 (amendments)

Classiﬁcation and Measurement of 
Share Based Payment Transactions

IAS 40 (amendments)

Transfers of Investment Property

Annual Improvements  
to IFRSs: 2014 – 2016 cycle

IFRIC 22

Amendments to IFRS 1 and IAS 28

Foreign Currency Transactions and 
Advance Considerations

The Directors do not expect that the adoption of the 
Standards listed above will have a material impact on 
the ﬁnancial statements of the Group in future periods. 
Certain standards which might have an impact are 
discussed below. 

IFRS 9 Financial Instruments

Nature of 
change

Impact

IFRS 9 addresses the classiﬁcation and 
measurement of ﬁnancial assets and liabilities, 
introduces a new impairment model for ﬁnancial 
assets and new rules for hedge accounting.

The Group has reviewed its ﬁnancial assets and 
liabilities and is expecting the following impact 
from the adoption of the new standard on 
1 April 2018:

i. Classiﬁcation and measurement
IFRS 9 contains three principal classiﬁcation 
categories for ﬁnancial assets: measured at 
amortised cost, fair value through proﬁt and 
loss (‘FVTPL’) and fair value through other 
comprehensive income (‘FVTOCI’). 

The Group’s ﬁnancial assets at 31 March 2018 
consist primarily of trade receivables which 
will continue to be reﬂected at amortised cost 
as the Group’s business model is to collect the 
contractual cash ﬂows due from tenants.

There will be no impact on the Group’s accounting 
for ﬁnancial liabilities, as the new requirements only 
affect the accounting for ﬁnancial liabilities that 
are designated at fair value through proﬁt or loss 
and the Group does not have any such liabilities. 

ii. Impairment 
The new impairment model requires the 
recognition of impairment provisions based on 
expected credit losses (‘ECL’) rather than only 
incurred credit losses as is the case under IAS 39.

The main area of potential impact to the Group 
is considered to be impairment provisioning of 
trade receivables.

IFRS 9 Financial Instruments (continued)

Impact

Gross trade receivables held at 31 March 2018 were 
£776,000 with an impairment provision recognised 
under IAS 39 of £2,200. The credit risk associated 
with unpaid rent is deemed to be low. 

We have performed an assessment of the 
impact of impairment losses recognised for trade 
receivables under IFRS 9 at 31 March 2018 through 
estimating the ECLs based on actual credit loss 
experienced over the past three years. Based 
on this assessment, the impact of impairment 
losses recognised under IFRS 9 is estimated to be 
immaterial.

The Company holds loans and receivable 
balances with the subsidiaries of the Group as 
disclosed in note iv to the Company ﬁnancial 
statements. Management do not estimate there 
to be a material impact on the Company ﬁnancial 
statements from the recognition of impairment 
provisions for the loans and receivables under 
IFRS 9.

Changes to debt modiﬁcation rules for non 
substantial modiﬁcations may result in a gain or 
loss being recognised in the proﬁt and loss equal 
to the difference in the present value of cash 
ﬂows under the original and modiﬁed terms of the 
debt, discounted at the effective interest rate. We 
have reviewed debt modiﬁcations made in the 
year as a result of reﬁnancing our secured facility 
with Helaba and have concluded that there is no 
material impact on the ﬁnancial statements at 
transition.

iii. Hedge accounting
As a general rule, more hedge relationships might 
be eligible for hedge accounting, as the standard 
introduces a more principles-based approach. 
The Group does not adopt hedge accounting and 
therefore there is no impact of this change.

iv. Disclosures
The new standard also introduces expanded 
disclosure requirements and changes in 
presentation. These are expected to change the 
nature and extent of the Group’s disclosures for 
ﬁnancial instruments particularly in the year of 
adoption.

Date of 
adoption 
by Group

The Group intends to adopt the standard for 
ﬁnancial years commencing on or after 1 April 
2018. Comparatives for 2018 are not expected to 
be restated.

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Annual Report and Accounts 2018

120 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

IFRS 16 Leases

Nature of 
change

IFRS 16 was issued in January 2016. It will result in 
almost all leases being recognised on the balance 
sheet for a lessee, as the distinction between 
operating and ﬁnance leases is removed. Under 
the new standard, an asset (the right to use the 
leased item) and a ﬁnancial liability to pay rentals 
are recognised. The accounting for lessors will not 
signiﬁcantly change.

Impact

The standard does not impact the accounting for 
the rental income earned by the Group as lessor as 
it scopes out leases of investment properties.

At present, as a lessee the Group holds a limited 
number of operating leases as reﬂected in note 
15, the most signiﬁcant being the lease of its head 
office in London. Management has performed an 
assessment of the impact of bringing operating 
leases on balance sheet based on leases held 
at 31 March 2018. IFRS 16 is estimated to have an 
immaterial impact to the Group.

Date of 
adoption 
by Group

Mandatory for the ﬁrst time in the ﬁnancial year 
commencing 1 April 2019. At this stage, the Group 
does not intend to adopt the standard before its 
effective date.

1 Signiﬁcant accounting policies (continued)

IFRS 15 Revenue from Contracts with Customers

Nature of 
change

Impact

The IASB has issued a new standard for the 
recognition of revenue. The new standard is based 
on the principle that revenue is recognised when 
control of a good or service transfers to a customer. 

Management has assessed the effects of 
applying the new standard on the Group’s 
Financial Statements.

i. Revenue recognition
IFRS 15 does not apply to rental income which, 
at 31 March 2018 accounted for 98% of total 
gross revenue of the Group, but does apply to 
management fees and surrender premiums 
receivable. It also affects the timing of recognising 
property transactions at the point of completion 
rather than on unconditional exchange of 
contracts and when signiﬁcant risks and rewards of 
ownership have passed.

Management has assessed the recognition of 
management fee income and does not expect 
IFRS 15 to have an impact. Surrender premiums 
received will be considered on a case by case 
basis. The standard will affect the timing of 
recognising property transactions and the Group’s 
accounting policy will change to recognising 
transactions upon completion. 

ii. Disclosures
The new standard also introduces expanded 
disclosure requirements. These will change 
the nature and extent of the Group’s 
revenue disclosures.

Date of 
adoption 
by Group

The Group intends to adopt the standard for 
ﬁnancial years commencing on or after 1 April 
2018. Comparatives for 2018 are not expected to 
be restated.

LondonMetric Property Plc 
Annual Report and Accounts 2018

121

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1 Signiﬁcant accounting policies (continued)
d) Basis of consolidation
i) Subsidiaries
The consolidated ﬁnancial statements include 
the accounts of the Company and its subsidiaries. 
Subsidiaries are those entities controlled by the Group. 
Control is assumed when the Group:
•  Has the power over the investee
•  Is exposed, or has rights, to variable return from 

its involvement with the investee

•  Has the ability to use its power to affect its returns

In the consolidated balance sheet, the acquiree’s 
identiﬁable assets, liabilities and contingent liabilities are 
initially recognised at their fair value at the acquisition date. 

The results of subsidiaries are included in the consolidated 
ﬁnancial statements from the date that control commences 
until the date that control ceases.

Where properties are acquired through corporate 
acquisitions and there are no signiﬁcant assets or liabilities 
other than property, the acquisition is treated as an asset 
acquisition, in other cases the purchase method is used.

ii) Joint ventures and associates
Joint ventures are those entities over whose activities 
the Group has joint control. Associates are those entities 
over whose activities the Group is in a position to exercise 
signiﬁcant inﬂuence but does not have the power to 
jointly control.

Joint ventures and associates are accounted for under 
the equity method, whereby the consolidated balance 
sheet incorporates the Group’s share of the net assets of 
its joint ventures and associates. The consolidated income 
statement incorporates the Group’s share of joint venture 
and associate proﬁts after tax.

The Group’s joint ventures and associates adopt the 
accounting policies of the Group for inclusion in the  
Group ﬁnancial statements.

e) Property portfolio
i) Investment properties
Investment properties are properties owned or leased 
by the Group which are held for long term rental income 
and for capital appreciation. Investment property 
includes property that is being constructed, developed 
or redeveloped for future use as an investment property. 
Investment property is initially recognised at cost, including 
related transaction costs. It is subsequently carried at each 
published balance sheet date at fair value on an open 
market basis as determined by professionally qualiﬁed 
independent external valuers. Changes in fair value are 
included in the income statement. Where a property held 
for investment is appropriated to development property, it 
is transferred at fair value. A property ceases to be treated 
as a development property on practical completion.

In accordance with IAS 40 Investment Properties, no 
depreciation is provided in respect of investment properties.

Investment property is recognised as an asset when:
•  It is probable that the future economic beneﬁts that 
are associated with the investment property will ﬂow 
to the Group

•  There are no material conditions precedent which could 

prevent completion

•  The cost of the investment property can be 

measured reliably

All costs directly associated with the purchase and 
construction of a development property are capitalised. 
Capital expenditure that is directly attributable to the 
redevelopment or refurbishment of investment property, 
up to the point of it being completed for its intended use, 
is included in the carrying value of the property.

ii) Assets held for sale
An asset is classiﬁed as held for sale if its carrying amount is 
expected to be recovered through a sale transaction rather 
than through continuing use. This condition is regarded 
as met only when the sale is highly probable, the asset is 
available for sale in its present condition and management 
expect the sale to complete within one year from the 
balance sheet date. 

iii) Tenant leases
Management has exercised judgement in considering the 
potential transfer of the risks and rewards of ownership in 
accordance with IAS 17 for all properties leased to tenants 
and has determined that such leases are operating leases.

iv) Net rental income
Rental income from investment property leased out under 
an operating lease is recognised in the proﬁt or loss on a 
straight line basis over the lease term.

Contingent rents, such as turnover rents, rent reviews and 
indexation, are recorded as income in the periods in which 
they are earned. Rent reviews are recognised when such 
reviews have been agreed with tenants.

Where a rent free period is included in a lease, the rental 
income foregone is allocated evenly over the period from 
the date of lease commencement to the earlier of the ﬁrst 
break option or the lease termination date. Lease incentives 
and costs associated with entering into tenant leases 
are amortised over the period from the date of lease 
commencement to the earlier of the ﬁrst break option 
or the lease termination date.

Property operating expenses are expensed as incurred and 
any property operating expenditure not recovered from 
tenants through service charges is charged to proﬁt or loss.

v) Proﬁt and loss on sale of investment properties
Proﬁts and losses on sales of investment properties are 
calculated by reference to the carrying value at the 
previous year end valuation date, adjusted for subsequent 
capital expenditure.

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Annual Report and Accounts 2018

122 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

1 Signiﬁcant accounting policies (continued)
f) Financial assets and ﬁnancial liabilities
Financial assets and ﬁnancial liabilities are recognised in 
the balance sheet when the Group becomes a party to 
the contractual terms of the instrument. Unless otherwise 
indicated, the carrying amounts of the ﬁnancial assets and 
liabilities are a reasonable approximation of the fair values.

i) Trade and other receivables and payables
Trade and other receivables and payables are initially 
measured at fair value and subsequently at amortised cost 
using the effective interest method. An impairment provision 
is created where there is objective evidence to suggest that 
the Group will not be able to collect receivables in full.

ii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits 
held at call with banks and other short term highly liquid 
investments with original maturities of three months or less.

iii) Borrowings
Borrowings are recognised initially at fair value less 
attributable transaction costs. Subsequently, borrowings 
are stated at amortised cost with any difference being 
recognised in the income statement over the term of 
the borrowing.

iv) Derivative ﬁnancial instruments
The Group uses derivative ﬁnancial instruments to hedge its 
exposure to interest rate risks. Derivative ﬁnancial instruments 
are recognised initially at fair value, which equates to cost 
and subsequently remeasured at fair value, with changes 
in fair value being included in the income statement.

g) Finance costs and income
Net ﬁnance costs include interest payable on borrowings, 
net of interest capitalised and ﬁnance costs amortised.

Interest is capitalised if it is directly attributable to the 
acquisition, construction or redevelopment of development 
properties from the start of the development work until 
practical completion of the property. Capitalised interest is 
calculated with reference to the actual interest rate payable 
on speciﬁc borrowings for the purposes of development 
or, for that part of the borrowings ﬁnanced out of general 
funds, with reference to the Group’s weighted average 
cost of borrowings.

Finance income includes interest receivable on funds 
invested at the effective rate and notional interest 
receivable on forward funded developments at the 
contractual rate.

h) Tax
Tax is included in proﬁt or loss except to the extent that it 
relates to items recognised directly in equity, in which case 
the related tax is recognised in equity.

Current tax is the expected tax payable on the taxable 
income for the year, using tax rates enacted or substantively 
enacted at the balance sheet date, together with any 
adjustment in respect of previous years.

Deferred tax is provided using the balance sheet liability 
method, providing for temporary differences between 
the carrying amounts of assets and liabilities for ﬁnancial 
reporting purposes and their tax bases. The amount of 
deferred tax provided is based on the expected manner 
or realisation or settlement of the carrying amount of assets 
and liabilities, using tax rates enacted or substantively 
enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is 
probable that future taxable proﬁts will be available against 
which the asset can be utilised.

As the Group is a UK REIT there is no provision for deferred 
tax arising on the revaluation of properties or other 
temporary differences.

The Group must comply with the UK REIT regulation to 
beneﬁt from the favourable tax regime.

i) Share based payments
The fair value of equity-settled share based payments 
to employees is determined at the date of grant and 
is expensed on a straight line basis over the vesting 
period based on the Group’s estimate of shares that will 
eventually vest. 

j) Shares held in Trust
The cost of the Company’s shares held by the Employee 
Beneﬁt Trust is deducted from equity in the Group balance 
sheet. Any shares held by the Trust are not included in the 
calculation of earnings or net assets per share.

k) Dividends
Dividends on equity shares are recognised when they 
become legally payable. In the case of interim dividends, 
this is when paid. In the case of ﬁnal dividends, this is 
when approved by the shareholders at the Annual 
General Meeting.

LondonMetric Property Plc 
Annual Report and Accounts 2018

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2 Segmental information

As at 31 March

Property value

Distribution

Convenience & leisure

Long income

Retail parks

Office

Residential

Development

For the year to 31 March

Gross rental income

Distribution

Convenience & leisure

Long income

Retail parks

Office

Residential

Development

For the year to 31 March

Net rental income

Distribution

Convenience & leisure

Long income

Retail parks

Office

Residential

Development

100%  
owned  
£000

1,223,505

174,700

95,250

139,775

–

1,765

42,560

Share  
of JV  
£000

9,576

–

125,580

–

–

28,374

925

2018

Total  
£000

1,233,081

174,700

220,830

139,775

–

30,139

43,485

100%  
owned  
£000

921,165

156,270

51,825

145,170

70,000

1,655

27,315

Share  
of JV  
£000

6,172

–

114,800

–

–

39,456

–

2017

Total  
£000

927,337

156,270

166,625

145,170

70,000

41,111

27,315

1,677,555

164,455

1,842,010

1,373,400

160,428

1,533,828

100%  
owned  
£000

57,737

10,281

4,769

7,044

2,007

58

92

Share  
of JV  
£000

513

–

8,664

–

–

617

–

2018

Total  
£000

58,250

10,281

13,433

7,044

2,007

675

92

100%  
owned  
£000

46,144

8,634

3,481

11,557

3,941

68

80

81,988

9,794

91,782

73,905

100%  
owned  
£000

57,656

10,108

4,696

6,653

1,904

57

86

Share  
of JV  
£000

513

–

8,561

–

–

319

–

2018

Total  
£000

58,169

10,108

13,257

6,653

1,904

376

86

100%  
owned  
£000

46,200

8,500

3,387

11,211

3,678

32

83

Share  
of JV  
£000

411

–

7,747

–

–

953

–

9,111

Share  
of JV  
£000

412

–

7,683

–

603

–

2017

Total  
£000

46,555

8,634

11,228

11,557

3,941

1,021

80

83,016

2017

Total  
£000

46,612

8,500

11,070

11,211

3,678

635

83

81,160

9,393

90,553

73,091

8,698

81,789

An operating segment is a distinguishable component of the Group that engages in business activities, earns revenue and 
incurs expenses, whose results are reviewed by the Group’s chief operating decision makers and for which discrete ﬁnancial 
information is available. Gross rental income represents the Group’s revenues from its tenants and net rental income is the 
principal proﬁt measure used to determine the performance of each sector. Total assets are not monitored by segment. 
However, property assets are reviewed on an ongoing basis. The Group operates almost entirely in the UK and no 
geographical split is provided in information reported to the Board.

We have reclassiﬁed the operating segments this year to reﬂect the current portfolio mix and investment strategy. The retail 
segment has been split into three categories of convenience and leisure, long income and retail parks and the comparatives 
have been updated accordingly.

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Annual Report and Accounts 2018

124 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

3 Gross revenue

For the year to 31 March

Gross rental income

Property advisory fee income

2018
£000

81,988

1,721

83,709

2017
£000

73,905

1,713

75,618

For the year to 31 March 2018, 12% of the Group’s gross rental income was receivable from one tenant. For the comparative 
period, 14% of the Group’s gross rental income was receivable from one tenant.

4 Administration expenses
a) Total administration expenses

For the year to 31 March

Staff costs

Auditor’s remuneration

Depreciation

Other administrative expenses

b) Staff costs

For the year to 31 March

Employee costs, including those of Directors, comprise the following:

Wages and salaries

Less staff costs capitalised

Social security costs

Pension costs

Share based payment

2018
£000

10,008

180

263

3,340

13,791

2018
£000

8,422

(1,835)

6,587

702

301

2,418

10,008

2017
£000

9,787

184

105

3,192

13,268

2017
£000

8,720

(1,762)

6,958

720

276

1,833

9,787

The emoluments and pension beneﬁts of the Directors are set out in detail within the Remuneration Committee report 
on page 97.

The long term share incentive plan (‘LTIP’) that was created following the merger in 2013 allows Executive Directors and 
eligible employees to receive an award of shares, held in trust, dependent on performance conditions based on the 
earnings per share, total shareholder return and total accounting return of the Group over a three year vesting period. 
The Group expenses the estimated number of shares likely to vest over the three year period based on the market price 
at the date of grant. In the current year the charge was £2.4 million (2017: £1.8 million).

The Company awarded 2,163,274 LTIP shares during the year, 1,661,282 of which were awarded to Executive Directors 
as shown in the Remuneration Committee report on page 101. The cost of acquiring the shares expected to vest under 
the LTIP of £2.8 million has been charged to reserves this year (2017: £5.2 million).

Employee costs of £1.8 million (2017: £1.8 million) have been capitalised in respect of time spent on development projects.

c) Staff numbers
The average number of employees including Executive Directors during the year was:

Head office and property management

2018
Number

31

2017
Number

33

LondonMetric Property Plc 
Annual Report and Accounts 2018

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4 Administration expenses (continued)
d) Auditor’s remuneration

For the year to 31 March

Audit services:

Audit of the Group and Company ﬁnancial statements, pursuant to legislation

Audit of subsidiary ﬁnancial statements, pursuant to legislation

Other fees:

Audit related assurance services

Other advisory services

Total fees for audit and other services

2018
£000

111

4

27

2

144

2017
£000

74

79

26

–

179

In addition to the above audit fees, £47,000 (2017: £31,000) was due to the Group’s auditor in respect of its joint venture 
operations. This year, BDO LLP will be responsible for the audit of other subsidiary entities at a cost to the Group of £30,950.

5 Finance costs

For the year to 31 March

Interest payable on bank loans and related derivatives

Debt and hedging early close out costs

Amortisation of loan issue costs 

Commitment fees and other ﬁnance costs 

Total borrowing costs

Less amounts capitalised on the development of properties

Net borrowing costs

Fair value gain on derivative ﬁnancial instruments

Total ﬁnance costs

2018
£000

15,530

18,981

1,350

1,705

37,566

(1,695)

35,871

(26,186)

9,685

2017
£000

16,916

3,516

1,409

1,643

23,484

(1,924)

21,560

(220)

21,340

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During the year, the Group cancelled £128 million interest rate swaps and recouponed a further £190 million at a total cost 
of £19.0 million. Debt and hedging break costs in the Cash ﬂow statement on page 117 have been classiﬁed within ﬁnancing 
activities this year. Prior year comparatives have been amended.

6 Taxation

For the year to 31 March

Current tax

UK tax charge on proﬁt

2018
£000

32

2017
£000

13

The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:

For the year to 31 March

Proﬁt before tax

Tax at the standard rate of corporation tax in the UK of 19% (2017: 20%)

Effects of:

Expenses not deductible for tax purposes

Tax effect of income not subject to tax

Share of post tax proﬁt of joint ventures

UK tax charge on proﬁt

2018
£000

186,050

35,350

–

(32,724)

(2,594)

32

2017
£000

63,011

12,602

36

(11,913)

(712)

13

The current tax charge relates to income tax charged to non resident landlords on property rental income in the Isle of Man. As the 
Group is a UK REIT there is no provision for deferred tax arising on the revaluation of properties or other temporary differences. 

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Annual Report and Accounts 2018

126 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

7 Dividends

For the year to 31 March

Ordinary dividends paid

2016 Second interim dividend: 3.75p per share

2017 First quarterly interim dividend: 1.8p per share

2017 Second quarterly interim dividend: 1.8p per share

2017 Third quarterly interim dividend: 1.8p per share

2017 Fourth quarterly interim dividend: 2.1p per share

2018 First quarterly interim dividend: 1.85p per share

2018 Second quarterly interim dividend: 1.85p per share

Quarterly dividend payable in 2019

2018 Third quarterly interim dividend: 1.85p per share

2018 Fourth quarterly interim dividend: 2.35p per share

2017
£000

23,404

11,257

11,243

–

–

–

–

45,904

2018
£000

–

–

–

11,269

14,457

12,817

12,829

51,372

12,837

16,311

The Company paid its third quarterly interim dividend in respect of the current ﬁnancial year of 1.85p per share, wholly 
as a Property Income Distribution (‘PID’), on 19 April 2018 to ordinary shareholders on the register at the close of business 
on 16 March 2018. 

The fourth quarterly interim dividend for 2018 of 2.35p per share, of which 1.7p is payable as a PID, will be payable on 
11 July 2018 to shareholders on the register at the close of business on 8 June 2018. A scrip dividend alternative will be offered 
to shareholders as it was for the ﬁrst three quarterly dividend payments.

Neither dividend has been included as a liability in these accounts. Both dividends will be recognised as an appropriation 
of retained earnings in the year to 31 March 2019.

During the year the Company issued 4,833,765 ordinary shares in relation to the last two quarterly dividend payments 
for 2017 and the ﬁrst two quarterly dividend payments for 2018, which reduced the cash dividend payment by £8.0 million 
to £43.4 million.

8 Earnings and net assets per share
Adjusted earnings and net assets per share are calculated in accordance with the Best Practice Recommendations 
of The European Public Real Estate Association (‘EPRA’). The EPRA earnings measure highlights the underlying performance 
of the property rental business.

The earnings per share calculation uses the weighted average number of ordinary shares during the year and excludes 
the average number of shares held by the Employee Beneﬁt Trust for the year.

The net asset per share calculation uses the number of shares in issue at the year end and excludes the actual number 
of shares held by the Employee Beneﬁt Trust at the year end.

a) EPRA earnings
EPRA earnings for the Group and its share of joint ventures are detailed as follows:

For the year to 31 March

Gross rental income

Property costs

Net rental income

Management fees

Administrative costs

Net ﬁnance costs1

Other

EPRA earnings

Group  
£000

81,988

(828)

81,160

1,721

(13,800)

(16,475)

(32)

52,574

JV  
£000

9,794

(401)

9,393

(763)

(106)

(1,982)

–

6,542

2018  
£000

91,782

(1,229)

90,553

958

(13,906)

(18,457)

(32)

59,116

Group  
£000

73,905

(814)

73,091

1,713

(13,268)

(16,304)

(13)

45,219

JV  
£000

9,111

(413)

8,698

(732)

(85)

(2,094)

–

5,787

2017  
£000

83,016

(1,227)

81,789

981

(13,353)

(18,398)

(13)

51,006

1  Group net ﬁnance costs reﬂect net borrowing costs of £35,871,000 (note 5) less early close out costs of £18,981,000 (note 5) and ﬁnance income of £415,000

LondonMetric Property Plc 
Annual Report and Accounts 2018

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8 Earnings and net assets per share (continued)
The reconciliation of EPRA earnings to IFRS reported proﬁt can be summarised as follows:

For the year to 31 March

EPRA earnings

Revaluation of investment property

Fair value of derivatives

Debt and hedging early close out costs

(Loss)/proﬁt on disposal

Amortisation of intangible assets

Group  
£000

52,574

114,723

26,186

(18,981)

(2,139)

–

JV  
£000

6,542

6,842

234

(76)

113

–

2018 
£000

59,116

121,565

26,420

(19,057)

(2,026)

–

IFRS reported proﬁt

172,363

13,655

186,018

Group  
£000

45,219

22,200

220

(3,516)

(4,503)

(182)

59,438

b) Earnings per ordinary share

For the year to 31 March

Basic and diluted earnings

EPRA adjustments1

EPRA earnings

1  Adjustments shown in table reconciling EPRA earnings with IFRS reported proﬁt

For the year to 31 March

Weighted average number of ordinary shares1

1  Excludes shares held in the LondonMetric Property Plc Employee Beneﬁt Trust 

Basic and diluted earnings per share

EPRA earnings per share

c) Net assets per share

As at 31 March

Equity shareholders’ funds

Fair value of derivatives

Fair value of joint ventures’ derivatives

EPRA net asset value

As at 31 March

Ordinary share capital

Number of shares held in employee trust 

Number of ordinary shares

Basic net asset value per share

EPRA net asset value per share

Further EPRA performance measures are reﬂected in the Supplementary notes on pages 142 to 146.

JV  
£000

5,787

(1,227)

108

(126)

(982)

–

3,560

2018
£000

186,018

(126,902)

59,116

2017  
£000

51,006

20,973

328

(3,642)

(5,485)

(182)

62,998

2017
£000

62,998

(11,992)

51,006

2018
Number of 
shares
£000

2017
Number of 
shares
£000

692,138

625,457

26.9p

8.5p

2018
£000

10.1p

8.2p

2017
£000

1,149,489

1,006,915

(2,836)

(43)

23,350

229

1,146,610

1,030,494

2018
Number of 
shares
£000

697,216

(3,323)

693,893

2017
Number of 
shares
£000

692,383

(4,502)

687,881

165.7p

165.2p

146.4p

149.8p

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Annual Report and Accounts 2018

128 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

9 Investment properties
a) Investment properties

As at 31 March

Opening balance

Acquisitions

Other capital expenditure

Disposals

Property transfers

Revaluation movement

Movement in tenant incentives 
and rent free uplifts

2018

Under 
development 
£000

Total  
£000

Completed 
£000

Under 
development 
£000

27,315

32,064

29,584

1,373,400

1,289,560

306,626

49,820

81,043

18,055

–

(172,038)

(174,965)

56,550

60,840

7,901

(650)

2017

Total  
£000

1,346,110

141,883

25,956

(175,615)

(60,366)

13,370

–

114,723

103,976

15,615

(103,976)

–

6,585

22,200

Completed 
£000

1,346,085

274,562

20,236

(172,038)

60,366

101,353

4,431

593

5,024

12,801

65

12,866

1,634,995

42,560

1,677,555

1,346,085

27,315

1,373,400

Investment properties are held at fair value as at 31 March 2018 based on external valuations performed by professionally 
qualiﬁed valuers CBRE Limited (‘CBRE’) and Savills Advisory Services Limited (‘Savills’). The valuation of property held for sale 
at 31 March 2018 was £89.9 million (2017: £40.9 million).

The valuations have been prepared in accordance with the RICS Valuation – Professional Standards 2014 on the basis of fair 
value as set out in note 1. There has been no change in the valuation technique in the year. The total fees earned by CBRE 
and Savills from the Company represent less than 5% of their total UK revenues. CBRE and Savills have continuously been the 
signatory of valuations for the Company since October 2007 and September 2010 respectively.

Long term leasehold values included within investment properties amount to £101.4 million (2017: £102.0 million). All other 
properties are freehold.

Included within the investment property valuation is £70.3 million (2017: £65.3 million) in respect of unamortised lease 
incentives and rent free periods. 

The historical cost of all of the Group’s investment properties at 31 March 2018 was £1,328.8 million (2017: £1,135.5 million).

Capital commitments have been entered into amounting to £47.5 million (2017: £57.8 million) which have not been 
provided for in the ﬁnancial statements.

Internal staff costs of the development team of £1.8 million (2017: £1.8 million) have been capitalised, being directly 
attributable to the development projects in progress.

Forward funded development costs of £9.8 million (2017: £52.7 million) have been classiﬁed within investment property 
as acquisitions.

b) Valuation technique and quantitative information

ERV

Net initial yield

Reversionary yield

Weighted 
average  
(£ per sq ft)

Range  
(£ per sq ft)

Weighted 
average  
%

Range  
%

Weighted 
average  
%

Range  
%

5.95

3.36-16.02

4.57

0-6.78

4.98

3.92-7.36

15.37

9.01-27.00

4.88

3.99-7.30

4.48

3.36-7.00

21.21 16.33-36.86

5.6

4.52-7.21

4.96

4.60-6.21

Asset type

Fair  
value  
2018  
£000

Distribution

1,223,505

Convenience and leisure

174,700

95,250

139,775

29,385

Long income

Retail parks

Development – distribution

Development – convenience 
and leisure

Development – long income

Residential 

Valuation 
technique

Yield 
capitalisation

Yield 
capitalisation

Yield 
capitalisation

Yield 
capitalisation

19.18 14.13-25.86

Residual

7.35

6.97-11.56

5,015

8,160

1,765

Residual

Residual

Comparison

16.00

18.47

n/a

16.00

18.47

n/a

5.49

6.69

6.27

6.92

n/a

5.02-5.88

5.29-6.98

6.27

6.92

n/a

5.56

6.52

5.00

5.33

n/a

4.93-6.32

4.92-6.90

5.00

5.33

n/a

All of the Group’s properties are categorised as Level 3 in the fair value hierarchy as deﬁned by IFRS 13 Fair Value 
Management. There have been no transfers of properties between Levels 1, 2 and 3 during the year ended 31 March 2018. 
The fair value at 31 March 2018 represents the highest and best use.

LondonMetric Property Plc 
Annual Report and Accounts 2018

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9 Investment properties (continued)
i) Technique
The valuation techniques described below are consistent with IFRS 13 and use signiﬁcant ‘unobservable’ inputs. There have 
been no changes in valuation techniques since the prior year. 

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Yield capitalisation – for commercial investment properties, market rental values are capitalised with a market capitalisation 
rate. The resulting valuations are cross-checked against the net initial yields and the fair market values per square foot 
derived from recent market transactions.

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Residual – for certain investment properties under development, the fair value of the property is calculated by estimating 
the fair value of the completed property using the yield capitalisation technique less estimated costs to completion and 
a risk premium.

Comparison – for residential properties the fair value is calculated by using data from recent market transactions.

ii) Sensitivity
An increase or decrease in ERV will increase or decrease the fair value of the Group’s investment properties.

An increase or decrease to the net initial yields and reversionary yields will decrease or increase the fair value of the 
Group’s investment properties.

An increase or decrease in the estimated costs of development will decrease or increase the fair value of the Group’s 
investment properties under development.

There are interrelationships between the unobservable inputs as they are determined by market conditions; an increase 
in more than one input could magnify or mitigate the impact on the valuation.

iii) Process
The valuation reports produced by CBRE and Savills are based on:

•  Information provided by the Group, such as current rents, lease terms, capital expenditure and comparable sales 
information, which is derived from the Group’s ﬁnancial and property management systems and is subject to the 
Group’s overall control environment

•  Assumptions applied by the valuers such as ERVs and yields which are based on market observation and their 

professional judgement

CBRE and Savills meet the Auditors and the Audit Committee semi-annually.

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10 Investment in joint ventures
At 31 March 2018, the following principal property interests, being jointly-controlled entities, have been equity accounted 
for in these ﬁnancial statements:

Country of incorporation 
or registration1

Property sectors

Group share

Metric Income Plus Partnership

LMP Retail Warehouse JV PUT

England

Long income & leisure

Guernsey

Long income & distribution

LSP London Residential Investments Ltd

Guernsey

Residential

50.0%

45.0%

40.0%

1  The registered address for entities incorporated in England is One Curzon Street, London, W1J 5HB. The registered address for entities incorporated in Guernsey is 

Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3AP.

The principal activity of all joint venture interests is property investment in the UK in the sectors noted in the table above, 
which complements the Group’s operations and contributes to the achievement of its strategy.

The Metric Income Plus Partnership (‘MIPP’), in which the Company has a 50% interest, acquired a development site 
in Ringwood for £8.5 million (Group share: £4.3 million) and sold a B&Q warehouse in Hull for £11.6 million (Group share: 
£5.8 million) in the year. The partnership agreement was extended to June 2023 and its debt facility with Deutsche 
Pfandbriefbank was increased by £18.2 million and extended for a further three years to April 2023. 

The Group increased its investment in the LMP Retail Warehouse joint venture in September 2017 to 45.0% at a cost of 
£7.9 million. The joint venture, which holds a portfolio of DFS assets, disposed of two assets in Swansea and Swindon in the year 
for £13.9 million (Group share: £5.4 million).

The Group also disposed of 19 residential ﬂats for £21.6 million (Group share: £8.7 million) through its 40% interest in LSP London 
Residential Investments Limited in the year. 

At 31 March 2018, the freehold and leasehold investment properties were externally valued by Royal Institution of Chartered 
Surveyors (‘RICS’) Registered Valuers of CBRE Limited and Savills Advisory Services Limited. 

The valuation of property held for sale by joint ventures at 31 March 2018 was £21.9 million (Group share: £8.8 million), 
(2017: £1.6 million and Group share £0.7 million).

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Annual Report and Accounts 2018

130 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

10 Investment in joint ventures (continued)
The movement in the carrying value of joint venture interests in the year is summarised as follows:

As at 31 March

Opening balance

Additions at cost

Share of proﬁt in the year

Disposals

Proﬁt distributions received

The Group’s share of the proﬁt after tax and net assets of its joint ventures is as follows: 

Metric  
Income Plus
Partnership  
£000

LMP  
Retail 
Warehouse  
JV PUT  
£000

LSP  
London 
Residential 
Investments 
£000

2018
£000

107,567

12,662

13,655

(3,964)

(12,274)

117,646

Total
2018  
£000

Summarised income statement

Gross rental income

Property costs

Net rental income

Administration expenses

Management fees

Revaluation 

Finance income

Finance cost

Derivative movement

Proﬁt/(loss) on disposal

Proﬁt/(loss) after tax

Group share of proﬁt/(loss) after tax

EPRA adjustments:

Revaluation 

Derivative movement

(Proﬁt)/loss on disposal

Debt and hedging early close out costs

EPRA earnings

Group share of EPRA earnings

Summarised balance sheet

Investment properties

Other current assets

Cash

Current liabilities

Bank debt

Unamortised ﬁnance costs

Derivative ﬁnancial instruments

Net assets

Group share of net assets

11,066

(129)

10,937

(75)

(910)

16,775

21

(2,626)

473

1,275

25,870

12,935

(16,775)

(473)

(1,275)

11

7,358

3,679

9,466

(86)

9,380

(82)

(329)

904

–

(1,979)

(6)

580

8,468

3,373

(904)

6

(580)

185

7,175

2,761

183,355

98,630

351

21,682

(3,002)

(75,900)

1,169

85

127,740

63,870

37

1,142

(950)

(46,619)

321

–

52,561

23,661

1,543

22,075

(746)

797

(85)

(460)

(961)

21,114

(242)

(1,699)

(4,879)

12,800

23

(4,613)

467

(145)

27,705

13,655

2

(8)

–

(2,000)

(6,633)

(2,653)

4,879

–

2,000

9

255

102

70,935

208

4,434

(290)

–

–

–

75,287

30,115

(12,800)

(6,842)

(467)

145

205

14,788

6,542

(234)

(113)

76

6,542

352,920

164,455

596

27,258

(4,242)

272

13,128

(2,043)

(122,519)

(58,938)

1,490

85

255,588

117,646

729

43

117,646

2017
£000

119,666

450

3,560

(5,384)

(10,725)

107,567

Group 
share 
2018  
£000

9,794

(401)

9,393

(106)

(763)

6,842

12

(2,070)

234

113

13,655

LondonMetric Property Plc 
Annual Report and Accounts 2018

131

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Metric  
Income Plus
Partnership  
£000

LMP  
Retail 
Warehouse  
JV PUT  
£000

LSP  
London 
Residential 
Investments 
£000

10,290

(115)

10,175

(24)

(774)

5,123

39

9,881

(20)

9,861

(93)

(384)

(2,035)

2

(2,766)

(2,365)

251

(95)

(1)

11,928

5,964

(5,123)

(251)

95

204

6,853

3,426

(80)

977

–

5,883

1,781

2,035

80

(977)

–

7,021

2,128

2,381

(874)

1,507

(77)

(570)

(7,921)

3

(343)

19

(3,080)

–

(10,462)

(4,185)

7,921

(19)

3,080

60

580

233

Total
2017  
£000

22,552

(1,009)

21,543

(194)

(1,728)

(4,833)

44

(5,474)

190

(2,198)

(1)

7,349

3,560

4,833

(190)

2,198

264

14,454

5,787

Group 
share 
2017  
£000

9,111

(413)

8,698

(85)

(732)

(1,227)

22

(2,242)

108

(982)

–

3,560

1,227

(108)

982

126

5,787

174,370

110,775

98,641

383,786

160,428

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4,029

(3,089)

(75,900)

716

(462)

99,932

49,967

–

779

(1,021)

(54,470)

658

6

56,727

17,290

289

2,371

(526)

–

–

–

100,775

40,310

557

7,179

(4,636)

(130,370)

1,374

(456)

257,434

107,567

2018
£000

776

10

1,443

115

2,344

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3,200

(2,068)

(54,563)

559

(229)

107,567

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£000

280

14,931

3,455

92

18,758

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10 Investment in joint ventures (continued)

Summarised income statement

Gross rental income

Property costs

Net rental income

Administration expenses

Management fees

Revaluation 

Finance income

Finance cost

Derivative movement

(Loss)/proﬁt on disposal

Tax

Proﬁt/(loss) after tax

Group share of proﬁt/(loss) after tax 

EPRA adjustments:

Revaluation 

Derivative movement

Loss/(proﬁt) on disposal

Debt and hedging early close out costs

EPRA earnings

Group share of EPRA earnings

Summarised balance sheet

Investment properties

Other current assets

Cash

Current liabilities

Bank debt

Unamortised ﬁnance costs

Derivative ﬁnancial instruments

Net assets

Group share of net assets

11 Trade and other receivables

As at 31 March

Trade receivables

Amounts receivable from property sales

Prepayments and accrued income

Other receivables

All amounts fall due for payment in less than one year. Trade receivables comprise rental income which is due on 
contractual quarter days with no credit period. At 31 March 2018, trade receivables of £2,200 were overdue and considered 
at risk (2017: none). 

 
 
 
 
 
 
 
Annual Report and Accounts 2018

132 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

12 Cash and cash equivalents
Cash and cash equivalents include £5.3 million (2017: £5.3 million) retained in rent and restricted accounts which are not 
readily available to the Group for day to day commercial purposes.

13 Trade and other payables

As at 31 March

Trade payables

Amounts payable on property acquisitions and disposals

Rent received in advance

Accrued interest

Other payables 

Other accruals and deferred income

2018
£000

2,582

1,173

15,973

785

4,139

8,924

33,576

2017
£000

9,118

1,832

13,724

1,664

3,102

16,955

46,395

The Group has ﬁnancial risk management policies in place to ensure that all payables are paid within the credit timeframe.

14 Borrowings and ﬁnancial instruments
a) Non current ﬁnancial liabilities

As at 31 March

Secured bank loans

Unsecured bank loans

Unamortised ﬁnance costs

2018
£000

130,000

520,000

(6,449)

643,551

2017
£000

196,170

277,000

(6,851)

466,319

Certain bank loans at 31 March 2018 are secured by ﬁxed charges over Group investment properties with a carrying value 
of £357.7 million (2017: £388.6 million). 

b) Financial risk management
Financial risk factors
The Group’s overall risk management programme focuses on the unpredictability of ﬁnancial markets and seeks to minimise 
potential adverse effects on the Group’s ﬁnancial performance. The Group’s ﬁnancial risk management objectives are 
to minimise the effect of risks it is exposed to through its operations and the use of debt ﬁnancing. 

The principal ﬁnancial risks to the Group and the policies it has in place to manage these risks are summarised below:

i) Credit risk
Credit risk is the risk of ﬁnancial loss to the Group if a client or counterparty to a ﬁnancial instrument fails to meet its 
contractual obligations.

The Group’s principal ﬁnancial assets are cash balances and deposits and trade and other receivables. The Group’s credit 
risk is primarily attributable to its cash deposits and trade receivables. 

The Group mitigates ﬁnancial loss from tenant defaults by dealing with only creditworthy tenants. The trade receivable 
amounts presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is 
made where there is objective evidence that the Group will not be able to collect amounts due according to the original 
terms of the receivables concerned. The balance is low relative to the scale of the balance sheet and therefore the credit 
risk of trade receivables is considered to be low.

Cash is placed on deposit with a diverse mix of institutions with suitable credit ratings and rates of return and for varying 
periods of time. The credit ratings of the banks are monitored and changes are made where necessary to manage risk.

The credit risk on liquid funds and derivative ﬁnancial instruments is limited due to the Group’s policy of monitoring 
counterparty exposures with a maximum exposure equal to the carrying amount of these instruments. The Group has 
no signiﬁcant concentration of credit risk, with exposure spread over a large number of counterparties.

LondonMetric Property Plc 
Annual Report and Accounts 2018

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14 Borrowings and ﬁnancial instruments (continued)
ii) Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the ﬁnance charges and principal repayments 
on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its ﬁnancial obligations as they fall due.

The Group actively maintains a mixture of long term and short term committed facilities that are designed to ensure that the 
Group has sufficient available funds for operations and committed investments. The Group’s funding sources are diversiﬁed 
across a range of banks and institutions. Weekly cash ﬂow forecasts are prepared for the Executive Committee to ensure 
sufficient resources of cash and undrawn borrowing facilities are in place to meet liabilities as they fall due. 

The Group had cash reserves of £26.2 million (2017: £42.9 million) and available and undrawn bank loan facilities at  
31 March 2018 of £53.8 million (2017: £296.8 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.

As at 31 March 2018

Bank loans

Derivative ﬁnancial instruments

As at 31 March 2017

Bank loans

Derivative ﬁnancial instruments

Less than  
one year  
£000

One to  
two years  
£000

16,047

1,000

17,047

16,091

1,244

17,335

Two to  
ﬁve years  
£000

426,590

2,439

429,029

More than  
ﬁve years  
£000

270,587

–

270,587

Less than  
one year  
£000

One to  
two years  
£000

Two to  
ﬁve years  
£000

More than  
ﬁve years  
£000

12,245

5,712

17,957

12,245

6,500

18,745

265,620

21,529

287,149

251,672

16

251,688

Total  
£000

729,315

4,683

733,998

Total  
£000

541,782

33,757

575,539

iii) Market risk – interest rate risk
The Group is exposed to interest rate risk from the use of debt ﬁnancing at a variable rate. It is the risk that future cash ﬂows 
of a ﬁnancial instrument will ﬂuctuate because of changes in interest rates. It is Group policy that a reasonable portion of 
external borrowings are at a ﬁxed interest rate in order to manage this risk.

The Group uses interest rate swaps and caps to manage its interest rate exposure and hedge future interest rate risk for the 
term of the bank loan. Although the Board accepts that this policy neither protects the Group entirely from the risk of paying 
rates in excess of current market rates nor eliminates fully the cash ﬂow risk associated with interest payments, it considers 
that it achieves an appropriate balance of exposure to these risks.

At 31 March 2018, 73% of the Group’s exposure (including share of joint ventures) to interest rate ﬂuctuations was hedged 
by way of current and forward starting swaps and caps assuming existing debt facilities are fully drawn (2017: 87%).

The average interest rate payable by the Group (including share of joint ventures) on all bank borrowings at 31 March 2018 
including the cost of amortising ﬁnance arrangement fees, was 2.8% (2017: 3.5%). A 1% increase or decrease in interest rates 
would decrease or increase the Group’s annual proﬁt before tax by £2.3 million or £1.6 million respectively.

iv) Capital risk management
The Group’s objectives when maintaining capital are to safeguard the entity’s ability to continue as a going concern so 
that it can provide returns to shareholders and as such it seeks to maintain an appropriate mix of debt and equity. The capital 
structure of the Group consists of debt, which includes long term borrowings and undrawn debt facilities, and equity 
comprising issued capital, reserves and retained earnings. The Group balances its overall capital structure through the 
payment of dividends, new share issues as well as the issue of new debt or the redemption of existing debt.

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Annual Report and Accounts 2018

134 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

14 Borrowings and ﬁnancial instruments (continued)
c) Financial instruments
i) Categories of ﬁnancial instruments

Measured at amortised cost

Measured at fair value

As at 31 March

Non current assets

Derivative ﬁnancial instruments (see 14c(iii))

Current assets

Cash and cash equivalents (note 12)

Trade receivables (note 11)

Other receivables (note 11)

Non current liabilities

Derivative ﬁnancial instruments (see 14c(iii))

Borrowings (note 14a)

Current liabilities

Trade payables (note 13)

Accrued interest (note 13)

Other accruals (note 13)

Other payables (note 13)

2018
£000

–

2017
£000

2018
£000

2017
£000

–

2,836

26,162

42,944

776

115

280

92

–

–

–

27,053

43,316

2,836

–

–

643,551

466,319

2,582

785

8,924

4,139

9,118

1,664

16,955

3,102

659,981

497,158

–

–

–

–

–

–

–

–

–

–

–

–

23,350

–

–

–

–

–

23,350

ii) Fair values
To the extent ﬁnancial assets and liabilities are not carried at fair value in the consolidated balance sheet, the Directors 
are of the opinion that book value approximates to fair value at 31 March 2018.

iii) Derivative ﬁnancial instruments 
Details of the fair value of the Group’s derivative ﬁnancial instruments that were in place at 31 March 2018 are 
provided below: 

As at 31 March

Average rate

Notional amount

Fair value

Interest rate caps – expiry

Less than one year

One to two years

Two to ﬁve years

As at 31 March

Interest rate swaps – expiry

Less than one year

One to two years

Two to ﬁve years

More than ﬁve years

Total fair value

2018
%

2.0

3.0

2.0

2.1

2018
%

0.6

2.0

1.3

–

1.3

2017
%

2.0

2.0

2.3

2.1

2018
£000

100,000

10,000

19,620

129,620

2017
£000

16,313

100,000

29,620

145,933

2018
£000

–

–

74

74

2017
£000

–

1

121

122

Average rate

Notional amount

Fair value

2017
%

–

0.6

2.0

2.1

1.9

2018
£000

50,000

10,000

425,000

–

485,000

2017
£000

–

50,000

166,960

425,000

641,960

2018
£000

18

(122)

2,866

–

2,762

2,836

2017
£000

–

(134)

(6,187)

(17,151)

(23,472)

(23,350)

All derivative ﬁnancial instruments are non current interest rate derivatives, and are carried at fair value following a valuation 
as at 31 March 2018 by J C Rathbone Associates Limited.

The market values of hedging products change with interest rate ﬂuctuations, but the exposure of the Group to movements 
in interest rates is protected by way of the hedging products listed above. In accordance with accounting standards, 
fair value is estimated by calculating the present value of future cash ﬂows, using appropriate market discount rates. 
For all derivative ﬁnancial instruments this equates to a Level 2 fair value measurement as deﬁned by IFRS 13 Fair Value 
Measurement. The valuation therefore does not reﬂect the cost or gain to the Group of cancelling its interest rate protection 
at the balance sheet date, which is generally a marginally higher cost (or smaller gain) than a market valuation.

 
LondonMetric Property Plc 
Annual Report and Accounts 2018

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15 Commitments under operating leases
The Group’s minimum lease rentals receivable under non cancellable operating leases, excluding joint ventures, are 
as follows:

As at 31 March

Less than one year

Between one and ﬁve years

Between six and ten years

Between 11 and 15 years

Between 16 and 20 years

Over 20 years

2018
£000

83,087

323,519

313,920

213,107

96,093

47,380

2017
£000

78,420

304,595

292,985

192,168

92,599

59,872

1,077,106

1,020,639

The Group’s minimum lease payments under non cancellable operating leases, excluding joint ventures, are as follows: 

As at 31 March

Less than one year

Between one and ﬁve years

16 Share capital 

As at 31 March

Issued, called up and fully paid

Ordinary shares of 10p each

2018
£000

337

–

337

2018
Number

2018
£000

2017
Number

2017
£000

810

337

1,147

2017
£000

697,216,196

69,722

692,382,431

69,238

In June 2017, the Company granted options over 2,163,274 ordinary shares under its Long Term Incentive Plan and 608,280 
ordinary shares under the Director’s Deferred Bonus Plan. 

In addition, 2,212,076 ordinary shares in the Company that were granted to certain Directors and employees under the 
Company’s Long Term Incentive Plan in 2014 vested along with 606,160 ordinary shares in the Director’s Deferred Bonus Plan. 
The share price on vesting was 171.65p.

The Company issued 4,833,765 shares under the terms of its Scrip Dividend Scheme in the year. 

No disclosures have been made in accordance with IFRS 2 for share based payments to employees other than those 
in the Remuneration Committee report on pages 99 to 101 on the basis of materiality.

17 Reserves
The Group statement of changes in equity is shown on page 116.

The following describes the nature and purpose of each reserve within equity:

Share capital

Share premium

The nominal value of shares issued.

The premium paid for new ordinary shares issued above the nominal value.

Capital redemption reserve

Amounts transferred from share capital on redemption of issued ordinary shares.

Other reserve

A reserve relating to the application of merger relief in the acquisition of LondonMetric 
Management Limited and Metric Property Investments plc by the Company, the cost of 
the Company’s shares held in treasury and the cost of shares held in trust to provide for the 
Company’s future obligations under share award schemes.

Retained earnings

The cumulative proﬁts and losses after the payment of dividends.

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Annual Report and Accounts 2018

136 LondonMetric Property Plc 
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:47)(cid:90)(cid:87)(cid:93)(cid:88)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

18 Analysis of movement in net debt

As at 31 March

Opening balance

Cash movement

Loan issue costs paid

Amortisation of loan issue costs

Cash and cash 
equivalents
£000

Borrowings
£000

Net debt
£000

Cash and cash 
equivalents
£000

Borrowings
£000

Net debt
£000

2018

2017

42,944

(16,782)

–

–

466,319

176,830

(948)

1,350

423,375

193,612

(948)

1,350

42,621

323

–

–

567,910

(101,819)

(1,181)

1,409

525,289

(102,142)

(1,181)

1,409

Closing balance

26,162

643,551

617,389

42,944

466,319

423,375

19 Related party transactions 
Management fees and proﬁt distributions receivable from the Group’s joint venture arrangements in which it has an equity 
interest were as follows:

For the year to 31 March

LSP Green Park Property Trust

LSP London Residential Investments

Metric Income Plus Partnership

LMP Retail Warehouse JV Property Unit Trust

Group interest

31.4%

40.0%

50.0%

45.0%

Management fees

Proﬁt distributions

2018
£000

–

384

1,008

329

1,721

2017
£000

–

475

854

384

1,713

 2018
£000

–

5,303

3,750

3,221

 2017
£000

10

5,120

3,434

2,161

12,274

10,725

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.

20 Events after the balance sheet date
On 11 April 2018 the Group conditionally exchanged to sell four distribution and two industrial warehouses for £36.0 million. 

The Group completed the disposal of the Superdrug Distribution Centre in South Elmsall for £15.0 million on 26 April 2018.

On 27 April 2018 the Group’s residential joint venture exchanged on a bulk sale of 10 ﬂats at Moore House, London for 
£17.0 million. 

On 7 May 2018 the Group completed the disposal of the Morrisons store at Loughborough for £32.5 million 

On 8 May 2018 the Group’s Metric Income Plus partnership completed the acquisition of a forward funded development in 
Telford for £4.0 million (Group share: £2.0 million)

On 10 May 2018 the Group’s Metric Income Plus partnership completed the acquisition of a Wickes store in Newmarket for 
£6.3 million (Group share: £3.1 million).

 Company balance sheet

As at 31 March

LondonMetric Property Plc 
Annual Report and Accounts 2018

137

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Fixed assets

Investment in subsidiaries

Other tangible assets

Derivative ﬁnancial instruments

Current assets

Trade and other receivables

Cash at bank

Total assets

Current liabilities

Trade and other payables

Non current liabilities

Borrowings

Derivative ﬁnancial instruments

Total liabilities

Net assets

Equity

Called up share capital

Share premium 

Capital redemption reserve

Other reserve

Retained earnings

Equity shareholders’ funds

Note

2018 
£000

2017 
£000

iii

vi

iv

v

vi

vi

893,822

785,413

73

2,762

310

–

896,657

785,723

455,112

17,574

472,686

312,732

37,103

349,835

1,369,343

1,135,558

11,050

11,050

516,362

–

516,362

527,412

841,931

69,722

96,079

9,636

39,694

626,800

841,931

10,849

10,849

272,505

17,600

290,105

300,954

834,604

69,238

88,548

9,636

69,101

598,081

834,604

The Company reported a proﬁt for the ﬁnancial year to 31 March 2018 of £50.8 million (2017: £93.5 million).

The ﬁnancial statements were approved and authorised for issue by the Board of Directors on 30 May 2018 and were signed 
on its behalf by:

Martin McGann
Finance Director

Registered in England and Wales, No 7124797

The notes on pages 139 to 141 form part of these ﬁnancial statements.

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Annual Report and Accounts 2018

138 LondonMetric Property Plc 
 Company statement of changes in equity

For the year ended 31 March

At 1 April 2017

Proﬁt for the year

Purchase of shares held in trust

Vesting of shares held in trust

Share based awards

Reserve transfer of impairment 
in subsidiary

Dividends paid

At 31 March 2018

At 1 April 2016

Proﬁt for the year

Ordinary share capital issued

Purchase of shares held in trust

Vesting of shares held in trust

Share based awards

Reserve transfer of impairment 
in subsidiary

Dividends paid

At 31 March 2017

Share 
capital 
£000

69,238

Share 
premium 
£000

88,548

Capital 
 redemption 
reserve 
£000

9,636

Other 
reserve 
£000

69,101

–

(2,783)

3,911

–

(30,535)

–

Retained 
earnings 
£000

598,081

50,771

–

(3,635)

2,420

30,535

(51,372)

–

–

–

–

–

–

9,636

39,694

626,800

Capital 
redemption 
reserve 
£000

9,636

–

–

–

–

–

–

–

9,636

Other 
reserve 
£000

80,112

–

–

(5,195)

3,633

–

(9,449)

–

69,101

Retained 
earnings 
£000

542,791

93,541

–

–

(3,629)

1,833

9,449

(45,904)

598,081

Total 
£000

834,604

50,771

(2,783)

276

2,420

–

(43,357)

841,931

Total 
£000

695,343

93,541

92,772

(5,195)

4

1,833

–

(43,694)

834,604

–

–

–

–

–

484

69,722

Share 
capital 
£000

62,804

–

6,280

–

–

–

–

–

–

–

–

–

7,531

96,079

Share 
premium 
£000

–

–

86,492

–

–

–

–

154

69,238

2,056

88,548

The notes on pages 139 to 141 form part of these ﬁnancial statements.

139
(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:43)(cid:87)(cid:85)(cid:88)(cid:73)(cid:86)(cid:97)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)

LondonMetric Property Plc 
Annual Report and Accounts 2018

For the year ended 31 March 2018

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i Accounting policies
Accounting convention
The separate ﬁnancial statements of the Company are presented as required by the Companies Act 2006. They have been 
prepared in accordance with FRS 101 (Financial Reporting Standard 101) ‘Reduced Disclosure Framework’ as issued by the 
Financial Reporting Council. 

As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard 
in relation to share based payments, ﬁnancial instruments, capital management, presentation of a cash ﬂow statement 
and certain related party transactions.

The accounting policies relevant to the Company are the same as those set out in the accounting policies for the Group, 
except as noted below. 

Subsidiary undertakings 
Investments in subsidiary companies are stated at cost less any provision for impairment.

ii Proﬁt attributable to members of the parent undertaking
As permitted by Section 408 Companies Act 2006, the income statement of the Company is not presented as part of these 
ﬁnancial statements. The reported proﬁt of the Company was £50.8 million (2017: £93.5 million).

Audit fees in relation to the Company only were £110,500 in the year (2017: £75,480).

iii Fixed asset investments

At 1 April 2017

Additions 

Disposals

Impairment of investment

At 31 March 2018

Subsidiary 
undertakings 
£000

785,413

319,914

(180,970)

(30,535)

893,822

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The carrying value of the Company’s investments was impaired by £30.5 million following an impairment review to assess 
the recoverable amount based on the net assets of the subsidiary companies.

The Company is incorporated in England and is the ultimate holding company of the Group and has the following 
subsidiary undertakings:

Country of  
incorporation or
registration3

Proportion of voting rights 
held (by way of share  
capital or units held)

Nature of business

London & Stamford Property Limited

LondonMetric Management Limited

LMP Retail Warehouse JV Holdings Limited1

Metric Property Investments plc

Metric Property Finance 1 Limited

Metric Property Finance 2 Limited

Metric LP Income Plus Limited1

LSI (Investments) Limited

LSI Developments Limited

LondonMetric Saturn Limited

LondonMetric Retail Distribution I Limited

LondonMetric Saturn II Limited

LondonMetric Retail Distribution II Limited

LondonMetric Retail Distribution III Limited

LondonMetric Liverpool Limited

LondonMetric Swindon Limited

LondonMetric Distribution Limited

LondonMetric Retail Limited

LondonMetric Edinburgh Limited

LondonMetric Derby Limited

Goresbrook Property Limited

Guernsey

Guernsey

Guernsey

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

England

100%

100%

Intermediate holding company

Management company

81.88%

Intermediate holding company

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Intermediate holding company

Intermediate holding company

Intermediate holding company

Intermediate holding company

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

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140 LondonMetric Property Plc 

Annual Report and Accounts 2018

(cid:54)(cid:87)(cid:92)(cid:77)(cid:91)(cid:8)(cid:78)(cid:87)(cid:90)(cid:85)(cid:81)(cid:86)(cid:79)(cid:8)(cid:88)(cid:73)(cid:90)(cid:92)(cid:8)(cid:87)(cid:78)(cid:8)(cid:92)(cid:80)(cid:77)(cid:8)(cid:43)(cid:87)(cid:85)(cid:88)(cid:73)(cid:86)(cid:97)(cid:8)(cid:1665)(cid:86)(cid:73)(cid:86)(cid:75)(cid:81)(cid:73)(cid:84)(cid:8)(cid:91)(cid:92)(cid:73)(cid:92)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:91)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

For the year ended 31 March 2018

iii Fixed asset investments (continued)

Country of  
incorporation or
registration3

Proportion of voting rights 
held (by way of share  
capital or units held)

LondonMetric Crawley Limited

Metric Property Launceston Limited

Metric Property Loughborough Limited1

Metric Property Coventry Limited

Metric Property Bedford Limited1

Metric Property Kirkstall Limited1

Metric Property Kings Lynn Limited1

LondonMetric Logistics Limited

L&S Business Space Limited1,2

L&S Highbury Limited1,2

LMP Green Park Cinemas Limited1,2

LMP Thrapston Limited1,2

LMP Bell Farm Limited1,2

LMP Omega II Limited1,2

LMP Wakeﬁeld Limited1,2

LMP Dagenham Limited1,2

LMP GB1B01 LLC1,2

LMP GB1B02 LLC1,2

LMP GB1B04-B05 LLC1,2

LMP GB1W01 LLC1,2

LMP GB1W02 LLC1,2

LMP GB1W03-W04 LLC1,2

LMP GB1W05 LLC1,2

LMP GB1W06 LLC1,2

LMP GB1W07-W08 LLC1,2

LMP GB2M01 LLC1,2

LMP GB3B01 LLC1,2

England

England

England

England

England

England

England

England

Guernsey

Guernsey

Guernsey

Guernsey

Guernsey

Guernsey

Guernsey

Guernsey

Delaware

Delaware

Delaware

Delaware

Delaware

Delaware

Delaware

Delaware

Delaware

Delaware

Delaware

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100% 

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

Nature of business

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

Property investment

1  Undertakings held indirectly by the Company
2  Exempt from the requirement to ﬁle audited accounts 
3  The registered address for companies incorporated in England is One Curzon Street, London, W1J 5HB. The registered address for companies incorporated in Guernsey is 

Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3AP. The registered address for companies incorporated in Delaware is The Corporation Trust Company, 
Corporation Trust Centre, 1209 Orange Street, Wilmington, DE19801

All of the undertakings listed above operate in their country of incorporation except those who are tax resident in the UK. 
All shares held are ordinary shares.

iv Trade and other receivables

As at 31 March

Prepayments and accrued income

Other receivables

Amounts due from subsidiary undertakings

All amounts under receivables fall due for payment in less than one year.

v Trade and other payables

As at 31 March

Trade payables

Other accruals and deferred income

Other payables

2018 
£000

915

32

2017 
£000

514

933

454,165

455,112

311,285

312,732

2018 
£000

530

7,646

2,874

11,050

2017 
£000

797

7,627

2,425

10,849

LondonMetric Property Plc 
Annual Report and Accounts 2018

141

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Non current ﬁnancial liabilities

As at 31 March

Secured bank loan

Unamortised ﬁnance costs

2018 
£000

520,000

(3,638)

516,362

2017 
£000

277,000

(4,495)

272,505

The following table shows the contractual maturity proﬁle of the Company’s ﬁnancial liabilities on an undiscounted cash ﬂow 
basis and assuming settlement on the earliest repayment date.

As at 31 March

Less than one year

One to ﬁve years

More than ﬁve years

Bank  
loans 
£000

12,843

429,856

136,364

579,063

Derivative 
ﬁnancial 
instruments 
£000

1,000

3,683

–

4,683

2018 
£000

13,843

433,539

136,364

583,746

2017 
£000

11,494

87,657

251,688

350,839

Derivative ﬁnancial instruments
The Company is exposed to market risk through interest rate ﬂuctuations. It is the Company’s policy that a signiﬁcant portion 
of external bank borrowings are at either ﬁxed or capped rates of interest in order to manage this risk. 

The Company uses interest rate swaps and caps to manage its interest rate exposure and hedge future interest rate risk for 
the term of the bank loan. Although the Board accepts that this policy neither protects the Company entirely from the risk 
of paying rates in excess of current market rates nor eliminates fully the cash ﬂow risk associated with interest payments, 
it considers that it achieves an appropriate balance of exposure to these risks.

The market values of hedging products change with interest rate ﬂuctuations, but the exposure of the Company to 
movements in interest rates is protected by way of the hedging products listed below. 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 Company 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.

Details of the fair value of the Company’s derivative ﬁnancial instruments that were in place are provided below.

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Average rate

Interest rate caps – expiry

Less than one year

One to two years

Two to ﬁve years

As at 31 March

Interest rate swaps – expiry

Less than one year

One to two years

Two to ﬁve years

Greater than ﬁve years

Total fair value

2018 
%

2.0

3.0

–

2.1

2018 
%

0.6

2.0

1.3

–

1.3

2017 
%

2.0

2.0

3.0

2.1

Average rate

2017 
%

–

0.6

2.0

2.1

1.9

2018
£000

70,000

10,000

–

80,000

2018 
£000

50,000

10,000

425,000

–

485,000

Notional

2017 
£000

16,313

70,000

10,000

96,313

Notional

2017 
£000

–

50,000

10,000

425,000

485,000

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2017 
£000

–

1

1

2

Fair value

2017 
£000

–

(134)

(318)

(17,150)

(17,602)

(17,600)

2018 
£000

–

–

–

–

2018 
£000

18

(122)

2,866

–

2,762

2,762

Further information on ﬁnancial risk management policies and practices can be found in note 14 of the Group accounts. 

vii Related party transactions
Related party transactions for the Company are as noted for the Group in note 19 to the Group ﬁnancial statements.

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Annual Report and Accounts 2018

142 LondonMetric Property Plc 
(cid:59)(cid:93)(cid:88)(cid:88)(cid:84)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:73)(cid:90)(cid:97)(cid:8)(cid:81)(cid:86)(cid:78)(cid:87)(cid:90)(cid:85)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:16)(cid:86)(cid:87)(cid:92)(cid:8)(cid:73)(cid:93)(cid:76)(cid:81)(cid:92)(cid:77)(cid:76)(cid:17)

i EPRA summary table

EPRA earnings per share

EPRA net asset value per share

EPRA triple net asset value per share

EPRA vacancy rate

EPRA cost ratio (including vacant property costs)

EPRA cost ratio (excluding vacant property costs)

EPRA net initial yield

EPRA ‘topped up’ net initial yield

The deﬁnition of these measures can be found in the Glossary on page 147.

ii EPRA proportionally consolidated income statement

For the year to 31 March

Gross rental income

Property costs

Net rental income

Management fees

Administrative costs

Net ﬁnance costs

Other

EPRA earnings

Group  
£000

81,988

(828)

81,160

1,721

(13,800)

(16,475)

(32)

52,574

JV  
£000

9,794

(401)

9,393

(763)

(106)

(1,982)

–

6,542

2018  
£000

91,782

(1,229)

90,553

958

(13,906)

(18,457)

(32)

59,116

Group  
£000

73,905

(814)

73,091

1,713

(13,268)

(16,304)

(13)

45,219

2018

8.5p

165.2p

165.7p

2.5%

15%

15%

4.5%

4.9%

JV  
£000

9,111

(413)

8,698

(732)

(85)

(2,094)

–

5,787

2017

8.2p

149.8p

146.4p

0.4%

16%

15%

4.5%

5.4%

2017  
£000

83,016

(1,227)

81,789

981

(13,353)

(18,398)

(13)

51,006

iii EPRA proportionally consolidated balance sheet

As at 31 March

Investment property

Gross debt

Cash

Other net (liabilities)/assets

EPRA net assets

Loan to value

Cost of debt

Undrawn facilities

Group  
£000

1,677,555

(650,000)

26,162

(24,710)

JV  
£000

2018  
£000

Group  
£000

JV  
£000

2017 
£000

164,455

1,842,010

1,373,400

160,428

1,533,828

(58,938)

(708,938)

(473,170)

(54,563)

(527,733)

13,128

(1,042)

39,290

(25,752)

42,944

(20,476)

3,200

(1,269)

46,144

(21,745)

1,029,007

117,603

1,146,610

922,698

107,796

1,030,494

35%

2.7%

28%

3.4%

35%

2.8%

30%

3.6%

53,750

12,050

65,800

296,750

32%

3.4%

2,938

30%

3.5%

299,688

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iv EPRA cost ratio

For the year to 31 March

Property operating expenses

Administration expenses

Share of joint venture property operating, administration expenses and management fees

Less:

Joint venture property management fee income

Ground rents

Total costs including vacant property costs (A)

Group vacant property costs

Share of joint venture vacant property costs

Total costs excluding vacant property costs (B)

Gross rental income

Share of joint venture gross rental income

Less:

Ground rents

Total gross rental income (C)

Total EPRA cost ratio (including vacant property costs) (A)/(C)

Total EPRA cost ratio (excluding vacant property costs) (B)/(C)

v EPRA net initial yield and ‘topped up’ net initial yield

As at 31 March

Investment property – wholly owned

Investment property – share of joint ventures

Less development properties

Less residential properties

Completed property portfolio

Allowance for:

  Estimated purchasers’ costs

  Estimated costs to complete

EPRA property portfolio valuation (A)

Annualised passing rental income

Share of joint ventures

Less development properties

Less residential properties

Annualised net rents (B)

Contractual rental increases for rent free periods

Contractual rental increases for stepped rental uplifts

‘Topped up’ net annualised rent (C)

EPRA net initial yield (B/A)

EPRA ‘topped up’ net initial yield (C/A)

vi EPRA Vacancy rate

As at 31 March

Annualised estimated rental value of vacant premises

Portfolio estimated rental value1

EPRA vacancy rate

1  Excludes residential and development properties

2018 
£000

828

13,800

1,270

(1,721)

(127)

14,050

(253)

(204)

13,593

81,988

9,794

91,782

(127)

91,655

15%

15%

2017 
£000

814

13,268

1,230

(1,713)

(121)

13,478

(548)

(236)

12,694

73,905

9,111

83,016

(121)

82,895

16%

15%

2018 
£000

2017 
£000

1,677,555

1,373,400

164,455

(43,485)

(30,139)

160,428

(27,315)

(41,111)

1,768,386

1,465,402

120,250

30,848

99,647

39,309

1,919,484

1,604,358

78,378

9,263

(1,198)

(352)

86,091

6,247

1,685

94,023

4.5%

4.9%

2018
£000

2,407

95,808

2.5%

65,169

8,814

(1,243)

(526)

72,214

10,558

3,151

85,923

4.5%

5.4%

2017
£000

384

86,228

0.4%

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Annual Report and Accounts 2018

144 LondonMetric Property Plc 
(cid:59)(cid:93)(cid:88)(cid:88)(cid:84)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:73)(cid:90)(cid:97)(cid:8)(cid:81)(cid:86)(cid:78)(cid:87)(cid:90)(cid:85)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:16)(cid:86)(cid:87)(cid:92)(cid:8)(cid:73)(cid:93)(cid:76)(cid:81)(cid:92)(cid:77)(cid:76)(cid:17)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

vii EPRA capital expenditure analysis

As at 31 March

Opening valuation

Acquisitions

Developments1

Capital expenditure2

Disposals

Revaluation

Lease incentives

Closing valuation

Group
2018
£000

JV
2018
£000

Total
2018
£000

Group
2017
£000

JV
2017
£000

Total
2017
£000

1,373,400

160,428

1,533,828

1,346,110

174,741

1,520,851

274,562

61,648

20,236

15,180

848

125

289,742

62,496

20,361

81,043

68,741

18,055

(172,038)

(18,937)

(190,975)

(175,615)

114,723

5,024

6,842

(31)

121,565

4,993

22,200

12,866

9,146

–

561

(22,631)

(1,227)

(162)

90,189

68,741

18,616

(198,246)

20,973

12,704

1,677,555

164,455

1,842,010

1,373,400

160,428

1,533,828

1  Includes capitalised interest of £1.7 million (2017: £1.9 million) and capitalised staff costs of £1.8 million (2017: £1.8 million)
2  Capital expenditure on completed properties

viii Total accounting return

For the year to 31 March

EPRA net asset value

– at end of year

– at start of year

Increase

Dividend paid

Equity placing

Net increase

Total accounting return

ix Portfolio split and valuation

As at 31 March

Mega distribution

Regional distribution

Urban logistics

Distribution

Convenience & leisure

Long income

Retail parks

Office

Investment portfolio

Development – distribution1

Development – retail2

Residential

Total portfolio

2018
£000

2017
£000

1,146,610

1,030,494

1,030,494

116,116

43,357

922,105

108,389

43,694

–

(92,772)

159,473

15.5%

59,311

6.4%

2018
£m

500.8

379.0

353.3

1,233.1

174.7

220.8

139.8

–

1,768.4

29.4

14.1

30.1

2018
%

27.2

20.6

19.1

66.9

9.5

12.0

7.6

–

96.0

1.6

0.8

1.6

2017 
£m

477.8

303.4

146.2

927.4

156.2

166.6

145.2

70.0

1,465.4

22.8

4.5

41.1

2017
%

31.1

19.8

9.5

60.4

10.2

10.8

9.5

4.6

95.5

1.5

0.3

2.7

1,842.0

100.0

1,533.8

100.0

1 Represents regional distribution of £16.2 million (0.9%) and urban logistics of £13.2 million (0.7%) at 31 March 2018
2 Represents long income of £8.2 million (0.5%) and convenience and leisure of £5.9 million (0.3%) at 31 March 2018

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Annual Report and Accounts 2018

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x Investment portfolio yields

As at 31 March

Distribution

Convenience & leisure

Long income

Retail parks

Office

Investment portfolio

xi Investment portfolio – Key statistics

As at 31 March 2018

Distribution

Convenience & leisure

Long income

Retail parks

Investment portfolio

Distribution development1

Retail development1

Commercial portfolio

EPRA NIY
%

EPRA  
topped up NIY
%

 2018

Equivalent  
yield
%

EPRA NIY
%

EPRA  
topped up NIY
%

Equivalent yield
%

 2017 

5.3

5.3

5.5

5.6

–

5.3

4.1

5.1

6.2

3.8

5.8

4.5

5.0

5.2

6.5

5.7

6.5

5.4

5.5

6.0

6.0

5.9

7.4

5.8

WAULT 
to expiry
years

WAULT
to ﬁrst break
years

Occupancy 
%

Average rent 
£ per sq ft

12.1

17.2

11.0

11.1

12.4

11.2

17.0

9.3

9.3

11.3

96.2

100.0

100.0

100.0

97.5

5.60

16.70

19.70

18.90

7.40

4.3

4.7

5.6

4.5

–

4.5

4.6

4.9

5.9

5.6

–

4.9

Area
 £000 sq ft

11,333

563

1,192

443

13,531

62

69

13,662

1  Excludes development sites at Bedford, Weymouth and Derby

xii Total property returns

For the year to 31 March

Capital return

Income return

Total return

xiii Contracted rental income 

As at 31 March

Distribution

Convenience & leisure

Long income

Retail parks

Office

Investment portfolio

Development – distribution

Development – retail

Commercial portfolio

Residential

Total portfolio

xiv Rent subject to expiry

As at 31 March 2018

Distribution

Convenience & leisure

Long income

Retail parks

Commercial portfolio

All property
2018
%

All property
2017
%

7.9

5.5

13.7

2018
£m

61.1

9.4

13.9

8.4

–

92.8

0.4

0.8

94.0

0.4

94.4

1.7

5.6

7.4

2017
£m

50.9

8.8

11.5

9.4

4.9

85.5

0.8

0.5

86.8

0.5

87.3

Within 3 years
%

Within 5 years
%

Within 10 years
%

Within 15 years
%

Within 20 years
%

Over 20 years
%

7.5

3.7

0.6

5.6

5.9

15.8

3.7

10.1

5.6

12.8

44.0

22.4

41.1

45.6

41.5

72.8

27.6

88.6

89.7

72.2

84.0

44.5

97.6

100.0

83.5

100.0

100.0

100.0

100.0

100.0

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Annual Report and Accounts 2018

146 LondonMetric Property Plc 
(cid:59)(cid:93)(cid:88)(cid:88)(cid:84)(cid:77)(cid:85)(cid:77)(cid:86)(cid:92)(cid:73)(cid:90)(cid:97)(cid:8)(cid:81)(cid:86)(cid:78)(cid:87)(cid:90)(cid:85)(cid:73)(cid:92)(cid:81)(cid:87)(cid:86)(cid:8)(cid:16)(cid:86)(cid:87)(cid:92)(cid:8)(cid:73)(cid:93)(cid:76)(cid:81)(cid:92)(cid:77)(cid:76)(cid:17)(cid:8)(cid:75)(cid:87)(cid:86)(cid:92)(cid:81)(cid:86)(cid:93)(cid:77)(cid:76)

xv Contracted rent subject to RPI or ﬁxed uplifts for investment portfolio

As at 31 March

Distribution

Convenience & leisure

Long income

Retail parks

Office

Commercial portfolio

xvi Top ten assets (by value)

As at 31 March 2018

Primark, Islip

Eddie Stobart, Dagenham

Primark, Thrapston

Dixons Carphone, Newark 

Argos, Bedford

Amazon, Omega South, Warrington

Poundworld, Wakeﬁeld

M&S, Sheffield

Kirkstall Bridge, Leeds

Airport Retail Park, Coventry

xvii Top ten occupiers

As at 31 March 2018

Primark1

Dixons Carphone

M&S

DHL1

Argos1

Eddie Stobart

DFS

Odeon1

Poundworld

Clipper Logistics

Top ten

Other commercial 

Total commercial

Residential 

Total Group 

1  Market capitalisation of Parent Company

2018 
£m

34.6

6.9

4.7

1.1

–

47.3

2018 
%

56.2

73.4

32.2

12.5

–

50.3

2017 
£m

29.9

7.7

3.4

1.4

3.0

45.4

2017 
%

57.8

87.5

29.6

14.1

60.9

52.4

Area
 £000 sq ft

1,062

454

783

726

658

357

527

626

120

138

Contracted
rent 
£m

Occupancy 
%

WAULT  
to expiry
years

WAULT  
to ﬁrst break
years

5.5

4.1

4.2

4.4

3.8

2.1

2.6

2.6

2.5

2.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

100.0

22.5

25.5

14.5

15.3

4.7

13.7

13.5

5.7

10.4

9.5

22.5

25.5

14.5

15.3

4.7

13.7

13.5

3.3

7.9

8.9

Contracted 
rental income 
£m

Market 
capitalisation 
£bn

Contracted 
rental income 
% 

9.7

7.8

7.0

4.1

4.1

4.1

3.6

3.3

2.7

2.2

48.6

45.4

94.0

0.4

94.4

21.4

2.4

4.6

39.0

6.9

0.5

0.5

2.1

n/a

0.4

10.2

8.3

7.4

4.3

4.3

4.3

3.9

3.5

2.9

2.4

51.5

48.1

99.6

0.4

100.0

 Glossary

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Annual Report and Accounts 2018

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Building Research Establishment 
Environmental Assessment Methodology 
(‘BREEAM’)
A set of assessment methods and 
tools designed to help construction 
professionals understand and mitigate 
the environmental impacts of the 
developments they design and build

Capital Return
The valuation movement on the property 
portfolio adjusted for capital expenditure 
and expressed as a percentage of the 
capital employed over the period

Commercial portfolio
The Group’s property portfolio excluding 
residential properties

Contracted Rent
The annualised rent excluding rent 
free periods

Cost of Debt
Weighted average interest rate payable

Debt Maturity
Weighted average period to expiry 
of drawn debt

Distribution
The activity of delivering a product for 
consumption by the end user

Energy Performance Certiﬁcate (‘EPC’)
Required certiﬁcate whenever a property 
is built, sold or rented. An EPC gives a 
property an energy efficiency rating from 
A (most efficient) to G (least efficient) and 
is valid for ten years. An EPC contains 
information about a property’s energy 
use and typical energy costs, and 
recommendations about how to reduce 
energy use and save money

EPRA Cost Ratio
Administrative and operating costs 
(including and excluding costs of 
direct vacancy) as a percentage 
of gross rental income

EPRA Earnings per Share (‘EPS’)
Recurring earnings from core operational 
activities divided by the average number 
of shares in issue over the year

EPRA NAV per Share
Balance sheet net assets excluding 
fair value of derivatives, divided by 
the number of shares in issue at the 
balance sheet date

EPRA NNNAV per Share
EPRA NAV per share adjusted to include 
the fair value of ﬁnancial instruments, 
debt and deferred taxes at the balance 
sheet date

EPRA net initial yield
Annualised rental income based on cash 
rents passing at the balance sheet date, 
less non recoverable property operating 
expenses, expressed as a percentage of 
the market value of the property, after 
inclusion of estimated purchaser’s costs

EPRA topped up net initial yield
EPRA net initial yield adjusted for 
expiration of rent free periods or other 

lease incentives such as discounted 
rent periods and stepped rents

EPRA Vacancy
The Estimated Rental Value (ERV) of 
immediately available vacant space 
as a percentage of the total ERV 
of the Investment Portfolio

Equivalent Yield
The weighted average income return 
expressed as a percentage of the market 
value of the property, after inclusion of 
estimated purchaser’s costs

Estimated Rental Value (‘ERV’)
The external valuers’ opinion of the 
open market rent which, on the date 
of valuation, could reasonably be 
expected to be obtained on a new 
letting or rent review of a property

European Public Real Estate Association 
(‘EPRA’)
The European Public Real Estate 
Association (EPRA) is the industry body 
for European Real Estate Investment  
Trusts (REITs) 

Gross rental income
Rental income for the period from let 
properties reported under IFRS, after 
taking into account the net effects 
of straight lining for lease incentives, 
including rent free periods. Gross rental 
income will include, where relevant, 
turnover based rent, surrender premiums 
and car parking income

Group
LondonMetric Property Plc and 
its subsidiaries

IFRS
The International Financial Reporting 
Standards issued by the International 
Accounting Standards Board and 
adopted by the European Union

Income Return
Net rental income expressed as a 
percentage of capital employed 
over the period

Logistics
The organisation and implementation 
of operations to manage the ﬂow of 
physical items from origin to the point 
of consumption

Net Debt
The Group’s bank loans net of cash 
balances at the period end

Net Rental Income
Gross rental income receivable after 
deduction for ground rents and other net 
property outgoings including void costs 
and net service charge expenses

Occupancy Rate
The ERV of the let units as a percentage 
of the total ERV of the Investment Portfolio

Omni-Channel Retailing
The evolution of multi-channel retailing 
providing a seamless shopping 
experience for the consumer through 
all available shopping channels, 
ie physical, internet, mobile, social media, 
telephone, catalogue etc

Passing Rent
The gross rent payable by tenants under 
operating leases, less any ground rent 
payable under head leases

Property Income Distribution (‘PID’)
Dividends from proﬁts of the Group’s 
tax-exempt property business under the 
REIT regulations. The PID dividend is paid 
after deducting withholding tax at the 
basic rate

Real Estate Investment Trust (‘REIT’)
A listed property company which 
qualiﬁes for and has elected into a tax 
regime which is exempt from corporation 
tax on proﬁts from property rental income 
and UK capital gains on the sale of 
investment properties

Total Accounting Return (‘TAR’)
The movement in EPRA NAV plus the 
dividend paid during the period 
expressed as a percentage of the EPRA 
NAV at the beginning of the period

Investment Portfolio
The Group’s property portfolio excluding 
development, land holdings and 
residential properties

Total Property Return (‘TPR’)
Unlevered weighted capital and income 
return of the property portfolio as 
calculated by IPD

Investment Property Databank (‘IPD’)
Investment Property Databank (IPD) is 
a wholly owned subsidiary of MSCI 
producing an independent benchmark 
of property returns and the Group’s 
portfolio returns

Total Shareholder Return (‘TSR’)
The movement in the ordinary share price 
as quoted on the London Stock Exchange 
plus dividends per share assuming that 
dividends are reinvested at the time of 
being paid

Like for Like Income Growth
The movement in contracted rental 
income on properties owned through 
the period under review, excluding 
properties held for development 
and residential

Loan to Value (‘LTV’)
Net debt expressed as a percentage 
of the total property portfolio value 
at the period end, adjusted for deferred 
completions on sales

Weighted Average Interest Rate
The total loan interest and derivative costs 
per annum (including the amortisation 
of ﬁnance costs) divided by the total debt 
in issue at the period end

Weighted Average Unexpired Lease Term 
(‘WAULT’)
Average unexpired lease term across 
the investment portfolio weighted 
by Contracted Rent

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Annual Report and Accounts 2018

148 LondonMetric Property Plc 
Notice of Annual General Meeting

This document is important and requires your immediate attention. If you are in any doubt 
as to the action you should take, you should seek your own personal ﬁnancial advice from 
your stockbroker, bank manager, solicitor, accountant, or other ﬁnancial advisor authorised 
under the Financial Services and Markets Act 2000.

If you have sold or otherwise transferred all your ordinary shares, please send this document, 
together with the accompanying documents, as soon as possible to the purchaser or 
transferee, or to the stockbroker, bank or other agent through whom the sale or transfer 
was effected, for delivery to the purchaser or transferee.

Notice is hereby given that the Annual General Meeting 
of the members of LondonMetric Property Plc (Registered 
number 7124797) will be held at The Connaught, Carlos 
Place, Mayfair, London W1K 2AL on 11 July 2018 at 10.00 am.

Resolutions 1 to 16 (inclusive) will be proposed as ordinary 
resolutions and resolutions 17 to 20 (inclusive) will be 
proposed as special resolutions.

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

 That the Annual Report and Audited Financial 
Statements for the year ended 31 March 2018 be 
considered and approved.

 That the Annual Report on Remuneration in the form 
set out in the Annual Report and Audited Financial 
Statements for the year ended 31 March 2018 
be approved.

 That Deloitte LLP be reappointed as auditor of the 
Company, to hold office until the conclusion of the next 
general meeting at which accounts are laid before 
the Company.

 That the Directors be authorised to determine the 
remuneration of the auditor.

That Patrick Vaughan be re-elected as a Director.

That Andrew Jones be re-elected as a Director.

That Martin McGann be re-elected as a Director.

That Valentine Beresford be re-elected as a Director.

That Mark Stirling be re-elected as a Director.

10.  That James Dean be re-elected as a Director.

11. 

That Alec Pelmore be re-elected as a Director.

12.  That Philip Watson be re-elected as a Director.

13.  That Rosalyn Wilton be re-elected as a Director.

14.  That Andrew Livingston be re-elected as a Director.

15.  That Suzanne Avery be elected as a Director.

16. 

 That the Directors be and they are hereby generally 
and unconditionally authorised in accordance with 
Section 551 of the Companies Act 2006 (the ‘2006 Act’), 
in substitution for all existing authorities:

a.   to exercise all the powers of the Company to allot 
shares and to make offers or agreements to allot 
shares in the Company or grant rights to subscribe 
for or to convert any security into shares in the 
Company (together ‘Relevant Securities’) up to an 
aggregate nominal amount of £23,247,835 (such 
amount to be reduced by the nominal amount of 
any equity securities (within the meaning of Section 
560 of the 2006 Act) allotted under paragraph 16b 
below in excess of £23,247,835); and

b.   to exercise all the powers of the Company to allot 

equity securities (within the meaning of Section 560 
of the 2006 Act) up to a maximum nominal amount 
of £46,495,670 (such amount to be reduced by 
any Relevant Securities allotted or granted under 
paragraph 16a above) provided that this authority 
may only be used in connection with a rights issue 
in favour of holders of ordinary shares and other 
persons entitled to participate therein where the 
equity securities respectively attributable to the 
interests of all those persons at such record date 
as the Directors may determine are proportionate 
(as nearly as may be) to the respective numbers 
of equity securities held by them or are otherwise 
allotted in accordance with the rights attaching to 
such equity securities subject to such exclusions or 
other arrangements as the Directors may consider 
necessary or expedient to deal with fractional 
entitlements or legal difficulties under the laws of 
any territory or the requirements of a regulatory 
body or stock exchange or by virtue of shares being 
represented by depositary receipts or any other 
matter whatsoever,

 provided that the authorities in paragraphs 16a and 
16b shall expire at the conclusion of the next Annual 
General Meeting of the Company after the passing 
of this resolution (or, if earlier, on the date which is 
15 months after the date of this Annual General 
Meeting), except that the Company may before such 
expiry make an offer or agreement which would or 
might require Relevant Securities or equity securities as 
the case may be to be allotted (and treasury shares to 
be sold) after such expiry and the Directors may allot 
Relevant Securities or equity securities (and sell treasury 
shares) in pursuance of any such offer or agreement as 
if the authority in question had not expired.

17. 

 That the Directors be and are empowered, in 
accordance with Sections 570 and 573 of the 2006 Act, 
to allot equity securities (as deﬁned in Section 560(1) 
of the 2006 Act) for cash pursuant to the authority 
conferred by resolution 16 or by way of a sale of 
treasury shares as if Section 561(1) of the 2006 Act did 
not apply to any such allotment or sale, provided that 
this power shall be limited to:

a.   the allotment of equity securities and sale of treasury 

shares for cash in connection with an offer of, or 
invitation to apply for, equity securities made to (but 
in the case of the authority conferred by paragraph 
16b of resolution 16 above, by way of a rights 
issue only):

(i)   to ordinary shareholders in proportion (as nearly 
as may be practicable) to their existing holdings; 
and

 
 
 
 
 
 
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Annual Report and Accounts 2018

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(ii)  to holders of other equity securities as required 

19. 

by the rights of those securities or, if the Directors 
otherwise consider necessary, as permitted by 
the rights of those securities,

 and so that the Directors may impose any limits or 
restrictions and make any arrangements which they 
consider necessary or appropriate to deal with any 
treasury shares, fractional entitlements, record dates, 
legal, regulatory or practical problems in, or under 
the laws of, any territory or any other matter; and

 That the Company be and is hereby generally and 
unconditionally authorised, in accordance with 
Section 701 of the 2006 Act, to make market purchases 
(within the meaning of Section 693(4) of the 2006 Act) 
of ordinary shares of 10p each in the capital of the 
Company (‘ordinary shares’) on such terms and in 
such manner as the Directors may from time to time 
determine provided that:

a.   the maximum number of ordinary shares authorised 

to be purchased is 69,743,505;

b.   the allotment of equity securities or sale of treasury 

b.   the minimum price which may be paid for an 

shares (otherwise than under paragraph 17a above) 
up to an aggregate nominal amount of £3,487,175,

 provided that this power shall expire at the conclusion 
of the next Annual General Meeting of the Company 
(or, if earlier, on the date which is 15 months after the 
date of this Annual General Meeting) but prior to its 
expiry the Company may make offers, and enter into 
agreements, which would, or might, require equity 
securities to be allotted (and treasury shares to be 
sold) after the authority expires and the Directors may 
allot equity securities (and sell treasury shares) under 
any such offer or agreement as if the authority had 
not expired.

18. 

 That the Directors be and are empowered, in addition 
to any authority granted under resolution 17, to allot 
equity securities (as deﬁned in Section 560(1) of the 
2006 Act) for cash pursuant to the authority conferred 
by resolution 16 or by way of a sale of treasury shares 
as if Section 561(1) of the 2006 Act did not apply to any 
such allotment or sale, such power to be:

a.   limited to the allotment of equity securities or sale 
of treasury shares up to a nominal amount of 
£3,487,175; and

b.   used only for the purposes of ﬁnancing (or 

reﬁnancing, if the authority is to be used within six 
months after the original transaction) a transaction 
which the Directors determine to be an acquisition 
or other capital investment of a kind contemplated 
by the Statement of Principles on Disapplying Pre-
Emption Rights most recently published by the Pre-
Emption Group prior to the date of this notice,

 provided that this power shall expire at the end of the 
next Annual General Meeting of the Company (or, if 
earlier, on the date which is 15 months after the date of 
this Annual General Meeting) but, in each case, prior 
to its expiry the Company may make offers, and enter 
into agreements which would, or might, require equity 
securities to be allotted (and treasury shares to be sold) 
after the authority expires and the Directors may allot 
equity securities (and sell treasury shares) under any 
such offer or agreement as if the authority in question 
had not expired.

ordinary share is 10p being the nominal amount 
thereof (exclusive of expenses payable by 
the Company);

c.   the maximum price which may be paid for an 

ordinary share (exclusive of expenses payable by 
the Company) cannot be more than the higher of:

(i)   105% of the average market value of an ordinary 
share for the ﬁve business days prior to the day 
on which the ordinary share is contracted to be 
purchased; and

(ii)  the value of an ordinary share calculated 

on the basis of the higher of:

  A. the last independent trade of; or

  B.  the highest current independent bid for,

 any number of ordinary shares on the trading venue 
where the market purchase by the Company will be 
carried out; and

 the authority conferred shall expire at the conclusion 
of the next Annual General Meeting of the Company 
except that the Company may before such expiry 
make a contract to purchase its own shares which 
will or may be completed or executed wholly or partly 
after such expiry.

20. 

 That the Company is authorised to call any general 
meeting of the Company other than the Annual 
General Meeting by notice of at least 14 clear days 
during the period beginning on the date of the passing 
of this resolution and ending on the conclusion of the 
next Annual General Meeting of the Company.

By order of the Board

Jadzia Duzniak
Company Secretary

30 May 2018

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Annual Report and Accounts 2018

150 LondonMetric Property Plc 
Notice of Annual General Meeting continued

Notes to the Notice of the Annual General Meeting:
(i) 

 Shareholders entitled to attend and vote at the meeting may 
appoint one or more proxies (who need not be shareholders) to 
attend, speak and vote on their behalf, provided that each proxy 
is appointed to exercise the rights attaching to the different shares 
held by him or her. 

(ix) 

(x) 

(ii) 

(iii) 

(iv) 

(v) 

 Your proxy could be the Chairman, another Director of the 
Company or another person who has agreed to attend to 
represent you. Your proxy will vote as you instruct and must attend 
the meeting for your vote to be counted. Details of how to appoint 
the Chairman or another person as your proxy using the proxy form 
are set out in the notes to the proxy form.

 Any person to whom this notice is sent who is a person nominated 
under Section 146 of the 2006 Act to enjoy information rights (a 
‘Nominated Person’) may, under an agreement between him/her 
and the shareholder by whom he/she was nominated, have a right 
to be appointed (or to have someone else appointed) as a proxy 
for the Annual General Meeting. If a Nominated Person has no 
such proxy appointment right, or does not wish to exercise it, he/she 
may, under any such agreement, have a right to give instructions 
to the shareholder as to the exercise of voting rights. The statement 
of rights of shareholders in relation to the appointment of proxies 
in paragraph (i) above does not apply to Nominated Persons. 
The rights described in that paragraph can only be exercised by 
shareholders of the Company. 

 To have the right to attend and vote at the meeting you must hold 
ordinary shares in the Company and your name must be entered 
on the share register of the Company in accordance with note (vi) 
below.

 To be valid, Forms of Proxy (and the power of attorney or other 
authority, if any, under which it is signed or a notarially certiﬁed 
copy thereof) must be completed and signed and received by 
Link Asset Services at PXS1, The Registry, 34 Beckenham Road, 
Beckenham, Kent BR3 4ZF as soon as possible but, in any event, 
so as to arrive no later than 10.00 am on 9 July 2018. A Form of 
Proxy accompanies this notice. Completion and return of a 
Form of Proxy will not preclude members from attending and 
voting at the meeting should they wish to do so. Where you have 
appointed a proxy using the hard copy proxy form and would 
like to change the instructions using another hard copy proxy 
form, please contact Link Asset Services at PXS1, The Registry, 34 
Beckenham Road, Beckenham, Kent BR3 4ZF. The deadline for 
receipt of proxy appointments (see above) also applies in relation 
to amended instructions. Any attempt to terminate or amend a 
proxy appointment received after the relevant deadline will be 
disregarded. Where two or more valid separate appointments 
of proxy are received in respect of the same share in respect of 
the same meeting, the one which is last sent shall be treated as 
replacing and revoking the other or others.

(vi) 

 The time by which a person must be entered on the register of 
members in order to have the right to attend or vote at the meeting 
is close of business on 9 July 2018. If the meeting is adjourned, the 
time by which a person must be entered on the register of members 
in order to have the right to attend or vote at the adjourned 
meeting is close of business on the day that is two days before 
the date ﬁxed for the adjourned meeting. Changes to entries 
on the register of members after such times shall be disregarded 
in determining the rights of any person to attend or vote at 
the meeting.

(vii)   CREST members who wish to appoint a proxy or proxies by 

utilising the CREST electronic proxy appointment service may do 
so by utilising the procedures described in the CREST Manual. 
CREST Personal Members or other CREST sponsored members, 
and those CREST members who have appointed a voting service 
provider(s), should refer to their CREST sponsor or voting service 
provider(s), who will be able to take the appropriate action on 
their behalf.

(viii)   In order for a proxy appointment or instruction made by means 
of CREST to be valid, the appropriate CREST message (a ‘CREST 
Proxy Instruction’) must be properly authenticated in accordance 
with Euroclear UK & Ireland’s speciﬁcations and must contain 
the information required for such instructions, as described in the 
CREST Manual. The message, regardless of whether it constitutes 
the appointment of a proxy or an amendment to the instruction 
given to a previously appointed proxy, must, in order to be valid, 
be transmitted so as to be received by the issuer’s agent (ID 
number RA10) by 10.00 am on 9 July 2018. For this purpose, the 
time of receipt will be taken to be the time (as determined by the 
timestamp applied to the message by the CREST Applications 

Host) from which the issuer’s agent is able to retrieve the message 
by enquiry to CREST in the manner prescribed by CREST.

 The Company may treat as invalid a CREST Proxy Instruction in the 
circumstances set out in Regulation 35(5)(a) of the Uncertiﬁcated 
Securities Regulations 2001.

 CREST members and, where applicable, their CREST sponsors or 
voting service providers should note that Euroclear UK & Ireland 
does not make available special procedures in CREST for any 
particular messages. Normal system timings and limitations will 
therefore apply in relation to the input of CREST Proxy Instructions. 
It is the responsibility of the CREST member concerned to take (or, 
if the CREST member is a CREST personal member or sponsored 
member or has appointed a voting service provider(s), to procure 
that his or her CREST sponsor or voting service provider(s) take(s)) 
such action as shall be necessary to ensure that a message is 
transmitted by means of the CREST system by any particular time. 
In this connection, CREST members and, where applicable, their 
CREST sponsors or voting system providers are referred, in particular, 
to those sections of the CREST Manual concerning practical 
limitations of the CREST system and timings.

(xi) 

(xii) 

 Any corporation which is a member can appoint one or more 
corporate representatives who may exercise on its behalf all of its 
powers as a member provided that they do not do so in relation 
to the same shares.

 You may not use any electronic address provided either in this 
Notice of Annual General Meeting or any related documents 
(including the form of proxy) to communicate with the Company 
for any purposes other than those expressly stated.

(xiii)   As at 30 May 2018 (being the closest practical business day before 
the publication of this Notice), the Company’s issued share capital 
consisted of 697,435,054 ordinary shares carrying one vote each.

(xiv)   Members satisfying the thresholds in Section 527 of the 2006 Act can 

require the Company to publish a statement on its website setting 
out any matter relating to:

a.   the audit of the Company’s accounts (including the Auditor’s 
report and the conduct of the audit) that are to be laid before 
the meeting; or

b.   any circumstances connected with an auditor of the Company 
ceasing to hold office since the last Annual General Meeting, 
that the members propose to raise at the meeting.

 The Company cannot require the members requesting the 
publication to pay its expenses. Any statement placed on the 
website must also be sent to the Company’s auditor no later 
than the time it makes its statement available on the website. 
The business which may be dealt with at the meeting includes 
any statement that the Company has been required to publish 
on its website.

(xv)   Any member attending the meeting has the right to ask questions. 
The Company must cause to be answered any such question 
relating to the business being dealt with at the meeting but no such 
answer need be given if:

a.   to do so would interfere unduly with the preparation for the 
meeting or involve the disclosure of conﬁdential information;

b.   the answer has already been given on a website in the form 

of an answer to a question; or

c.   it is undesirable in the interests of the Company or the good 

order of the meeting that the question be answered.

(xvi)   A copy of this Notice, and other information required by Section 
311A of the 2006 Act, can be found at www.londonmetric.com.

(xvii)  The following documents are available for inspection at the 

registered office of the Company during normal business hours on 
each weekday (public holidays excluded) from the date of this 
notice until the conclusion of the Annual General Meeting and 
at the place of the Annual General Meeting for 15 minutes prior 
to and during the meeting:

a.   copies of the Executive Directors’ service contracts with the 

Company; and

b.   copies of letters of appointment of Non Executive Directors; and

c.   a copy of the Articles of Association of the Company.

(xviii)  In the case of joint registered holders, the signature of one holder 
on a proxy card will be accepted and the vote of the senior 
holder who tenders a vote, whether in person or by proxy, shall be 
accepted to the exclusion of the votes of the other joint holders. 
For this purpose, seniority shall be determined by the order in which 
names stand on the register of members of the Company in respect 
of the relevant joint holding.

 
 
 
 
 
 
 
 
 
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Annual Report and Accounts 2018

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Explanatory notes:
The information below is an explanation of the business to be considered 
at the Annual General Meeting.
Resolution 1 – To receive the Annual Report and Audited 
Financial Statements
The Chairman will present the Annual Report and Audited Financial 
Statements for the year ended 31 March 2018 to the meeting. 
Resolution 1 is to consider and approve the Report of the Directors, the 
ﬁnancial statements and the Auditor’s report on the ﬁnancial statements 
and on the auditable part of the Annual Report on Remuneration 
for the ﬁnancial year ended 31 March 2018.
Resolution 2 – Annual Report on Remuneration
Resolution 2 is an ordinary resolution to approve the Annual Report 
on Remuneration relating to the implementation of the Company’s 
existing Remuneration Policy, which was approved at last year’s Annual 
General Meeting. Section 439 of the 2006 Act requires UK-incorporated 
listed companies to put their Annual Report on Remuneration to an 
advisory shareholder vote. As the vote is advisory it does not affect 
the actual remuneration paid to any individual Director. The Annual 
Report on Remuneration is set out in full in the Annual Report and 
Financial Statements. 
Resolutions 3 and 4 – Reappointment of auditors
Resolution 3 relates to the reappointment of Deloitte LLP as the 
Company’s auditor to hold office until the next Annual General Meeting 
of the Company and Resolution 4 authorises the Directors to set 
their remuneration. 
Resolutions 5 to 15 – Re-election and election of Directors
Resolutions 5 to 15 deal with re-election and election of the Directors 
(as applicable). Biographies of each of the Directors seeking re-election 
and election can be found on pages 64 and 65 of the Annual Report 
and Accounts. The Board has conﬁrmed, following a performance 
review, that all Directors standing for re-election or election continue 
to perform effectively and demonstrate commitment to their role. 
Resolution 16 – Allotment of share capital
At the last Annual General Meeting of the Company the Directors were 
given authority to allot ordinary shares in the capital of the Company. 
This authority expires at the conclusion of the Annual General Meeting 
(or, if earlier, on the date which is 15 months after the date of the Annual 
General Meeting). 

Your Board considers it appropriate that a similar authority be granted 
to allot ordinary shares in the capital of the Company up to a maximum 
nominal amount of £23,247,835 (representing approximately one third of 
the Company’s issued ordinary share capital as at 30 May 2018) during 
the period up to the conclusion of the next Annual General Meeting of 
the Company. Such authority is sought in paragraph 16a of Resolution 16. 

In accordance with the guidelines issued by the Investment Association, 
paragraph 16b of Resolution 16 will allow Directors to allot, including 
the shares referred to in paragraph 16a of Resolution 16, shares in the 
Company in connection with a pre-emptive offer by way of a rights 
issue to shareholders up to a maximum nominal amount of £46,495,670, 
representing approximately two thirds of the issued ordinary share 
capital of the Company as at 30 May 2018.

Your Board considers it appropriate to seek this additional allotment 
authority at the Annual General Meeting in order to take advantage 
of the ﬂexibility it offers. However, the Board has no present intention of 
exercising either authority. If they do exercise the authority, the Directors 
intend to follow best practice as regards its use, as recommended by 
the Investment Association.

As at the date of this Notice the Company does not hold any ordinary 
shares in the capital of the Company in treasury.
Resolutions 17 and 18 – General and additional authority to disapply 
pre-emption rights
At the last Annual General Meeting of the Company the Directors were 
also given authority to allot equity securities for cash without ﬁrst being 
required to offer such shares to existing shareholders. This authority 
expires at the conclusion of the Annual General Meeting (or, if earlier, 
on the date which is 15 months after the date of last year’s Annual 
General Meeting).

The passing of Resolutions 17 and 18 would allow the Directors to allot 
equity securities (or sell any shares which the Company may purchase 
and hold in treasury) without ﬁrst offering them to existing holders in 
proportion to their existing holdings.

The authority set out in Resolution 17 is limited to: (a) allotments or sales in 
connection with pre-emptive offers and offers to holders of other equity 
securities if required by the rights of those shares; or (b) otherwise than 
in connection with a pre-emptive offer, up to an aggregate nominal 
amount of £3,487,175 (representing 34,871,753 shares). This aggregate 

nominal amount represents 5% of the issued ordinary share capital 
of the Company as at 30 May 2018. 

Taking into account the template resolutions published by the UK 
Pre-Emption Group in May 2016, the authority set out in Resolution 18 is 
limited to allotments or sales of up to an aggregate nominal amount of 
£3,487,175 (representing 34,871,753 shares) in addition to the authority 
set out in Resolution 17 which are used only for the purposes of ﬁnancing 
(or reﬁnancing, if the authority is to be used within six months after the 
original transaction) a transaction which the Directors determine to 
be an acquisition or other capital investment of a kind contemplated 
by the Statement of Principles on dis-applying pre-emption rights most 
recently published by the UK Pre-Emption Group prior to the date of 
this Notice. This aggregate nominal amount represents approximately 
an additional 5% of the issued ordinary share capital of the Company 
as at 30 May 2018. 

The Directors also conﬁrm their intention to follow the provisions of the 
UK Pre-Emption Group’s Statement of Principles regarding cumulative 
usage of authorities within a rolling three year period where the 
Principles provide that usage in excess of 7.5% of issued ordinary share 
capital of the Company (excluding treasury shares) should not take 
place without prior consultation with shareholders, except in connection 
with an acquisition or speciﬁed capital investment as referred to above.
Resolution 19 – Authority to purchase own shares
Resolution 19 gives the Company authority to buy back its own ordinary 
shares in the market as permitted by the 2006 Act. The authority limits the 
number of shares that could be purchased to a maximum of 69,743,505 
(representing approximately 10% of the Company’s issued ordinary 
share capital as at 30 May 2018) and sets minimum and maximum prices. 
This authority will expire at the conclusion of the next Annual General 
Meeting of the Company.

The Directors have no present intention of exercising the authority to 
purchase the Company’s ordinary shares but will keep the matter under 
review, taking into account the ﬁnancial resources of the Company, the 
Company’s share price and future funding opportunities. The authority 
will be exercised only after consideration by the Directors of the effect 
on net asset value and if the Directors believe that to do so would be 
in the interests of shareholders generally. Any purchases of ordinary 
shares would be by means of market purchases through the London 
Stock Exchange.

Listed companies purchasing their own shares are allowed to hold 
them in treasury as an alternative to cancelling them. No dividends 
are paid on shares whilst held in treasury and no voting rights attach 
to treasury shares.

If Resolution 19 is passed at the Annual General Meeting, it is the 
Company’s current intention to hold in treasury the majority of the shares 
it may purchase pursuant to the authority granted to it. However, in 
order to respond properly to the Company’s capital requirements and 
prevailing market conditions, the Directors will need to reassess at the 
time of any and each actual purchase whether to hold the shares in 
treasury or cancel them, provided it is permitted to do so. The Company 
may hold a maximum of up to 10% of its issued share capital in treasury 
in accordance with guidelines issued by the Investment Association.

As at 30 May 2018 (the latest practicable date before publication of 
this Notice), there were share awards over 7,874,111 ordinary shares in 
the capital of the Company representing approximately 1.13% of the 
Company’s issued ordinary share capital. If the authority to purchase 
the Company’s ordinary shares was exercised in full, these awards 
would represent approximately 1.13% of the Company’s issued ordinary 
share capital.
Resolution 20 – Notice period for general meetings
It is proposed in Resolution 20 that shareholders should approve the 
continued ability of the Company to hold general meetings other than 
the Annual General Meeting on 14 clear days’ notice. 

This resolution is required under Section 307A of the 2006 Act. 
Under that section, a traded company which wishes to be able to call 
general meetings (other than an Annual General Meeting) on 14 clear 
days’ notice must obtain shareholders’ approval. Resolution 20 seeks 
such approval.

The resolution is valid up to the next Annual General Meeting of the 
Company and needs to be renewed annually. The Company will also 
need to meet the requirements for voting by electronic means under 
Section 307A of the 2006 Act before it can call a general meeting on 
14 days’ notice.

The shorter notice period would not be used as a matter of routine for 
general meetings, but only where the ﬂexibility is merited by the business 
of the meeting and is thought to be to the advantage of shareholders 
as a whole.

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Annual Report and Accounts 2018

152 LondonMetric Property Plc 
Financial calendar

Announcement of results

Annual General Meeting

30 May 2018

11 July 2018

 Shareholder information

Advisors to the Company

Joint Financial Advisors  
and Brokers
Peel Hunt LLP
Moor House 
120 London Wall 
London EC2Y 5ET

JP Morgan Securities Limited
25 Bank Street 
Canary Wharf 
London E14 5JP

Auditor
Deloitte LLP
2 New Street Square  
London EC4A 3BZ

Property Valuers
CBRE Limited
St Martin’s Court  
10 Paternoster Row 
London EC4M 7HP

Savills Advisory 
Services Limited
33 Margaret Street 
London W1G 0JD

Tax Advisors
PricewaterhouseCoopers LLP
1 Embankment Place 
London WC2N 6RH

Registrar
Link Asset Services
34 Beckenham Road 
Beckenham  
Kent BR3 4TU

Secretary and 
Registered Address
Jadzia Duzniak 
One Curzon Street 
London W1J 5HB

www.londonmetric.com

Solicitors to the Company
Jones Day
21 Tudor Street  
London EC4Y 0DJ 

CMS Cameron McKenna 
Nabarro Olswang LLP
78 Cannon Place  
Cannon Street  
London EC4N 6AF

Stephenson Harwood LLP
1 Finsbury Circus 
London EC2M 7SH

Mourant Ozannes
PO Box 186 
1 Le Marchant Street  
St Peter Port 
Guernsey  
Channel Islands GY1 4HP

REIT status and taxation
As a UK REIT, the Group is exempt from corporation tax on rental income and 
UK property gains. Dividend payments to shareholders are split between 
Property Income Distributions (‘PIDs’) and non PIDs.

For most shareholders, PIDs will be paid after deducting withholding tax at the 
basic rate. However, certain categories of shareholder are entitled to receive 
PIDs without withholding tax, principally UK resident companies, UK public bodies, 
UK pension funds and managers of ISAs, PEPs and Child Trust Funds. There is a form 
on the Company’s website for shareholders to certify that they qualify to receive 
PIDs without withholding tax.

Payment of dividends 
Shareholders who would like their dividends paid direct to a bank or building 
society account should notify Link Asset Services. Tax vouchers will continue to be 
sent to the shareholder’s registered address.

Design and production  
Radley Yeldar – www.ry.com

Paper  
The cover is printed on Revive 
100 Silk which is 100% recycled 
waste. The report text is printed 
on Revive 100 Silk which is 100% 
recycled waste, Revive 100 Offset 
which is 100% recycled waste.

Find us online
www.londonmetric.com

LondonMetric Property Plc
One Curzon Street
London 
W1J 5HB
United Kingdom

Telephone +44 (0) 20 7484 9000
Fax +44 (0) 20 7484 9001