Real estate for
reliable income
Annual Report and Accounts 2020
Strategic report
Overview
Our purpose
How our purpose works
Performance highlights
Chair’s statement
At a glance
Our strategy
Our strategic priorities
Chief Executive’s review
Focus on Mucklow acquisition
Our markets
Our business model
Performance review
Key performance indicators
Property review
Financial review
Responsible Business
Responsible Business review
Risk
Risk management
Viability Statement
Principal risks
01
02
10
11
12
14
15
18
20
22
24
26
38
45
60
63
64
Chief Executive’s review page 15
A responsible business
Environmental
Social
Governance
Responsible Business review page 45
LondonMetric Property Plc
Annual Report and Accounts 2020
Read more on our progress at Bedford Link page 33
Governance
Introduction from the Chair
77
Board leadership and Company purpose
Board of Directors
Management team
Our activities
Our purpose and culture
Our stakeholders
Division of responsibilities
Leadership framework
Leadership roles and responsibilities
Composition, succession and evaluation
Nomination Committee report
Audit, risk and internal control
Audit Committee report
Remuneration
Remuneration Committee report
Directors’ Remuneration Policy
Annual Report on Remuneration
Report of the Directors
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
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93
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104
112
119
130
140
144
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154
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177
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189
191
196
196
Financial performance
IFRS net assets
£1,431.8m
2019: £1,216.8m
Total accounting return1
3.0%
2019: 10.7%
EPRA EPS1
9.3p
2019: 8.8p
Dividend per share
8.3p
2019: 8.2p
1 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 38. Definitions can be found
in the Glossary on page 189
01
Overview
Our purpose
To own and manage desirable real estate
that meets occupiers’ demands, delivers
reliable, repetitive and growing income-led
returns and outperforms over the long term.
We explain over the
following pages how
we retain our core focus,
but continue to adapt
to market conditions.
Own
Own desirable real
estate that meets
occupiers’ needs
Manage
Manage & enhance
responsibly to improve
our assets and help
occupiers thrive
Collaborate
Maximise our expertise
and relationships to
build on our position as
partner of choice
Generate
Generate reliable,
repetitive and growing
income-led total returns
See our business model to find out
about how this creates value page 22
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
02
Overview
Own desirable real estate
What this means
to our business
Aligning the portfolio to the right side
of longer term macro and structural
trends shaping real estate.
Owning quality assets, with
high occupier appeal, in good
locations, that deliver reliable and
growing income.
Growing exposure to urban logistics,
where there are strong demand/supply
dynamics and high intrinsic values.
Adding to our long income portfolio
which offers attractive long-let and
index linked income.
Delivering enhancements,
synergies and income growth
from our Mucklow acquisition in
the year, which significantly added
to our urban logistics and long
income exposure.
Highlights
35%
£614m
Urban logistics exposure,
up from 27%
Total acquisitions, including
the Mucklow portfolio
24%
55%
Long income exposure,
up from 22%
Percentage of income
subject to contractual uplifts
See Property review page 26
LondonMetric Property Plc
Annual Report and Accounts 2020
Strategic report
Governance
Financial statements
03
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Amazon in Warrington
Our 357,000 sq ft regional
distribution warehouse
let to Amazon for a
further 12 years.
Costco in Coventry
Our 129,000 sq ft long income
asset, acquired through the
Mucklow acquisition and
let to Costco for a further
17 years.
LondonMetric Property Plc
Annual Report and Accounts 2020
Our occupier activity
130 lettings, regears and
rent reviews in the year
with existing and new
occupiers. These deals
generated £5.2 million
of additional income.
Lettings at Bedford Link
We let three distribution
warehouses totalling
188,000 sq ft, completing
lettings on phase one
of the development
and achieving a WAULT
of 16 years.
04
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Responsible Bedford Link
As we progress the next phase
of development at Bedford
we are looking to enhance
further our ‘Responsible
Building’ credentials.
See Bedford Logistics case study page 33
LondonMetric Property Plc
Annual Report and Accounts 2020
Strategic report
Governance
Financial statements
05
Overview
Manage and enhance responsibly
What this means
to our business
Increasing the desirability of our assets
to ensure they remain fit for purpose.
Providing real estate solutions to our
occupiers to help their businesses thrive.
Improving the length and strength
of our income and growing our rent.
Undertaking asset management
and short cycle developments in
a responsible and sustainable way
having regard for the environment
and local communities.
Highlights
+£5.2m
11.6 yrs
Additional income from
our lettings and rent review
Average lease lengths
on lettings signed
670,000 sq ft
BREEAM Very Good certified
developments completed or in
construction during the year
LondonMetric Property Plc
Annual Report and Accounts 2020
See Responsible Business review page 45
06
Overview
Expertise and relationships
What this means
to our business
Leveraging our highly talented,
motivated and aligned team
to make the right decisions and
deliver long term outperformance.
Adopting a ‘partner of choice’
approach, collaborating with
all stakeholders.
Strengthening and deepening
our occupier relationships to
ensure high occupancy and
customer satisfaction.
33
Employees following the
integration of 7 employees
from the Mucklow acquisition
Highlights
98.6%
Occupancy rate
+5.1%
Total Property Return,
560 bps outperformance
against IPD All Property
See Responsible Business review page 45
LondonMetric Property Plc
Annual Report and Accounts 2020
Strategic report
Governance
Financial statements
07
Our team is highly talented,
motivated and aligned
We have a highly
experienced team and
added further depth through
the Mucklow acquisition.
Our latest employee survey
continues to show high
levels of satisfaction.
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Investing and working
with our occupiers
During the year, LondonMetric
exchanged on the purchase
and funding of a development
for £24.0m at a yield of 5.2%.
The 232,000 sq ft warehouse
is pre-let to Croda, a FTSE 100
chemical company, on a
20 year lease with RPI linked
uplifts. It will be a BREEAM Very
Good certified building that
Croda will use as its global
distribution hub, employing
200 people.
In parallel, LondonMetric
agreed to extend the lease
on another Croda warehouse
that it owned and where the
lease had expired. This helped
to facilitate Croda’s short term
occupational needs until the
new building completes.
LondonMetric subsequently
sold that warehouse for £5.9m
with two years remaining
on the lease, delivering an
ungeared return of 11%
per annum.
LondonMetric Property Plc
Annual Report and Accounts 2020
Some of our key customers
08
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Our occupier base
We continue to focus strongly
on the credit strength,
quality and sector diversity
of our occupiers.
Income from
Top 10 Occupiers
36%
decreasing from 51% in 2019
and further diversifying our
income base
LondonMetric Property Plc
Annual Report and Accounts 2020
Strategic report
Governance
Financial statements
09
Overview
Generate income growth
What this means
to our business
Owning desirable assets that
deliver reliable, repetitive and
growing income.
Focusing our activity on further
strengthening our portfolio income
metrics and delivering rental
growth organically and through
contractual uplifts.
Continuing to deliver on our
progressive and covered
dividend policy.
Generating highly attractive
income led total returns in a low
interest rate environment.
Highlights
£123m
Contracted rental income
p.a., up from £90m
+3.0%
Total accounting return
11.2 yrs
+3.8%
Portfolio WAULT
Like for like income growth
+5.6%
5 years
Growth in earnings per share
Of dividend progression
LondonMetric Property Plc
Annual Report and Accounts 2020
See Our markets page 20
See Property review page 26
10
Overview
Performance highlights
Net rental income1
£115.9m
23.6%
81.8
90.6
93.8
115.9
EPRA EPS1
9.3p
5.6%
8.2
8.5
8.8
9.3
IFRS reported profit
(before exceptional acquisition costs)
£51.5m
57.0%
186.0
119.7
63.0
51.5
2017
2018
2019
2020
2017
2018
2019
2020
2017
2018
2019
2020
IFRS net assets
£1,431.8m
17.7%
EPRA net asset value per share1
Dividend per share
1,006.9
1,149.5
1,216.8
1,431.8
171.7p
1.8%
149.8
165.2
174.9
171.7
8.3p
1.2%
7.5
7.9
8.2
8.3
2017
2018
2019
2020
2017
2018
2019
2020
2017
2018
2018
2020
Total property return
WAULT
5.1%
7.4
13.7
9.0
5.1
11.2 years
1.3 years
12.8
12.4
12.5
11.2
2017
2018
2019
2020
2017
2018
2019
2020
Loan to value ratio
3.5
2.8
3.1
2.9
35.9%
30.5
34.7
32.2
35.9
Cost of debt
2.9%
20bps
2017
2018
2019
2020
2017
2018
2019
2020
The definition of each EPRA measure
can be found in the Glossary page 189
1 Alternative performance measures
The Group financial statements are
prepared in accordance with IFRS where
the Group’s interests in joint ventures and
any non-controlling interests are shown
as a single line item on the consolidated
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
and excludes any non-controlling interest
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 and
on this page, reflect the proportionately
consolidated results of the Group 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 38 and in note 8 to the Group
financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020
Overview
Chair’s statement
11
The disruption caused by the COVID-19
pandemic and the speed with which it has
impacted our lives is truly unprecedented.
The changes it has brought are certainly
proving to be one of the most defining
events of my career. It is putting enormous
pressure on government deficits and
corporate cash flows across the world.
It is also further challenging many long
established practices of modern day life.
Whilst there will be pain along the way
and longer term economic consequences,
I am in no doubt that the world will be able
to ride the disruption and recover. Clearly,
we can’t predict exactly how the recovery
will play out but two themes I pointed to in
my statement last year are likely to persist.
Firstly, interest rates are unlikely to move
significantly higher over the medium term
from their unprecedented low levels which,
together with significant cuts in corporate
dividends and an ever ageing population,
are intensifying the global search for income.
Secondly, technological and behavioural
change will continue to impact the way
we live, work and socialise.
COVID-19 is serving to further accelerate
structural trends that were already
underway. This is having a profound
impact on commercial property, with the
outlook for certain sectors that were already
facing disruption continuing to deteriorate
and the polarisation of performances
widening further.
It had been apparent to us for a long while
that changes in consumer behaviour were
going to significantly impact traditional
retail property and, over the last year and
particularly over recent months with ‘forced
adoption’ of new living and shopping habits,
this sub sector has seen materially adverse
valuation movements and rental declines.
Conversely, the supportive tailwinds for
logistics and long income property have
strengthened further and continue to
validate our strategic decisions and actions
to align the portfolio to these sectors.
Our successful acquisition of Mucklow
in the year significantly advanced
our ambition to grow our urban logistics
exposure and we have been delighted by
the performance to date of the Mucklow
portfolio. Along with our other activity,
the acquisition has helped to further
strengthen our portfolio characteristics,
income diversification and wider
corporate capabilities.
Over the year, I’m pleased to report that
our portfolio delivered further income
growth, a robust valuation performance
and significant outperformance of the IPD
All Property benchmark. EPRA earnings
per share increased by 5.6% and dividends
per share rose by 1.2%; a fifth year of
progression. As a measure of our longer
term progress and performance, over the
seven years since our merger, we have
delivered a total shareholder return of 135%
and significantly outperformed the FTSE 350
Real Estate Super Sector average of 34%.
Whilst we are not immune from current
events, our portfolio continues to perform
well. We enjoy excellent relationships with
our stakeholders which, combined with long
experience and continued balance sheet
discipline and improvements, means that
we are well placed. This was evident from
our recent equity fundraise, which attracted
overwhelming support from existing and new
shareholders. The transaction is allowing us
to execute on some high quality investment
opportunities that will further strengthen
our portfolio as well as support our long term
progressive dividend policy whilst maintaining
our conservatively positioned balance sheet.
We recognise that the success of the
Company is reliant on our people and I
would like to thank the Board and all our
employees for their continued hard work.
The Company has not only successfully
integrated additional employees from the
Mucklow acquisition but has also quickly
adapted to a change in the way it works
without interruption. This is a testament to the
strong and committed team that we have
and I am astonished, impressed and very
grateful for the way the team has managed
the business remotely during lockdown.
Looking forward, we continue to believe
that the most attractive characteristic
of real estate is its income compounding
qualities over the longer term. The ability
to generate reliable, repetitive and
growing income returns makes certain
property sectors a perfect asset class
in which to deploy capital.
Patrick Vaughan
Chair
10 June 2020
Over the year, I’m pleased
to report that our portfolio
delivered further income
growth, a robust valuation
performance and significant
outperformance of the IPD
All Property benchmark.
Patrick Vaughan
Chair
+135%
Total shareholder return
over seven years since merger
Significantly outperformed
the FTSE 350 Real Estate Super
Sector average of 34%
+5.6%
EPRA Earnings per share
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 12
Overview
At a glance
We own structurally supported real estate
underpinned by changing consumer
shopping habits. Distribution represents
69.8% of the portfolio and our long
income exposure has grown to 24.0%.
Our focus on distribution and long income1
Assets by geography1
6 7
5
4
1
Distribution
69.8%
3
2
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
4
5
Long Income
Retail Parks
6 Offices
7
Residential
35.4%
19.5%
14.9%
24.0%
3.6%
2.4%
0.2%
1
Including developments, based on value
Other
3.0%
North East
& Yorkshire
8.3%
Midlands
36.3%
London &
South East
40.4%
North West
5.6%
South West
6.4%
LondonMetric Property PlcAnnual Report and Accounts 2020 Our portfolio
Urban Logistics
Smaller logistics units, strategically
located in or close to dense areas
of population to meet increasing
consumer demands for next
and same day delivery.
Mega & Regional Distribution
Mega Distribution
Large scale modern distribution
units, greater than 500,000 sq ft
and located close to major
arterial routes.
Regional Distribution
Mid size units between 100,000 sq ft
and 500,000 sq ft serving as regional
hubs and creating the connecting
link in any modern supply chain.
Long Income
Convenience, Roadside & Leisure
Consists of convenience & wholesale
discount stores, roadside assets
and several Odeon cinemas.
NNN Retail
Primarily consists of standalone
properties let to discount, essential,
electrical and home retailers.
Trade, DIY & Other
Principally building, trade and DIY
stores as well as car servicing centres.
98 assets
6.5m sq ft
Value
£830.8m
Rent
£41.9m (£6.50 psf)
WAULT
7.8 years
Contractual uplifts
33.3%
17 assets
6.1m sq ft
Value
£807.2m
Rent
£35.4m (£6.00 psf)
WAULT
14.2 years
Contractual uplifts
87.8%
113 assets
2.8m sq ft
Value
£563.0m
Rent
£33.9m (£14.70 psf)
WAULT
13.3 years
Contractual uplifts
57.2%
13
Portfolio value
£2,347m
2019: £1,846m
WAULT
11.2 years
2019: 12.5 years
Total property return
5.1%
2019: 9.0%
Top occupiers by
contracted income (%)1
8.4
4.4
3.8
3.5
3.4
2.7
2.7
2.6
2.2
2.0
1 Excludes income from sales that
had exchanged but not completed
by year end
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
14
Our strategy
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
Strategic priorities
1 Align portfolio to
real estate assets
benefiting from
macro trends and
that are structurally
supported
2 Focus on long-let
property in good
locations with
strong occupier
contentment, intrinsic
value and rental
growth prospects
3 Improve the quality
and sustainability
of our assets
and income
5 Remain rational
and disciplined
in our investment
approach
4 Enhance income
6 Use the team’s
and value through
asset management
expertise to maintain
a strong portfolio,
make well informed
decisions and act in
the best interests of
our stakeholders
7 Generate reliable
income with income
growth to pay a
progressive and
covered dividend
8 Strong focus on
the credit strength,
quality and
sector diversity
of our occupiers
Read more page 02
Read more page 04
Read more page 06
Read more page 08
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategy
Chief Executive’s review
15
We have built up a
collection of excellent
assets let on long leases
with high occupier appeal
and offering reliable,
predictable and growing
income streams.
Andrew Jones
Chief Executive
94%
in logistics and long income,
our conviction call sectors
Overview
We continue to live in a world of
ongoing disruption, social change and
economic uncertainty, all of which are
having a profound effect on real estate
This backdrop has been further impacted
by the exogenous shock of COVID-19.
Whilst the timing and suddenness of the
pandemic were unforeseeable, many
trends that we are seeing play out as a result
of enforced distancing were already in
the system. This pandemic may not in itself
transform the world, but it is accelerating
changes that were already underway as
many temporary behaviours become more
permanent. We are seeing changes that
were expected to take years to emerge
now happening in months or even weeks.
As a result, real estate performances
continue to polarise, with many distressed
sectors being severely damaged whilst
the winning sectors are likely to see a
wider margin of victory.
For many years, our portfolio composition
has been influenced by the macro
trends in the wider economy that affect
real estate. We have, therefore, looked to
pivot and tilt our portfolio to gain maximum
benefit. During the year, we accelerated
our conviction calls of investing into logistics
and long income with these sectors now
representing 94% of our portfolio. We observe
the real estate market as it is, not as it was
or how we want or hope it to be.
For us, it is not only the returns that we
achieve that are important but also the
returns weighed against the risks involved
and stress incurred. Buying cheap assets
is fine but buying good assets cheaply
is better. Therefore, whilst the property
market throws us lots of opportunities, we
let most go, preferring to focus on quality
investments that offer long term income,
capital growth and downside protection
from strong intrinsic values.
Investing in the best real estate assets in
the right sectors is an extremely attractive
proposition in a zero interest rate world.
In this time of uncertainty, we are not
only seeing more quality opportunities
but also a much less crowded landscape,
as competitors remain distracted.
Whilst this crisis may destroy a number
of companies and the majority will look
to survive, it is only the best that will
look to improve.
Overall, our portfolio continues to perform
strongly and we have built up a collection
of excellent assets let on long leases with
high occupier appeal, that require limited
operational management and which
offer a reliable, predictable and growing
income stream.
Structural trends towards online and
convenience are being accentuated
The unprecedented shock from COVID-19
has caused a sudden and forced adoption
of new habits by consumers and businesses.
A recent study found that it takes 66 days
to form a new habit and it is expected that
many of the temporary habits formed are
likely to take on more permanency and
accelerate further.
In this crisis, consumers have relied almost
exclusively on online, convenience and
essential operators to fulfil their needs.
In our view, this enforced way of shopping
is simply increasing the speed of structural
decline of traditional bricks and mortar
retail with a corresponding shift online.
Whereas pre-crisis projections estimated
UK online spend would rise from 23% to 28%
of non-food retail within the next few years,
the number once we fully emerge from the
pandemic is likely to be significantly higher.
Part of the acceleration of trends is likely
to be reflected in the future approach of
many retailers. John Lewis reported recently
that, since closing their stores in March,
they had seen an 84% surge in online trade
which helped to limit group sales decline
to just 17% year on year. Furthermore, they
expect the shift online to be sustained
after lockdown ends. With the operational
costs and capital intensity of running store
estates and an unrivalled click and collect
operation through Waitrose, it is no surprise
they are comprehensively reviewing
their estate.
History will be a poor indicator of how
the recovery from the pandemic will play
out. Consumers will emerge in a new
economic and social reality, changing
behaviours in profound ways. As ever, it is
those retailers that are able to react that
will successfully navigate these unchartered
times. In the process, there is expected
to be a consolidation of retailers which
will fundamentally alter the competitive
and partner landscape.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 16
Our strategy
Chief Executive’s review continued
Own desirable real estate
Generate income
Our portfolio has further aligned to
urban logistics where there is strong
rental growth
The continual shift online is requiring
companies to improve their logistics
capabilities further, both to contend
with faster and more accurate delivery
demands from customers, as well as
holding higher levels of inventory and
managing returns.
There has been a marked increase in
demand for distribution capacity over
the last few months, notably within online
food where internet penetration has
historically been low, but where a 26%
growth in online sales is now expected for
2020 compared to previous predictions
of just 9% prior to the pandemic. This is
creating a chronic shortage of capacity
and, with new supply currently constrained,
the demand/supply dynamics remain
strong. This provides terrific certainty in
an uncertain world and helps to ensure
that the intrinsic value of warehousing
continues to grow.
Over the year, our logistics platform
increased from £1,339 million to £1,638 million,
representing 69.8% of our portfolio. However,
this 22% top line growth fails to reflect the
changing shape of our distribution exposure.
In big box logistics, whilst we are still
seeing rental growth, it is noticeably less
than before. Occupier demand here
has been matched by new supply and is
tempering rental growth. This outlook and
our tighter geographic focus has prompted
us to sell a further £113.5 million of mega
distribution, reducing our exposure to this
segment from 23.1% to 14.9% of the portfolio.
In urban logistics, we continue to see the
strongest rental growth where, in the right
locations, there is a perfect condition
of rising demand and falling supply due
to strong competition from more valuable
land use. It has been, and continues to
be, our strong conviction call and one
that prompted our strategic acquisition
of Mucklow.
The purchase is delivering on our aspirations
and enabled us to materially accelerate and
improve our urban logistics platform that,
at £831 million, now accounts for 35.4%
of our portfolio, increasing over the year
from £504 million and 27.3% respectively.
The strategic rationale of our conviction
call is underpinned by the fact that
it is only possible to service customer
demands by distributing from a portfolio
of warehouses located adjacent to major
urban populations. Amazon continues
to increase its domination of the UK with
an ever growing network and DPD recently
reported that it experienced record
volumes for the time of the year, delivering
to one million households on a single
day, broadly equating to 1,400 deliveries
per minute.
Urban logistics remains one of the few
standout areas of the real estate market
that we believe has strong long term
growth prospects. Whilst we continue to
see increased interest from consolidators,
ownership remains fragmented which
is providing further opportunity for us
to scale up.
Long income real estate continues
to offer resilient and reliable income
generating characteristics
The other area of real estate which we
continue to find attractive is long income.
A property let on long leases, to a high
quality counterparty with guaranteed
income growth at a yield of at least 400bps
higher than government bond yields,
offers highly resilient and reliable income
generating characteristics. We believe
that these strong fundamentals remain
underappreciated particularly when their
index linked properties are factored in.
Our long income assets are focused
on sectors that we believe are less
susceptible to the migration of spend
online and that benefit from the changes
in the way people are shopping and living.
They focus on convenience, discount,
essential, trade and roadside services.
During the year, including Mucklow
properties, we acquired £161.6 million
of long income assets let on long leases
and with a high proportion of the income
subject to contractual rental uplifts.
In a world of ongoing disruption,
we continue to prioritise the quality
of income from our occupiers
The global search for income has
intensified further as corporates across
the board cut dividends and yields on
government bonds fall to record lows.
We believe that the macro environment
is highly supportive for the right real
estate that can generate income
streams that are reliable, predictable
and which are expected to grow.
The portfolio has performed strongly
delivering a total property return of
5.1% driven entirely by income returns
and outperforming IPD All Property by
560 bps. Our portfolio is well positioned
with 98.6% occupancy and a WAULT
of 11.2 years.
In this current disruptive environment,
we continue to focus strongly on the
credit strength, quality and sector
diversity of our occupiers. The Mucklow
acquisition, together with our other
activity, has increased the scale and
resilience of our portfolio and helped
to grow our contracted income from
£90 million to £123 million. It has also
significantly improved the diversification
and granularity of our income; our top
ten occupiers now account for 36% of
contracted rent, down from 51% in 2019,
and we have a much broader and
more diverse occupier base overall.
We continue to believe that there is
more growth to come from the portfolio.
Rents in urban logistics continue to
recalibrate upwards and, despite
a strong performance to date, we
expect to leverage our enlarged urban
portfolio for many years to come and
capture the embedded rental growth.
Furthermore, with contractual rental
uplifts on 55% of our income we continue
to have good visibility of rental growth
on the other parts of our portfolio.
LondonMetric Property PlcAnnual Report and Accounts 2020 17
Manage & enhance
Expertise & relationships
Outlook
We continue to benefit from our
strong team and their relationships
Our team’s economic alignment to
shareholders ensures a strong conviction
to make the right property decisions.
We remain rational and disciplined and
will always prefer to sell assets that don’t
meet our strict investment criteria and
wait patiently until an attractive opportunity
presents itself, even where this causes a
short term disruption to our income flow.
As a result, we continue to benefit from
our decisions, as well as some excellent
execution and hard work across our
investment and asset management teams.
Similarly, our finance team has performed
strongly, delivering on our debt strategy,
working closely with the property team
and helping to ensure that the integration
of Mucklow was completed successfully
and within a quick timeframe.
We have been delighted with the Mucklow
acquisition and we are benefiting from
the added depth it has brought to our
team as well as the presence that we have
established around Birmingham.
Our response to the COVID-19 pandemic
has focused on keeping our people safe
and working closely with our occupiers
and other stakeholders. Our experienced
team of 33 has successfully and seamlessly
transitioned to remote working and
operated highly effectively in what has
been an intense period. It has been an
amazing effort by all and reflects the
strength and focus of our team.
Our focus on owning the right assets
in the winning real estate sectors
is delivering reliable, repetitive
and growing income led returns
which is supporting our progressive
dividend policy
Our alignment to the right side of
structural change ensures that our
portfolio can continue to deliver
long term income growth. This is in
sharp contrast to the wider property
market where the outlook for rental
income is either flat or falling and
where dividends are under significant
pressure. As strong believers in the
power of income compounding
and that a covered dividend is the
bedrock for attractive income returns,
we will continue to ensure that the
income we generate is passed into
our shareholders’ pockets.
In these challenging times, we have
focused on protecting the existing
portfolio, engaging with our occupiers
and improving our balance sheet
strength. In addition, market uncertainty
is giving rise to quality investment
opportunities that are seldom
available in a normalised market.
Through our relationships and with
the proceeds of our significantly
oversubscribed equity raise, we are
transacting on some excellent assets
with £15 million acquired post year
end and further deals agreed or in
legals that total in excess of £80 million.
Therefore, as we continue to stay alert
and rational, we will be able to add
more quality assets to our portfolio.
Notwithstanding the uncertainty from
COVID-19, we remain excited by the
outlook for the portfolio and believe
that today’s market has created an
opportunity for experienced managers
who can properly assess underlying
real estate fundamentals to generate
attractive returns through careful asset
selection and diligent underwriting.
The performance of the business is
strong with operational activity continuing
to enhance our income metrics
Like for like income growth was 3.8% and
asset management added £5.2 million
per annum of contracted rent in the year
helped by a number of initiatives on the
Mucklow assets.
Lettings and regears were signed on
2.1 million sq ft with a WAULT of 12 years
and we undertook rent reviews on 3.4 million
sq ft delivering a 12% rental uplift on a five
yearly equivalent basis, with urban logistics
open market reviews achieving a 32% uplift.
Since the year end, we have continued
to see strong letting activity including
distribution lettings in Stoke, Birmingham
and Greenford of 141,000 sq ft, 38,000 sq ft
and 34,000 sq ft respectively.
After successfully letting the first phase
at our Bedford development, we have
commenced the phased build out of
a further 166,000 sq ft, whilst at Tyseley we
are making good progress with lettings
as well as pre-lets on future development.
We continue to embed sustainability and
high ESG standards across our activities.
Our GRESB score again improved over the
year from 67% to 71%, maintaining our Green
Star rating, and 78% of our developments
completed or under construction in the
year are BREEAM Very Good.
Despite the significant impact of COVID-19,
our rent collection has been pleasing and
we continue to experience minimal income
interruption. We acted swiftly to counter
attempts to withhold payment and this
has paid off. Remarkably, it was some of
the more financially robust occupiers that
initially proved more problematic and we
have been very clear that those that can
afford to pay should pay. At the same time,
we are actively assisting some occupiers
that have experienced material near
term challenges, providing them with
proportionate and appropriate assistance,
in some cases accompanied by value
enhancing asset management deals.
We acknowledge that the operational
backdrop is evolving quickly and that
extrapolating success to date may be
premature. However, with each month
that passes, we continue to build a better
picture of the resilience of our portfolio.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 18
Our strategy
The deal
116,000 sq ft distribution warehouse in Worcester let to Bosch,
acquired through the Mucklow acquisition.
Mucklow
in focus
The recommended offer for A&J Mucklow
was a key highlight in the year. LondonMetric
paid £413m in consideration through the
issue of new shares and cash in June 2019.
The transaction had compelling strategic,
operational, portfolio and financial
rationale and was overwhelmingly
supported by both sets of shareholders.
It has been successfully integrated and
is delivering on expectations.
Learn more in our case studies:
Tyseley case study page 37,
Wednesbury One case study page 27
LondonMetric Property Plc
Annual Report and Accounts 2020
Background to the transaction
Mucklow was a family run business
founded in 1933 and listed on the London
Stock Exchange. The Mucklow family
accounted for a third of shareholders. It had
a long term focus on income growth and
value creation, delivering an impressive
dividend growth of 5% pa over 35 years.
LondonMetric was in close contact with
the Chairman of Mucklow during the
second half of 2018, having identified it
as an attractive acquisition opportunity.
Over that period, Mucklow announced
that it was looking for a successor to the
CEO after his decision to step down from
the business. Discussions progressed into
early 2019 as a combination of the two
businesses looked increasingly attractive.
Benefits to Mucklow holders of the deal
LondonMetric was seen by Mucklow
as a safe guardian of its assets
and wider shareholders interests,
particularly important given the
family’s significant shareholding
The share element of the deal
allowed Mucklow holders to transfer
their shareholdings into LondonMetric
without significant tax disadvantages
Portfolio rationale for LondonMetric
Complementary and income
producing portfolio of urban logistics
and long income assets
Acquired at an attractive yield
and offering strong income
growth prospects
Significantly increased its exposure
to the UK’s second largest conurbation
around Birmingham, adding well
located assets
Diversified and improved the
granularity of LondonMetric’s income
Strategic and Operational rationale
Immediately earnings accretive
through economies of scale
& synergies
Opportunity for LondonMetric
to deploy its more active asset
management approach on
the Mucklow assets
Mucklow’s low LTV of 16% allowed
LondonMetric to offer part of
the consideration in cash without
adversely impacting leverage
Enabled the combined entity
to benefit from greater scale
Strategic report
19
Mucklow portfolio1
Board Involvement & Integration
Board Involvement
Following the initial decision to progress
with a deal in March 2019, the Board were
given a full overview of Mucklow and the
strategic rationale for the transaction.
Following the completion of detailed due
diligence, a comprehensive analysis and
strategy documentation was presented
to the Board.
The Board were kept up to date regularly
through a merger tracker and at board
meetings. There was regular contact with
the Board and questioning of the Executive
Directors throughout the process.
Prior to concluding the transaction,
the Board had full access to and
Integration & performance
People & systems
Integration of the Mucklow team,
portfolio and systems was a key priority.
The process achieved significant and
immediate cost savings primarily from
the Mucklow board stepping down,
further subsequent departures and
removal of other corporate overheads.
The core team of seven employees has
been successfully integrated, with each
having a direct reporting line into the senior
LondonMetric team and clearly identified
responsibilities. An office relocation to
smaller premises in central Birmingham
was undertaken along with a portfolio
and financial systems migration.
Portfolio activity & performance
The assets have performed well, adding
a positive valuation contribution and
generating good income growth.
LondonMetric’s key focus was to more
proactively manage the Mucklow assets
to lengthen and grow their income.
Over the year, 57 occupier deals were
completed, adding £1.1 million p.a. of rent
with a WAULT on lettings of 10.5 years.
A 135,000 sq ft development in Tyseley also
completed and discussions are progressing
well with occupiers on up to 195,000 sq ft
of further development.
The 11 offices acquired as part of the
deal were not deemed core assets for
LondonMetric and, in the year, two were
sold at a 7% premium to acquisition cost.
3.8m sq ft
Across 64 assets
£26.1m
Rental income p.a.
7.2 years
WAULT
5.4%
NIY, with equivalent yield of 6.1%
Mucklow portfolio split
4
3
2
Urban Logistics
69%
1
69%
14%
15%
2%
1
2
Urban Logistics
Long Income
3 Office
4
Retail Parks
1 Portfolio statistics as reported at time
of the transaction
LondonMetric Property Plc
Annual Report and Accounts 2020
benefit of the Company’s legal and
financial advisers.
After announcement of the deal, the
Board were kept regularly up to date on
the deal progress and investor feedback.
Following successful completion,
several members of the Board visited a
number of the Mucklow assets and met
with the Mucklow team. Integration was
an important part of the transaction and
the Board has been kept fully apprised
of progress, performance of the Mucklow
portfolio and material portfolio decisions
considered on the Mucklow assets.
Read more on S172 on page 52
Sustainability
LondonMetric has worked to understand
the environmental characteristics of the
Mucklow portfolio, specifically through:
• A programme of EPC reviews and
an identification of environmental
improvements across the portfolio
• Integrating energy reporting and
appointing a third party energy
management service
A number of initiatives were undertaken
in the year including LED lighting upgrades,
building refurbishments and a BREEAM
Very Good development.
Read more on BREEAM developments page 37
and Mucklow environmental initiatives page 49
129,000 sq ft Mucklow asset let
to Costco for a further 17 years.
GovernanceFinancial statements
20
Our strategy
Our markets
Real estate remains an attractive investment class
underpinned by ultra low interest rates. However,
there is a significant polarisation in performances
which is being accentuated by the pandemic.
Owning the right real estate aligned to structural
change has never been more important.
Overview
Structural trends in real estate
The right real estate remains an attractive
investment proposition, underpinned by
ultra low interest rates and a historic high
yield spread to government bonds.
It is clear that the global pandemic lockdown
will be eased gradually which is likely to
prevent businesses from producing as much
as normal and households from spending
as much as normal. Whilst economies
will recover, it is likely to take time and to
be below historic norms for some time.
The impact of the lockdown has not been
uniform across all sectors and businesses
and, as a result, the winners and losers are
being redefined. Failing or weak businesses
have been further exposed whilst those
that have kept pace with structural changes
affecting how we work, shop and live are
faring far better.
Growth may be muted for certain
businesses but structural changes have
accelerated. More people have adopted
technology through online shopping,
trialled home working and have seen
the positive impact of not making
non essential journeys.
Whilst some of the shift away from
physical to online retailing that we have
seen during the pandemic will reverse
once lockdown is lifted, many of the
shopping habits developed over this time
are likely to remain. This will have further
adverse implications for physical retail
and further increase the demand for
logistics warehousing.
Owning the right assets in the right
sectors of real estate and occupied by
the right companies is more important
than ever before.
1 Ultra low interest rates
Property let on long leases to a
strong counterparty at a yield that is
at least 400bps higher than offered
on government bonds is extremely
attractive. These fundamentals
remain underappreciated particularly
when the compounding impact of
index linked leases are factored in.
2 Global search for income
Longevity of life is having a profound
impact on the search for income.
The demographic tsunami, where
a significant number of retirees is
expected worldwide, will put acute
pressure on the need for reliable
and repetitive income, particularly
when corporate dividends are
being cut worldwide.
3 Technology disrupting
Online shopping habits have
accelerated further as a result of
the pandemic. Trends that were
expected to occur over 5 to 10 years
are now embedding themselves
today as more people have trialled
and become increasingly reliant
on online shopping.
4 Urbanisation continuing
The continued gravitational pull towards
larger conurbations continues to put
pressure on land availability and the
need for residential. As online adoption
grows and delivery times become
quicker and more accurate, the need for
the right land in urban cities increases.
5 Focus on efficiency & sustainability
Investing in, creating and providing
efficient and sustainable buildings for
all stakeholders is key to the success
of the occupier and investor alike.
Online UK retail sales
growth in April 20201
+18%
Compared to an 18% fall
overall for total UK retail sales
Growth in UK online food sales2
+26%
Expected in 2020 compared
to previous predictions prior
to the pandemic of just 9%
Most active sectors for UK
logistics take up in Q1 2020
Retail (online)3
34%
Percentage of take up
Retail (food)3
21%
Percentage of take up
1 Source: Office for National Statistics
2 Source: GlobalData
3 Source: CBRE
LondonMetric Property PlcAnnual Report and Accounts 2020 Strong occupational demand for structurally supported logistics and long income
21
Logistics take up remains strong and
has strengthened during the pandemic
Modern and efficient logistics and fulfilment
networks are required to deliver seamlessly
to both the store and the consumer’s home.
The continual shift online is requiring
companies to improve their logistics
capabilities further to contend with faster
and more accurate delivery demands from
customers as well as holding higher levels
of inventory and managing returns.
Take up of logistics has remained strong,
primarily driven by design and build activity.
The pandemic has increased demand
for distribution capacity further over the
last few months, notably within online
food, with further additional short term
requirements adding to demand.
Availability falling for logistics but big
box rental growth less pronounced
Whilst supply levels and speculative
development have responded to
increased demand, vacancy rates
continue to remain at low levels
with availability falling.
Speculative supply remains at rational
levels and the pandemic is likely to have
delayed the start of some speculative
schemes until greater certainty prevails.
In big box logistics, however, we believe
that occupier demand is being matched
by new supply which is tempering rental
growth. Whilst rental growth is still positive,
it is noticeably less than before.
Take-up
(million sq ft)
Q1 2019
Q2 2019
Q3 2019
Q4 2019
Q1 2020
Secondhand
D&B
Speculative
Source: CBRE
Availability
(million sq ft)
5.4
Q1 2019
7.8
Q2 2019
6.8
Q3 2019
5.5
Q4 2019
6.2
Q1 2020
Secondhand
Spec. under construction
Spec. completed
30.1
29.9
28.6
27.1
25.7
Urban logistics is one of the few
standout areas of the real estate market
We continue to see the strongest
rental growth in urban logistics.
There is a perfect condition of rising
demand and falling supply with strong
competition from more valuable
land uses, mainly residential.
This is particularly the case around
major conurbations, particularly in the
South East and the Midlands, which
is leading to strong rental growth
in these areas.
Urban logistics remains one of the
few standout areas of the real estate
market and we believe that it has
strong long term growth prospects.
Long income and convenience
benefiting from structural change
Long income assets focused on
sectors less susceptible to the migration
of spend online and that benefit from
the changes in the way people are
shopping and living remain in demand.
Convenience food in particular is
a standout winner. It continues to be
one of the fastest growing channels
in the UK food and grocery market
and, over a five year period to 2023,
is predicted to grow by 17% to £48 billion
of sales.
Investors reallocating weightings to distribution and long income
The investment market for logistics and
industrial has remained strong. After two
record years of investment volumes,
activity in these sectors fell in 2019 with
CBRE estimating £5 billion of transactions.
This was more in line with the five year
average and the fall was partly attributed
to the lack of available investments.
As investors further re-weight their real
estate allocations to logistics, there
continues to be strong demand for prime
warehouses that are well located, well
specified and long let to good covenants;
the South East is in particular demand
as reflected in the low yields recorded.
Similarly, long income assets, particularly
convenience food, remain very well bid.
Convenience stores let to Aldi for 20 years
with RPI rental uplifts have been transacting
at yields of approximately 4.0%.
UK Real Estate sector yields (%)
9
8
7
6
5
4
Shopping
Centre UK
Logistics
(South East)
Offices
(Central London)
Q1
2007
2008
2009
2010
2011
2012
2013
2014
2015 2016 2017 2018 2019 2020
Source: CBRE
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 22
Our strategy
Our business model
Our key stakeholders
External relationships
across all of our activities
are critical to the success
of our business.
People
Our success is dependent
on employing a talented,
motivated and diverse team
with strong property and
finance expertise.
Contractors and suppliers
Delivering developments and
asset management initiatives
on time, on budget and in
adherence with our standards
is a high priority. We select high
quality and robust contractors
who have a proven track record
and we work in collaboration
with them.
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.
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 page 45
See Our stakeholders
page 87
Our actions generate
value and long term
sustainable returns.
The value we create
Total shareholder return
outperformance (1yr)
Total accounting return (1yr)
EPRA EPS growth (1yr)
+710bps +3.0% +5.6%
Outperformance against
the FTSE 350 Real Estate
Super Sector average
Over three years, we have
delivered a total accounting
return of 30.6%
In the seven years post
merger, EPRA earnings per
share has grown by 138%
from 3.9p to 9.3p per share
Dividend growth (1yr)
Sustainable improvements
Community benefits
+1.2% +670k
1,100+
Fifth year of dividend
progression
Square feet of BREEAM Very
Good developments in
construction or completed
at the year end
Permanent jobs expected to
be created by occupiers at
our developments completed
in the year or underway
LondonMetric Property PlcAnnual Report and Accounts 2020
23
Our purpose drives our
ability to create sustainable
income, drive income
growth and create value
Own desirable real estate
The correct asset selection is increasingly
critical to deliver future outperformance.
We have aligned our portfolio towards the
logistics and long income sectors and continue
to improve the quality of our portfolio.
Total property return in 2020
5.1%
560 bps outperformance
of IPD All Property
Manage & enhance responsibly
Experience & relationships
We deliver real estate solutions that will help
occupiers’ businesses thrive. A combination
of responsible asset management and
short cycle developments help to grow
and improve the quality of our income.
Additional income
+£5.2m
from occupier transactions
in 2020
Using our expertise to work closely
with occupiers and wider stakeholders
to understand their needs results in high
satisfaction and occupancy levels.
Occupancy
98.6%
Generate income growth
Income is central to our business model.
The income from our assets is passed
to our shareholders in the form of a well
covered and progressive dividend.
Net rental income
£115.9m
+24%
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 24
Performance review
Key
performance
indicators
We continue to track seven key performance indicators (‘KPIs’)to monitor
the performance of the business, which includes our share of joint ventures.
The KPIs are also used to determine how Executive Directors and senior
employees are evaluated and remunerated.
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
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
Maintain a higher
Maintain
than market
benchmark WAULT
strong occupier
contentment
KPI
Total shareholder return (%)
Total accounting return (%)
Total property return (%)
EPRA earnings per share (p)
Like for like income growth (%)
WAULT (years)
EPRA vacancy (%)
2020
2019
2018
-7.6
2020
17.0
2019
16.6
2018
3.0
2020
10.7
2019
15.5
2018
5.1
9.0
13.7
2020
2019
2018
9.3
8.8
8.5
2020
2019
2018
3.8
2020
5.7
2019
4.3
2018
11.2
2020
12.5
2019
12.4
2018
1.4
2.2
2.5
Performance
Remuneration
2020/21 ambition
Total Shareholder Return
(‘TSR’), being the share price
movement together with the
dividend, in the seven years
post merger was 135%, almost
four times that of the FTSE 350
Real Estate Super Sector index
movement of 34%.
12 month TSR delivered -7.6%
compared to the FTSE 350
Real Estate Super Sector
return of -14.7%.
Under the Remuneration Policy
37.5% of LTIP awards are subject
to TSR growth compared with
the FTSE 350 Real Estate Super
Sector excluding agencies
and operators.
The TSR component of the 2016
LTIP award vested in full in the
year and the TSR component
of the 2017 LTIP award is
expected to vest in full.
The three year TSR for the 2017
LTIPs was 58.9% compared to
the FTSE 350 Real Estate Super
Sector excluding agencies
and operators of just 1.9%.
Three year TSR performance
to be in the upper quartile
of the FTSE 350 Real Estate
Super Sector, excluding
agencies and operators.
Total Accounting Return
(‘TAR’) of EPRA NAV movement
together with dividend paid
in the year.
Unlevered Total Property Return
(‘TPR’), including capital and
income return, of the portfolio
as calculated by IPD.
12 month TAR delivered
a return of 3.0%.
The full calculation can be
found in Supplementary
note viii on page 185.
12 months TPR delivered
a return of 5.1% compared
to the IPD All Property
benchmark of -0.5%.
EPRA earnings per share from
The movement in the
Weighted average
Occupancy rate of investment
operational activities have
grown by 5.6% over the last
12 months.
contracted rental income
unexpired lease term across
portfolio at 31 March 2020
on properties owned through
the investment portfolio
was 98.6%, an increase of 0.8%
the period increased by 3.8%.
(excluding residential and
over the year and reducing
development) of 11.2 years
our vacancy to 1.4%.
as at 31 March 2020.
In the seven years post merger,
Additional income was
EPRA earnings per share has
grown by 138% from 3.9p to
generated from asset
management activity
9.3p per share.
following lettings, regears
and rent reviews of £5.2 million
per annum.
Under the Remuneration Policy
37.5% of LTIP awards granted
since 2016 are subject to TAR
growth compared with the
FTSE 350 Real Estate Super
Sector excluding agencies
and operators.
The TAR component of the 2016
LTIP award vested in full in the
year and the TAR component
of the 2017 LTIP award is
expected to vest in full.
The three year TAR for the 2017
LTIPs was 30.6% compared
to the FTSE 350 Real Estate
Sector excluding agencies
and operators of 1.2%.
Three year total accounting
return to be in the upper
quartile of FTSE 350 Real
Estate Super Sector, excluding
agencies and operators.
35% of the annual bonus
award is subject to TPR
outperforming the IPD
Quarterly Universe index.
This year TPR outperformed
the IPD benchmark delivering
a 100% bonus payout.
35% of the annual bonus
Forms part of EPRA earnings
Linked to individual personal
Linked to individual personal
award is subject to an EPRA
per share, which as noted
EPS growth target. This year
above, is a key financial
EPRA EPS outperformed
its growth target securing
a full bonus payout.
performance measure for
the Company’s variable
incentive arrangements.
objectives, representing
30% of the annual bonus
performance conditions.
objectives, representing
30% of the annual bonus
performance conditions.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 34% of the
EPRA EPS component of the
2016 LTIP award vested in the
year and 53% of the EPRA EPS
component of the 2017 LTIP
award is expected to vest.
One year TPR outperformance
against IPD Quarterly
Universe index.
Deliver and sustain EPRA
earnings per share growth
and dividend progression.
Deliver like for like
income growth ahead
of inflation plus 1.5%.
Maintain high weighted
average unexpired lease
term targeting >10 years.
Maintain high occupancy
across the investment portfolio,
targeting in excess of 95%.
LondonMetric Property PlcAnnual Report and Accounts 2020 Financial performance indicators
We monitor other financial
performance indicators in respect
of LTV, debt maturity and cost
of borrowing.
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.
Remuneration
The table on page 127 shows how
our KPIs are reflected in and therefore
aligned to remuneration and
incentive arrangements.
ESG and Sustainability
Our Responsible Business review
on pages 45 – 59 sets out our
performance over the year including
information on our EPC ratings,
BREEAM rated developments,
carbon reduction performance
and stakeholder engagement.
See Financial review
page 38
See Risk management
page 60
See Remuneration Committee report
page 112
See Responsible Business review
page 45
25
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
Maintain a higher
than market
benchmark WAULT
Maintain
strong occupier
contentment
KPI
Total shareholder return (%)
Total accounting return (%)
Total property return (%)
EPRA earnings per share (p)
Like for like income growth (%)
WAULT (years)
EPRA vacancy (%)
2020
2019
2018
-7.6
2020
17.0
2019
16.6
2018
3.0
2020
10.7
2019
15.5
2018
5.1
9.0
13.7
2020
2019
2018
9.3
8.8
8.5
2020
2019
2018
3.8
2020
5.7
2019
4.3
2018
11.2
2020
12.5
2019
12.4
2018
1.4
2.2
2.5
Performance
Total Shareholder Return
Total Accounting Return
Unlevered Total Property Return
(‘TSR’), being the share price
(‘TAR’) of EPRA NAV movement
(‘TPR’), including capital and
movement together with the
together with dividend paid
income return, of the portfolio
dividend, in the seven years
in the year.
as calculated by IPD.
post merger was 135%, almost
four times that of the FTSE 350
Real Estate Super Sector index
movement of 34%.
12 month TSR delivered -7.6%
compared to the FTSE 350
Real Estate Super Sector
return of -14.7%.
12 month TAR delivered
a return of 3.0%.
The full calculation can be
found in Supplementary
note viii on page 185.
12 months TPR delivered
a return of 5.1% compared
to the IPD All Property
benchmark of -0.5%.
Remuneration
Under the Remuneration Policy
Under the Remuneration Policy
35% of the annual bonus
37.5% of LTIP awards are subject
37.5% of LTIP awards granted
to TSR growth compared with
since 2016 are subject to TAR
award is subject to TPR
outperforming the IPD
the FTSE 350 Real Estate Super
growth compared with the
Quarterly Universe index.
This year TPR outperformed
the IPD benchmark delivering
a 100% bonus payout.
Sector excluding agencies
and operators.
FTSE 350 Real Estate Super
Sector excluding agencies
The TSR component of the 2016
and operators.
LTIP award vested in full in the
The TAR component of the 2016
year and the TSR component
LTIP award vested in full in the
of the 2017 LTIP award is
expected to vest in full.
The three year TSR for the 2017
year and the TAR component
of the 2017 LTIP award is
expected to vest in full.
LTIPs was 58.9% compared to
The three year TAR for the 2017
the FTSE 350 Real Estate Super
LTIPs was 30.6% compared
Sector excluding agencies
and operators of just 1.9%.
to the FTSE 350 Real Estate
Sector excluding agencies
and operators of 1.2%.
EPRA earnings per share from
operational activities have
grown by 5.6% over the last
12 months.
The movement in the
contracted rental income
on properties owned through
the period increased by 3.8%.
In the seven years post merger,
EPRA earnings per share has
grown by 138% from 3.9p to
9.3p per share.
Additional income was
generated from asset
management activity
following lettings, regears
and rent reviews of £5.2 million
per annum.
Weighted average
unexpired lease term across
the investment portfolio
(excluding residential and
development) of 11.2 years
as at 31 March 2020.
Occupancy rate of investment
portfolio at 31 March 2020
was 98.6%, an increase of 0.8%
over the year and reducing
our vacancy to 1.4%.
Forms part of EPRA earnings
per share, which as noted
above, is a key financial
performance measure for
the Company’s variable
incentive arrangements.
Linked to individual personal
objectives, representing
30% of the annual bonus
performance conditions.
Linked to individual personal
objectives, representing
30% of the annual bonus
performance conditions.
35% of the annual bonus
award is subject to an EPRA
EPS growth target. This year
EPRA EPS outperformed
its growth target securing
a full bonus payout.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 34% of the
EPRA EPS component of the
2016 LTIP award vested in the
year and 53% of the EPRA EPS
component of the 2017 LTIP
award is expected to vest.
2020/21 ambition
Three year TSR performance
Three year total accounting
One year TPR outperformance
to be in the upper quartile
of the FTSE 350 Real Estate
Super Sector, excluding
agencies and operators.
return to be in the upper
quartile of FTSE 350 Real
Estate Super Sector, excluding
agencies and operators.
against IPD Quarterly
Universe index.
Deliver and sustain EPRA
earnings per share growth
and dividend progression.
Deliver like for like
income growth ahead
of inflation plus 1.5%.
Maintain high weighted
average unexpired lease
term targeting >10 years.
Maintain high occupancy
across the investment portfolio,
targeting in excess of 95%.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
26
Performance review
Property review
We invest in real estate that can
deliver repetitive, reliable and growing
income returns. Our actions aim
to further improve the quality of the
portfolio and its income metrics.
The acquisition of Mucklow
dominated activity in the year
It added a £455 million portfolio of
highly complementary assets with 83%
aligned to urban logistics and long income.
Other acquisitions totalled £159 million
let for an average of 17.3 years, with 75%
of income subject to contractual rental
uplifts. These acquisitions related to long
income as well as urban and regional
distribution assets.
Disposals totalled £179 million and largely
consisted of mega and regional distribution
warehouses as well as 26 residential flats
and two offices; the latter acquired through
the Mucklow transaction and sold at a
blended 7% premium to acquisition costs.
We will continue to patiently sell down the
remaining nine Mucklow offices and five
flats, all of which are non-core.
Our investment activity continues to
improve the portfolio’s composition
Our logistics platform increased to
£1,638 million, representing 69.8% of
the portfolio. Within this, urban logistics
rose from 27.3% to 35.4% of the portfolio,
whilst mega distribution fell from 23.1%
to 14.9%.
Long income also increased from 21.9%
of the portfolio to 24.0%, with the remaining
6.2% of the portfolio predominantly in
retail parks and offices.
The portfolio’s composition will change
further once we complete in full on
£64 million of mainly larger box distribution
sales that had exchanged prior to the year
end and once we deploy the proceeds of
the recent equity raise. Since the year end,
we have acquired £15 million of urban
logistics and long income assets with
further deals agreed or in legals that total
in excess of £80 million.
Investment activity in the year
5
5
1
2
4
4
Acquired
£614m
1
Disposed*
£179m
2
3
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
4
Long Income
5 Office & Other
£326.6m
£49.4m
1
2
Urban Logistics
Regional Distribution
–
3 Mega Distribution
£161.6m
4
Long Income
£76.2m
5 Office & Residential
£7.6m
£28.4m
£113.5m
£8.0m
£21.5m
£2.3 billion portfolio
6
5
4
1
In urban logistics
35%
3
2
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
4
5
Long Income
Retail Parks
6 Offices & Residential
35.4%
19.5%
14.9%
24.0%
3.6%
2.6%
Our acquisition activity
in the year focused
on urban logistics and
long income. We
believe that these two
sectors continue to
offer strong long term
growth prospects as
well as highly resilient
and reliable income.
Valentine Beresford
Investment Director
* (i) Excludes a £10.5 million regional
disposal that exchanged last year
but completed in the year
(ii) Includes £64.4 million of disposals,
predominantly larger box distribution,
that exchanged in the year and are
expected to have completed by the
end of June 2020
LondonMetric Property PlcAnnual Report and Accounts 2020
27
Weighted average unexpired
lease term (WAULT)
11.2 yrs
Occupancy
98.6%
We continue
to focus on
strengthening our
portfolio metrics
and are signing long
leases and delivering
good rental growth
on our assets.
Mark Stirling
Asset Director
Our portfolio metrics continue
to reflect our focus on generating
long and growing income
The portfolio’s WAULT of 11.2 years continues
to provide a high level of income security
with only 7.1% of income expiring within
three years and 47.1% within 10 years.
Occupancy increased from 97.8% to
98.6% and our gross to net income ratio
improved from 98.2% to 98.8%, which
continues to compare highly favourably
against our peers and reflects the
portfolio’s low operational requirements.
In the year, we undertook 130 occupier
initiatives generating £5.2 million per annum
of additional rent and helping to deliver
like for like income growth of 3.8%.
These initiatives consisted of:
• Contractual rental uplifts which apply
to 55% of our income, 58% of which
is index linked, where 30 reviews were
settled delivering £0.7 million of increased
rent at an average of 11% above passing
on a five yearly equivalent basis;
• Open market rent reviews, predominantly
on urban logistics, where 11 reviews were
settled delivering £0.6 million of increased
rent at an average of 28% above passing
on a five yearly equivalent basis; and
• Leasing activity where we signed 89
new leases and regears, mostly on
urban logistics, delivering £3.9 million
of increased rent with a WAULT of
11.6 years.
Since the year end, we have continued to
see strong distribution letting activity and,
in total, have let a further 0.3 million sq ft,
which, including rent reviews, has added a
further £1.6 million per annum of rent.
Lease expiry profile
5
1
4
Income expiring
within 3yrs
7%
3
1
2
3
4
5
0-3 years
4-10 years
11-15 years
16-20 years
> 20 years
2
7.1%
40.0%
26.5%
14.6%
11.8%
The Mucklow acquisition
is delivering income growth
One of our key focuses in the year was to
use our more proactive asset management
approach to lengthen and grow the
income from Mucklow assets acquired.
57 of our 130 occupier initiatives in the year
related to Mucklow assets and generated
£1.1 million per annum of additional rent.
The Mucklow portfolio continues to offer
good reversionary potential and is located
in strong locations with 79% in the Midlands,
predominantly around Birmingham, and
10% in London and the South East. As well
as further development opportunities, there
is also long term redevelopment potential
to alternative and higher value uses.
Case study
Wednesbury One
Wednesbury One was the third largest
asset acquired through Mucklow. It is
well located between Wolverhampton
and Birmingham, close to J9 of the M6 and
J1 of the M5. It comprises 173,000 sq ft of
modern distribution across six warehouses
and generates an income of £1.0 million
per annum.
Through lettings and regears, the WAULT
to first break will have been extended by
a further three years since acquisition and,
including rent reviews, the running yield is
expected to have increased by 60 bps.
Read more on the Mucklow acquisition page 18
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
28
Performance review
Property review continued
Improving our income
diversification and granularity
In this disruptive environment, we
continue to focus strongly on the credit
strength, quality and sector diversity
of our occupiers.
Our investment and asset management
actions, particularly through the Mucklow
acquisition, have continued to increase
the resilience of our portfolio by further
improving our income diversification
and granularity.
As shown below, we have a diverse
occupier base by type of business.
Over the year, we materially reduced
our income exposure to retailer logistics,
falling from 34% of contracted income
to 20%. Conversely, we have materially
increased our exposure to business
services and trade occupiers, rising from
18% to 36% of income, spread across
a broad range of sectors.
Our contracted income increased over
the year from £89.7 million to £123.3 million
which, following completion of sales that
had exchanged but not completed by
year end, will reduce slightly to £119.2 million.
Split of income by occupier type*
Top 10 occupiers by contracted income (%)*
Primark
DFS
M&S
Argos
Eddie Stobart
Dixons Carphone
Odeon
DHL
Amazon
Clipper Logistics
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Income from
Top 10 Occupiers
36%
2019: 51%
Our top ten
occupiers account
for 36% of contracted
income compared
to 51% in 2019.
There was a material
reduction in income
concentration across
most occupiers,
with a significant
reduction for
Dixons Carphone
following our sale
of their warehouse
in Newark.
8.4
10.9
4.4
4.3
3.8
5.2
3.5
4.7
3.4
4.6
2.7
8.8
2.7
3.3
2.6
3.5
2.2
2.4
2.0
2.6
* Excluding income from sales that had exchanged prior to the year end but not completed
1 Business Services & Trade
2 Third Party & Retailer Logistics
3 Convenience, Leisure & Stores
3
3
3
1
1
1
36%
(2019: 18%)
36%
(2019: 52%)
28%
(2019: 30%)
2
2
2
Manufacturing & Packaging
10%
Third Party Logistics (3PL)
16%
Convenience, Wholesale & Roadside
Building, Trade & DIY
IT, Telecoms & Media
Aerospace, Auto & Transportation
Food, Healthcare & Chemicals
Education
Other
6%
5%
5%
3%
2%
5%
Store Only Retail Logistics
Omni Channel Retail Logistics
Online Only Retail Logistics
8%
8%
4%
Electrical & Home Retail
Essential & Discount Retail
Leisure
Other Retail
9%
8%
6%
3%
2%
LondonMetric Property PlcAnnual Report and Accounts 2020 29
Total Property Return
in the year
+5.1%
Rent collection strong
+93%
Valuation and total return performance
Over the year, the portfolio delivered
a strong total property return of 5.1%,
significantly outperforming the IPD All
Property index of -0.5%:
• Distribution delivered 8.5% with
urban and regional seeing the
strongest performance
• Long income delivered 1.8%
• Offices delivered 4.3% and retail
parks delivered -9.2%.
Outperformance was driven by capital
returns, where the portfolio was flat
compared to IPD All Property of -4.8%:
• Distribution delivered a 3.9% increase
• Long income was down 3.4%
• Offices and retail parks fell by 0.7%
and 15.5% respectively.
On a like for like basis, the equivalent
yield across the portfolio increased by
7bps and ERV growth was 1.7%.
ERV growth was highest in urban logistics
at 2.2%, whilst regional increased 0.7%
and mega was up 0.2%.
The investment portfolio’s EPRA topped up
net initial yield is 5.0% and the equivalent
yield is 5.5%.
Impact of COVID-19 pandemic
Unsurprisingly, the COVID-19 pandemic
has created unprecedented short term
disruption to many UK businesses and is
putting pressure on the robustness and
sustainability of their cash flows.
Despite this uncertainty, our rent collection
during the pandemic has been strong
with 93% of rent due by 1 April collected
or being collected monthly and 94% of
monthly rents due over the two month
period to 25 May also collected, with total
rental payments that we have forgiven or
written off amounting to c.1% of rent due.
This resilience reflects our close relationships
with our occupiers, our resolute response
to non payment and, most significantly,
the operational importance to occupiers
of our distribution assets as well as the
convenience and essential services that
our other assets provide.
Whilst our occupiers have remained
well capitalised through this crisis we are,
however, providing appropriate and
proportionate help to a small minority
of customers that are being materially
impacted and most in need of short
term cash flow assistance.
The table below sets out the type of
assistance we are providing.
LondonMetric’s assistance to occupiers during the COVID-19 pandemic
Monthly rental
payments
Rental concessions with
asset management upside
Rental
deferrals
Concessions have resulted in
an increase in the proportion
of our rental income that
is received monthly in
advance instead of quarterly
in advance.
Monthly rents now account
for 18% of our income
compared to 13% prior to
the pandemic.
We have agreed
compensatory asset
management initiatives
across 4% of our income.
In return for near term rent
concessions, we are agreeing
on initiatives with occupiers
which lengthen and
strengthen the future income
streams from our assets.
Short term rental deferments
have been agreed
on a further 2% of our
rental income.
The near term rent
concessions will typically
be recovered over the 12
subsequent months.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 30
Performance review
Property review continued
Distribution
Our distribution warehouses provide critical
infrastructure to occupiers and we invest in
those assets with the best return prospects.
Overview
Our distribution assets are spread across
the urban, regional and mega subsectors
with over half in urban.
Including developments, we increased
distribution assets over the year from
£1,339 million to £1,638 million, accounting
for 69.8% of our overall portfolio. The average
WAULT on these assets is 11 years with 59% of
income subject to contractual income uplifts.
In the year, we acquired £327 million of urban
logistics and £49 million of long-let regional
distribution. Disposals totalled £150 million,
mainly relating to larger box warehousing.
This investment activity has seen our
distribution weighting towards London,
the South East and the Midlands increase
further to 83% and our North East and
Yorkshire exposure more than halve to 4%.
Increased alignment to urban logistics
In urban ‘last mile’ logistics, we continue
to see the strongest rental growth within the
distribution sector. Severely restricted supply
and strong occupier demand continues
to generate highly favourable market
dynamics, which are driving attractive
income growth and returns.
Distribution Portfolio
Urban logistics has been our strong
conviction call and one that prompted
our strategic acquisition of Mucklow, which
has materially improved and enlarged our
urban platform. Over the year, this portfolio
increased from £504 million to £831 million,
accounting for 51% of our distribution assets.
Whilst urban logistics has a lower WAULT than
our other distribution sectors, it benefits from
higher alternative use values, low average
rents of £6.50 psf and strong income growth
potential. As a consequence, we prefer to
have a lower proportion of leases subject
to contractual rental uplifts.
Further reduction in big box exposure
In big box logistics, whilst there has been
rental growth, it is not as pronounced as
in previous years. Supply is able to react
to occupier demand relatively easily
and we believe that this is weakening the
prospects for future organic rental growth.
Reflecting these dynamics as well as our
efforts to improve geographic focus and
income diversification, we sold a further
£114 million of mega box warehousing,
reducing our exposure to this segment over
the year from 23.1% to 14.9% of the portfolio.
1
2
3
As at 31 March 2020
Urban
Regional
Mega
Typical warehouse size
Value1
WAULT
Average Rent (psf)
ERV (psf)
Topped up NIY
Contractual uplifts
Total Property Return in 2020
Up to
100,000 sq ft
100,000 to
500,000 sq ft
In excess of
500,000 sq ft
£830.8m
7.8 yrs
£6.50
£7.10
4.8%
33.3%
7.8%
£457.6m
13.9 yrs
£349.6m
14.5 yrs
£6.20
£6.50
4.3%
78.1%
11.1%
£5.70
£5.60
4.3%
100%
7.1%
Distribution Portfolio
3
Distribution
£1,638m
1
2
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
51%
28%
21%
1
Including developments
LondonMetric Property PlcAnnual Report and Accounts 2020 Strategic report
31
Acquired
£376m
Mostly urban logistics
Disposed
£150m
Mostly mega distribution
Post year end
investment activity
Post year end, we acquired
a 14,000 sq ft urban logistics
warehouse for £3.2 million let
to Royal Mail in Epsom and sold
a small warehouse in Hemel
Hempstead for £3.6 million.
We also have terms agreed
on a further £11 million
of acquisitions.
Acquisitions
Disposals
3.1m sq ft
Urban warehousing acquired as part
of the Mucklow acquisition. The assets
were acquired at a NIY of c.5.6% and
a WAULT of 5.7 years, with 87% located
in the Midlands and around Birmingham.
726,000 sq ft
Mega warehouse in Newark sold for
£80.8 million, at a NIY of 5.1%. The asset
was acquired in 2014 for £68.5 million
and is let to Dixons Carphone for a
further 14 years at a rent of £6.00 psf.
299,000 sq ft
Regional warehouse let to John Wiley &
Sons for 17 years, acquired for £17.8 million
at a NIY of 9.0% with RPI linked rental uplifts.
232,000 sq ft
Regional warehouse forward funded
development pre-let to Croda for 20 years,
acquired for £24.0 million at a yield on
cost of 5.2% with RPI linked rental uplifts.
330,000 sq ft
& 176,000 sq ft
Two warehouses in Doncaster sold
for £51.2 million (£47.9 million at share),
reflecting a NIY of 6.2%. They comprised
a mega warehouse that was acquired
in 2015 for £29.0 million and is let to Next
for a further four years at a rent of £6.60
psf, and a regional warehouse acquired
in 2013 for £16.6 million and let to DFS for
a further ten years at a rent of £7.00 psf.
152,000 sq ft
Regional distribution warehouse in
Rotherham sold for £13.3 million at a NIY
of 5.0%. The warehouse was acquired in
2014 for £10.3 million and is let to Royal Mail
for a further eight years.
84,000 sq ft
Urban warehouse in Doncaster sold
for £5.9 million at a NIY of 7.0% let to
Croda for a further two years.
22,000 sq ft
Urban warehouse in Nottingham sold
for £2.0 million (£1.6 million at share)
at a NIY of 5.5% let to DFS for a further
ten years.
35,000 sq ft
Urban warehouse let to Mega Marble
for 15 years, acquired for £5.7 million at
a NIY of 5.0% with RPI linked rental uplifts.
26,000 sq ft
Urban warehouse let to Harrow Green
for 17 years, acquired for £4.2 million
at a reversionary yield of 6.0%.
£8.4 million
Increase in ownership of two warehouses
at a NIY of 5.9%, arising from the upweight
in our DFS Joint Venture equity holding
from 45% to 82%.
LondonMetric Property Plc
Annual Report and Accounts 2020
GovernanceFinancial statements Distribution Lettings & Regears
(Additional Income p.a.)
+£4.0m
Distribution Rent Reviews
(Additional Income p.a.)
+£1.0m
Key occupiers lettings
& rent reviews
32
Performance review
Property review continued
Distribution continued
Asset management
We continue to grow our distribution
income through our occupier-led asset
management and development activity.
Distribution lettings and regears
Distribution lettings and regears in the year
were signed on 1.7 million sq ft. These deals
added £4.0 million per annum of income,
with a WAULT of ten years and incentives
equivalent to under six months’ rent free.
• 38,000 at Star Gate in Birmingham,
where we have let the warehouse
to Network Rail
• 34,000 sq ft at Greenford, where we
have let a recently refurbished unit
to a fast growing online pharmacy
New lettings were signed on 0.4 million sq ft
adding £3.2 million per annum of rent and
mostly related to completed developments:
• At our Bedford Link development, we let
three warehouses totalling 188,000 sq ft
to L3 Macdonald Humfrey, Workstories
and Larson Juhl. This completed the
letting of phase one of the development,
achieving a WAULT of 16 years
• At Crawley, we let 36,000 sq ft to
Amazon and 46,000 sq ft to International
Logistics, also completing the letting
of that development
Distribution rent reviews
Distribution rent reviews in the year
were settled across 17 assets representing
3.0 million sq ft and adding £1.0 million
per annum of income at 12% above
passing on a five yearly equivalent basis:
• 12 urban logistics reviews accounted
for just over half of the rental uplift and
these were settled at an average of
24% above previous passing rent on a
five yearly equivalent basis, with open
market reviews achieving 32% uplifts
on average
• At Tyseley, 58,000 sq ft was let to
• Five mega and regional reviews
delivered £0.5 million of rental uplift in
the year. These were all contractual
uplifts and settled at an average
of 9% above previous passing rent
on a five yearly equivalent basis
Read more on the Bedford Link
case study page 33
Read more on the Wednesbury One
case study page 27
Read more on the Tyseley
case study page 37
Read more on Greenford and Mucklow
asset improvements page 49
Decora Blinds
Regears were signed across 1.3 million sq ft
with occupiers including XPO, John Wiley,
Ceva Logistics, Dixons Carphone and
Siemens. These deals generated additional
income of £0.8 million per annum, which
represents an uplift on previous passing
rent of 12% and increased the WAULT
from three years to ten years.
Post year end, we have signed a further
0.3 million sq ft of lettings and regears which,
including rent reviews, has added a further
£1.6 million per annum of rent. The WAULT
on these transactions is over eight years,
which include:
• 141,000 sq ft at our Stoke development,
where we have let the second
warehouse to Pets at Home
• c.50,000 sq ft in Fareham, where we
have regeared the lease and settled
a rent review
LondonMetric Property PlcAnnual Report and Accounts 2020
Case study
Bedford Logistics
Following three successful lettings in the year,
our future ambition is to enhance our “Responsible
Building credentials” at our Bedford Link development.
Phase 1
The three warehouses were developed
and completed in June 2019. We signed
three lettings generating £1.4 million per
annum of rent with a WAULT of 16.3 years.
Phase 2
Following completion of phase one,
we have commenced development of
166,000 sq ft and there is further development
potential of c.350,000 sq ft.
The Logistics Park provides an open
and landscaped space with integrated
pedestrian and cycle routes. The buildings
are BREEAM Very Good, EPC ‘A’ rated and
built with c.10% rooflights and the ability
to retro install solar PVs. Electric vehicle
charge points are also installed.
As part of this next phase, we are
looking to enhance the development’s
“Responsible Building credentials”.
Consequently, we are looking at a number
of initiatives including:
• Evaluating “in use” energy performance
of the first phase buildings
• Forecasting energy in use for the planned
buildings and assessing potential areas
to further mitigate carbon emissions and
work towards Net Zero Carbon 2050
• Assessing the proposed designs
against well-being criteria, which
has already resulted in Well Enabled
design adaptations
• Establishing the carbon impact
associated with the overall construction
Bedford
A1
12 MINS
A428
Unit 2
Under construction
Future phase
A421
M1
8 MINS
33
Phase 1 overview
188,000 sq ft
Lettings
£1.4m p.a.
Additional rent
6.4%
Yield on cost
The 3 occupiers
Larson-Juhl
L3 Macdonald Humfrey
Workstories
Being located nearby,
we saw the progress at
Bedford Link and realised
that if we didn’t move
quickly, we would miss
a rare opportunity to
reposition our business
in a fantastic location, in
a building fit for the next
25 years. LondonMetric
and their team have
supported and worked
openly with us through
the whole process.
Jonathan Burrage
Managing Director,
Larson-Juhl
Location
Bedford is an attractive
distribution hub, providing
access to London in under
an hour. It also provides
business resilience due
to its equidistant location
along the A421, upgraded
link road connecting the
M1 and A1.
Several blue chip companies
have a significant presence
in the area, including Argos
whose warehouse is also
owned by LondonMetric.
Read more online at
bedfordlinklogisticspark.com
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
34
Performance review
Property review continued
Long income
Our portfolio offers long dated income
with income growth. It is aligned to structurally
supported sectors of convenience, roadside,
trade and essential/discount shopping.
Waitrose, Dunelm and Safestore. A further
£99.2 million was acquired at a blended
NIY of 6.1%, with a WAULT of 17.4 years and
contractual rental uplifts on 70% of income.
Post year end, we acquired a further
£12 million of long income assets let to Kwik
Fit and Euro Garages. Furthermore, we are
currently in legals on acquiring a £60 million
sale and leaseback portfolio of five assets
let to a convenience/online operator
and have terms agreed on an £11 million
acquisition relating to a roadside portfolio.
Asset management
Our letting activity continues to focus
on lengthening and strengthening our
income. In the year, we signed 22 leases
and regears with a WAULT of 14.5 years,
occupier incentives of nine months and
rents in line with passing.
Rent reviews settled in the year generated
an uplift of £0.2 million at 13% above
previous passing on a five yearly equivalent
basis. These reviews were mostly related
to convenience and leisure assets with
RPI or fixed uplifts.
Overview
Our long income assets are typically
single tenant assets with low operational
requirements. They are assets that we
believe are benefiting from the changes
in the way people live and shop, insulated
from structural dislocation, namely;
convenience food, wholesale, roadside
services, discount and essential retail,
bulky goods as well as trade and DIY.
Our long income portfolio offers long dated
and predominantly index linked income.
It has grown to £563 million, representing
24% of our total portfolio.
The assets have a WAULT of 13.3 years,
are 100% let to strong occupiers at
affordable average rents of £14.70 psf
and are valued at an attractive topped
up NIY of 5.6%.
The average lot size is c.£5 million with 57%
of income subject to contractual uplifts.
Investment activity
In the year, we were a significant net
acquirer of long income assets, purchasing
£161.6 million and disposing of £8.0 million.
£62.4 million was acquired through Mucklow
and included high quality assets let
predominantly to Costco, Booker, Wickes,
Long Income portfolio
As at 31 March 2020
Value1
WAULT
Average Rent (psf)
Topped up NIY
ERV growth
Contractual uplifts
Total Property Return in 2020
1
Convenience,
Roadside
& Leisure
£251.0m
16.7 years
£16.20
4.9%
10.0%
93%
5.0%
2
NNN
Retail
£176.6m
9.9 years
£20.80
6.7%
-1.1%
23%
-0.5%
3
Trade, DIY
& Other
£135.4m
13.6 years
£9.10
5.6%
2.6%
56%
-1.1%
Portfolio split
3
2
Long Income
£563m
1
1 Convenience & Leisure
2 NNN Retail
3
Trade, DIY & Other
45%
31%
24%
Key occupier activity
1
Includes developments
LondonMetric Property PlcAnnual Report and Accounts 2020 35
Convenience,
Roadside & Leisure
Convenience food and wholesale
discount stores form over half of this
portfolio. The remaining assets are split
broadly evenly between roadside assets
and five well located and modern
Odeon cinemas.
Our roadside portfolio has grown to over
£55 million and consists of convenience
stores with an attached petrol filling station
(PFS), drive through coffee outlets as well
as automated car washes located in
high density urban areas.
NNN Retail
Trade, DIY & Other
These assets consist primarily of properties
let to discount, essential, electrical and
home retail occupiers. They are typically
single tenanted assets with very low
operational requirements.
Through our occupier relationships we
have been able to build up a portfolio
of other properties that have strong
long income characteristics let to good
covenants with high occupier contentment.
Over half of the assets are located in
London and the South East with the largest
located in New Malden, London, and
benefit from high alternative use values.
Most of the properties in our MIPP
joint venture are held within the NNN
Retail segment.
C.60% of this segment consists of assets
that are trade/DIY focused. A recent
addition to this portfolio has been
prominent roadside service centres
concentrated around the South/East,
let at low rents to Kwik Fit, with high
alternative use values.
Activity in year
£44.3 million was acquired through
the Mucklow transaction, principally let
to Booker, Costco and Waitrose. A further
£32.7 million was acquired in separate
acquisitions including seven convenience
stores with an attached PFS, as well as a
number of IMO car washes.
Disposals totalled £7.2 million.
Five regears were signed with Co-op (x2),
Booker, Waitrose and Odeon, extending
the WAULT from 12 years to 18 years.
Activity in year
£36.5 million of acquisitions were transacted.
These related to the upweight in our DFS
Joint Venture ownership of eight stores
and the acquisition, through Mucklow,
of a Dunelm and Halford store.
Disposals totalled £0.8 million.
15 lettings and regears were signed
with a WAULT of 13 years including key
deals with the Range, Argos, Halfords,
Currys PC World, DFS and Pets at Home.
Activity in year
£48.1 million of acquisitions were
transacted. These consisted of two
assets acquired through Mucklow let
to Wickes and Safestore, a sale and
leaseback portfolio of 21 Kwik Fit service
centres, two buildings let to Meggitt
and National Express and a forward
funding of a pre-let trade development
let to Howdens and MKM.
Two regears were signed with B&Q
and Selco, extending the WAULT from
seven years to 13 years.
Acquisitions
£77.0m
WAULT on lettings
18 years
Acquisitions
£36.5m
WAULT on lettings
13 years
Acquisitions
£48.1m
WAULT on lettings
13 years
Key occupiers
Key occupiers
Key occupiers
Aldi
Lidl
M&S Simply Food
Costco
Euro Garages
DFS
The Range
Odeon
Waitrose
Co-op
Currys PC World
Smyths
B&M
Dunelm
Pets at Home
Argos
Wickes
Safestore
B&Q
Jewson
Selco
Kwik Fit
Howdens
National Express
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 36
Performance review
Property review continued
Developments
In the year, we completed 436,000 sq ft
of developments that are expected to
generate £3.5 million of additional rent
reflecting an anticipated yield on cost of
6.5%. We have another 425,000 sq ft under
construction and up to a further 834,000 sq ft
of pipeline developments.
Area sq ft
’000
Additional
rent
£m
Yield
on cost
%
188
58
77
58
55
436
232
166
27
425
c.350
up to 210
up to 195
57
22
up to 834
1.4
0.4
0.6
0.8
0.3
3.5
1.3
1.2
0.6
3.1
2.3
tbc
1.3
0.4
0.3
6.4
7.0
7.0
5.4
7.8
6.5
5.2
6.7
6.3
6.0
c.7.3
tbc
c.7.0
4.7
5.0
Completed in the year
Bedford (Phase 1)
Tyseley (Phase 1a)
Tyseley (Phase 1b)1
Durham (funding)
Swindon (extension)
Total
Under construction at year end
Croda, Goole (funding)
Bedford (Phase 2a)1
Weymouth1
Total
Pipeline developments
Bedford (Phase 2b)1
i54 Wolverhampton
Tyseley (Phase 2)1
New Malden1
Wallingford (funding)
Total
1 Anticipated yield on cost and rents
Completed in year
0.4m sq ft
In construction or pipeline
1.3m sq ft
Croda funding
232,000 sq ft distribution warehouse
pre-let to Croda for 20 years which we
agreed to forward fund in the year, and
which is expected to complete in Q3 2020.
Bedford
On site with a phased distribution
development of 166,000 sq ft with good
levels of occupier interest. There is a
further 350,000 sq ft of distribution
development potential.
Weymouth
19,000 sq ft convenience development
in Weymouth let to Aldi that completed
in June 2020. Offers have been received
on the letting of three small pods totalling
a further 8,000 sq ft, where development
is conditional on planning.
Tyseley
In the year, we completed 135,000 sq ft of
distribution development at our Tyseley site
which was acquired through the Mucklow
transaction. Over half of the warehousing is
let and there is strong occupier interest on
the remainder. There is further development
potential which is conditional on planning
and occupier commitment:
• Up to 180,000 sq ft of distribution
warehousing development where
we are in advanced discussions
with potential occupiers
• Up to 15,000 sq ft of roadside service
and convenience food development
i54
Up to 210,000 sq ft of distribution
development potential through our
i54 site option in Wolverhampton
which we acquired through Mucklow.
Wallingford funding
Forward funding of a 22,000 sq ft trade
counter development in Wallingford
pre-let to MKM and Howdens with
a WAULT of 18 years. Construction has
commenced with completion expected
by the end of the year.
New Malden
Extension to and modification of
an existing NNN Retail asset which is
expected to be let for 15 years to Dixons,
Lidl and several other convenience
food occupiers. Construction remains
conditional on planning.
LondonMetric Property PlcAnnual Report and Accounts 2020 37
Phase 1 – completed
135,000 sq ft
Anticipated Rent: £1.0m
Anticipated Yield on cost: 7%
Phase 2 – pipeline
195,000 sq ft
Subject to commitments
Anticipated Rent: £1.3m
Yield on cost: 7%
Mucklow Park, Tyseley is strategically
located within 3 miles of central
Birmingham with easy access to J6
of the M6 and J5 of the M42 and
close to Birmingham Airport.
58,000 sq ft
Battery Way extension
up to 180,000 sq ft
of development
potential
Case study
Tyseley, Mucklow Park
Working with the local council and community to enable
development of over 300,000 sq ft of urban logistics
warehousing in Birmingham.
Phase 2
LondonMetric is currently in advanced
discussions on pre-lets with occupiers on
building out the remaining 195,000 sq ft.
There is potential to develop up to
180,000 sq ft of urban logistics warehousing
and a further 15,000 sq ft of roadside
services and convenience food property.
7 developed
urban warehouses
77,000 sq ft
Phase 1
Prior to its acquisition by LondonMetric,
Mucklow had engaged with Birmingham
City Council over several years to enable
the building of a new link road next
to its 19 acre site.
Mucklow supported the council in
their grant application for funding of
the new road by committing to build
135,000 sq ft of urban logistics warehousing
and swapping land with the council
to improve the road’s position.
Construction of the road and warehousing
started in late 2018, completing in
summer 2019. Over that time Mucklow/
LondonMetric, worked closely with
the council and the local community
to ensure minimal local disruption.
Prior to works completing, a letting
of the 58,000 sq ft BREEAM Very Good
warehouse was signed with Decora and,
subsequently, LondonMetric completed
development of a further seven units
totalling 77,000 sq ft where one unit was let
post year end and there is strong interest
on the remaining units.
Read more online at
mucklowparktyseley.com
Sustainability and ESG
We continue to improve the quality of our
assets through development and asset
management. 78% of developments
that completed in the year or that
were under construction at the year
end are expected to be certified
BREEAM Very Good.
Furthermore, we continue to engage
with our occupiers on energy efficiency
initiatives, including solar PV installations,
LED lighting upgrades and improving
the environmental performance of
our buildings, particularly across our
distribution portfolio.
These activities, together with other
responsible business and sustainability
actions, have contributed to a continued
improvement in ESG related surveys
and benchmark scores.
In the year, we further improved our
GRESB score from 67 to 71, which allowed
us to maintain our Green Star. We also
maintained our EPRA Gold star and
further improved our FTSE4Good score
from 3.1 to 3.4, consolidating our position
in that index.
Our targets set for 2021 will see us look
to include a net zero carbon ambition
as well as extend personal ESG related
targets more widely across the Company.
BREEAM Very Good developments
(completed or under construction in year)
670,000 sq ft
Improved our GRESB score
71
For further details on our approach
to Sustainability, Responsible Business
and ESG see pages see pages 45 –59
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
38
Performance review
Financial review
While we have not been immune from the
impact of COVID-19, which only affected
the last month of the financial year we are
reporting on, our portfolio has remained
resilient and our rent collection for the
first quarter of 2021 has been very strong.
We have utilised our close relationships
with customers and have helped those
in need by negotiating short term
concessions and asset management
initiatives which suit both parties.
Our financial results for the year to
31 March 2020 are once again strong.
We have benefited from the corporate
acquisition of the A&J Mucklow Group
in June last year, which added 64
complementary assets valued at
£454.7 million to our balance sheet.
EPRA earnings per share increased 5.6%
to 9.3p, driven by a 23.6% increase in net
rental income. We have continued to grow
and pay our dividend despite the recent
economic challenges and have declared
a fourth quarter dividend of 2.3p payable
on 22 July 2020. Our dividend for the year
of 8.3p is 1.12 times covered by EPRA earnings
and represents a 1.2% increase over the
previous year.
Our portfolio is well positioned to weather
the disruption caused by the pandemic, with
94% of our assets in the structurally supported
distribution and long income sectors.
However, there is naturally a heightened
degree of uncertainty surrounding our
year end property valuation, and our three
external valuers have included material
uncertainty clauses in their valuation
reports which is in line with the RICS guidance.
Our property valuation fell by 0.5%, and the
resulting revaluation deficit of £12.0 million
or 1.5p per share including our share of joint
ventures, contributed to the IFRS reported
loss this year of £5.7 million.
EPRA net asset value per share fell by 3.2p
to 171.7p, primarily due to the one off costs
relating to the acquisition of A&J Mucklow,
of 2.5p per share. The consideration paid
generated a surplus of £48.3 million
over the fair value of assets acquired.
This goodwill was created predominantly
by the strong performance of the
LondonMetric share price up to the
final offer price being determined and
has therefore been fully impaired in
the period and charged to the income
statement, along with our transaction
costs of £8.9 million.
Our financial position was strengthened
by a new £75 million unsecured revolving
credit facility signed with HSBC in March,
which increased our headroom
to £220 million at the year end, and
provides security and optionality in these
unprecedented times. Other financing
metrics remain strong, with average cost
of debt falling to 2.9% (March 2019: 3.1%)
and loan to value of 35.9% (2019: 32.2%)
after completing sales that exchanged
in the year.
Post year end, we have successfully
raised £120 million through an
equity placing that was significantly
oversubscribed and has, in the short
term, reduced our LTV to 30.9%.
We intend to deploy the proceeds into
new and attractive investment opportunities,
the majority of which have been identified
and are already in solicitors’ hands.
Looking forward we continue to focus
on the safety of our team and the needs
of our stakeholders. Our past investment
decisions, driven by changing consumer
spending habits and technological
change, positions us well to deal with
the challenges ahead.
Presentation of financial information
The Group financial statements have been prepared in accordance with IFRS. Management monitors
the performance of the business principally on a proportionately consolidated basis, which includes the
Group’s share of joint ventures and excludes any non-controlling interest on a line by line basis. The figures
and commentary in this review are presented on a proportionately consolidated basis, consistent with
our management approach, as we believe this provides a meaningful analysis of overall performance.
These measures are alternative performance measures, as they are not defined under IFRS.
The Group uses alternative performance measures based on the European Public Real Estate Association
(‘EPRA’) Best Practice Recommendations (‘BPR’) to supplement IFRS, in line with best practice in our sector,
as they highlight the underlying performance of the Group’s property rental business. These are adopted
throughout this report and are key business metrics supporting the level of dividend payments and for the
variable elements of the Executive Directors’ remuneration arrangements. We note that EPRA has updated
its definitions of EPRA NAV and, in accordance with their guidance, we will adopt them next year.
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 189.
Our portfolio delivered
further income growth in
the year, with EPRA earnings
per share increasing 5.6%
to 9.3p.
Martin McGann
Finance Director
IFRS net assets
£1.4bn
2019: £1.2bn
EPRA net assets per share
171.7p
2019: 174.9p
LondonMetric Property PlcAnnual Report and Accounts 2020 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
Other1
EPRA earnings
Group
£m
112.3
(1.2)
111.1
1.1
(15.8)
(24.9)
(0.2)
71.3
Non-
controlling
interest
£m
(1.3)
–
(1.3)
–
–
0.3
0.2
(0.8)
JV
£m
6.3
(0.2)
6.1
(0.5)
(0.1)
(1.5)
–
4.0
2020
£m
117.3
(1.4)
115.9
0.6
(15.9)
(26.1)
–
74.5
Group
£m
85.1
(1.2)
83.9
1.7
(13.7)
(18.1)
0.2
54.0
JV
£m
10.4
(0.5)
9.9
(0.8)
–
(2.1)
–
7.0
39
2019
£m
95.5
(1.7)
93.8
0.9
(13.7)
(20.2)
0.2
61.0
1 Other items include the tax charge attributable to the non-controlling interest
Net rental income
£115.9m
2019: £93.8m
EPRA earnings per share
9.3p
2019: 8.8p
Net rental income
Delivering growth in earnings and a
progressive dividend over the longer
term continues to be our primary focus
and strategic aim. This is driven by growth
in our underlying net rental income,
which increased by 23.6% in the year to
£115.9 million. This was largely due to the
Mucklow portfolio contributing £20.5 million
in the nine months since acquisition.
Movements in net rental income are
reflected in the table below.
Net rental income 2019
Net rent from existing properties1
Contribution from developments1
Surrender premiums received
Net rent from acquisitions1
Net rent lost from disposals1
Property cost reduction
Net rental income 2020
£m
93.8
0.7
1.9
(1.7)
28.9
(8.0)
0.3
115.9
1 Properties held, developments completed,
acquisitions and disposals in 2019 and 2020
Income from lettings, rent reviews and
regears of our existing portfolio and
completed developments generated
additional income of £2.6 million this year.
Surrender premiums received were
£1.7 million lower than last year and income
from net acquisitions of £20.9 million included
the Mucklow contribution of £20.5 million.
Property costs have decreased by
£0.3 million reflecting lower vacant unit
costs and our property cost leakage has
seen a corresponding reduction to 1.2%
(March 2019: 1.8%).
Rent is usually payable on a quarterly basis,
although we have in the past agreed that
some tenants can pay monthly to assist with
cash flow management. March quarterly
and April monthly rents were the first to be
impacted by the COVID-19 disruption and
some of our tenants requested assistance
with payments. We spent time liaising and
agreeing concessions where necessary to
help and suit both parties, and increased
the proportion of our annual rent payable
monthly from 13% before the pandemic,
to 18%. We have collected or are collecting
monthly 93% of rents due by 1 April and
have agreed short term rental concessions
with compensatory asset management
initiatives on a further 4% and short term
deferrals on another 2%. As at the date
of this report, we have also collected 94%
of the monthly rents due over the two
month period to 25 May. We have assessed
the recoverability of our year end debtor
balance taking into account the latest
rent collection rates and have increased
our provision to £0.4 million this year
(2019: £0.2 million) as reflected in note 11
to the financial statements.
Administrative costs
Administrative costs have increased
by £2.2 million to £15.9 million and are
stated after capitalising staff costs of
£2.1 million (2019: £1.9 million) in respect
of time spent on development projects
in the year. Employee headcount has
increased to 33 at the year end from 28 last
year, following the Mucklow acquisition
which contributed £0.7 million towards
the increase in overhead.
Annualised administrative cost savings of
the combined group post acquisition are
approximately £1.8 million.
EPRA cost ratio
EPRA cost ratio
including direct
vacancy costs
EPRA cost ratio
excluding direct
vacancy costs
2020
%
2019
%
14.2
15.0
13.3
14.1
We continue to measure our effective
management of costs by the EPRA cost
ratio, which at 14.2% remains one of the
lowest in our sector, having fallen 80 bps
during the year.
The full calculation is shown in
Supplementary note iv on page 184.
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
£26.1 million, an increase of £5.9 million
over last year.
This reflected additional interest charges
on the Mucklow £60 million SWIP debt
facility of £1.6 million and on increased
borrowings needed primarily to fund
the acquisition. Gross debt increased
£348.6 million over the year to £974.8 million.
In addition, the average interest rate
payable over the year was higher than
the previous year, as we replaced part of
our cheaper RCF borrowings with longer
dated private placement debt. However,
the average cost of debt at the year end
was 20bps lower than last year at 2.9%
as we had drawn a higher proportion
of unsecured borrowing at floating rates.
Further detail is provided in notes 5 and 10
to the financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 40
Performance review
Financial review continued
IFRS reported profit
For the year to 31 March
EPRA earnings
Revaluation of investment property
Fair value of derivatives
(Loss)/profit on disposal
Debt and hedging early close out costs1
Impairment of goodwill
Acquisition costs
IFRS reported profit/(loss)
Group
£m
71.3
(3.8)
(3.2)
(4.9)
(0.2)
(48.3)
(8.9)
2.0
Non-
controlling
interest
£m
(0.8)
2.0
–
–
–
–
–
JV
£m
4.0
(10.2)
(0.4)
(2.3)
–
–
–
(8.9)
1.2
1 Cancellation on acquisition of Mucklow bank facility with HSBC
2020
£m
74.5
(12.0)
(3.6)
(7.2)
(0.2)
(48.3)
(8.9)
(5.7)
Group
£m
54.0
75.9
(4.4)
0.6
–
–
–
JV
£m
7.0
(11.5)
(0.3)
(1.6)
–
–
–
2019
£m
61.0
64.4
(4.7)
(1.0)
–
–
–
126.1
(6.4)
119.7
Share of joint ventures
EPRA earnings from joint venture investments
were £4.0 million, a decrease of £3.0 million
over last year as reflected in the table below.
For the year to 31 March
Metric Income Plus
Partnership (MIPP)
LMP Retail Warehouse
JV (DFS)
LSP London Residential
Investments
(Moore House)
EPRA earnings
2020
£m
4.0
0.1
(0.1)
4.0
2019
£m
4.6
2.4
–
7.0
The decrease in earnings from our MIPP
joint venture was due to the receipt last
year of surrender income of £0.7 million.
In April 2019, the Group increased its
interest in the DFS joint venture from 45%
to 82% by acquiring its partner’s interest
and repaying the external debt facility
with M&G. As a result, we were required
to consolidate our interest in the Group
accounts and reflect our remaining
partner’s 18% share as a non-controlling
interest. In total, DFS contributed £5.1 million
to EPRA earnings in the year compared
with £2.4 million last year.
In addition, the Group received net
management fees of £0.6 million for
acting as property advisor to each
of its joint ventures (2019: £0.9 million)
which have fallen as a result of the
Group’s increased share of DFS costs,
and property sales reducing fees.
IFRS reported profit
Management principally monitors the
Group’s EPRA earnings, as they highlight
the underlying performance of the
Group’s property rental business and
exclude property and derivative valuation
movements, profits and losses on disposal
of properties, financing break costs, goodwill
and acquisition costs, all of which may
fluctuate considerably from year to year.
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 above.
The Group’s reported loss for the year
was £5.7 million compared with a profit
of £119.7 million last year. The £125.4 million
reduction was primarily due to exceptional
goodwill and acquisition costs of £57.2 million
and a property revaluation deficit of
£12.0 million this year compared to a gain
of £64.4 million in 2019. Reported profit before
exceptional goodwill and acquisition costs
was £51.5 million.
Sales of 26 flats at Moore House
generated a loss on sale of £2.4 million.
Three further flats were sold at Moore
House post year end, reducing the
number now held to just five, two of
which are currently under offer.
Group sales generated a further loss
of £4.9 million, primarily in relation to
the disposal of our mega warehouse
in Newark let to Dixons Carphone.
The total profit over original cost of all sales
in the year was £12.1 million, representing
a return of 10.4%. Disposals are discussed
in detail in the Property review on page 26.
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, principally
management fees and interest receivable,
is subject to UK tax in the normal way.
The A&J Mucklow Group previously
operated as a UK REIT. Their activities have
been incorporated into the LondonMetric
Group REIT since acquisition.
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 resolving issues as they arise.
We continue to monitor and comfortably
comply with the REIT balance of business
tests and distribute as a Property Income
Distribution (‘PID’) 90% of REIT relevant
earnings to ensure our REIT status is
maintained. The Group paid the required
PID for the year to 31 March 2019 by 31 March
2020 and has already paid a large part of its
expected PID for the year to 31 March 2020.
The balance is expected to be paid in July
as part of the fourth quarterly dividend.
In accordance with REIT regulations,
£5.5 million was withheld from distributions
and paid directly to HMRC in the year.
Our strategy was updated and approved
by the Board in the year and can be found
on our website at www.londonmetric.com.
LondonMetric Property PlcAnnual Report and Accounts 2020 41
Balance sheet
EPRA net assets for the Group and its share of joint ventures are as follows:
As at 31 March
Investment property
Trading property
Gross debt
Cash
Other net liabilities
EPRA net assets
Derivatives
IFRS net assets
Group
£m
2,273.6
1.1
2,274.7
(932.7)
81.8
(34.3)
1,389.5
(4.7)
1,384.8
Non-
controlling
interest
£m
2020
£m
(14.9)
2,351.1
–
1.1
(14.9)
2,352.2
–
(0.8)
8.6
(7.1)
–
(7.1)
(974.8)
86.1
(26.3)
1,437.2
(5.4)
1,431.8
JV
£m
92.4
–
92.4
(42.1)
5.1
(0.6)
54.8
(0.7)
54.1
Group
£m
1,688.0
–
1,688.0
(565.0)
20.6
(24.1)
1,119.5
(1.6)
1,117.9
JV
£m
158.2
–
158.2
(61.2)
3.5
(1.3)
99.2
(0.3)
98.9
2019
£m
1,846.2
–
1,846.2
(626.2)
24.1
(25.4)
1,218.7
(1.9)
1,216.8
EPRA net asset value is a key measure
of the Group’s overall performance,
reflecting both income and capital
returns. It excludes the fair valuation of
derivative instruments that are reported in
IFRS net assets. A reconciliation between
IFRS and EPRA net assets is detailed in
the table above and in note 8 to the
financial statements.
IFRS reported net assets have increased 17.7%
in the year to £1,431.8 million, mainly due
to the acquisition of Mucklow which added
net assets of £364.7 million but reduced
cash reserves by £129.4 million as reflected
in note 15 to the financial statements.
On a per share basis, both IFRS and
EPRA net assets decreased in the year,
largely due to the exceptional costs
of the Mucklow acquisition of 2.5p per
share and also due to the fall in value
of investment properties. EPRA net assets
per share fell by 3.2p to 171.7p in the
year as reflected in the table opposite.
The goodwill arising on acquisition
includes Mucklow transaction costs of
£6.5 million and fair value adjustments
as reflected in note 15 to the financial
statements, reducing net assets per
share by 1.3p.
Total accounting return is another
important measure of our performance
and a component of the variable
element of Directors’ remuneration
arrangements. It reflects EPRA net asset
value growth plus dividends paid in the
year. Our return this year of 3.0% is lower
than last year but compares favourably
on a three year basis with many of
our peers at 30.6%. The full calculation
can be found in Supplementary note viii
on page 185.
EPRA NAV at 1 April 2019
1,218.7
174.9
£m
p
EPRA earnings
Dividends2
Property revaluation
Acquisition of Mucklow
Issue of new shares
Goodwill
Acquisition costs
Other movements1
EPRA NAV at
31 March 2020
74.5
(64.2)
(12.0)
283.6
(48.3)
(9.1)
(6.0)
9.3
(8.0)
(1.5)
–
(1.3)
(1.2)
(0.5)
1,437.2
171.7
1 Other movements include loss on sales (£7.2 million),
debt break costs (£0.2 million) and share based
awards (£4.3 million), offset by scrip share issue
savings (£5.8 million)
2 Dividend per share is based on the weighted
average number of shares in the year. The actual
dividend paid in the year was 8.4p as reflected in
note 7 to the financial statements
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 2020, the Company
paid the third and fourth quarterly dividends
for 2019 and the first two quarterly dividends
for 2020 at a total cost of £64.2 million
or 8.4p per share as reflected in note 7
to the financial statements.
The Company issued 2.9 million ordinary
shares in the year under the terms of the
Scrip Dividend Scheme, which reduced
the cash dividend payment by £5.8 million
to £58.4 million.
The first two quarterly payments for the year
to 31 March 2020 of 2.0p per share were
paid as Property Income Distributions (‘PIDs’)
in the year. The third quarterly payment of
2.0p was paid as a PID in April 2020 and the
Company has approved a fourth quarterly
payment of 2.3p in July 2020, of which 0.75p
per share will be a PID. The total dividend
payable for 2020 has increased 1.2% to
8.3p, comprising a PID of 6.75p and an
ordinary dividend of 1.55p.
The Board took the following into account
when considering its dividend payments:
• Its REIT obligations to distribute 90%
of property rental business profits;
• Its desire to pay a sustainable, covered
and progressive return to shareholders;
• Its EPRA earnings for 2020; and
• The outlook for 2021 and uncertainties
associated with the COVID-19 pandemic.
At the year end the Company had
distributable reserves of £836.8 million,
providing substantial cover for the dividend
payable for the year. When required and
at least six monthly, the Company receives
dividends from its subsidiaries which
increase distributable reserves.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 42
Performance review
Financial review continued
Portfolio valuation
The Mucklow acquisition dominated
our investment activity this year, growing
the portfolio by 64 complementary
assets worth £454.7 million on acquisition
and enabling us to pivot further into
urban logistics, which now represents
35.4% of our overall portfolio. The assets
acquired included £13.6 million of
Mucklow developments.
Our segmental reporting in note 2
to the financial statements and in the
table opposite has been amended
following the acquisition to reflect a new
though comparatively small office sector
and to combine convenience, leisure
and long income assets as one long
income category.
Our distribution exposure continues
to dominate and represented 69.8%
of our portfolio including distribution
developments at the year end. Further sales
of 26 flats at Moore House have reduced
our residential exposure to just 0.2% of
our portfolio. Our development exposure
remains modest at 2.4% of the portfolio
and includes the remaining site at Bedford,
our forward funded development in Goole,
a pre-let convenience development in
Weymouth and the Tyseley development site
acquired as part of the Mucklow portfolio.
Phase 1 of our developments at Bell
Farm, Bedford and Tyseley completed
on schedule in the year, along with our
forward funded development at Durham.
These completed developments have
been substantially let as discussed in
detail in the case studies on pages 33
and 37 of the Property review.
Our property portfolio, including the share
of joint venture assets, grew by £500.3 million
in the year to £2.3 billion. The movement
in the portfolio is reflected in the table
opposite and also in supplementary
note vii on page 185.
Property values in the second half
of the year fell by £28.6 million leading
to an overall deficit for the year of
£12.0 million or 0.5%.
The portfolio has delivered a total
property return of 5.1% this year compared
to the IPD All Property index of -0.5%.
Our distribution sector delivered a return
of 8.5%, with urban and regional seeing
the strongest performance.
Alongside the Mucklow corporate
acquisition, the Group spent a further
£136.0 million in the year acquiring
£29.1 million of distribution and £71.2 million
of long income assets and increased its
investment in DFS assets by £35.7 million.
We completed 15 commercial property
disposals along with the 26 residential
flat sales in the period generating net
proceeds of £126.4 million at share and
reducing the book value of property
by £133.6 million (including the cost of
lease incentives written off of £5.4 million).
The largest disposal was our mega
warehouse in Newark which was sold
in January 2020 for £80.8 million.
Property portfolio by sector
As at 31 March
Distribution
Long income
Retail Parks
Offices
Investment portfolio
Residential
Development1
Property portfolio value
Head lease and right of use assets
£m
1,593.7
552.5
83.3
55.1
2,284.6
4.9
57.0
2,346.5
5.7
2,352.2
2020
%
67.9
23.5
3.6
2.4
97.4
0.2
2.4
£m
1,292.6
389.5
87.0
–
1,769.1
17.3
59.8
2019
%
70.0
21.2
4.7
–
95.9
0.9
3.2
100.0
1,846.2
100.0
–
1,846.2
1 Represents regional distribution £38.1 million (1.6%), urban logistics £6.2 million (0.3%), long income £10.5 million
(0.5%), office £1.1 million and other land £1.1 million at 31 March 2020. Split of prior year comparatives was
regional distribution £22.6 million (1.2%), urban logistics £23.9 million (1.3%), long income £13.3 million (0.7%)
Portfolio movement in the year
Opening valuation
Acquisitions1,2
Developments3
Capital
expenditure4
Disposals
Revaluation
Lease incentives5
Group
£m
1,688.0
635.3
43.1
10.2
(113.4)
(3.8)
9.6
Property valuation
2,269.0
Head lease and
ROU assets
Closing valuation
5.7
2,274.7
Non-
controlling
interest
£m
–
(17.0)
–
(0.2)
0.3
2.0
–
2020
Portfolio
value
£m
1,846.2
577.1
43.1
10.3
(128.2)
(12.0)
10.0
2019
Portfolio
value
£m
1,842.0
156.3
34.3
15.0
(258.8)
64.4
(7.0)
(14.9)
2,346.5
1,846.2
–
5.7
–
(14.9)
2,352.2
1,846.2
JV
£m
158.2
(41.2)
–
0.3
(15.1)
(10.2)
0.4
92.4
–
92.4
1
Group acquisitions in the year include £634.2 million completed investment properties as reflected in note 9
and trading property of £1.1 million
2 DFS upweight from 45% to 82% has been reflected in this table as an acquisition by the Group and offset
as a disposal by the joint venture
3 Group developments include acquisitions and capital expenditure on properties under development
as reflected in note 9
4 Capital expenditure on completed properties
5 Comprises incentives and rent frees of £15.4 million (2019: £9.2 million) less amounts written off on disposal
of £5.4 million (2019: £16.2 million)
LondonMetric Property PlcAnnual Report and Accounts 2020 43
One disposal in Wakefield that
exchanged last year completed in the
period, generating proceeds of £10.5 million
and has been accounted for in these
financial statements. We also exchanged
to sell a further four assets in the year
for £64.4 million at share with delayed
completions. These disposals will complete
and be accounted for next year.
At the year end, the Group had capital
commitments of £28.9 million as reported
in note 9 to the financial statements,
relating primarily to our forward funded
development in progress at Goole.
Further detail on property acquisitions,
sales, asset management and development
can be found in the Property review on
page 26.
Financing
The key performance indicators used
to monitor the Group’s debt and liquidity
position are shown in the table below.
The Group and joint venture split is shown
in Supplementary note iii on page 183.
As at 31 March
Gross debt
Cash
Net debt
Loan to value1
Cost of debt2
Undrawn facilities
2020
£m
974.8
86.1
888.7
35.9%
2.9%
133.8
2019
£m
626.2
24.1
602.1
32.2%
3.1%
373.5
Average debt maturity 4.7 years 6.4 years
Hedging3
67%
73%
1
LTV at 31 March 2020 includes the impact of sales
that completed post year end of £64.4 million within
cash and investment properties, and excludes the
fair value debt adjustment of £2.7 million
2 Cost of debt is based on gross debt and includes
amortised costs but excludes commitment fees
3 Based on the notional amount of existing hedges
and total debt facilities
Net debt has increased £286.6 million in
the year, primarily to fund the cash offer
for Mucklow and transaction costs of
£135 million, incorporate its SWIP £60 million
loan and repay its £20 million HSBC facility
in full. Further debt was drawn to fund other
acquisitions and development expenditure
in the year, increasing our LTV to 35.9%,
which includes the completion of sales
that had exchanged in the year. It remains
our intention to keep this below 40% over
the longer term.
As reported last year, we repaid our
DFS joint venture’s secured debt facility
with M&G in April 2019, at the same time
as increasing our equity holding to 82%.
Mucklow’s £60 million fixed rate loan was
reflected at its fair value on acquisition in
accordance with IFRS 3, increasing debt
by £2.9 million. This premium is released
on a straight-line basis to finance costs
over the remaining term of the facility.
In the period since acquisition we
have released £0.2 million to finance
costs and decreased the fair value
adjustment to £2.7 million.
Average debt maturity
Undrawn facilities
1
1
3
2
4.7
years
1
2
3
Debt expiring within 0-3 years
Debt expiring within 3-10 years
Debt expiring 10+ years
Debt drawn
6
5
4
£975m
3
2
1
2
3
4
5
6
Unsecured RCF
Unsecured Wells Fargo facility
Private placement
Secured term loan
MIPP joint venture
Secured SWIP fixed rate debt
£134m
3
1
2
42%
36%
22%
1
2
3
Unsecured RCF
Unsecured Wells Fargo facility
Unsecured HSBC facility
25%
19%
56%
Total facilities
7
6
5
4
£1,106m
1
2
3
Unsecured RCF
Unsecured Wells Fargo facility
Unsecured HSBC facility
Private placement
Secured term loan
MIPP joint venture
Secured SWIP fixed rate debt
42%
5%
29%
14%
4%
6%
1
2
3
4
5
6
7
40%
7%
7%
25%
12%
4%
5%
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 44
Performance review
Financial review continued
Financing continued
In March 2020, we entered into a new
£75 million unsecured revolving credit
facility with HSBC, which diversified and
increased our firepower to provide further
operational flexibility. At the year end,
we had available undrawn facilities
of £133.8 million and cash balances
of £86.1 million, providing security and
optionality and ample headroom to cover
the Group’s £28.9 million of contractual
capital commitments as disclosed in
note 9 to the financial statements.
Our post year end equity raise increased
our firepower by £120 million to c.£340 million.
Our key financial ratios remain strong
with average debt cost reducing to 2.9%
(March 2019: 3.1%) and average maturity
of 4.7 years (March 2019: 6.4 years).
Of our total facilities of £1.1 billion, 54%
or £594 million are unsecured revolving
credit facilities, providing operational
flexibility at low average costs. At 31 March
2020 debt drawn under these facilities
represented 47% of debt drawn compared
with 25% last year. This has contributed
to a shorter debt maturity at the year end
of 4.7 years (March 2019: 6.4 years) and
offsets the positive impact of our new SWIP
and private placement debt facilities,
which have an average maturity period
of 11.1 years, and has also contributed
to our lower average cost of debt as
the marginal cost of drawing under the
revolving credit facilities is only 1.5%.
The Group has comfortably complied
throughout the year with the financial
covenants contained in its debt funding
arrangements and has substantial levels
of headroom. Covenant compliance
is regularly stress tested for changes in
capital values and income.
The Group’s unsecured facilities and
private placement loan notes, which
together account for 76% of debt drawn
at the year end, contain gearing and
interest cover financial covenants.
At 31 March 2020 and after adjusting for the
equity raise, the Group’s gearing ratio as
defined within these funding arrangements
was 56% which is significantly lower than
the maximum limit of 125%, and its interest
cover ratio was 4.3 times, comfortably
higher than the minimum level of 1.5 times.
Property values would have to fall by
37% and rents by 58% before banking
covenants are breached.
£112.2 million from property disposals
and £15.4 million from joint ventures.
Capital expenditure on asset management
and development activities cost the Group
£22.0 million.
Cash inflows from financing activities
reflect net new borrowings of £283.8 million,
offset by cash dividend and distribution
payments of £58.8 million, financing costs
of £2.1 million and share purchases of
£7.2 million.
Further detail is provided in the Group
cash flow statement on page 157.
Cost of debt
2.9%
3.5
2.8
3.1
2.9
The Group’s policy is to de-risk the
impact of movements in interest rates
by entering into hedging arrangements.
At 31 March 2020, 67% of our exposure
to interest rate fluctuations was hedged
by way of swaps and caps assuming
existing debt facilities are fully drawn
(2019: 73%). Since the year end, we
have cancelled £350 million interest
rate swaps that hedged our unsecured
facilities and were due to expire in
2022, reducing the proportion of debt
hedged to 36%, mainly through our fixed
coupon private placement and SWIP
debt. This will contribute to interest cost
savings of c. £2.3 million per annum in an
environment where we expect rates to
remain lower for longer and has reduced
our average cost of debt to 2.7%.
We are advised by Chatham Financial
and continue to monitor our hedging
profile in light of forecast interest
rate movements.
Cash flow
During the year, the Group’s cash balances
increased by £61.2 million as reflected in
the table below.
2020
£m
2019
£m
2017
2018
2019
2020
84.7
69.6
Loan to value ratio
(16.0)
0.4
35.9%
30.5
34.7
32.2
35.9
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 increase/
(decrease) in cash
(24.0)
(15.8)
44.7
54.2
(199.2)
83.2
215.7
(143.0)
61.2
(5.6)
The net cash inflow from operating
activities of £44.7 million is stated after
charging exceptional acquisition costs paid
in the period of £15.6 million as reported
in note 15. After adjusting for these one
off costs, cash flows from operating
activities were £60.3 million, representing
an increase of £6.1 million or 11.3%
compared to last year.
The Group spent £304.8 million acquiring
property and subsidiaries in the year
and received net cash proceeds of
2017
2018
2019
2020
Interest cover ratio
4.3x
4.5
5.0
4.7
4.3
2017
2018
2019
2020
LondonMetric Property PlcAnnual Report and Accounts 2020 Strategic report
Governance
Financial statements
45
Responsible Business review
Inside this section
Overview and achievements
Environmental
Social (including Section 172 Statement)
Governance (including TCFD)
46
48
52
58
Our Responsible Business
activities are embedded
into our investment, asset
management, development
and corporate activities.
We work with all of our
stakeholders to deliver
on our objectives.
Martin McGann
Finance Director &
Responsible Business
Board representative
LondonMetric Property Plc
Annual Report and Accounts 2020
46
Responsible Business
Responsible Business review
Our Responsible Business activities address the
material ESG issues that impact our business.
Overview
LondonMetric’s portfolio has changed
significantly over the last five years, moving
away from offices and retail parks into
distribution warehousing and long income
assets that are typically single tenanted.
Consequently, the operational intensity of
our portfolio has fallen significantly along
with its carbon footprint. The acquisition of
Mucklow in the year significantly increased
our portfolio size as well as our exposure
to urban logistics.
The Company is committed to improving its
Responsible Business disclosure, mitigating
climate change and sustainability risks
whilst continuing to capture environmental
and stakeholder related opportunities.
This is embedded in our investment, asset
management and development activities.
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 and remuneration
of Executive Directors is partly linked to
achieving ESG related targets.
Addressing ESG
Responsible Business
Responsible Investment
Generating sustainable value
S
R
O
T
OUR P
E
O
P
L
E
IN V E S
S
E
I
T
I
N
U
M
M
Responsible Business
Managing stakeholder
relationships and risk well
O
C
C
O
N
TRACTORS & S U P P
R S
L I E
O
C
C
U
P
I
E
R
S
Responsible
Asset Management
Responding to occupier
needs and enhancing
asset quality
Responsible
Development
Future-proofing
our assets
Read more in our
full report online at
www.londonmetric.com
Environmental
Social
Governance
Through our activities we look to
minimise the environmental impact
of our business, maximise opportunities
to improve the efficiency of our assets
and improve the resilience of our
assets to mitigate physical climate
change risks and wider risks from
transitioning to a low carbon economy.
We look to work in conjunction with
our occupiers on all initiatives.
Our actions consider the long term
interests of all our stakeholders
including the interests of our
employees, suppliers, customers and
local communities as well as ensuring
that the Company maintains a
high standard of business conduct.
The Board is committed to
upholding high standards of
corporate governance. Responsible
Business is an important part of
ensuring that we deliver on those
standards. In particular, it ensures
that appropriate Health & Safety
procedures are in place and that
proper processes are followed
by its supply chain.
Read more page 48
Read more page 52
Read more page 58
LondonMetric Property PlcAnnual Report and Accounts 2020
Progress and achievements
Our Responsible Business activities have
delivered further improvements and we have
maintained our Green Star status in the latest
GRESB assessment, which we continue to view as
our most applicable sustainability benchmark.
Global Real Estate Sustainability
Benchmark (‘GRESB’)
• Achieved 71% score in the 2019 survey
and maintained our Green Star status.
This score is up from 34% in 2014 and
67% in 2018
• We continue to score above our peer
EPRA Sustainability Best Practice
Recommendations (‘sBPR’)
• Since 2015, we have reported annually
our environmental performance data
in the format required by EPRA sBPR
and received special commendation
for improvements made
average which, for 2019, was 67%
• In 2019, we maintained our Gold Award
• We continue to look to improve our
GRESB score
FTSE4Good
• In the 2019 FTSE4Good Index assessment,
we achieved a score of 3.4 out of 5.0
compared to 2.6 for our peer group
ISS reporting
• Our investor Responsible Business
survey identified ISS as an important
ESG benchmark in 2018
• This improved on our 2018 score of 3.1
and is the second year that we have
been included in the index
• We continue to respond and improved
our score further in 2019, in line with our
industry benchmark
Targets overview
Our 22 Responsible Business targets in
the year focused on:
• Further reducing our energy usage,
environmental improvements to our
buildings and greater scrutiny on
physical climate and transition risks
• Integrating the Mucklow assets acquired
We continue to make good progress
against these targets with 91% achieved
or in progress.
Many of the targets remain relevant for
next year and are being rolled forward with
minor modifications. We have also added
several new targets including the setting of:
• Working with occupiers to help them
• Responsible Business related objectives
reduce their energy consumption and
improve their occupational satisfaction
• Ensuring developments are built to a
high environmental standard and our
supply chain acts in accordance with
our procedures
• Developing community and other
stakeholder relationships
more widely across our employees
• A Net Zero Carbon target, which we
will look to formalise over the year
Performance against our 2020 targets
is detailed in the full Responsible Business
review for FY 2020. Our targets for the
next year will be available on our website.
47
Awards
GRESB Green
Star and EPRA
sBPR Gold Award
maintained
Targets for 2020
91%
achieved
or in progress
EPC rating of ‘C’ or above
on assets for MEES purposes
71%
Read more page 48
BREEAM Very Good certification
78%
on developments completed or
in construction during the year
Annual carbon footprint
reduction in the year
-34% absolute
-88% like-for-like
Read more in our full
Responsible Business review
online at www.londonmetric.com
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
48
Responsible Business
Responsible Business review continued
Environmental
Managing
environmental risks
and opportunities
Through our investment, asset management and
development activities we look to minimise the
environmental impact of our business and maximise
the opportunities to improve the efficiency of our assets.
Our environmental performance
Our energy consumption and greenhouse
gas emissions have fallen significantly
over recent years and, in the year, fell by
a further 34% and 82% respectively.
Energy consumed for 2020 was 748 MWh
compared to 9,056 MWh in 2015 and
1,134 MWh in 2019. The large fall in 2020
was mainly due to the sale of vacant
warehouses in the prior year and the letting
of vacant units during the year; a major
contributor to prior year consumption.
However, the reduction was partly offset
by the Mucklow portfolio acquired, which
accounted for 58% of consumption.
The high level of green tariff supplies now
in place has seen our GHG emissions fall to
1tCO2e per £m net income (2019: 6tCO2e).
Only a small proportion of the portfolio has
landlord controlled energy supply and this
limits our ability to further reduce our energy
consumption. However, we continue to
look to reduce consumption, improve
the efficiency of our assets and engage
with our occupiers to support them in
reducing their carbon footprint.
Investing
Our investment process involves the
careful assessment of environmental risks.
94% of our relevant assets are rated ‘E’
or above. ‘A’-’C’ rated assets represent
71%, up from 59% in 2015 but down on
2019. The fall over the year was due to
the acquisition of Mucklow which added
assets that are less efficient but in more
urban locations. In addition, the EPC on
21% of those assets were unknown and,
as a result, we are undertaking a number
of EPC reviews across the portfolio.
As climate change risk increases,
we continue to review our approach
to environmental due diligence, and
look to enhance our environmental risk
and resilience assessment on both new
acquisitions and existing assets.
In the year, we undertook a full review
of flood risks across the whole portfolio
and are analysing the data and
will undertake more detailed asset
assessments where required.
Energy consumption (MWh)
Asset managing
EPC Rating of Portfolio (by area at share)*
2
1
E
A
D
C
A
B
C
D
E
1 Below E
2 Unknown
B
2019
19.7%
26.7%
29.1%
23.1%
1.4%
n/a
n/a
2020
18.4%
24.3%
28.6%
13.3%
9.5%
0.3%
5.6%
* For purposes of Minimum Energy Efficiency
Standards (MEES)
7000
6000
5000
4000
3000
2000
1000
0
2017
2018
2019
2020
Distribution
Office
Long Income/Retail
ESOS compliance
In line with our regulatory compliance,
we completed our planned energy
audits well ahead of the December
2019 deadline.
Energy audits, LED upgrades & grid
capacity review: We continue to undertake
audits on our assets and engage with
our occupiers. Over the last year, this
prompted the installation of internal LED
lighting upgrades across assets totalling
1.5 million sq ft resulting in EPC improvements.
We continue to pursue further LED upgrades
with our occupiers.
Renewable energy: Following ongoing
engagement with our occupiers and
feasibility studies, 1.0 MW of solar PV capacity
is installed across our assets. The sale of a
mega distribution warehouse in the year
significantly reduced our solar capacity by
1.0 MW, but we continue to look at further
solar installations and expect 1.5 MW
of capacity to be installed in FY 2021.
Recharge points: Electric vehicle recharge
points are installed on a number of our
assets and we continue to add further
installations across the portfolio.
Green energy & smart metering:
We have increased the percentage of our
managed energy consumption derived
from renewable sources from 85% to 96%
in the year which has helped to significantly
reduce our carbon footprint. Furthermore,
the proportion of our supply covered by
smart meters increased from 69% to 75%.
Tenant energy data: We continue to collect
occupiers’ energy consumption data and
this helps us to understand the true carbon
footprint of our assets. In 2019, we increased
data capture to cover 38% of our portfolio
and our 2020 data capture is underway.
LondonMetric Property PlcAnnual Report and Accounts 2020 49
LED lighting
Installed across
c.1.5m sq ft in year
Our carbon footprint
GHG Emissions (Scope 1&2)
72tCO2e
This amounts to
per million sq ft
5tCO2e
1tCO2e
per £m income
Building certification
BREEAM Very Good/Excellent
20%
of the portfolio (by area),
up from 10% in 2015
Green supply of energy
Managed supply
96%
green energy sourced
from green supplies
Responsible asset
management in action
Asset management activity in the year
Distribution warehousing represents 70%
of our portfolio with asset management
activities predominantly focused on this
sector. For all assets, we actively look to
incorporate environmental improvements
into leasing and regear opportunities.
Not only does this reduce occupational
costs for our tenants but it also improves the
quality and economic life of our buildings
as well as their future resilience.
Significant improvements were underway
or completed in the year across a number
of assets including at our newly acquired
warehouse let to Wiley in Bognor Regis
where, as part of a lease regear, we
are undertaking substantial building
improvement works.
Most of our improvements relate to
more efficient lighting, heating systems
and roofing. We continue to engage
with our occupiers on a variety of
improvement opportunities.
Case study
Improving our Mucklow assets
Following the acquisition of Mucklow,
we have looked at environmental
improvements on the Mucklow assets to
improve occupier appeal and energy
ratings. A number of initiatives are
underway, principally involving LED lighting
upgrade on units, which are leading to
significant improvements in EPC ratings.
An exercise to update unknown or lower
EPC rated assets is also ongoing and
being undertaken in conjunction with
improvement works where possible.
Case study
Urban logistics refurbishment
in Greenford, London
During the year, we undertook a significant
upgrade of a 34,000 sq ft urban warehouse.
Works include roof oversheeting, new
rooflights, LED lighting upgrade, better
loading configurations, asbestos removal,
modern HVAC system and upgrade of
the grid capacity. During refurbishment,
which is ongoing, we agreed a five year
lease with an online company who will use
the unit as their HQ. We are working closely
with them to incorporate their requirements
into the works.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 50
Responsible Business
Responsible Business review continued
Environmental
Responsible development
in action
Developing
We carry out developments responsibly
and with proper consideration for the
environment, sustainability and society.
We continue to integrate sustainable
features into developments including solar
PVs, rooflights, electric vehicle recharging,
water conservation and ecology. For large
developments, we target BREEAM Very
Good and our development team ensures
that, along with our project managers,
we select high quality and robust
contractors with a proven track record
and high standards.
Looking forward, we are increasingly
focused on enhancing our ‘Responsible
Building’ credentials to ensure that carbon
emissions are further mitigated, both during
the construction phase as well as once
operational, and that our developments
meet certain well-being criteria.
Wellbeing is an increasing area of focus.
Following the Mucklow acquisition,
one of the offices that was acquired has
subsequently achieved a WELL gold award,
which we believe was only the third office
in the UK to receive such an award at
that time.
BREEAM Very Good
Developments completed
in year or under construction
rated BREEAM Very Good
78%
across 0.7m sq ft
Bedford
Goole
Weymouth
The logistics park consists of up to c.700,000
sq ft of logistics warehousing. 188,000 sq ft
is built and let with a further 166,000 sq ft
under construction. 1,000 jobs are expected
to be created overall.
The 232,000 sq ft development will provide
Croda with a worldwide distribution hub.
It is pre-let for 20 years and is expected
to complete in Q3 2020. 200 jobs are
expected to be created.
The 19,000 sq ft convenience store is let
to Aldi and completed in June 2020.
It is expected to create up to 20 new jobs
with an additional 20 staff relocating to
the new store.
The 40 acre site provides an open
and landscaped space with integrated
pedestrian and cycle routes. The buildings
are highly efficient with c.10% rooflights,
electric vehicle charging and the ability to
retro install solar PV. We have worked closely
with the local community and council
throughout the development.
The warehouse will have exceptional
credentials with high safety and
environmental standards including
energy saving measures, c.12% rooflights, zero
waste to landfill policy, stringent employee
protection systems, water saving measures
(including rain water harvesting) and
cycle network links.
LondonMetric assisted Aldi in upsizing their
footprint in the area to provide a modern
shopping experience. There was significant
local public consultation and it received
strong support from the local community.
In conjunction with Aldi and as part of
its COVID-19 giving, LondonMetric has
supported the Lantern Trust, a local charity.
BREEAM Very Good
188,000 sq ft
BREEAM Very Good
232,000 sq ft
BREEAM Very Good
19,000 sq ft
LondonMetric Property PlcAnnual Report and Accounts 2020 51
Environmental performance
highlights for 2020
Energy consumption
748 MWh
Greenhouse gas
(GHG) emissions
72 tCO2e
Down 34% on an absolute basis
Down 82% on an absolute basis (scope 1,2)
The reduction was mainly due to the sale
of vacant warehouses in the prior year along
with the letting of further vacancies in the year;
these were a major contributor to prior year’s
consumption. However, this reduction was
partly offset by the consumption generated
from the Mucklow assets acquired. Like for
like consumption fell by 0.2% which, although
small, reflects the significant reductions
already achieved and still puts us on track to
reach our long term target to reduce energy
intensity by 20% against a 2015/16 baseline,
by 31 March 2022.
The 82% absolute fall was caused by a further
shift to green tariff supplies. This high level
of green supply has prompted us to report
market based GHG emissions, instead of
location based emissions for Scope 2, as it
more clearly shows our progress towards
a zero carbon future. On a like for like basis,
market based emissions fell 88% with location
based emission falling 9.9% (mainly due to
grid decarbonisation). This puts us on track
to meet our longer term target to reduce
GHG emissions intensity by 20% against
a 2015/16 baseline, by 31 March 2022.
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)
Scope 1
Scope 2 –
location-based
Scope 2 –
market-based
Indirect greenhouse gas emissions in tonnes
of CO2e (transmission and distribution losses) Scope 3
Indirect emissions from employee business
travel (by vehicle) in tonnes of CO2e over
which the company does not have control
Scope 3
Total carbon footprint in tonnes of CO2e
Total Scope 1, 2 & 3
Scope 1 and 2 intensity (tonnes of
CO2e per £m net income after
administrative costs)
£m net income after administrative costs
Scope 1 & 2
intensity
2019/20
2018/19
27
154
46
13
7
92
0.75
96.4
22
275
378
23
7
430
5.56
71.9
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.
We have used the main requirements of ISO14064
Part 1, the GHG Protocol Corporate Accounting
and Reporting Standard (Revised Addition)
along with the recently introduced Streamlined
Energy and Carbon Reporting regulations for
our methodology.
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.
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 (2019).
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 suppliers’
fuel mix disclosure or the latest Association
of Issuing Bodies European Residual Mixes (2019).
The total carbon footprint and emissions intensities
have been calculated using market-based
Scope 2 emissions.
Data for the year to 31 March 2019 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).
Emissions from employee business travel (by vehicle)
have been calculated and reported under Scope 3
emissions for the first time. Emissions have been
calculated on a distance travelled basis, where
the relevant vehicle emissions factor has been
applied to expensed mileage.
An operational control consolidation approach
has been adopted.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 52
Responsible Business
Responsible Business review continued
Social
Companies Act 2006
Section 172 statement
Strengthening stakeholders relationships, as well as
motivating and leveraging our highly talented team
is vitally important for our future success.
The Board of Directors, both individually
and collectively, is aware of its duty under
Section 172 of the Companies Act 2006
to act in the way it considers, in good faith,
would be most likely to promote the success
of the Company for the benefit of its
members as a whole, having regard to:
• The likely consequences of decisions
in the long term
• The interests of its employees
• The Company’s relationships with
suppliers, customers and others
• The impact of the Company’s operations
on the community and the environment
• The Company’s reputation and
maintaining high standards of
business conduct
• The need to act fairly as between
members of the Company
Identifying the relevant issues
and stakeholders
Throughout this report we set out our key
stakeholders as our people, our occupiers,
our suppliers, our investors and our
communities. Building relationships with
our stakeholders, as described on pages
01 to 09, has been a strategic priority for
many years and is integral to our business
model as shown on pages 22 to 23.
We believe that in order to generate
value and long term sustainable returns
we need to understand the views and
take account of what is important to
our key stakeholders. We do this through
effective and proactive engagement.
Methods of engagement
On pages 88 to 89 we explain why each
stakeholder group is important to us and
how we engage with them. Engagement
is both at Board and management levels
and includes one to one meetings and
roadshows, dedicated management
teams and regular discussions, formal
employee appraisals and customer,
investor and employee surveys.
Our engagement this year with our
stakeholder groups is summarised in
our Governance report on pages 87 to 92
and is supplemented in this Responsible
Business review on pages 53 to 57.
Impact on decisions made in the year
We have outlined on pages 88 to 89 how
we have considered the interests of each
of our stakeholder groups when making
important decisions in the year, which
include the following key examples:
1. The corporate acquisition
of A&J Mucklow Group
2. Employee engagement and the
work of the designated workforce
Non Executive Director
3. Shareholder consultation on new
Remuneration Policy
Acquisition of Mucklow
See case study on page 18
Employee engagement
See page 90
Shareholder consultation
See Shareholder engagement on page 90
See Remuneration Committee report
on page 112
In preparation for the Company’s
implementation of the 2018 UK Corporate
Governance Code and the new
requirement to report its compliance
with S172, the Board has further considered
how stakeholder interests are incorporated
into its decision-making processes.
Board briefing papers and appraisals
document stakeholder interests and
views, ensuring the Board is fully
informed when making decisions.
Board and Committee minutes record
the consideration of stakeholders in the
decision making process where relevant,
and an explanation of Directors’ duties
under S172 will be provided on induction
for all newly appointed Directors.
Our responsibility to stakeholders,
together with consideration of the long
term consequences of our decisions and
maintaining high standards of business
conduct, is integral to the way the
Board operates.
After due consideration, we believe that
the Board has taken into account the views,
interests and impact on key stakeholders
in its decisions made during the year.
Read more
Consequences
of decisions
in long term
Chief Executive’s
review page 15
Promoting long term
success page 92
Interests of its
employees
Our people
pages 54 – 55
Employee engagement
page 90
Relationships
with stakeholders
Our stakeholders
pages 87 – 92
Social considerations
pages 53 – 57
New Remuneration
Policy page 119
Impact on
community and
environment
Environment
pages 48 – 51
Community page 57
TCFD page 59
See page 58
Reputation,
high standards
Act fairly between
members
See page 54
See page 142
LondonMetric Property PlcAnnual Report and Accounts 2020 53
Occupiers
We recognise that when our occupiers’
businesses thrive, so our business
also thrives. We treat our occupiers as
customers and put them at the centre
of our decision making. Our occupier-
led approach provides us with market
knowledge to better understand future
trends and make informed decisions.
Our high occupancy rate and customer
satisfaction scores demonstrate the
strength of these relationships and
extending existing relationships and
developing new contacts are a key
focus for us.
Develop trusted relationships
Our strong occupier relationships reflect
our differentiated proposition where we:
• Are approachable and actively
engage with our occupiers
• Strive to listen, fully understand
occupier requirements and create
solutions that are mutually beneficial
• Make quick decisions, act swiftly
and deliver on our promises
Customer satisfaction
We undertake regular surveys across
our key occupiers with our most recent
survey in March 2019 receiving responses
from occupiers representing over half of
our income and scoring of 8/10 for property
satisfaction and 9/10 for how well we
compared against other landlords.
Our survey for 2020 was due to be released
in March but we decided, given COVID-19,
that the timing would be inappropriate
and have deferred it to next year. However,
we continued to enjoy strong and close
relationships with our occupiers as reflected
in the long leases we signed in the year,
high occupancy rates and high levels
of rent collection during the pandemic.
We have seen a noticeable increase
in our occupiers’ willingness to discuss
environmental initiatives and, as part
of that, we undertook a grid capacity
resilience review with several identified
occupiers to ensure our properties
continue to provide them with sufficient
power capacity for their current and
future needs.
Our occupier relationships
are crucial to the success
of LondonMetric. We
work closely with our
occupiers to understand
their requirements and our
ambition is to be their real
estate partner of choice.
Mark Stirling
Asset Director at LondonMetric
COVID-19
response
Despite uncertainty
from COVID-19,
rent collection has
been strong, but
we have provided
some assistance
to occupiers.
Assistance to existing occupiers
We have provided appropriate and proportionate
help to some customers materially impacted by
COVID-19 as follows:
• Changing payment terms to monthly rather
than quarterly in advance
• Rent concessions in return for compensatory
asset management initiatives that improves
our longer term income streams
• Rent deferrals to be repaid over a future time
period, typically 12 months
Rent free accommodation to assist occupiers
providing key services and products
We are engaging with occupiers to offer short term
accommodation on a part or full rent free basis
where they are fulfilling contracts to help fight the
COVID-19 pandemic. This has resulted in short term
licences being granted on:
• 11,000 sq ft to Core Group to help them provide
modular buildings in connection with the
construction of the NEC Nightingale Hospital
• 6,500 sq ft to Hayley Group to help them provide
25 million face masks to the NHS and TfL
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 54
Responsible Business
Responsible Business review continued
Social
Our people are
critical to the success
of the Company
Our people
The Company is highly focused with
33 employees and six Non Executive
Directors. Since merger in 2013, employee
and Director numbers have fallen
by 34% despite a significant increase
in assets managed. This reflects improved
efficiencies and the lower operational
requirements of our portfolio.
During the year, we successfully integrated
the core team of seven employees from
our Mucklow acquisition and have instigated
an office relocation for them to better
located and more modern premises.
Culture and approach
We have successfully attracted and
retained a talented and loyal team. This is
reflected in our low annual voluntary staff
turnover rate which has averaged 6%
since merger. We believe this reflects our:
• Culture of empowerment, inclusion,
openness and teamwork
• Fair and performance
based remuneration
• Small number of staff, which allows
a flexible and individual approach
COVID-19 people response
Our people response has been focused
on ensuring their safety. Our team has
successfully transitioned to remote
working and is operating highly effectively.
We continue to monitor the well-being
of our staff during this time.
Employee gender diversity
Directors
The number of
persons of each sex
who were Directors:
2
6
How we continue to improve our approach to our people
Inclusion &
communication
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. Regular strategy and performance
updates are provided to employees from the Executive Directors.
Modern working
practices
We have implemented more flexible working arrangements covering dress code,
holiday buy back, improved systems to enable home working and a core hours policy.
Fair
remuneration
Diversity
& equal
opportunity
Employee
development
& training
Health
& safety
Well-being
& employee
satisfaction
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, medical
insurance, childcare and cycle to work vouchers.
We promote diversity across knowledge, experience, gender, age and ethnicity
with a published diversity and inclusion policy in place. Whilst overall female
employee representation is good, we recognised that we needed to specifically
promote greater gender diversity. Over the year, we increased female Board
representation to 25%. Recognising the significant diversity imbalance in
the real estate sector, we continue to support the Real Estate Balance group
to further our promotion of diversity both internally and externally.
An annual appraisal process is undertaken where training needs and performance
are discussed. We actively encourage training and we continue to monitor our staff
training each year, some of which related to a senior employee’s MBA programme.
We continue to undertake Responsible Business training across our employees and
encourage participation in Young Property Professionals groups. We continue
to offer secondment and work placement opportunities.
In 2016, we formalised a policy to provide and maintain safe and healthy working
conditions for all employees, providing appropriate equipment, workplace
assessments, operational processes and safe systems of work. See page 58
for further details on health & safety.
Last year, we significantly reduced our office space and undertook a major
refurbishment and modernisation of the office. We also undertook a well-being
review of the space and carried out a wider employee and office well-being
survey to gauge overall employee satisfaction, which was reported on in 2019.
We have continued to see further improvements in overall employee satisfaction.
The results of our 2020 employee survey show further improvements against the
previous year and Andrew Livingston, the Company’s designated workforce
Non Executive Director, continues to be closely involved. Further enhancements
to employee well-being will be looked at where possible.
Senior Leadership
The number of persons
of each sex who were
members of the Senior
Leadership Team
(other than identified
as Directors):
2
7
All Employees
The number of
persons of each sex
who were employees:
15
18
LondonMetric Property PlcAnnual Report and Accounts 2020 Our people
Satisfaction survey
Overview of survey
In February 2020, we undertook our third
annual employee survey. The survey is used
to gauge overall employee satisfaction
and track changes from the previous year.
The survey was open to all employees
including all members of the Mucklow
team that had transferred as part of the
acquisition of Mucklow. There was a very
high participation rate, which was in line
with the previous year.
In total, there were 34 questions across
three main categories of:
• The company
• The office environment
• About the individual employee
There were five possible scores for each
question ranging from strongly agreeing
to strongly disagreeing and all responses
were anonymous.
Results of survey and next steps
Overall, the survey demonstrated
that there was a high level of employee
satisfaction with an improvement in scores
over the year across all three categories.
100% of respondees either agreed
or strongly agreed that they enjoyed
working at LondonMetric, felt proud
working at the Company and would
recommend working for LondonMetric.
There were significant improvements
in scoring on work life balance, office
facilities and how employees felt about
the way the Company recognised
their contribution.
Further steps in response to COVID-19
Due to the pandemic, all employees are
working remotely. As a result, the 2020
survey has since been supplemented
to understand working from home
practices and individual circumstances
and to help guide our decisions on our
return to the office environment.
Board consideration
During the year, the 2019 survey
was presented to Andrew Livingston,
the designated workforce Non Executive
Director. Andrew also hosted an
informal lunch for eight employees in the
summer to discuss the survey and wider
employee matters.
The survey and feedback from the
informal lunch was provided to the
Board as part of the wider employee
engagement agenda.
The key results from the 2020 survey
were presented to Andrew Livingston.
The Board has also reviewed the results
which will be further considered over
the next year.
Survey breakdown of scores
(percentage of those that responded with agree or strongly agree)
y
n
a
p
m
o
C
e
c
ffi
O
e
e
y
o
p
m
E
l
Enjoy working
at LondonMetric
Considerate of work
life balance
Confidence in
management decisions
Office environment
positively impacts work
Feel proud to work
for LondonMetric
2020
2019
2020
2019
2020
2019
2020
2019
2020
2019
Make a valuable contribution
to LondonMetric
2020
2019
Recognised for the
contribution made
2020
2019
Would recommend
LondonMetric as an employer
2020
2019
55
100
96
81
75
96
92
70
67
100
96
93
92
85
67
100
100
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 56
Responsible Business
Responsible Business review continued
Social
Contractors & Suppliers
Contractor compliance
100%
with our Responsible Development
Requirements
Our Responsible Procurement Policy
It outlines our approach to implementing
supply chain and procurement standards
on developments and standing investments.
This policy focuses on areas such as labour,
human rights, health and safety, resource,
pollution risk and community.
Suppliers
Whilst spend on asset services is relatively
small, we continue to monitor compliance
of our suppliers against our Managing
Agents’ policies. In 2020, our focus was on
the procurement activities on assets acquired
through the Mucklow acquisition.
Investors and Joint Ventures
Investor related meetings in the year
250+
shareholders, analysts and potential investors
We value our good relationships
with equity investors
Over the year, as covered in detail on
pages 90 to 92, we saw over 250 equity
investors through meetings, site visits
and conferences. This was greater than
in previous years due to the acquisition
of Mucklow in the year and involved
significant dialogue with both our
shareholder base as well as Mucklow’s.
Feedback continues to be very supportive
of our strategy and achievements.
We reviewed the relevant managing
agent’s procedures and looked at the
main suppliers to our Mucklow assets
and their policies. Whilst this process is still
ongoing, with a more detailed review to
follow in the next year, our initial analysis
of the key supplier was highly positive
and demonstrated their strong focus
on sustainability improvements such as
biodiversity, use of electric vehicles and
waste recycling.
Contractors
In conjunction with our external project
managers, our development team ensures
that we select high quality and robust
contractors with a proven track record.
We regularly review the financial robustness
of our contractors and work closely with
them throughout projects.
Our development team monitors progress
and tracks all elements of our projects
including sub-contracted works. We stay
in close contact with our contractors and
arrange regular visits and detailed reviews
and checks of their systems and processes.
Our Responsible Development
Requirements checklist is used
on all projects and sets minimum
requirements for contractors. We specify
compliance by the Contractor with the
Considerate Constructors Scheme on
most of our projects where we deem it
appropriate. There was 100% compliance
with our checklist in the year.
COVID-19 response
Whilst the pandemic caused disruption
to our developments, it was limited and
most of our sites resumed operations
within a short time frame. We were very
appreciative of the commitment shown
by our project and contractor teams.
Meeting investor expectations
on Responsible Business
As shareholder expectations on corporate
governance and sustainability increase,
we had planned to undertake our second
Responsible Business survey of investors in
March 2020 following on from our previous
survey in 2018. However, we decided to
delay this to the following year given the
COVID-19 pandemic.
However, we saw a marked increase
in engagement on ESG matters from
shareholders and it was a particular
focus of investor meetings with positive
feedback received on our ESG progress.
We continue to use this feedback from
shareholders to inform the setting of
our sustainability targets and our wider
corporate reporting.
Debt investors and joint ventures
We continue to enjoy good relationships
across the debt capital markets and
continue to broaden our base of
debt providers. In addition, we enjoy
strong relationships with our Joint
Venture partners.
COVID-19 response
There has been significant investor
contact during the pandemic and
shareholders continue to be highly
supportive, as evidenced by our
substantially oversubscribed equity
raise after the year end.
LondonMetric Property PlcAnnual Report and Accounts 2020 57
Local Communities
Permanent jobs expected to be created
1,100+
by occupiers at our developments that
completed or were underway in the year
COVID-19 Communities fund created
£127k
mainly for causes local to our assets that
have been impacted by COVID-19
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. Through our actions, we aim
to maximise the local benefits of our
activities 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, typically
using local contractors
• Creation of modern buildings and
facilities fit for future needs
• Long term commitments from
our occupiers, who typically sign
10-15 year leases, and create
significant local jobs
• Involvement of local authorities
and councils to ensure we work
in partnership with them and
consider their views
• Engagement with local residents,
particularly throughout and post
developments to ensure they
are informed and involved
• Our ongoing involvement in areas
local to our properties by funding of
local events and facilities and engaging
with schools
• 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 £22,958
and LondonMetric encourages its
employees to participate in charitable
and local community events which,
in the year, raised nearly £5,000 for
charitable causes
Our charity response to COVID-19
In response to COVID-19, LondonMetric
earmarked funds for charitable causes that
could make a difference to communities
impacted by the pandemic.
In addition, the Board and certain other
key employees agreed to waive 20%
of salaries and fees for a three month
period which provided additional funds
to LondonMetric’s COVID-19 charity funds;
the fund currently amounts to £127,000.
LondonMetric also arranged an internal
#2.6 Challenge event which saw great
support from employees and raised
£5,000 for the Ahoy Centre Charity.
COVID-19
response
LondonMetric set
up a COVID-19
communities and
charities committee
and published a
response statement
on its website
COVID-19 Committee set up
Showing our appreciation
Charitable giving
In response to the pandemic,
LondonMetric set up an internal
committee consisting of five
employees, led by the Finance
Director. It meets virtually once
a week and engages with all
employees on how the Company
can assist local communities.
In order to show our appreciation
of the front line tackling the
pandemic, we provided a
COVID-19 statement on our
website and arranged for
supportive and prominent
banners to be put up at
several of our developments.
c.£100,000 of our COVID-19
fund has been allocated to:
• National charities, including
LandAid and Macmillan
• Foodbanks and other local
organisations near key assets
• Several local NHS trusts
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 58
Responsible Business
Responsible Business review continued
Governance
Governance
and compliance
Overview
Board Representation
for Responsible Business
Martin McGann, Finance Director,
represents the Board at Responsible
Business Working Group meetings and
his remuneration is linked to the Company
achieving certain Responsible Business
related objectives.
Policies & Statements
The Company’s overall Responsible
Business policy is available on its
website along with other related
documents including:
• The Responsible Business Working
Group’s terms of reference
• Responsible Business targets
• Full Responsible Business reports
• Our approach to health and safety
• Compliance & anti
corruption procedures
• Responsible Procurement Policy
• Community Policy
• Modern Slavery Act Statement
• Regular environmental
performance reports
For wider corporate governance
reporting please see page 76
Confirmations
The Company confirms that no human
rights concerns have arisen within its
direct operations or supply chains and
that it has not incurred any fines, penalties
or settlements in relation to corruption.
The Company continually reviews
and updates all of these documents
as required.
The Board is committed to upholding the
high standards of corporate governance and
Responsible Business is an important part of
ensuring that we deliver on those high standards.
Health & Safety in focus
Responsibility and procedures
The Board is responsible for ensuring that
appropriate Health and Safety procedures
are in place. Mark Stirling, Asset Director,
is responsible for overseeing implementation
of our procedures and reporting back to
the Board. RP&P Management acts as our
Corporate Health and Safety Advisor and
we meet formally with them twice a year.
H&S risks assessment & training
Where risks need to be assessed under
a specific duty or regulation, we ensure
that an assessment is carried out and that
all necessary actions are implemented.
Health and safety training is carried out
for employees and additional training
is considered on a case by case basis.
Health & Safety policy
Our policy is regularly reviewed and
addresses three key areas of:
I. Employment – The policy ensures our
employees are offered a safe and healthy
working environment.
II. Construction – Procedures and processes
have been developed to ensure we comply
with current legislation with a Project
Manager, Principal Designer and Principal
Contractor appointed on all projects
to oversee, manage and monitor health
and safety.
III. Managed Properties – The majority
of our assets are let on full repairing and
insuring leases. For single occupier assets,
the occupier is responsible for managing
health and safety matters at the property
and the wider estate.
Where there are multiple occupiers on
the same estate, we appoint a Managing
Agent to manage health and safety
matters relating to common parts.
The Managing Agent is responsible for
ensuring health and safety assessments
are completed and regularly reported
back to us.
Health & Safety in 2019/20
• Quarterly internal meetings
• Half yearly project audits:
– Projects at Liskeard and Swindon
were inspected by RP&P
– Further audits to be carried
out next year
• Two reportable incidents on projects
• Zero accident rate for employees
• No health and safety prosecutions
or enforcements
• Health & Safety policy to be updated
in 2020/21 following Mucklow deal
Our contractor requirements
We have implemented 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
• Considerate Constructors Scheme
compliance (where appropriate)
• 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. During the
year, we commenced the audit of one
of our key contractors to ensure that
they were adhering to our requirements.
A particular emphasis was on their
compliance with our supply chain
standards, including matters related to
modern slavery. This audit is still ongoing.
LondonMetric Property PlcAnnual Report and Accounts 2020
59
Further information
Page 76
Page 14
Page 48
TCFD Disclosure
Recommendation
Commentary
Governance
Disclosure of
governance on
climate related risks
and opportunities
The Board is responsible for the Company’s risk management framework, including the consideration of
climate-related risks and opportunities as part of its wider oversight for Responsible Business. Implementation of
Responsible Business is delegated to the Senior Leadership Team with two of its members, the Finance Director
and Head of Responsible Business, leading the Responsible Business working group; other members consist
of a representative from each of the investment, asset management and development teams. The Head of
Responsible Business ensures that annual Responsible Business targets are delivered and leads engagement
and training across the Company on Responsible Business, helped by our sustainability advisor, JLL.
Strategy
Disclosure of actual
and potential
impacts of climate
related risks and
opportunities on
the organisation’s
business, strategy
and financial
planning
LondonMetric has identified that climate-related risks could impact on the Company by reducing:
1.
the desirability of its assets to occupiers such that buildings are no longer fit for purpose from a location,
design or operational perspective
its ability to sell assets as a result of a greater focus by investors on climate-related risks
its access to capital and impacting on reputation due to concerns over how well its buildings are
adapted for climate change and how well its occupiers’ are positioned for a low carbon economy
2.
3.
The Company’s shift from retail parks and offices into distribution assets that have lower energy requirements
means that the overall carbon footprint of its buildings is significantly lower. Whilst its recent pivot from larger
distribution assets into smaller urban logistic units means that its assets are typically slightly older and less
energy efficient, the use of the building tends to be less energy intense and there is greater value in the land.
Consequently, occupiers and investors are less concerned about the environmental performance of these
buildings. We are, however, improving and climate-change adapting our assets through maintenance and
energy efficiency upgrades. Furthermore, whilst development is only a small part of our activities, we are
focusing on enhancing the sustainability features of our developments, future-proofing new buildings and
taking advantage of opportunities of the shift to a low carbon economy. During our investment process,
we are careful to review the locational risks, the fabric and the energy efficiency of potential acquisitions
to understand the climate and carbon-related risks and costs involved in rectifying those risks.
Risk Management
Disclosure of the
Company’s process
for identifying,
assessing and
managing climate
related risks
Climate related risks are considered by the Board who recognise that climate change is an increasingly
important priority. The Head of Responsible Business and the Finance Director update them on climate
related risks as well as opportunities. The Company is raising its understanding and assessing the potential
impact of physical changes, such as extreme weather and longer-term shifts in climate patterns, as well
as the transitional changes in terms of emissions pricing, costs from adopting lower emission technology,
regulation of products, legislative and consumer behaviour. Our risk register is regularly reviewed and
updated to keep track of the changing nature of these risks.
Page 60
Page 68
During the year, we started to analyse which acute and chronic physical climate risks are most likely to affect
our assets and identified flooding as the highest risk area. As a consequence, with the help of WSP, we carried
out an updated desktop flood analysis across the portfolio, adjusting historic data for future risk levels. The
results of this analysis are being processed and overlayed with further, more detailed site specific analysis
where appropriate. The work undertaken will allow us to more easily monitor future changes in flooding risk.
Further work will be undertaken to consider the impact of other climate change related risks and we will look
at how modelling of short, medium and long term horizons for increases in global temperatures could help us
in better understanding the risks to our portfolio. Over the year, we also increased our focus on the transitional
risks that impact our business with particular scrutiny of potential MEES legislative changes, which would
require a high level of energy efficiency at each asset by the end of the decade.
Metrics and Targets
Disclosure of metrics
and targets that
allow the Company
to assess and
manage climate-
related risks and
opportunities
The specific metrics that we use to assess climate-related risks and opportunities are tracked both within
the corporate risk management process and within our Responsible Business workstream. Relevant material
energy and carbon metrics, and EPC ratings, for our standing assets, are tracked and are reported within
the ‘Environmental’ section of this report on pages 48 to 51, along with BREEAM Very Good certification on
development activity. We report in line with EPRA Best Practice Recommendations on Sustainability Reporting
and issue our EPRA tables on our website: www.londonmetric.com/sustainability. We disclose Scope 1, Scope
2, and aspects of Scope 3 greenhouse gas (GHG) emissions in our carbon reporting table on page 51: our
absolute landlord-controlled carbon footprint has decreased significantly over the last six years and our like for
like carbon footprint has also materially reduced, particularly due to the shift to renewable electricity across
most of our portfolio. The relevant targets to manage climate-related risks and opportunities are detailed at
www.londonmetric.com/sustainability. Performance against our historic Responsible Business annual targets
is provided in our full Responsible Business report which is also available on our website and updated annually.
Page 47
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 60
Risk
Risk management
Risk management is critical for reducing
the negative impact that risk could have
on the Company’s strategic objectives and
for safeguarding stakeholders’ interests.
Our risk management approach
Our risk management structure is illustrated below:
Structure
Responsibility
– Overall responsibility for risk
management and internal controls
– Assess and monitor the business’s
long term viability
– Set strategic objectives and
consider risk as part of this process
– Determine appropriate risk
appetite levels
– Set delegated authority limits
for senior management
– Key oversight and assurance
function on risk management,
internal controls and viability
– Report to the Board on
the effectiveness of risk
management processes
Board
Audit Committee
– Identify, assess and quantify risk
– Implement and monitor risk
mitigation processes
Senior Leadership Team
The Board has overall responsibility
for establishing and maintaining a risk
management framework which is critical
to its decision making process and key to
the long term success and growth of the
business. This framework is designed to
give the Board confidence that risks with
the potential to cause material harm to its
operations and stakeholders are identified
and mitigated as far as possible. The Board
has a low risk appetite in respect of these
objectives but acknowledges that no
system can eliminate the inherent risk in
running the business entirely.
A culture of risk awareness is embedded in
the Company and within decision making
processes supported by robust systems for
the identification and management of risk.
At each meeting the Board considers risk
via a high level dashboard which enables
material issues to be monitored and new
and emerging risks to be identified early
with appropriate action taken to remove
or reduce their likelihood and impact.
The Audit Committee has a key oversight
and assurance role and assists the Board.
The Committee annually scrutinises
the Company’s risk register and seeks
comfort that the principal risks facing the
Company have been carefully identified,
assessed and mitigated and continue to
be monitored. The Committee also reviews
the effectiveness of the Group’s internal
controls including all material financial,
operational and compliance controls
which form part of the risk mitigation
framework. It does this by reviewing an
annual internal control evaluation report
completed by the Finance Director and
through the audit process which includes
an assessment of controls. Both the risk
register and the internal control evaluation
report were last considered by the Audit
Committee at its March 2020 meeting.
In addition, the Committee also received
a cyber security update from the Finance
Director at that meeting, which described
the penetration, social engineering and
LondonMetric Property PlcAnnual Report and Accounts 2020 disaster recovery testing undertaken in
the year to ensure that the Company’s IT
infrastructure and systems continue to be
robust and fit for purpose.
Based on its review and assessment,
the Audit Committee is satisfied that no
significant weaknesses were identified
in the Group’s internal control structure
during the year and that an effective
risk management system is in place.
The Committee’s findings have been
reported to the Board.
The Senior Leadership Team is comprised
of individuals with a breadth of skills and
experience from across the Company. It is
responsible for ongoing risk identification
and the design, implementation and
maintenance of a robust system of internal
controls in light of the risks identified.
Short reporting lines and low staff numbers
facilitate the early identification of risks and
the development of appropriate mitigation
strategies based on an assessment of the
impact and likelihood of a risk occurring.
The risk register is comprehensively
reviewed and updated at least annually
by the Company Secretary assisted by
members of the Senior Leadership Team.
Within the risk register, specific risks are
identified and their probability rated
by management as having either a high,
medium or low impact. A greater weighting
is applied the higher the significance
and probability of a risk. These weightings
are then mathematically combined to
produce an overall gross risk rating which
is colour coded using a traffic light system.
Risk specific safeguards are identified,
detailed in the register and rated as
strong, medium or weak. The stronger
the safeguard, the greater the weighting
applied. The gross risk rating and strength
Our three risk areas
of the safeguards against that risk are
then combined to produce a resultant
overall net risk. Consideration is given
to the implementation of further action
to reduce risk where necessary. Finally,
every risk is allocated an owner and
details of how the safeguards are
evidenced are noted.
Principal risks
Our principal risks and uncertainties are
identified and reported on in pages 64
to 75. These risks have the potential to
cause material harm to our operations
and stakeholders and could impact our
ability to execute our strategic priorities
or exceed the Board’s risk appetite.
Identifying emerging risk
Senior Leadership Team members are
closely involved in day to day matters
and have a breadth of experience
across corporate and regulatory, property,
banking, finance and risk management
matters. Each member, within their field
of specialism, considers emerging risks
that have the potential to adversely
impact the business or its stakeholders.
These risks are evaluated and monitored
at regular meetings held by the Senior
Leadership Team, with appropriate
mitigation measures implemented as
required. Significant emerging risks are
raised and discussed at Board level.
61
risks. Reports are also commissioned
and briefings arranged on wide ranging
pertinent topics to understand changes
within the real estate sector and the
wider economic outlook.
Changes in risk factors
COVID-19
COVID-19 has been introduced as a new
principal risk factor and is reported in more
detail on pages 64 to 65. The disruption
from COVID-19 and the risk of a prolonged,
severe economic downturn is such that
this risk is inextricably interlinked with
other principal risk categories.
At this stage it is too early to predict
COVID-19’s full impact on the business.
The impact on the macro-economy and
therefore tenants is the greatest challenge
facing the Company and dominates
management’s and the Board’s time.
It is also however creating opportunities.
We continue to operate against this
unprecedented economic and social
backdrop which is accelerating a number
of trends that were already in the system.
This is having a profound effect on real
estate as performances across sectors
continue to polarise. The structural trends
towards online and convenience that
have underpinned our conviction calls
into logistics and long income are set to
Senior management within the property
team have strong relationships, particularly
within retail, and regularly meet with
occupiers to understand their needs
and to gain insights into their businesses.
Management also have strong banking
relationships and more broadly, regularly
meet industry representatives, shareholders
and analysts. These relationships are one
of the key tools used to identify emerging
Whilst COVID-19 is
creating an economic
shock the Board believes
that the Company is well
placed to deal with the
current disruption and
opportunities it may bring.
We consider risks under three main headings but recognise that they are often interlinked.
1
Corporate
risks
Strategy, market,
economy, systems,
employees, wider
stakeholders,
regulatory, social
and environmental
responsibilities
2
Property
risks
These relate
to the entire
Group
Portfolio composition
and management,
developments,
valuation
and occupiers
These focus
on our core
business
3
Financing
risk
Investors,
joint ventures,
debt and cash
management
These focus
on how we
fund our
operations
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 62
Risk
Risk management continued
accelerate, as many temporary changes
from the pandemic are set to become
permanent with changes that were
expected to take years now occurring
within months.
Against this backdrop, our portfolio remains
well positioned and has continued to
perform strongly as borne out by our high
rent collection and continued dividend
payments. These uncertain times are starting
to give rise to quality investment opportunities
that are seldom available in a normalised
market. Through our occupier relationships
we have identified some excellent assets,
at attractive pricing, which would further
strengthen our portfolio’s long term income
characteristics. Not only do we expect
to see further opportunities arise but also
we expect competition to be less intense
than before with pricing reflective of this.
a strong financial position and looking
at ways of helping its communities.
International trade negotiations
following Brexit
On 31 January 2020, the UK left the EU
but substantial uncertainty remains over its
relationship with the EU and other nations
and the shape of future trade deals which
are still to be finalised. This has the potential
to further negatively impact the macro-
economic environment, in addition to
the impact from COVID-19 and could
affect the Company’s investment and
occupier market. The Board still ultimately
believes that the profound structural
changes described above, which are
being accelerated by COVID-19, will be
more important than the outcome of the
international trade negotiations on the
business longer term.
Whilst COVID-19 is creating an economic
shock the Board believes that the Company is
well placed to deal with the current disruption
and opportunities it may bring. It remains
focused on keeping its people safe, working
closely with occupiers, suppliers and other
stakeholders, continuing to maintain
Climate change
The risks to companies from climate
change are under ever greater scrutiny
and we have, for the first time, provided
a statement on page 59 that attempts
to adhere to the Task Force on Climate
related Financial Disclosure (TCFD).
Whilst we believe that we own resilient
assets, we started to assess the impact of
climate change on our properties, both
in terms of the risk of transitioning to a low
carbon economy and also the physical
risks resulting from climate change, as part
of our initial TCFD considerations during the
year. The Board’s primary consideration at
this stage has been assessing the impact
that climate change risk could have on the
liquidity of our assets. We have therefore
commissioned WSP, our environmental
due diligence advisor, to undertake a
desktop flood risk review across our entire
portfolio, to analyse the key risk of flooding.
We expect to receive their report back
shortly. This analysis will continue to be
updated at least annually. We have also
increased the scrutiny of the environmental
credentials of our buildings, attaching an
environmental risk rating to each asset.
Post mitigation residual risk
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.
Post mitigation residual risk
Corporate risks
1 Strategy
2 COVID-19
3 Economic and political factors
4 Human resources
5 Regulatory and tax framework
6 Responsible Business approach
7 Systems, processes and
financial management
Property risks
8 Investment
9 Development
10 Valuation
11 Transaction and tenant
Financing risk
12 Capital and finance
Change
in the year
No change
Increased risk
Decreased risk
New
Moderate
Moderate
2
3
4
5
6
10
11
9
1
7
8
12
y
t
i
l
i
b
a
b
o
r
P
Low
2
11
3
10
5
6
7
9
12
1
4
8
t
c
a
p
m
i
l
a
i
t
n
e
t
o
P
Low
LondonMetric Property PlcAnnual Report and Accounts 2020
63
Risk
Viability Statement
In accordance with the 2018 UK Corporate Governance
Code, the Board has assessed the prospects of the Group
over a period longer than the 12 months required by the
‘Going Concern’ provision. The Directors conducted this
review taking account of the Group’s financial position,
business strategy, principal risks and outlook.
Assessment of viability review period
The Board has determined that the
three year period to 31 March 2023 is an
appropriate period over which to assess
the Group’s viability, as in previous years,
for the following reasons:
• The Group’s financial business plan
and detailed budgets cover a rolling
three year period;
• It is a reasonable approximation of the
typical time it takes from committing
funds to development projects to
practical completion. The average
length of the Group’s developments
that completed in the year at Bedford,
Tyseley and Durham was ten months; and
• Three years is considered to be the
optimum balance between long
term property investment and the
difficulty in accurately forecasting
ahead given the cyclical nature
of property investment.
This period is reviewed and challenged
annually to ensure it remains appropriate.
In addition to the three year viability
assessment period, the Board considered
a number of other factors when assessing the
Group’s longer term prospects, including:
• The weighted average unexpired
lease length of 11.2 years;
• The longer term nature of some debt
facilities and a weighted average
debt maturity of 4.7 years; and
• The longer term investment horizon
and nature of the property cycle.
Assessment of prospects
The Group’s strategy is reviewed by the
Board at each meeting and extensively
at one meeting or lunch each year.
The business plan is structured around
the Group’s strategy and consists of
a rolling three year profit and cash flow
forecast, which factors in deals under
offer, committed developments and
also reinvestment plans.
The business plan considers capital
commitments, dividend cover, loan
covenants and REIT compliance metrics.
The Senior Leadership Team provides
regular strategic input to the financial
forecasts covering investment,
divestment and development plans
and capital allocation.
Forecasts are updated at least monthly,
and are reviewed against actual
performance and reported quarterly
to the Board. The corporate model has
been enhanced and rebuilt this year
by BDO LLP following the acquisition
of A&J Mucklow.
When assessing longer term prospects,
the Board is mindful of the following:
• Income certainty, with 55% of
the Group’s rental income benefiting
from contractual uplifts and an average
unexpired lease length of 11.2 years;
• A proven track record of executing
transactions, making good sector
choices and growing income;
• Substantial liquidity with undrawn
debt facilities and cash of £220 million;
• Headroom under loan covenants; and
• Past experience of raising debt and
equity finance, including the recent
£120 million equity raise.
Assessment of viability
The business plan was stress tested to
validate its resilience to a combination
of adverse movements in its principal
risks including:
• Changes to macro-economic
conditions including the impact of
the COVID-19 pandemic, affecting
rental income levels, property values,
transactions and developments;
• Challenges in the retail environment
including tenant failures impacting
occupancy levels and lettings;
• Changes in the availability of funds
and interest rates; and
• Changes in property market conditions
impacting reinvestment assumptions.
The sensitivity analysis involved modelling
a downside scenario reducing both
property values and rental income by
15%, removing uncommitted capital
expenditure and asset sales that had
exchanged or were in legals, and
assuming no new debt facilities were
entered into but existing revolving facilities
were renewed.
Throughout this downside scenario,
the Group had sufficient reserves to
continue in operation and remain
compliant with its banking covenants.
Property values would need to fall by
approximately 37% and rental income
fall by 58% to breach the gearing
and interest cover covenants under the
Group’s unsecured and private placement
debt facilities, that together account for
76% of the Groups borrowing including
its share of joint ventures.
This scenario testing, when combined
with the Group’s strong financial position,
March quarter rent collection evidence,
and mitigation actions available
including deferring non committed
capital expenditure and selling assets,
supports the Group’s ability to weather
the current economic uncertainties
caused by the COVID-19 pandemic and
over the longer term viability period.
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.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 64
Risk
Principal risks
Corporate risks
1.
Strategy
2.
COVID-19
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Strategic objectives
may be:
– Suboptimal returns
for shareholders
– Strategy and objectives are regularly reviewed by the
Board to adapt to change
– Inappropriate
for the current
economic climate
or market cycle
– Not achieved due to
poor implementation
– Missed opportunities
– Strong occupier and property relationships shape
– Ineffective
portfolio decisions
threat management
– Retail and logistics related research is commissioned
– Wrong balance
of skills and resources
for ongoing success
Impact on strategy
to assist strategic decision making
– The portfolio is UK based with the UK a world leader
in the online shopping market
– Regular and rigorous portfolio reviews take into
consideration sector weightings, tenant and geographical
concentrations, perceived threats and market changes,
the balance of income to non-income producing assets
and asset management opportunities
– The three year forecast is regularly flexed and reported
– A Senior Leadership Team comprises of departmental
heads from all key business functions with diverse skills
and experience
– Our organisational structure is relatively flat making it
easier to identify market changes and monitor operations
– Senior management are the Company’s eighth largest
shareholder, their interests aligned with external investors
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Global health and
economic crisis leading
to a severe downturn.
– Suboptimal returns
for shareholders
– Occupier demand
and solvency may
be impacted
– Asset liquidity
may reduce
– Debt markets may
be impacted
Impact on strategy
– We are working closely with and providing help to our
primary occupational partners who are sincere in their need
for assistance. This includes entering into a small number
of deferral deals and ‘win-win’ asset management initiatives
– We are heavily focused on working capital and capital
allocation and have put some discretionary expenditure
on hold
– We have limited exposure to development and development
supply chains at present
– We are maintaining significant shareholder engagement
during the lockdown period
– We invested in additional IT to enable all staff to work from
home before the government lockdown was initiated for
their safety
– The Senior Leadership Team meet remotely twice weekly
to discuss key operational and financial aspects integral
to the management of the business. This facilitates
communication between the different teams.
Other departmental committees also meet remotely
regularly each week
– The Executive Directors keep the Board informed through
remote briefings between Board meetings
– The Chief Executive provides weekly lockdown updates
to keep all staff informed and maintain team spirit
– We have significantly increased our weighting to our preferred,
structurally supported sectors. 70% of the portfolio is now
The Board view the
Company’s strategic
aligned to distribution, underpinned by modern shopping
priorities as fundamental
habits and 24% in long income in a market searching for yield
to its business and reputation.
– We have reduced our mega distribution exposure in the year
from 23% to 15% where a supply side response to demand
is tempering rental growth. This will reduce further when
more sales complete in June
– 35% of our portfolio is in urban logistics, up from 27% last year.
This is our largest sector exposure and one where demand
is rising but supply is severely restricted
– Net rental income has increased by 24% in the year,
predominantly through our acquisition of A&J Mucklow
– Dependency on our top ten occupiers has reduced from
51% to 36% and the granularity of our income has been
further improved
Decreased risk
Our investment activity
reduced this risk in the year
as we pivoted further into
our preferred, structurally
supported sectors which offer
superior growth prospects.
The probability of this risk
reducing further over
the next 12 months has
increased. We have an
expectation of being able
to source further high quality
investment opportunities.
Read more
Chief Executive’s review page 15
Property review page 26
– The macro environment is highly supportive of the right
real estate that can generate long and strong income.
COVID-19 and its economic
impact are outside the
We are actively executing on attractive long term investment
Company’s control.
We continue to focus on
what we can control within
the business. Our weighting
in structurally supported
sectors make us well-placed
to continue to flourish in
a recovery.
New principal risk
The timing and trajectory
of the economic recovery
is highly uncertain meaning
this remains a high risk.
Read more
Chief Executive’s review page 15
Responsible Business review page 45
opportunities alongside a high expectation of finding
additional and compelling opportunities in the near term
– COVID-19 is accelerating structural shifts which are likely to
become permanent. Within a two month period, for example,
Tesco have doubled their online capacity to 1.2 million weekly slots
– At the year end we had £220 million in cash and undrawn
facilities which provide flexibility and optionality. £75 million
was from a new, three year revolving credit facility from HSBC
completed in March. In March we also substituted assets into
our secured Helaba facility so that it could be fully redrawn
– In May 2020 we raised £120 million through an equity placing to
fund a pipeline of existing and potential investment opportunities
– In April we cancelled £350 million of interest rate swaps to provide
additional earnings headroom
– All staff have worked remotely and uninterrupted through the
lockdown period and a number of transactions have been
executed including a £120 million equity placing, post year end
acquisitions of £15 million, sales of £13 million and transactions
agreed or in legals in excess of £80 million
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
65
No change
Increased risk
Decreased risk
New
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– We have significantly increased our weighting to our preferred,
structurally supported sectors. 70% of the portfolio is now
aligned to distribution, underpinned by modern shopping
habits and 24% in long income in a market searching for yield
The Board view the
Company’s strategic
priorities as fundamental
to its business and reputation.
– We have reduced our mega distribution exposure in the year
from 23% to 15% where a supply side response to demand
is tempering rental growth. This will reduce further when
more sales complete in June
– 35% of our portfolio is in urban logistics, up from 27% last year.
This is our largest sector exposure and one where demand
is rising but supply is severely restricted
– Net rental income has increased by 24% in the year,
predominantly through our acquisition of A&J Mucklow
– Dependency on our top ten occupiers has reduced from
51% to 36% and the granularity of our income has been
further improved
Decreased risk
Our investment activity
reduced this risk in the year
as we pivoted further into
our preferred, structurally
supported sectors which offer
superior growth prospects.
The probability of this risk
reducing further over
the next 12 months has
increased. We have an
expectation of being able
to source further high quality
investment opportunities.
Read more
Chief Executive’s review page 15
Property review page 26
Impact
Mitigation
Commentary
Appetite
Change in the year
COVID-19 and its economic
impact are outside the
Company’s control.
We continue to focus on
what we can control within
the business. Our weighting
in structurally supported
sectors make us well-placed
to continue to flourish in
a recovery.
New principal risk
The timing and trajectory
of the economic recovery
is highly uncertain meaning
this remains a high risk.
Read more
Chief Executive’s review page 15
Responsible Business review page 45
– The macro environment is highly supportive of the right
real estate that can generate long and strong income.
We are actively executing on attractive long term investment
opportunities alongside a high expectation of finding
additional and compelling opportunities in the near term
– COVID-19 is accelerating structural shifts which are likely to
become permanent. Within a two month period, for example,
Tesco have doubled their online capacity to 1.2 million weekly slots
– At the year end we had £220 million in cash and undrawn
facilities which provide flexibility and optionality. £75 million
was from a new, three year revolving credit facility from HSBC
completed in March. In March we also substituted assets into
our secured Helaba facility so that it could be fully redrawn
– In May 2020 we raised £120 million through an equity placing to
fund a pipeline of existing and potential investment opportunities
– In April we cancelled £350 million of interest rate swaps to provide
additional earnings headroom
– All staff have worked remotely and uninterrupted through the
lockdown period and a number of transactions have been
executed including a £120 million equity placing, post year end
acquisitions of £15 million, sales of £13 million and transactions
agreed or in legals in excess of £80 million
1.
Strategy
Strategic objectives
– Suboptimal returns
– Strategy and objectives are regularly reviewed by the
may be:
– Inappropriate
for the current
economic climate
or market cycle
– Not achieved due to
poor implementation
for shareholders
Board to adapt to change
– Missed opportunities
– Strong occupier and property relationships shape
– Ineffective
portfolio decisions
threat management
– Retail and logistics related research is commissioned
– Wrong balance
to assist strategic decision making
of skills and resources
– The portfolio is UK based with the UK a world leader
for ongoing success
in the online shopping market
Impact on strategy
2.
COVID-19
Risk
Global health and
– Suboptimal returns
– We are working closely with and providing help to our
economic crisis leading
for shareholders
primary occupational partners who are sincere in their need
to a severe downturn.
– Occupier demand
and solvency may
be impacted
– Asset liquidity
may reduce
– Debt markets may
be impacted
Impact on strategy
– Regular and rigorous portfolio reviews take into
consideration sector weightings, tenant and geographical
concentrations, perceived threats and market changes,
the balance of income to non-income producing assets
and asset management opportunities
– The three year forecast is regularly flexed and reported
– A Senior Leadership Team comprises of departmental
heads from all key business functions with diverse skills
and experience
– Our organisational structure is relatively flat making it
easier to identify market changes and monitor operations
– Senior management are the Company’s eighth largest
shareholder, their interests aligned with external investors
for assistance. This includes entering into a small number
of deferral deals and ‘win-win’ asset management initiatives
– We are heavily focused on working capital and capital
allocation and have put some discretionary expenditure
on hold
– We have limited exposure to development and development
supply chains at present
– We are maintaining significant shareholder engagement
during the lockdown period
– We invested in additional IT to enable all staff to work from
home before the government lockdown was initiated for
their safety
– The Senior Leadership Team meet remotely twice weekly
to discuss key operational and financial aspects integral
to the management of the business. This facilitates
communication between the different teams.
Other departmental committees also meet remotely
regularly each week
– The Executive Directors keep the Board informed through
remote briefings between Board meetings
– The Chief Executive provides weekly lockdown updates
to keep all staff informed and maintain team spirit
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
66
Risk
Principal risks continued
Corporate risks
3.
Economic
and
political
factors
4.
Human
resources
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Economic and
political factors may
lead to a market
downturn or specific
sector turbulence.
Adverse outcome
of international
trade negotiations
following Brexit.
– Suboptimal returns
for shareholders
– Occupier demand
and solvency may
be impacted
– Asset liquidity
may reduce
– Debt markets may
be impacted
Impact on strategy
– We commission economic and market research to better
understand the potential impact of economic factors
on our tenants and preferred sectors
– Our strong occupier relationships provide market
intelligence and help us better understand our
tenants needs
– The majority of our portfolio is in resilient asset classes
with sustained demand for logistics, convenience retail
and long income
– We regularly monitor tenant and contractor
covenant strength
– We limit speculative development exposure and letting risk
– We maintain a high weighted average unexpired lease
term reducing reletting risk
– We have a low vacancy rate
– Income granularity reduces the impact of single tenant risk
– We have flexible funding arrangements with significant
headroom in covenant levels
Risk
Impact
Mitigation
Commentary
There may be an
inability to attract,
motivate and
retain high calibre
employees.
The business may lack
the skill set to establish
and deliver strategy
and maintain a
competitive advantage.
Impact on strategy
– Our staffing plan focuses on experience and expertise
necessary to deliver strategy
– Our organisational structure has clear responsibilities
and reporting lines
– Executive Directors and senior managers are incentivised
in a similar manner. Both have significant unvested share
awards in the Company. These incentivise long term
performance and retention, providing stability in the
management structure
– Remuneration arrangements are designed to attract
and retain high quality staff
– Annual appraisals identify training requirements
and assess performance
– Specialist support is contracted where appropriate
– Staff satisfaction surveys are undertaken and staff
turnover levels are low
– There is a phased refreshment plan for Non
Executive Directors
– We remain focused on fit for purpose distribution and long
The Board monitor political
income assets, including convenience and discount retail,
that allow us to take a longer term investment horizon to
and economic developments
which are outside of its control.
Focus remains on building
and maintaining a robust
‘all weather’ portfolio.
deliver reliable, repetitive and growing income
– Our portfolio metrics continue to be strong with occupancy
at 99% and an average unexpired lease length of 11.2 years.
Only 7% of rent expires within three years
– We increased contracted rent in the year from £90 million
to £123 million
– We have further diversified our tenant base this year
predominantly through the acquisition of A&J Mucklow
– At 31 March 2020 and after adjusting for the equity raise,
the Group’s gearing ratio for its unsecured and private
placement debt facilities, which represent 76% of debt drawn,
was 56% and significantly lower than the maximum limit of
125%, and its interest cover ratio was 4.3 times, significantly
higher than the minimum level of 1.5 times
– 54% of the Group’s total debt facilities are flexible unsecured
revolving credit facilities
– Our Executive Board was reduced in the year making it
more reflective of Company size. Valentine Beresford and
Mark Stirling stepped down at the AGM but remain as
Investment Director and Asset Director respectively. Both are
Appetite
The Board believes it is vitally
important that the Company
has the appropriate level
of leadership, expertise
members of the Senior Leadership Team which is responsible
and experience to deliver
for implementing strategy and running day to day operations
its objectives and adapt
– Succession planning remains high on the Board’s agenda
to change.
for the coming year
– Our designated workforce Non Executive Director met a group
of employees in the year to hear their views and concerns
– Flexible working was rolled out to all employees
– Ex-Mucklow staff share a similar ethos and have been
successfully integrated into the Company
Increased risk
Uncertainty remains over the
outcome of international trade
negotiations following the UK’s
exit from the EU. These could
further negatively impact the
economy in addition to the
severe economic shock from
COVID-19. We believe however
that profound structural
shifts in the retail landscape,
accelerated by COVID-19,
will be more important than
the outcome of the trade
negotiations in the medium
to long term.
Read more
Property review page 26
Change in the year
No significant change
There was no significant
change in perceived risk
during the year.
We do not anticipate
this risk factor will change
significantly in the next
12 months.
Read more
Our people page 54
Nomination Committee report page 97
Remuneration Committee report
page 112
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
67
No change
Increased risk
Decreased risk
New
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– We remain focused on fit for purpose distribution and long
income assets, including convenience and discount retail,
that allow us to take a longer term investment horizon to
deliver reliable, repetitive and growing income
– Our portfolio metrics continue to be strong with occupancy
at 99% and an average unexpired lease length of 11.2 years.
Only 7% of rent expires within three years
– We increased contracted rent in the year from £90 million
to £123 million
– We have further diversified our tenant base this year
predominantly through the acquisition of A&J Mucklow
– At 31 March 2020 and after adjusting for the equity raise,
the Group’s gearing ratio for its unsecured and private
placement debt facilities, which represent 76% of debt drawn,
was 56% and significantly lower than the maximum limit of
125%, and its interest cover ratio was 4.3 times, significantly
higher than the minimum level of 1.5 times
– 54% of the Group’s total debt facilities are flexible unsecured
revolving credit facilities
Risk
Impact
Mitigation
Commentary
– Our Executive Board was reduced in the year making it
more reflective of Company size. Valentine Beresford and
Mark Stirling stepped down at the AGM but remain as
Investment Director and Asset Director respectively. Both are
members of the Senior Leadership Team which is responsible
for implementing strategy and running day to day operations
– Succession planning remains high on the Board’s agenda
for the coming year
– Our designated workforce Non Executive Director met a group
of employees in the year to hear their views and concerns
– Flexible working was rolled out to all employees
– Ex-Mucklow staff share a similar ethos and have been
successfully integrated into the Company
The Board monitor political
and economic developments
which are outside of its control.
Focus remains on building
and maintaining a robust
‘all weather’ portfolio.
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.
Increased risk
Uncertainty remains over the
outcome of international trade
negotiations following the UK’s
exit from the EU. These could
further negatively impact the
economy in addition to the
severe economic shock from
COVID-19. We believe however
that profound structural
shifts in the retail landscape,
accelerated by COVID-19,
will be more important than
the outcome of the trade
negotiations in the medium
to long term.
Read more
Property review page 26
Change in the year
No significant change
There was no significant
change in perceived risk
during the year.
We do not anticipate
this risk factor will change
significantly in the next
12 months.
Read more
Our people page 54
Nomination Committee report page 97
Remuneration Committee report
page 112
3.
Economic
and
political
factors
Economic and
– Suboptimal returns
– We commission economic and market research to better
political factors may
for shareholders
understand the potential impact of economic factors
– Occupier demand
on our tenants and preferred sectors
and solvency may
– Our strong occupier relationships provide market
lead to a market
downturn or specific
sector turbulence.
Adverse outcome
of international
trade negotiations
following Brexit.
be impacted
– Asset liquidity
may reduce
– Debt markets may
be impacted
Impact on strategy
intelligence and help us better understand our
tenants needs
– The majority of our portfolio is in resilient asset classes
with sustained demand for logistics, convenience retail
– We regularly monitor tenant and contractor
and long income
covenant strength
– We limit speculative development exposure and letting risk
– We maintain a high weighted average unexpired lease
term reducing reletting risk
– We have a low vacancy rate
– Income granularity reduces the impact of single tenant risk
– We have flexible funding arrangements with significant
headroom in covenant levels
4.
Human
resources
There may be an
inability to attract,
motivate and
The business may lack
the skill set to establish
and deliver strategy
retain high calibre
and maintain a
employees.
competitive advantage.
– Our staffing plan focuses on experience and expertise
necessary to deliver strategy
– Our organisational structure has clear responsibilities
and reporting lines
Impact on strategy
in a similar manner. Both have significant unvested share
– Executive Directors and senior managers are incentivised
awards in the Company. These incentivise long term
performance and retention, providing stability in the
management structure
– Remuneration arrangements are designed to attract
and retain high quality staff
– Annual appraisals identify training requirements
and assess performance
– Specialist support is contracted where appropriate
– Staff satisfaction surveys are undertaken and staff
turnover levels are low
– There is a phased refreshment plan for Non
Executive Directors
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
68
Risk
Principal risks continued
Corporate risks
5.
Regulatory
and tax
framework
6.
Responsible
business
approach
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Non-compliance
with legal or
regulatory obligations.
– Reputational damage
– We monitor regulatory changes that impact our business
– The 2018 Code now applies to the Company
– Potential loss of
REIT status
with specialist support from lawyers and consultants
– We consider the impact of legislative changes on strategy
– Increased costs
– We have allocated responsibility for specific obligations
– Reduced access
to debt and
capital markets
– Fines, penalties,
sanctions
Impact on strategy
to individuals within the Senior Leadership Team
– Our health and safety handbook is regularly updated
and audits are carried out on developments to
monitor compliance
– 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
– External tax specialists provide advice
– Our REIT compliance is monitored
– A company-wide anti-bribery, anti-corruption, money
laundering and corporate culture seminar was held in the year
– We continued to undertake health and safety site audits on
our developments through an external specialist consultancy.
These included our smaller developments at Swindon and
Liskeard this year. Feedback has been positive and no
significant issues were identified
– We moved the residency of our legacy offshore subsidiaries
onshore to simplify the Group structure and operations
The Board has no appetite
where non-compliance
risks injury or damage to its
broad range of stakeholders,
assets and reputation.
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Non-compliance
with responsible
business practices.
– Reputational damage
– We monitor changes in law, stakeholder sentiment and
– We continue to meet with a large number of investors,
– Suboptimal returns
for shareholders
– Asset liquidity may
be impacted
– Reduced access
to debt and
capital markets
– Poor relationships
with stakeholders
Impact on strategy
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. We also consider our impact
on the environment and local communities
– Responsibility for specific obligations is allocated
to Senior Leadership Team members
– 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
– We consider environmental and climate change risk
relating to our assets
– We work with our occupiers to improve the resilience of
our assets to climate change and a low carbon economy
– Sustainability targets are set, monitored and reported
– Contractors are required to conform to our responsible
development requirements
The Board has a low tolerance
for non-compliance with
risks which impact reputation
and stakeholder sentiment
towards the Company.
seeing over 250 in the year
– We liaised with key A&J Mucklow investors as part of
the corporate acquisition
– We sought investor views on changes to the Remuneration
Policy and made adjustments based on feedback
– A COVID-19 Communities and Charity Committee is providing
community and NHS assistance funded in part through the
Board and key employees waiving 20% of their salary and fees
for three months
– We have not drawn on any of the government’s COVID-19
financial support measures
– Company-wide ESG training has been arranged
– We continue to score well in ESG benchmarks, such as maintaining
our GRESB Green star and a GRESB score of 71% (up from 67%
last year)
– 78% of developments completed or underway in the year are
expected to achieve a BREEAM Very Good rating
– We continue to improve the environmental credentials of
our buildings such as installing LED lighting (Primark) and expect
to install 1.5MW of solar PV capacity in 2021
– We are undertaking a flood risk review of our entire portfolio and
are looking at other climate related risks that could impact our
portfolio including all material physical and transactional risks
No significant change
The Board considers this risk
to have remained broadly
consistent during the year.
New regulations and evolving
best practice will continue
to impact the business.
We do not anticipate this risk
factor will change significantly
in the next 12 months.
Read more
Responsible Business review page 45
Financial review page 38
Increased risk
ESG significance continues
to increase for stakeholders,
particularly in relation to
climate change.
We anticipate that ESG risk,
particularly climate change
risk, will continue to increase
over the next 12 months.
Read more
Responsible Business review page 45
Our stakeholders page 87
TCFD page 59
Full Responsible Business report can be
found at www.londonmetric.com
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
69
No change
Increased risk
Decreased risk
New
5.
Regulatory
and tax
framework
with legal or
regulatory obligations.
– Potential loss of
REIT status
with specialist support from lawyers and consultants
– We consider the impact of legislative changes on strategy
– Increased costs
– We have allocated responsibility for specific obligations
– Reduced access
to debt and
capital markets
– Fines, penalties,
sanctions
Impact on strategy
to individuals within the Senior Leadership Team
– Our health and safety handbook is regularly updated
and audits are carried out on developments to
monitor compliance
– 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
– External tax specialists provide advice
– Our REIT compliance is monitored
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Non-compliance
– Reputational damage
– We monitor regulatory changes that impact our business
– The 2018 Code now applies to the Company
– A company-wide anti-bribery, anti-corruption, money
laundering and corporate culture seminar was held in the year
– We continued to undertake health and safety site audits on
our developments through an external specialist consultancy.
These included our smaller developments at Swindon and
Liskeard this year. Feedback has been positive and no
significant issues were identified
– We moved the residency of our legacy offshore subsidiaries
onshore to simplify the Group structure and operations
The Board has no appetite
where non-compliance
risks injury or damage to its
broad range of stakeholders,
assets and reputation.
No significant change
The Board considers this risk
to have remained broadly
consistent during the year.
New regulations and evolving
best practice will continue
to impact the business.
We do not anticipate this risk
factor will change significantly
in the next 12 months.
Read more
Responsible Business review page 45
Financial review page 38
6.
Responsible
business
approach
Non-compliance
with responsible
business practices.
– Suboptimal returns
for shareholders
– Asset liquidity may
be impacted
– Reduced access
to debt and
capital markets
– Poor relationships
with stakeholders
Impact on strategy
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– Reputational damage
– We monitor changes in law, stakeholder sentiment and
– We continue to meet with a large number of investors,
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. We also consider our impact
on the environment and local communities
– Responsibility for specific obligations is allocated
to Senior Leadership Team members
– 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
– We consider environmental and climate change risk
relating to our assets
– We work with our occupiers to improve the resilience of
our assets to climate change and a low carbon economy
– Sustainability targets are set, monitored and reported
– Contractors are required to conform to our responsible
development requirements
seeing over 250 in the year
– We liaised with key A&J Mucklow investors as part of
the corporate acquisition
– We sought investor views on changes to the Remuneration
Policy and made adjustments based on feedback
– A COVID-19 Communities and Charity Committee is providing
community and NHS assistance funded in part through the
Board and key employees waiving 20% of their salary and fees
for three months
– We have not drawn on any of the government’s COVID-19
financial support measures
– Company-wide ESG training has been arranged
– We continue to score well in ESG benchmarks, such as maintaining
our GRESB Green star and a GRESB score of 71% (up from 67%
last year)
– 78% of developments completed or underway in the year are
expected to achieve a BREEAM Very Good rating
– We continue to improve the environmental credentials of
our buildings such as installing LED lighting (Primark) and expect
to install 1.5MW of solar PV capacity in 2021
– We are undertaking a flood risk review of our entire portfolio and
are looking at other climate related risks that could impact our
portfolio including all material physical and transactional risks
The Board has a low tolerance
for non-compliance with
risks which impact reputation
and stakeholder sentiment
towards the Company.
Increased risk
ESG significance continues
to increase for stakeholders,
particularly in relation to
climate change.
We anticipate that ESG risk,
particularly climate change
risk, will continue to increase
over the next 12 months.
Read more
Responsible Business review page 45
Our stakeholders page 87
TCFD page 59
Full Responsible Business report can be
found at www.londonmetric.com
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
70
Risk
Principal risks continued
Corporate risks
7.
Systems,
processes
and financial
management
8.
Investment
risk
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Controls for
safeguarding assets
and supporting
strategy may be weak.
– Compromised
asset security
– Suboptimal returns
for shareholders
– The Company has a strong controls culture
– We have IT security systems in place with back up
supported and tested by a specialist advisor
– Our business continuity plan is regularly updated
– Decisions made on
inaccurate information
– Our property assets are safeguarded by
appropriate insurance
Impact on strategy
– 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
Property risks
– Our IT systems have allowed us to remain fully operational
during the COVID-19 shutdown
– Penetration, social engineering and disaster recovery testing
was undertaken in the year. No significant issues were identified
The Board’s appetite for such
risk is low and management
continually strives to monitor
and improve processes.
– An integrated sales ledger invoicing system has
been implemented
– Following our acquisition of A&J Mucklow we upgraded their
IT infrastructure and successfully integrated their property
and accounting records onto our systems
– Our corporate forecast model has been fully reviewed and
rebuilt by BDO LLP to incorporate A&J Mucklow and to streamline
its updating and flexing capacity
No significant change
There was no significant change
in perceived risk during the year.
We anticipate cyber risk may
rise over the next 12 months
as criminals look to exploit
increased home working in
response to COVID-19.
Read more
Audit Committee report page 104
Risk
Impact
Mitigation
Appetite
Change in the year
We may be unable
to source affordable
investment opportunities.
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
Commentary
through these
– We continue to build on our strong occupier, developer
The Board continues to focus
and industry relationships and attract off market opportunities
on having the right people
and funding in place to take
advantage of opportunities
as they arise.
– COVID-19 is presenting opportunities to invest in high quality
assets not generally available in a normalised market
– COVID-19 will impact the operational performance of
some competitors and their ability to make investments
in the near-term
– We remain disciplined and selective
Decreased risk
Our investment activity,
particularly the acquisition
of A&J Mucklow, enabled
us to pivot further into our
preferred sectors.
We anticipate this risk may
reduce further over the
next 12 months as a result
of increased opportunities
coupled with potentially
less competition.
Read more
Property review page 26
Mucklow in focus page 18
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
71
No change
Increased risk
Decreased risk
New
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– Our IT systems have allowed us to remain fully operational
during the COVID-19 shutdown
– Penetration, social engineering and disaster recovery testing
was undertaken in the year. No significant issues were identified
The Board’s appetite for such
risk is low and management
continually strives to monitor
and improve processes.
– An integrated sales ledger invoicing system has
been implemented
– Following our acquisition of A&J Mucklow we upgraded their
IT infrastructure and successfully integrated their property
and accounting records onto our systems
– Our corporate forecast model has been fully reviewed and
rebuilt by BDO LLP to incorporate A&J Mucklow and to streamline
its updating and flexing capacity
No significant change
There was no significant change
in perceived risk during the year.
We anticipate cyber risk may
rise over the next 12 months
as criminals look to exploit
increased home working in
response to COVID-19.
Read more
Audit Committee report page 104
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– We continue to build on our strong occupier, developer
and industry relationships and attract off market opportunities
through these
– COVID-19 is presenting opportunities to invest in high quality
assets not generally available in a normalised market
– COVID-19 will impact the operational performance of
some competitors and their ability to make investments
in the near-term
– We remain disciplined and selective
The Board continues to focus
on having the right people
and funding in place to take
advantage of opportunities
as they arise.
Decreased risk
Our investment activity,
particularly the acquisition
of A&J Mucklow, enabled
us to pivot further into our
preferred sectors.
We anticipate this risk may
reduce further over the
next 12 months as a result
of increased opportunities
coupled with potentially
less competition.
Read more
Property review page 26
Mucklow in focus page 18
7.
Systems,
processes
and financial
management
Controls for
safeguarding assets
and supporting
strategy may be weak.
– Compromised
asset security
– The Company has a strong controls culture
– We have IT security systems in place with back up
– Suboptimal returns
supported and tested by a specialist advisor
for shareholders
– Decisions made on
inaccurate information
– Our business continuity plan is regularly updated
– Our property assets are safeguarded by
appropriate insurance
Impact on strategy
– 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
8.
risk
Investment
We may be unable
to source affordable
Ability to implement
strategy and deploy
– Management’s extensive experience and their
strong network of relationships provide insight into
investment opportunities.
capital into value and
the property market and opportunities
earnings accretive
investments is at risk.
Impact on strategy
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
72
Risk
Principal risks continued
9.
Development
risk
10.
Valuation
risk
Impact
– Poorer than
expected performance
– Reputational damage
Impact on strategy
Property risks
Risk
– 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
Mitigation
Commentary
Appetite
Change in the year
– We only undertake short cycle and relatively de-risked
developments on a pre-let basis or where there is high
occupier demand
– Development exposure as a percentage of our
total portfolio is limited with larger projects, such as
Bedford Link and Tyseley, phased
– Development sites are acquired with planning
consent whenever 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 process includes tendering and the
use of highly regarded firms with proven track records
– We review and monitor contractor covenant strength
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Investments may
fall in value.
Pressure on NAV
growth and potentially
loan covenants.
Impact on strategy
– Our portfolio is pivoted towards structurally
supported sectors.
– 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. This reduces 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
– The majority of our assets are single let and operationally
light with little or no cost leakage
– We monitor tenant covenants and trading performance
The Board is willing to take
on limited new speculative
development following
letting progress made
during the year.
– Our development exposure is small at 2.4% of the portfolio
– We work with a limited number of contractors which helps
us to stay close to their operations. All have managed their
cash flows and COVID-19 risks well to date
– The majority of sites have remained open or have reopened
and are implementing COVID-19 social distancing measures
which adhere to government guidelines
– Only one small development has a longstop date expiring
within 12 months but is expected to complete before then
– Limited speculative development is planned in the
foreseeable future
– Only 15% of our developments that completed in the year
remain unlet and we have strong interest on the remaining units
– Phase I at Bedford Link is now fully let at an average rent
– No developments completing in the year were delayed
ahead of budget
or over budget
– Development budgets and cost monitoring procedures
are fully integrated with the accounting system
– Our year end coincided with the commencement of the
There is no certainty
Government instigated COVID-19 lockdown and increasing
that property values will
be realised. This is an
inherent risk in the industry.
economic uncertainty
– Our preferred sector assets have performed well and maintained
or increased in value with urban logistics providing the strongest
valuation contribution
– Certain sectors of the retail market have seen material valuation
falls and we expect values to weaken further. Our three remaining
retail parks represent just 3.6% of the portfolio and delivered
a total property return of -9.2%
– 55% of our income has contractual uplifts, 58% of which is
– Asset management initiatives added £5 million to contracted
rent including lettings on 2 million sq ft on average lease lengths
– Rent reviews on 3 million sq ft delivered a 12% uplift on a five
yearly equivalent basis, with urban logistics achieving average
inflation linked
of 12 years
uplifts of 24%
No significant change
There was no significant change
in perceived risk during the year.
Contractor insolvency risk
and supply chain disruption
may increase as a result of the
impact of COVID-19 over the
next 12 months. The Company
has however limited exposure
to development.
Read more
Developments page 36
Bedford Link case study page 33
Tyseley case study page 37
Increased risk
The impact of COVID-19
on the macro-economy
has increased this risk.
The majority of our portfolio
remains strategically aligned
to structurally supported
sectors where the prospects
for value preservation and
growth are significantly higher
than sectors which are not.
Read more
Property review page 26
Financial review page 38
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
73
No change
Increased risk
Decreased risk
New
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– Our development exposure is small at 2.4% of the portfolio
– We work with a limited number of contractors which helps
us to stay close to their operations. All have managed their
cash flows and COVID-19 risks well to date
– The majority of sites have remained open or have reopened
and are implementing COVID-19 social distancing measures
which adhere to government guidelines
– Only one small development has a longstop date expiring
within 12 months but is expected to complete before then
– Limited speculative development is planned in the
foreseeable future
– Only 15% of our developments that completed in the year
remain unlet and we have strong interest on the remaining units
– Phase I at Bedford Link is now fully let at an average rent
ahead of budget
– No developments completing in the year were delayed
or over budget
– Development budgets and cost monitoring procedures
are fully integrated with the accounting system
The Board is willing to take
on limited new speculative
development following
letting progress made
during the year.
No significant change
There was no significant change
in perceived risk during the year.
Contractor insolvency risk
and supply chain disruption
may increase as a result of the
impact of COVID-19 over the
next 12 months. The Company
has however limited exposure
to development.
Read more
Developments page 36
Bedford Link case study page 33
Tyseley case study page 37
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– Our year end coincided with the commencement of the
Government instigated COVID-19 lockdown and increasing
economic uncertainty
– Our preferred sector assets have performed well and maintained
or increased in value with urban logistics providing the strongest
valuation contribution
– Certain sectors of the retail market have seen material valuation
falls and we expect values to weaken further. Our three remaining
retail parks represent just 3.6% of the portfolio and delivered
a total property return of -9.2%
– 55% of our income has contractual uplifts, 58% of which is
inflation linked
– Asset management initiatives added £5 million to contracted
rent including lettings on 2 million sq ft on average lease lengths
of 12 years
– Rent reviews on 3 million sq ft delivered a 12% uplift on a five
yearly equivalent basis, with urban logistics achieving average
uplifts of 24%
There is no certainty
that property values will
be realised. This is an
inherent risk in the industry.
Increased risk
The impact of COVID-19
on the macro-economy
has increased this risk.
The majority of our portfolio
remains strategically aligned
to structurally supported
sectors where the prospects
for value preservation and
growth are significantly higher
than sectors which are not.
Read more
Property review page 26
Financial review page 38
9.
risk
Development
– Excessive capital
– Poorer than
– We only undertake short cycle and relatively de-risked
may be allocated
expected performance
developments on a pre-let basis or where there is high
– Reputational damage
occupier demand
Impact on strategy
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
10.
risk
Valuation
Investments may
Pressure on NAV
– Our portfolio is pivoted towards structurally
fall in value.
growth and potentially
supported sectors.
loan covenants.
Impact on strategy
– Development exposure as a percentage of our
total portfolio is limited with larger projects, such as
Bedford Link and Tyseley, phased
– Development sites are acquired with planning
consent whenever 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 process includes tendering and the
use of highly regarded firms with proven track records
– We review and monitor contractor covenant strength
– 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. This reduces 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
– The majority of our assets are single let and operationally
light with little or no cost leakage
– We monitor tenant covenants and trading performance
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
74
Risk
Principal risks continued
Property risks
11.
Transaction
and tenant
risk
12.
Capital and
finance risk
Risk
Impact
Mitigation
Appetite
Change in the year
Pressure on NAV,
earnings and potentially
loan covenants.
– We undertake thorough due diligence on all acquisitions
including legal and property, tenant covenant strength
and trading performance
Impact on strategy
– Tenant concentration within the portfolio is considered
for all acquisitions and leasing transactions
– We have a diversified tenant base and limited exposure
to occupiers in bespoke properties
– Asset management initiatives undergo cost benefit
analysis prior to implementation
– External advisors 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
Financing risk
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
The Company has
insufficient funds
and available credit.
Strategy implementation
is at risk.
Impact on strategy
– We maintain a disciplined investment approach with
competition for capital. Assets are considered for sale
when they have achieved target returns and strategic
asset plans
– 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
– A modest level of gearing is maintained
– 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. Chatham Financial provide
specialist hedging advice
Commentary
no significant arrears
– Our tenant default rate within the industry is low and we have
The Board has no appetite
– Rent collection has been strong despite the challenging
economic backdrop of COVID-19. As at the date of this report,
93% of rent due by 1 April has been received or is due to be
collected monthly. Short term rental deferrals have been
agreed on a further 2% and short term rental concessions
with compensatory asset management initiatives on an
– 18% of our rent is now paid monthly compared to 13% before
the COVID-19 pandemic. As at the date of this report, we have
collected 94% of monthly rent due over the two month period
additional 4%
to 25 May
for risk arising out of poor
due diligence processes on
acquisitions, disposals and
lettings. A degree of tenant
covenant risk and lower
unexpired lease terms are
accepted on urban logistics
assets where there is high
occupational demand,
redevelopment opportunity
or alternative site use.
Increased risk
The impact of COVID-19 has
increased tenant failure risk.
Read more
Chief Executive’s review page 15
Property review page 26
– We inherited a £60 million SWIP loan on our acquisition
of A&J Mucklow fixed at 3.51% until 2031
– In March we entered into a 3 year loan with HSBC for £75 million
on similar terms and pricing as our existing revolving credit facility.
This diversifies our lender base ahead of refinancing the main
facility within the next 18 months
– In May 2020 we extended Santander’s participation in our
main revolving credit facility by a year so that it matches that
of the majority of syndicate members
– Our debt maturity at the year end was 4.7 years
– We have substantial headroom under our financial loan
covenants. Loan to value is 35.9% (37.7% excluding disposals
with delayed completion) and the interest cover on unsecured
facilities is 4.3 times
The Board has no appetite
for imprudently low levels
of available headroom
in its reserves or credit lines.
The Board has some appetite
for interest rate risk and loans
cost benefit assessment
and takes into account that
not all loans are fully drawn
all the time.
No significant change
There was no significant change
in perceived risk during the year.
We do not anticipate this risk
factor will change significantly
Read more
Financial review page 38
are not fully hedged. This follows
in the next 12 months.
LondonMetric Property PlcAnnual Report and Accounts 2020
Our strategic priorities
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
75
No change
Increased risk
Decreased risk
New
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
– Property purchases
Pressure on NAV,
– We undertake thorough due diligence on all acquisitions
– Our tenant default rate within the industry is low and we have
earnings and potentially
including legal and property, tenant covenant strength
no significant arrears
– Rent collection has been strong despite the challenging
economic backdrop of COVID-19. As at the date of this report,
93% of rent due by 1 April has been received or is due to be
collected monthly. Short term rental deferrals have been
agreed on a further 2% and short term rental concessions
with compensatory asset management initiatives on an
additional 4%
– 18% of our rent is now paid monthly compared to 13% before
the COVID-19 pandemic. As at the date of this report, we have
collected 94% of monthly rent due over the two month period
to 25 May
The Board has no appetite
for risk arising out of poor
due diligence processes on
acquisitions, disposals and
lettings. A degree of tenant
covenant risk and lower
unexpired lease terms are
accepted on urban logistics
assets where there is high
occupational demand,
redevelopment opportunity
or alternative site use.
Increased risk
The impact of COVID-19 has
increased tenant failure risk.
Read more
Chief Executive’s review page 15
Property review page 26
Mitigation
Commentary
Appetite
Change in the year
– We inherited a £60 million SWIP loan on our acquisition
of A&J Mucklow fixed at 3.51% until 2031
– In March we entered into a 3 year loan with HSBC for £75 million
on similar terms and pricing as our existing revolving credit facility.
This diversifies our lender base ahead of refinancing the main
facility within the next 18 months
– In May 2020 we extended Santander’s participation in our
main revolving credit facility by a year so that it matches that
of the majority of syndicate members
– Our debt maturity at the year end was 4.7 years
– We have substantial headroom under our financial loan
covenants. Loan to value is 35.9% (37.7% excluding disposals
with delayed completion) and the interest cover on unsecured
facilities is 4.3 times
The Board has no appetite
for imprudently low levels
of available headroom
in its reserves or credit lines.
The Board has some appetite
for interest rate risk and loans
are not fully hedged. This follows
cost benefit assessment
and takes into account that
not all loans are fully drawn
all the time.
No significant change
There was no significant change
in perceived risk during the year.
We do not anticipate this risk
factor will change significantly
in the next 12 months.
Read more
Financial review page 38
11.
risk
Transaction
and tenant
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
loan covenants.
and trading performance
Impact on strategy
– Tenant concentration within the portfolio is considered
for all acquisitions and leasing transactions
– We have a diversified tenant base and limited exposure
to occupiers in bespoke properties
– Asset management initiatives undergo cost benefit
analysis prior to implementation
– External advisors 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
12.
Capital and
finance risk
Risk
The Company has
insufficient funds
and available credit.
Impact
is at risk.
Strategy implementation
– We maintain a disciplined investment approach with
competition for capital. Assets are considered for sale
when they have achieved target returns and strategic
Impact on strategy
asset plans
– 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
– A modest level of gearing is maintained
– 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. Chatham Financial provide
specialist hedging advice
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
76
Governance
Inside this section
Introduction from the Chair
77
Board leadership and Company purpose
Board of Directors
Management team
Our activities
Our purpose and culture
Our stakeholders
Division of responsibilities
Leadership framework
Leadership roles and responsibilities
Composition, succession and evaluation
Nomination Committee report
Audit, risk and internal control
Audit Committee report
Remuneration
Remuneration Committee report
Directors’ Remuneration Policy
Annual Report on Remuneration
Report of the Directors
Report of the Directors
Directors’ Responsibility Statement
80
82
84
86
87
93
94
97
104
112
119
130
140
144
LondonMetric Property Plc
Annual Report and Accounts 2020
Our governance framework
underpins the way we
manage our business and
supports the successful
delivery of our strategy.
It guides our ability to operate
in a way that is both legally
compliant and responsible,
and is embedded into
our day to day business
operations.
This report sets out the
Company’s governance
policies and practices and
explains how we discharge
our duties, apply the
principles and comply with
the provisions of the Code.
Patrick Vaughan
Chair
Introduction from the Chair
77
report that we have complied with the
provisions throughout the year under
review, except for Provision 19 in relation
to the length of my tenure, which is fully
explained in the Nomination Committee
report on page 97.
Mucklow in focus
The most significant transaction in
the year was the corporate acquisition
of the A&J Mucklow Group as explained in
the case study on page 18. This transaction
was a fantastic opportunity to bring
together like-minded individuals, cultures
and real estate and we welcomed
a small team of talented employees
to LondonMetric.
As stewards of the Company,
we are responsible to our
shareholders, customers,
employees and other
stakeholders for its long
term success.
Patrick Vaughan
Chair
Read more on Mucklow in focus
on page 18
Good governance principles and
practices are at the heart of a well run
business and drive its long term success.
Your Board remains committed to leading
by example and upholding the highest
standards of governance that we have
set in the past.
The Board provides leadership and
direction to the business, establishes
and fosters the culture, values and ethics
within, and independently oversees
management’s execution of strategy
within an acceptable risk management
and internal control framework.
As stewards of the Company, we are
responsible to our shareholders, customers,
employees and other stakeholders for
its long term success.
We recognise that, as guardian of
our culture, the Board plays a vital role in
defining the way in which we do business
and sets the tone for the Company.
Its attitude and mindset to do what is right
shapes the environment within which
the executive team works and the way
it behaves towards its stakeholders.
This culture permeates throughout the
organisation by the close involvement of
the Senior Leadership Team in day to day
operations. It is my role as Chair to lead
and manage the Board, and promote its
culture and thinking beyond the boardroom
and throughout the organisation.
We continued the work started last year
to consider the new provisions and themes
of the 2018 UK Corporate Governance
Code (‘Code’), which is effective for the
first time this year. I am pleased to
Board changes and succession
As outlined last year and following a review
of the size and composition of the Board,
Valentine Beresford and Mark Stirling
stepped down from the Board in July 2019
but remained as Investment and Asset
Directors respectively and members of
the Senior Leadership Team responsible
for running the business. They continue
to provide valuable contributions to
Board discussions.
It was also agreed last year that
Robert Fowlds, who joined in January
2019 as a Non Executive Director, would
replace James Dean as Remuneration
Committee Chair after serving 12 months
as a member. James agreed to continue
in his role until this time to facilitate an
orderly transition.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
78
Introduction from the Chair continued
This year, we have decided to retain James
as Remuneration Committee Chair until
the AGM to facilitate the implementation
of the new Remuneration Policy and
provide continuity for shareholder liaison.
James will step down from the Remuneration
Committee but continue as a Non Executive
Director. Although his tenure could appear
to compromise his independence under
Provision 10 of the Code, the Board values
his in depth property expertise, insights
and the challenge and sound judgement
he brings to meetings. We firmly believe
he acts in an independent manner at
all times and have treated him as such in
our calculations of Board independence in
accordance with the Code. The Nomination
Committee will continue its search for a
suitable replacement, prioritising candidates
with a similar level of property expertise
and experience.
Our work on succession planning and
developing talent will continue to be
a key area of focus for the Nomination
Committee to support the Company’s
long term plans. We will remain mindful of
the benefits of a diverse Board as we search
for suitably experienced replacements.
Purpose and culture
We believe that leading by example and
creating an open, honest and inclusive
working environment allows employees to
fulfil their potential and successfully deliver
our strategic objectives. The acceptable
way of doing things has to be set from
the top, particularly by the Senior
Leadership Team.
Last year we took steps to define and
document our purpose and values, as
reflected on page 01. This year, the Board
reviewed the alignment of its purpose,
values and strategy with the culture
and behaviour displayed throughout
the organisation, which was assessed by
the Senior Leadership Team’s review of
the results of the second staff survey and
reported by the designated workforce Non
Executive Director to the Board. The results
of this survey are set out in the employee
engagement section on page 90.
A third employee survey was completed by
staff in March and the details are reflected
in the Responsible Business review on page
55. The Board has reviewed the results and
will consider the conclusions drawn and
any recommendations for improvements
to working practices over the next year.
Our culture is a key strength and we
are proud of our high staff retention rates
and contented workforce. Our employees
have a clear understanding of our strategy
and are engaged and committed to
delivering it.
We have set out our purpose on page
01 and how this is delivered through
our strategic priorities on page 14 and
business model on page 22.
Further reading on pages 01 – 09
Our purpose
To own and manage desirable
real estate that meets occupiers’
demands, delivers reliable, repetitive
and growing income-led returns
and outperforms over the long term.
S172 Statement and understanding
our stakeholders
The new Code and Miscellaneous Reporting
Regulations require us to demonstrate
how we have discharged our duty under
S172 Companies Act 2006 and report
our compliance formally in a statement,
which we have set out on page 52.
This statement formalises and articulates
practices we have been following implicitly
for many years. We already recognise
as a strategic priority the importance of
building relationships with our stakeholders,
as described on pages 06 to 07, and a
responsibility the Board takes very seriously.
We are here not only to generate financial
returns for shareholders but also to act
responsibly and in the best interests of all
of our stakeholders, the communities in
which we operate and wider society.
Our commitment to being both a
responsible employer and partner has
been demonstrated during the recent
unprecedented disruption caused to our
everyday lives by the COVID-19 pandemic.
Our focus has been on the safety of our staff,
occupiers and other stakeholders and
we have worked closely with our tenants
and sought to provide workable solutions
to those most affected and in need.
All employees have been successfully
working remotely without interruption.
We have initiated an employee-led
COVID-19 Communities and Charity
Committee and have provided financial
and other assistance and support to those
in need, including the provision of short
term rent free accommodation to Core
Group to help with the construction of
the Nightingale Hospital at the NEC in
Birmingham. Further details on our support
effort can be found on page 57.
On pages 87 to 92 we set out our key
stakeholders, why they are important to us,
how we engage with them and how they
have influenced the Board’s decisions.
This, together with consideration of the
long term consequences of our decisions
and maintaining high standards of
business conduct, is integral to the way
the Board operates.
We value the support and engagement
we have with all of our shareholders
and are proud of our comprehensive
investor relations programme. We have
seen much greater focus this year from
investors on the ESG agenda. We respond
to all enquiries we receive and will be
undertaking a company-wide training
session on ESG matters when lockdown
restrictions are lifted, to raise awareness
and discuss specific initiatives and
projects in hand.
Last year we appointed Andrew Livingston
as the designated workforce Non Executive
Director with responsibility for employee
engagement matters in accordance
with the Code. He has played an active
role this year, hosting an informal lunch
for a small group of employees away
from the office environment providing a
forum for employees to share their views,
raise any concerns they may have and
improve links between employees and
the Board. He also reviewed the results
of the employee surveys and fed back
conclusions to the Board. Further details
of employee engagement and well-being
can be found on page 90 and in the
Responsible Business review on
pages 54 to 55.
Read more on S172 Statement on page 52
Read more on Responsible
Business review on page 45
Read more on employee and
investor engagement on page 87
LondonMetric Property PlcAnnual Report and Accounts 2020
79
Diversity and inclusion
We look to employ and retain a diverse
group of talented individuals with a wide
range of skills, expertise and beliefs, and
to operate in a working environment free
of discrimination. We recognise that a
diverse organisation brings a wide range
of perspectives and avoids narrow thinking.
The Company’s Diversity and Inclusion
Policy, which can be found on our website,
guides new appointments and we actively
engage with recruiters to promote diversity
in candidate selection.
We continue to support initiatives including
Real Estate Balance, to promote gender
diversity in the real estate sector. Our low
staff turnover is something we are proud
of. However it also constrains the pace of
change as opportunities are dependent
upon staff vacancies arising as well as
the availability of suitable candidates.
To the extent that we have the opportunity,
we are committed to improving diversity
in its widest sense at all levels throughout
the organisation.
There has been an ongoing commitment
to strengthen female representation at
Board level, which has increased from 9%
in 2017 to 25% today, which is just marginally
below the Hampton Alexander target of 33%
to which we aspire. Female representation
throughout the Company has increased
this year to 45%.
Performance evaluation
This year, the evaluation of Board and
Committee effectiveness was carried
out internally. Next year we will commission
a full external review in accordance with
our three year cycle. The findings and
recommendations of this year’s review
and progress against the recommendations
made last year are summarised in the
Nomination Committee report on page 97.
The Directors agreed that the Board
and its Committees continue to work
well together, in an open and supportive
environment and with the right balance
of skills, knowledge and experience to
undertake its duties. I would like to extend
my thanks to my fellow Board members
for the valuable contribution they
each make.
Remuneration Policy
This year the Remuneration Committee
Chair has written to our largest shareholders
as part of the consultation process on
a new Remuneration Policy, which is set
out in detail on page 119. The key issues
raised by shareholders related to the
post-cessation shareholding requirement,
the alignment of pension contributions
and the bonus deferral opt-out. The final
proposed Policy, which we hope will be
supported by our shareholders at the
2020 AGM, took into consideration all
key issues raised and amended certain
provisions accordingly. We believe the new
Policy achieves a balance between fairly
rewarding the Executive Directors as well as
encouraging alignment with shareholders,
and demonstrates our commitment to
ensuring pay at LondonMetric is in line
with the Code.
Reporting
This year, as part of our commitment to
working with our wider stakeholder group
to improve the environment, we have
decided to use the authority in our Articles
to move away from the paper version of
this report and ask shareholders to instead
view it electronically online by visiting our
website. Those wishing to receive a hard
copy report have been accommodated
and this will be sent at least 20 working
days before the AGM.
We strive each year to improve the
transparency and clarity of our reporting
to you and are proud that last year we
received EPRA Gold Awards for both
our sustainability and financial reporting.
Looking ahead
We spend a great deal of time at each
Board meeting discussing the wider
economic, political and property markets
and challenges we face, ensuring we
respond to opportunities and remain
resilient. Most recently, our focus has
been the threat of COVID-19 and the
significant and widespread disruption
this outbreak has brought to our everyday
lives. Our flexible working policy meant
that we were well equipped to continue
our operations remotely and all employees
have continued to work throughout the crisis.
The health and well-being of our staff and
their families is our top priority and we have
and will continue to take whatever measures
are necessary to safeguard employees.
Having a clear strategy, experienced
team and strong balance sheet, puts us
in a good position to navigate through
these unprecedented times.
We are proud to have a small, highly
focused and close knit team of individuals
at LondonMetric with strong real estate
and financial expertise. We recognise
that our success would not be possible
without them.
On behalf of the Board, I would like
to thank each and every one of our
employees for their contribution and
commitment over the past year. I am
delighted to be continuing as Chair
and look forward to the year ahead.
Patrick Vaughan
Chair
10 June 2020
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 July 2018, publicly available at www.frc.org.uk.
The Board considers that the Company has complied with the provisions set out in
the Code throughout the year under review and to the date of this report, except for
Provision 19 relating to the tenure of the Chair, which is fully explained in the Nomination
Committee report on page 97. An explanation of how the Board has applied the
principles of the Code is contained in the governance section that follows.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
80
Board leadership and Company purpose
Board of Directors
The Board provides leadership and direction
to the business as a whole, having due regard
to the views and interests of its stakeholders
and the environment within which it operates.
7
6
4
5
8
2
1
3
From left to right:
Andrew Livingston, Robert Fowlds, Suzanne Avery, James Dean, Rosalyn Wilton, Andrew Jones, Patrick Vaughan, Martin McGann.
1. Patrick Vaughan
Chair of the Board and
Nomination Committee
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 Chair, becoming Non Executive
Chair 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 (Chair)
2. Andrew Jones
Chief Executive
3. Martin McGann
Finance Director
Appointed: 25 January 2013
Appointed: 13 January 2010
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:
None
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
LondonMetric Property PlcAnnual Report and Accounts 2020 81
4. Suzanne Avery
Independent Director
7. Andrew Livingston
Independent Director
Appointed: 22 March 2018
Appointed: 31 May 2016
Board independence
71%
Female representation
25%
Skills and experience:
Andrew was appointed to the Board in
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:
Audit Committee and
Nomination Committee
8. Rosalyn Wilton
Independent Director
Chair of Audit Committee
Appointed: 25 March 2014
Skills and experience:
Rosalyn was appointed to the Board of
LondonMetric in March 2014, becoming
Chair 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, Chair 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 Senior
Leadership Team.
Other appointments:
Deputy Chair of the University of London,
Vice Chair of the Harris Federation and
Chair of Governors of Harris Academy Bromley
Board Committees:
Audit Committee (Chair) 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,
Remuneration Committee and
Nomination Committee
5. James Dean
Independent Director
Chair of Remuneration Committee
Appointed: 29 July 2010
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 Chair of London &
Lincoln Properties Ltd and Patrick Dean Ltd
Board Committees:
Remuneration Committee (Chair)
6. Robert Fowlds
Senior Independent Director
Appointed: 31 January 2019
Skills and experience:
Robert was appointed to the Board in January
2019. He has over 35 years’ experience in real
estate and is a chartered surveyor. He was
head of real estate investment banking at J.P.
Morgan Cazenove until 2015 and, prior to
joining J.P. Morgan Cazenove in 2006, an
equity analyst at Merrill Lynch and Dresdner
Kleinwort Benson.
Other appointments:
Member of the Supervisory Board of
Klepierre S.A and Non Executive Director
of UK Commercial Property REIT Limited
Board Committees:
Audit Committee and
Remuneration Committee
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 82
Board leadership and Company purpose
Management team
The Senior Leadership Team operates under the
direction and leadership of the Chief Executive
to deliver the approved strategic objectives and
manage the day to day running of the business.
Our management team comprises
departmental heads from all key business
functions with a diverse range of skills
and experience.
The members and respective roles of the
Senior Leadership Team are listed below,
along with the dates they joined
the organisation.
3. Valentine Beresford
Investment Director
Joined: 24 March 2010
Throughout the recent disruption caused
by the COVID-19 pandemic, the Senior
Leadership Team has met remotely twice
each week to discuss the key operational and
financial aspects integral to the management
of the business. This has worked extremely
well and has facilitated talent development
below Board level and communication
between the different teams. There are
informal and off site meetings at other times
and due to the size of the organisation, the
Executive Directors and Senior Leadership
Team are involved in all significant business
discussions and decisions.
The team meets to discuss the evolution of
strategy, financial and operating targets
and performance, investment opportunities,
allocation of capital and employee matters.
It is supported by three sub-committees, each
focusing on different areas of the business:
the Investment, Asset Management and
Finance Committees, which meet regularly
and at least monthly. During the recent
COVID-19 pandemic, all staff have been
working remotely and Committees have
met by way of video conference calls two
or three times each week.
1. Andrew Jones
Chief Executive
Full biography page 80
Management Committees:
Investment Committee,
Asset Management Committee,
Finance Committee
2. Martin McGann
Finance Director
Full biography page 80
Management Committees:
Finance Committee
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. 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.
Management Committees:
Investment Committee
4. Mark Stirling
Asset Director
Joined: 24 March 2010
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. 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.
Management Committees:
Asset Management Committee
5. Andrew Smith
Strategy Director
Joined: 6 May 2014
Skills and experience:
Andrew joined LondonMetric in May 2014
from The British Land Company PLC where
he worked for nine years. Previously Andrew
worked for Pillar. At British Land he was
a senior member of the retail team and
Head of Investment Portfolio Management.
Since joining LondonMetric, Andrew has been
increasingly responsible for the Company’s
strategy and portfolio management as well as
its joint ventures, which he continues to fulfil.
Management Committees:
Investment Committee,
Asset Management Committee
LondonMetric Property PlcAnnual Report and Accounts 2020
83
6. Jadzia Duzniak
Company Secretary
Joined: 23 April 2007
Skills and experience:
Jadzia joined London & Stamford in 2007
prior to its IPO and became Company
Secretary on merger with Metric in 2013.
Jadzia is a qualified Chartered Accountant
and her role extends to corporate finance
and banking arrangements and transactions.
Management Committees:
Finance Committee
7. Jackie Jessop
Head of Finance
Joined: 1 March 2006
Skills and experience:
Jackie joined London & Stamford as
Financial Controller on its inception in
2006 having worked previously for Pillar
as Financial Controller. She became
Head of Finance at LondonMetric in 2013.
Jackie is a qualified Chartered Accountant
and is responsible for all aspects of financial
management and reporting.
Management Committees:
Finance Committee
8. Will Evers
Head of Long Income
Joined: 17 May 2010
Skills and experience:
Will joined Metric from inception in 2010
having previously worked at LaSalle
Investment Management and Bear Stearns.
Will’s primary focus is to source and execute
investment opportunities whilst having
responsibility for the portfolio management
and performance of the long income and
retail portfolio.
Management Committees:
Investment Committee
9. Nick Minto
Portfolio Management Executive
11. Ritesh Patel
Forecasting and Corporate Finance
Joined: 15 June 2011
Joined: 21 November 2011
Skills and experience:
Nick joined Metric as an Investment Analyst
in 2011. Following the merger in 2013,
Nick’s role has grown to incorporate
wider corporate, strategy and portfolio
management activity across the portfolio.
Nick is day to day responsible for the
portfolio management and performance
of the logistics portfolio. More recently,
the Company has supported Nick through
an EMBA programme.
Skills and experience:
Ritesh is a Chartered Accountant
and joined London & Stamford in 2011
having previously qualified with BDO LLP.
Ritesh is responsible for the corporate
forecasting model and also is an integral
part of the banking and corporate
finance team.
Management Committees:
Finance Committee
Management Committees:
Investment Committee
10. Gareth Price
Head of Investor Relations
Joined: 5 January 2015
Skills and experience:
Gareth joined LondonMetric in 2015 having
previously worked in corporate broking
at Cantor Fitzgerald and Oriel Securities.
He supports the Executive Directors
at shareholder roadshows and events
and also heads our Responsible Business
and Sustainability team.
Management Committees:
Finance Committee
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 84
Board leadership and Company purpose
Our activities
How the Board spent its time in 2020
Strategy & Operations
– Debated the property market outlook
and trends, focusing on the logistics
and long income sectors and the
economic and political landscape
at each meeting including Brexit and
the COVID-19 pandemic
– Approved major capital expenditure
and development projects including
at Goole and Bedford
– Approved property acquisitions and
disposals in excess of £10 million including
the corporate acquisition of Mucklow,
portfolios of IMO and Kwik Fit assets
and disposals in Newark, South Elmsall
and Doncaster
– Approved an increased equity
holding in our DFS joint venture
Finance & Risk
– Reviewed quarterly
performance against budgets
and analyst consensus
– Reviewed the rolling three year
financial forecasts, going concern
and the Viability Statement
– Approved the full year and half
year results and the Annual Report
People
– Received updates on the integration
of former Mucklow employees following
the acquisition
– Andrew Livingston continued work as
designated workforce Non Executive
Director, including hosting an informal
lunch outside of the office for a small
group of employees
– Reviewed the culture of the business
by considering the results of the annual
staff survey
– Half yearly presentation of results
to all staff
– Considered workforce remuneration
policies and packages and
alignment to Executive Directors
– Weekly updates from the Chief Executive
during the COVID-19 pandemic and
period of remote working
Strategy &
Operations
Finance
& Risk
The
Board
People
Governance,
Leadership &
Regulatory
Other
Stakeholders
Other stakeholders
– Considered feedback from Executive
Directors following shareholder meetings,
roadshows and results presentations
– Shareholder consultation on the
new Remuneration Policy proposals
– Considered S172 Statement and
Directors’ duty in relation to stakeholders
and implications for decision making
practices and processes
– Property tours of assets and
developments in Birmingham and
Bedford for Non Executive Directors
and in Crawley, Frimley and
Weybridge for investors
– Received Responsible Business
update including progress against
annual targets
– Approved electronic communication
of Annual Report
LondonMetric Property PlcAnnual Report and Accounts 2020
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
– Scrutinised the interim and
annual property valuations
– Annual review of the internal
control framework, risk register
and mitigation strategies
– Risk dashboard considered at each
Board meeting highlighting emerging
risks including political, environmental,
cyber and COVID-19
– Considered and approved
quarterly dividend, scrip and PID
– Approved the buyback and cancellation
of listed preference shares acquired as
part of the Mucklow acquisition
– Received a debt update paper from
the Finance Director on current and
proposed financing arrangements and
new LIBOR replacement regulations
Governance, Leadership & Regulatory
– Corporate governance update
paper received, reviewing compliance
with new provisions of the 2018 Code
– Approved tax strategy and
Whistleblowing Policy
– Approved updated Committee
terms of reference to incorporate
the 2018 Code
– Internal Board and Committee
performance evaluation and
review of results
– Reviewed succession planning and
considered tenure of James Dean
and Patrick Vaughan as independent
Non Executive Directors
– Approved appointment of Robert Fowlds
as Remuneration Chair following this
year’s AGM
– Continued support to Real Estate
Balance group promoting gender
diversity in the sector
85
In addition to the regular work of
the Board, the following key focus
areas in 2020 and planned for
2021are listed below.
Key activities in 2020
Approved the corporate acquisition
of A&J Mucklow Group and
monitored the staff and systems
integration processes
Further work on Company purpose
and monitoring culture though
employee surveys
Employee engagement by
the designated workforce
Non Executive Director
New Remuneration Policy and
consultation with shareholders
Considered independence and
tenure of Non Executive Directors
and approved Robert Fowlds
to succeed James Dean as
Remuneration Committee Chair
following AGM
Internal Board and Committee
performance evaluation
Key focus in 2021
Continue work on succession
planning for the Board and on
improving diversity at all levels
Continue to monitor the impact
of the COVID-19 pandemic on
strategy and working practices
External review of Board and
Committee performance
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 86
Board leadership and Company purpose
Our purpose and culture
To own and manage desirable real estate
that meets occupiers’ demands, delivers
reliable, repetitive and growing income-led
returns and outperforms over the long term.
Our purpose sets out to employees,
occupiers and others stakeholders
what we do and why. It underpins
our strategic priorities and long term
direction. Our values articulate what we
believe in and underpin our responsible
approach to business. Our culture guides
the way we work and our relationships
with stakeholders.
We strive to operate in an open, honest
and respectful manner, listening and
engaging with stakeholders and acting
with integrity to deliver our strategic
objectives. We believe in a ‘can do’
attitude, doing the right thing for the
long term, through empowerment,
inclusion, openness and teamwork.
The Board believes that the culture
of the business, alongside its values,
are the ultimate drivers of long
term success.
As Chair of the Board, I am responsible
for fostering the culture and values
of the Board and wider organisation.
When hosting Board meetings, I facilitate
a collaborative atmosphere in which all
Directors are able to voice their opinions
and contribute to the debate. The ability
for Board members to speak freely in
a supportive environment is crucial for
effective decision-making.
This culture and thinking permeates
through the organisation through the close
interaction of the Executive Directors and
Senior Leadership Team in day to day
activities. The tone is set from the top and
delegated to the Senior Leadership Team
who lead by example. Strong relationships
have been formed by staff over several
years of working together and processes
are well understood and adhered to
after many years of consistent application.
Our culture is a key strength and we benefit
from and are proud of our high staff
retention rates and contented workforce.
Our employees have a clear understanding
of our strategy and are engaged and
committed to delivering it.
Last year we took steps to define and
document our purpose and values,
as reflected on pages 01 to 09. This year,
the Board reviewed the alignment of
its purpose, values and strategy with
the culture and behaviour displayed
throughout the organisation.
Culture was assessed by the Senior
Leadership Team’s review of the results
of the second staff survey, which is
explained in detail on page 90.
These results were presented to the Board
by Andrew Livingston as the designated
workforce Non Executive Director,
who was pleased to note the top three
responses from employees when asked
to describe the Company’s culture as
being friendly, driven and collaborative.
If the Board is concerned that policy,
practices or behaviour are not in line
with the Company purpose, values or
strategy it will seek assurance from the
Senior Leadership Team that it has taken
corrective action. There were no concerns
raised in this regard in the year.
The Board and Senior Leadership
Team also monitors staff turnover rates,
whistleblowing incidents and customer
satisfaction surveys to assess and support
the alignment of culture and behaviour
across the Group with its purpose,
values and strategy.
Further details of the staff surveys and
employee well-being can be found
in the Responsible Business review on
pages 54 and 55 and in the employee
engagement section of this Governance
report on page 90.
We strive to operate
in an open, honest and
respectful manner, listening
and engaging with
stakeholders and acting
with integrity to deliver
our strategic objectives.
Patrick Vaughan
Chair
Our purpose
What we do and why
See page 01
Our values
What we believe in
See pages 02 – 09
Our culture
The way we work
See pages 54 – 55 and page 90
LondonMetric Property PlcAnnual Report and Accounts 2020
Board leadership and Company purpose
Our stakeholders
Our approach to business builds and
maintains the trust of our key stakeholders,
and underpins the delivery of our
strategic priorities.
Building relationships with our stakeholders
is a strategic priority as described on
pages 06 to 07 and integral to our business
model as shown on pages 22 to 23.
We believe that in order to generate
value and long term sustainable returns,
we need to understand the views and
take account of what is important to
our key stakeholders.
We having been doing this for
many years through effective and
proactive engagement.
This year for the first time, the 2018 Code
and Miscellaneous Reporting Regulations
require us to provide more information
about how the Board has considered
the matters and its duty under Section
172 of the Companies Act 2006 and our
statement in this regard is on page 52.
On pages 88 to 92, we set out our key
stakeholders, why they are important to us,
how we engage with them and how they
have influenced the Board’s decisions.
This, together with consideration of the
long term consequences of our decisions
and maintaining high standards of business
conduct which is assessed on page 92,
is integral to the way the Board operates.
This year the Board has considered
the provisions of the 2018 Code and its
compliance with S172, and has further
considered how stakeholder interests
are incorporated into its decision-
making processes.
Board briefing papers and appraisals
document stakeholder interests and views,
ensuring the Board is fully informed when
making decisions. Board and Committee
minutes record the consideration of
stakeholders in the decision making
process where relevant, and an
explanation of the Directors’ duty under
S172 will be provided on induction for
all newly appointed Directors.
The most significant transaction in the
year was the corporate acquisition of the
A&J Mucklow Group. As explained in the
case study on page 18, this transaction was
a fantastic opportunity to bring together
like-minded individuals, cultures and real
estate and we welcomed a small team
of talented employees to LondonMetric.
Other examples of how the Board has
considered the interests of stakeholders
in its decision-making process can be
found in the stakeholder engagement
table on pages 88 to 89 and in the
employee engagement and shareholder
engagement sections on page 90.
Read more about our acquisition
of A & J Mucklow Group on page 18
Read more about our employee
engagement on page 90
Read more about our shareholder
engagement on page 90
87
We believe that in order
to generate value and
long term sustainable returns
we need to understand
the views and take account
of what is important to our
key stakeholders.
Patrick Vaughan
Chair
Section 172 Summary
Directors’ duty to promote the success
of the Company for its members as
a whole, having regard to:
• Consequences of decisions
in the long term;
• Interests of employees;
• Company’s relationships with
suppliers, customers and others;
• Impact of Company’s operations
on the community and
environment; and
• Company’s reputation.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
88
Board leadership and Company purpose
Our stakeholders continued
Stakeholder engagement
Why they are
important to us
What is important
to them
How we have
engaged with them
– Flexible working
– Third employee survey undertaken in
– Opportunities
for progression
and career
development
– Diversity
the year and results of second considered
by the Board
– Designated workforce NED hosted
an external lunch for a small group
of employees
and inclusion
– Companywide anti-bribery,
– Fair and equal
treatment
and pay
We employ a small
dedicated and
hardworking team
of 33 employees.
They are critical
to our success and
the delivery of our
strategy and we
strive to ensure they
remain motivated
and happy at
work and create
opportunities for
development
and progress.
anti-corruption, money laundering
and corporate culture seminar
– Flexible working rolled out to
all employees
– Mucklow office move and staff liaison
– Annual one to one appraisal and review
– Open door policy
– Senior employees participate in LTIP
– All staff events including half year and
annual results presentations
– Weekly updates from Chief Executive
during COVID-19 pandemic
– Annual customer satisfaction survey
– Annual inspection and feedback report
for Mucklow assets
– Dedicated CRM and asset management
teams and regular ongoing customer
discussions and meetings
– Significant ongoing discussions during
COVID-19 with concessions and support
for a small minority of tenants who have
been affected
– New corporate website launched
with enhanced occupier focus
Our occupiers lie at
the heart of our core
purpose. We need
to understand our
occupiers’ needs
in order to deliver
fit for purpose real
estate solutions
which underpin long
term sustainable
income growth.
– Fit for purpose
real estate
– Acceptable
lease terms
– Well designed
and sustainable
buildings
– Good tenant/
landlord
relationship
How they influenced the
Board’s decision making
Integration of Mucklow
employees and
their well-being fully
considered by the
Board when considering
relocation plans.
Further detail given
in the case study on
page 18.
Workforce NED
met small teams of
employees in the year.
He listened to their views
and concerns, and
fed back results of staff
survey to the Board.
Four Non Executive
Directors accompanied
senior management on
tours of Mucklow assets
in Birmingham and
Bedford. These tours
allow the Board to see
things first hand from our
occupiers’ perspective
and understand
their needs.
To deliver our
strategy and being
a small team,
we are supported
by a diverse group
of key suppliers
including contractors,
professional advisors
and agents.
– Fair payment
terms and
prompt
settlement
– Signatory to the UK Prompt Payment
Code and our average payment time
this year was just 14 days
– Close involvement of development team
New corporate
website launched in
April with enhanced
occupier focus.
– Good, effective
with contractors
and stable
working
relationship
– Long term
partnership
– Annual contractor, project and supplier
audits undertaken
– Expected to have fully complied with
responsible development requirements
for those completed in the year
Our
people
Read more on
pages 54 – 55
Our
occupiers
Read more on
page 53
Our
suppliers
Read more on
page 56
LondonMetric Property PlcAnnual Report and Accounts 2020
89
How they influenced the
Board’s decision making
Chair of the
Remuneration
Committee wrote
to shareholders
advising them of
proposed changes
to the Remuneration
Policy and encouraging
liaison and feedback.
Their views were taken
into consideration
with adjustments
subsequently made
to the final proposed
new Policy.
A company-wide
training session on
ESG matters is planned
to provide a forum to
discuss and understand
sustainability initiatives
and projects in which
the Group is involved.
A briefing note and
regular updates were
provided to investment
and asset management
teams to assist their day
to day activities.
Why they are
important to us
What is important
to them
How we have
engaged with them
Our
investors
Understanding
the views and
priorities of our
investors, lenders
and partners is
fundamental to
the development
of our strategy and
their continued
financial support.
– Financial and
operational
performance
and progression
– Dividend and
dividend cover
– Strategic priorities,
investment plans
and capital
allocation
– ESG considerations
– Clear and
accurate reporting
– Over 250 investors met at investor
meetings, conferences, site visits
and roadshows
– Annual and half yearly results presentations
– AGM usually attended by all Directors
encouraging liaison
– Comprehensive information provided
on website, which was enhanced by
the new corporate website
– Head of Investor Relations responds to
ESG enquiries from investors which have
increased significantly in the year
– Tours of assets in Crawley, Frimley
and Weybridge alongside
senior management
– Liaised with all key Mucklow investors
as part of the corporate acquisition
– Significant shareholder contact in relation
to COVID-19
– Major shareholders representing over 60%
of issued share capital were consulted
on our new Remuneration Policy
Read more on
our investors on
page 56
Read more on the
new Remuneration
Policy on page 119
Our
communities
Supporting and
investing into the
communities within
which we work,
including local
businesses and
residents, underpins
our responsible
approach to
doing business
and delivering
our strategy.
Read more on
page 57
– Environmental
impact of our work
– Communities Policy, Charity and
Communities Working Group
– Disruption
to daily lives
and business
operations
– Impact on the
local economy
– Employment
opportunities
– Local community liaison at Bedford
following occupation of completed
units and ahead of Phase 2 of
the development
– Community consultations at New Malden,
Weymouth and Orpington
– Charitable giving by the Company
and support for staff charitable events
– COVID-19 Communities and Charity
Committee established and specific
charitable giving including to foodbanks
and NHS Trust charities in Dagenham,
Birmingham and Bedford
– 20% salary waiver by the Board and senior
executives for COVID-19 charitable giving
– Working with local schools including
at Kempton Challenger Academy
– Encouraging strong community
involvement by our contractors
– Local authority liaison and dialogue
– Certain unclaimed dividends donated
to charity
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
90
Board leadership and Company purpose
Our stakeholders continued
Employee engagement
At the end of last year, we completed our
second employee survey. The feedback
was very positive with 100% of employees
feeling proud to work for LondonMetric.
The survey covered three key areas:
1. The Company
2. The office environment
3. About me
Overall, we saw an improvement in the
results compared with the previous year
and 71% of the workforce were positive
about the Company, an increase of 5%.
Employees were pleased with the
changes made as part of the office
refurbishment in 2019, with 89% of
staff feeling positive about the office
environment, an increase of 29% on
the previous year.
The top three responses from employees
when asked to describe the Company’s
culture was that it was friendly, driven
and collaborative.
Andrew Livingston, the designated workforce
Non Executive Director, presented the results
to the Board for discussion as part of the wider
employee engagement agenda.
In June, Andrew hosted an employee
lunch for eight people across all disciplines
of the Company.
The informal lunch was an opportunity
to speak freely and discuss the survey
and business in general.
There are also many ad hoc occasions
where other Non Executive Directors
meet with employees, for example as part
of our Board induction process and at
property site visits. In addition, staff below
Board level are encouraged to attend
and present at Committee meetings.
The Company sent its third employee
survey to all staff in March 2020. Responses
were received from 82% of employees and
the majority of results were ahead of the
2019 survey. All employees enjoyed working
for the Company and 96% had confidence
in the Senior Leadership Team. 71% of
staff felt considered in decision-making,
an increase on the 2019 score of 64%.
The results have been collated and
reviewed by Andrew Livingston and the
Board and will be further considered
over the course of the year.
Further details are reflected in the
Responsible Business review on page 55.
During the COVID-19 pandemic all
employees have been working remotely.
A supplement to the third survey was
sent to staff in May to understand home
working practices, arrangements
and general staff well-being.
Dedicated workforce
Non Executive
Director
Annual employee
surveys
Half year
and annual results
presentations
to all staff
Annual one
to one
appraisals
How do we
engage with our
employees?
Companywide
training
and seminars
Shareholder engagement
Regular communication with investors
continues to be a top priority for the Board
who believes that understanding the views
of shareholders is an important contributor
to the Company’s strategic direction
and success.
The Chief Executive and Finance
Director are the Company’s principal
representatives and, along with the
Head of Investor Relations, hold meetings
throughout the year to communicate the
Company’s strategy and performance.
In addition, this year the Chair of the
Remuneration Committee consulted
with our major shareholders representing
over 60% of issued share capital on the
proposed changes to the Remuneration
Policy, which is discussed in detail in the
Remuneration Committee report on
page 112.
Investor meetings
The framework of investor relations is set
around the financial reporting calendar,
specifically the announcement of half
and full year results. In addition, significant
shareholder engagement occurs outside
of these periods and primarily consists of
UK regional and overseas roadshows and
responses to ad hoc requests for meetings.
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, financial
and operational performance, property
transactions and the markets in which we
operate, quality of underlying occupiers,
strength of the Company’s income, debt
structure and the real estate market in
general. In addition, we saw a significant
increase in environmental, social and
governance questions compared to
previous years.
Formal
whistleblowing
policy
Management team
invited to Board
and Committee
meetings
Open door
culture
For further reading on
Our people see pages 54 – 55
For further reading on the new
Remuneration Policy see page 119
LondonMetric Property PlcAnnual Report and Accounts 2020
91
Investor site visits
Tours provide an opportunity to see our
assets, understand strategy and meet the
senior management team. During the year,
two site visits were arranged for investors
at the Company’s distribution warehouses
in Crawley, Frimley and Weybridge.
Investor feedback
Investor feedback is presented to the
Board at scheduled meetings, together
with published analyst comments.
Feedback received continues to be very
supportive of the Company’s strategy,
performance, management and
future direction.
As part of its ongoing shareholder
engagement, the Company had intended
to conduct its second biennial investor
Responsible Business survey in March 2020.
As a result of COVID-19 and the significant
focus on the near term implications of the
pandemic, it was decided to postpone
this survey until a more appropriate date.
The feedback, however, on Responsible
Business from investor meetings and
other conversations with our investors’
ESG teams was very supportive of
our activity and our achievements.
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
and factsheets, half year results and
Annual Reports available for downloading.
The Company undertook a complete
website redesign in the year which included
a clearer and more comprehensive investor
relations page with additional features
such as consensus analyst estimates for
key company financials.
Annual General
Meeting
Annual and
half year
results presentations
Investor
roadshows and
meetings
Consultation
on Remuneration
Policy
How do we
engage with our
shareholders?
Property
tours
Investor survey
Senior
Independent
Director
Corporate
website
Investor activity
During the financial year, the Company
met with over 250 shareholders, analysts
and potential investors.
The acquisition of A&J Mucklow involved
significant shareholder dialogue with
both their shareholder base as well as
the Company’s. Whilst there was some
overlap in the shareholder base, a number
of Mucklow shareholders were unfamiliar
with LondonMetric. During the course
of the acquisition, we met or spoke with
all key Mucklow institutional and private
wealth investors. There was also significant
shareholder contact towards the end of
the year in relation to COVID-19.
A breakdown by type of investor seen
and location of meeting are shown in
the charts on page 92. Meetings were
held predominantly in the UK, with
approximately 67% of investors seen in
London, and a further 20% of investor
meetings held overseas in Canada,
Holland, South Africa and the United States.
The Company will continue to engage
with overseas investors to broaden its
investor base further.
Reflecting the importance of retail/private
wealth shareholders, the Company
maintained its high level of regional
roadshow activity including visits to
Bristol, Cheltenham, Edinburgh, Glasgow,
Liverpool, Manchester as well as a
roadshow in the Isle of Man. It also hosted a
number of private wealth group meetings.
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. It also became a partner
of the Property Chronicle magazine in
which it contributed opinions and thoughts
to editorial pieces targeted at private
wealth readers.
The Company also presented at several
conferences including participating in
an EPRA/Bloomberg panel event.
We have worked hard to continue our
close relationships with analysts in light
of the continued contraction of analyst
coverage across the equity markets.
We continue to enjoy strong analyst
coverage with 13 brokers covering us,
which is unchanged on the prior year.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 92
Board leadership and Company purpose
Our stakeholders continued
A live and on demand webcast of results
and a CEO interview is posted twice a year
on our website. Individual shareholders
can also raise questions directly with the
Company at any time through a facility
on the website.
This year, as part of our commitment to
working with our wider stakeholder group to
improve the environment, we have decided
to use the authority in our Articles to move
away from the paper version of this report
and ask shareholders to instead view it
electronically online by visiting our website.
Those wishing to receive a hard copy report
have been accommodated and this will be
sent at least 20 working days before the AGM.
Annual General Meeting
Shareholders are encouraged to
participate in the Annual General Meeting
(‘AGM’) of the Company, which provides a
forum for communication with both private
and institutional shareholders alike.
In usual circumstances, the whole Board
attends the AGM and is available to answer
shareholder questions. This year, due to the
COVID-19 pandemic, we are required to
hold the meeting as a closed meeting and
shareholders will not be able to attend.
Investor meetings
By location
4
3
1
2
1 Overseas
2
3
4
London
Site visit
UK regional
By type of investor
4
3
1
2
3
Specialist institution
Broker
Private wealth
4 Generalist institution
20%
67%
2%
11%
34%
6%
36%
24%
1
2
Key shareholder events
throughout the year
Q1 – Full year 2019
results presentation
– Pre-marketing meetings
ahead of A&J Mucklow
acquisitions
– Investor full year roadshow
held post results in London,
Amsterdam, Manchester,
Liverpool and Birmingham
Q2 – Annual General Meeting
of shareholders
– Investor roadshows in
London, the Isle of Man,
New York and Boston
– Site visit to Crawley
Q3 – Half year results presentation
– Half year investor
roadshow post results
– Investor roadshow in
London, Cape Town
and Johannesburg
Q4 – Investor meetings in
London, Bristol, Edinburgh,
Glasgow, Boston
and Toronto
– Site visits to Crawley,
Frimley and Weybridge
– Investor conference
calls on COVID-19
However, questions can be submitted
to the Company before the meeting
as described in the Notice of Annual
General Meeting on page 191.
Details of the resolutions to be proposed
and voting details can also be found in
the Notice.
Details of the number of proxy votes for,
against and withheld for each resolution
will be disclosed in the AGM RNS
announcement and on our website.
The Senior Independent Director is
available for shareholders to contact
if other channels of communication
with the Company are not available
or appropriate.
Promoting long term success
The Board is collectively responsible for
the long term success of the business,
having due regard to the views of its
stakeholders and the environment within
which it operates. We have had another
successful year, with strong financial
results and robust portfolio metrics.
The portfolio has significantly grown in
size and value as a result of the Mucklow
acquisition and looking ahead, the
combination of additional income from
our development programme, asset
management initiatives and acquisitions
help to support sustainable earnings and
dividends. Our strategy, activities and
financial results are set out in the Strategic
report on pages 01 to 75 and our long
term focus and success story is evidenced
by the Performance highlights and Key
performance indicators on pages 10
and 24 respectively.
Real estate is an inherently long term
cyclical business and the Board therefore
takes a longer term view when making
decisions. Some examples of this include:
• The Group’s financial budgets cover
a three year rolling period and are
updated monthly and reported
quarterly to the Board
• One Board meeting each year is
dedicated to the discussion of the
Group’s longer term strategy
• The risk register and dashboard
includes consideration of both short
term and longer term emerging risks
LondonMetric Property PlcAnnual Report and Accounts 2020 Division of responsibilities
Leadership framework
93
Board Of Directors
Chair: Patrick Vaughan
The Board is collectively responsible for
the long term success of the business, having
due regard to the views of its stakeholders
and the environment within which it operates.
It provides leadership and direction, establishes
and fosters the culture, values and ethics
of the organisation, and independently
oversees management’s execution of strategy
within an acceptable risk management and
internal control framework. The work of the
Board both complements and supports the
work of the executive team. The Board is made
up of a group of talented individuals with
wide-ranging commercial experience from
a range of industries and sectors including
property, finance, banking, risk management,
sustainability and retail.
Through this diversity, experience and
deep understanding of the business,
its culture and its stakeholders, the Board
delivers sustainable value as set out in
the Strategic report from page 01.
Our activities pages 84 – 85
Biographies pages 80 – 81
Roles & responsibilities pages 94 – 96
Board Committees
The Board has three Committees of Non Executive Directors to which it has delegated a number of its responsibilities. 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. The Chair of each Committee provides a verbal update on the matters discussed at each meeting to the Board.
Audit Committee
Remuneration Committee
Nomination Committee
Chair: Rosalyn Wilton
Chair: James Dean
Chair: Patrick Vaughan
The Audit Committee has oversight of the
Group’s financial and narrative reporting
processes and monitors the integrity of
the financial statements.
– Oversees financial reporting process
– Scrutinises significant judgements
made by management
– Monitors effectiveness of risk management
systems, internal control and viability
– Evaluates the external audit process
– Regulatory compliance oversight
– 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.
– Determines and implements
Remuneration Policy
– Sets remuneration packages and
incentives for Executive Directors
and senior management
– Approves annual bonus and LTIP targets
and outcomes
– Has oversight of workforce remuneration
arrangements and alignment
The Nomination Committee ensures that
the Board and its Committees have the right
balance of skills, knowledge and experience,
having due regard to succession planning
and diversity.
– Recommends appointments
– Board composition and succession
– Considers skills and diversity
– Leads performance evaluation
Audit Committee report page 104
Remuneration Committee report page 112
Nomination Committee report page 97
Management Committees
Senior Leadership Team
Operates under the direction and
leadership of the Chief Executive to deliver
the approved strategic objectives and
manage the day to day running of the
business. It is supported by sub-committees,
focusing on different areas of the business.
– Implementation of strategy
– Employee remuneration and well-being
– Sets budgets and manages operational
– Manages allocation of capital
and financial performance
– Identifies and assesses business risks
– Day to day management of the business
and implements mitigation strategies
and its principal risks
– Manage, appraise and develop staff
– Responsible business activities
Biographies pages 82 – 83
Investment Committee
Chair: Valentine Beresford
– Reviews investment and divestment
opportunities and allocation of capital
– Approves transactions of less than
£10 million and recommends higher
value transactions to the Board
Asset Management
Committee
Chair: Mark Stirling
– Reviews value enhancing operational
activities and development opportunities
Finance Committee
Chair: Martin McGann
– Reviews budgets and forecasts,
achievement of targets, funding
requirements and liquidity
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
94
Division of responsibilities
Leadership roles and responsibilities
The following table sets out the key roles and responsibilities of Board members.
The responsibilities of the Chair, Chief Executive, Senior Independent Director,
Board and Committees are set out in writing, approved annually and are available
on the Company’s website at www.londonmetric.com.
Role
Responsibilities
Chair
Patrick
Vaughan
– Leads the Board and ensures it operates effectively
– Sets Board culture, style and tone of discussions to promote
boardroom debate and openness
– Promotes Company purpose, values and ethics
– Builds relationships between Executive and Non Executive Directors
– Monitors progress against strategy and performance
of the Chief Executive
Chief Executive
Andrew Jones
– 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 Senior Leadership Team
Finance Director
Martin McGann
– Supports the Chief Executive in developing and implementing
strategy and alignment to financial objectives
– Stewardship of financial resources and risk management
Non Executive
Directors
Suzanne Avery
James Dean
Robert Fowlds
Andrew
Livingston
Rosalyn Wilton
Senior
Independent
Director
Robert Fowlds
Designated
Workforce NED
Andrew
Livingston
Company
Secretary
Jadzia Duzniak
– 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
– Acts as a sounding board for the Chair and trusted
intermediary for the other Directors
– Available as a communication channel for shareholders
if other means are not appropriate
– Leads performance evaluation of Chair
– Liaison with employees and attendance at key employee
and business events
– Monitors the results of staff surveys and reports to the Board
– Reviews messages received through the whistleblowing system
– Advises the Board and is responsible to the Chair 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
Division of responsibilities
The roles of Chair and Chief Executive
are separately held and their responsibilities
are defined in writing and approved
by the Board. There is a clear division of
responsibilities between the Chair, who
is responsible for leading the Board and
monitoring its effectiveness and the Chief
Executive, who is responsible for the day
to day management of the Group and
the implementation and delivery of the
Board’s agreed strategic objectives.
The Chair is responsible for ensuring a
constructive working relationship between
Executive and Non Executive Directors
and for encouraging and fostering
a culture of boardroom challenge
and debate.
He sets the Board agenda and maintains
regular contact with the Executive and
Non Executive Directors outside of formal
Board meetings, which ensures he is kept
abreast of individual views, any issues
arising and to foster an open and two
way debate about Board, Committee
and individual members’ effectiveness.
The Chair will be hosting a dinner for
the Non Executive Directors without
the Executive Directors present to foster
debate and challenge. This has been
delayed due to the lockdown restrictions
recently imposed.
Matters reserved for Board approval
To retain control of key decisions and
to ensure there is a clear division of
responsibilities between the running
of the Board and the running of the
business, certain matters are reserved
for the Board’s attention and approval.
These include the approval of strategy,
budgets, financial reports, significant
acquisitions and disposals above the
delegated authority limits (currently
£10 million), major capital expenditure,
funding and dividend policy.
LondonMetric Property PlcAnnual Report and Accounts 2020 95
Non Executive Directors
The Non Executive Directors are a diverse
group with a wide range of business
experience encompassing property,
finance, banking, risk management,
sustainability and retail. 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.
Each of the Non Executive Directors,
other than the Chair, is considered by
the Board to be independent from
management and has no commercial
or other connection with the Company.
Tenure is measured from the date of
election to the LondonMetric Board
as in previous periods and the Board’s
composition throughout the year met
the Code’s requirement that at least half
of its members, excluding the Chair, are
independent Non Executive Directors.
This balance ensures that no one individual
or small group of individuals dominates
the Board’s decision making.
The Senior Independent Director is Robert
Fowlds. He acts as a sounding board for
the Chair and an intermediary to the other
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. During the year Robert met with the
other Non Executive Directors, to appraise
the performance of the Chair as part of
the internal performance evaluation.
The Board considers the Company’s
stakeholders in its discussions and takes
account of the views of, and feedback
from, its shareholders, employees and
customers as described in detail on pages
87 to 92 and in the Responsible Business
review on pages 52 to 57.
The Company Secretary maintains
a rolling agenda for the Board and its
Committees and, in consultation with
the Chair, she ensures agenda items cover
the schedule of matters reserved for the
Board, compliance with the Code and
other regulatory requirements.
Selected members of the Senior
Leadership Team attend Board meetings
and present on topics of relevance,
increasing the range of views and input.
In addition, senior employees below Board
level are invited to present to the Board
and its Committees on operational and
regulatory topics during the course of the
year. This facilitates the open interaction
of Non Executive Directors with senior
managers throughout the organisation.
This year the Strategy Director, Head of
Investor Relations and Head of Finance
attended Board or Committee meetings
to discuss relevant operational topics.
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. The attendance record
of Directors at Board meetings during the
year is reflected in the table on page 96.
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
supplemented by site visits and provides
further opportunity to mix with senior
management. During the year Suzanne
Avery, James Dean, Robert Fowlds and
Patrick Vaughan accompanied the
Senior Leadership Team members and
the Head of Investor relations on tours
of the Mucklow portfolio in Birmingham
and assets in Bedford.
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, routine or administrative
matters, which this year included a
separate meeting to approve the
corporate acquisition of A & J Mucklow
Group. 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 or lunch
each year is dedicated to strategy to
ensure it remains relevant and adapts
to changing economic, market and
environmental conditions.
At each Board meeting, the Chief Executive
provides a review of the business, setting
out progress against strategic objectives
and discusses any issues arising.
Read more on the acquisition
of A&J Mucklow on page 18
Read more on Board membership
and attendance at meetings
on page 96
Read more on Our stakeholders
on page 87
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
96
Division of responsibilities
Leadership roles and responsibilities continued
Membership and attendance
The number of Board and Committee members and their attendance during the year
was as follows:
Member
Chair
Patrick Vaughan
Executive Directors
Andrew Jones
Martin McGann
Valentine Beresford4
Mark Stirling4
Non Executive Directors
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Rosalyn Wilton
Percentage independent1
Date
appointed
Tenure
(years)3
Independent
Board2
13/1/2010
25/1/2013
13/1/2010
n/a
n/a
22/3/2018
29/7/2010
31/1/2019
31/5/2016
25/3/2014
10
7
10
n/a
n/a
2
10
1
4
6
n/a
No
No
n/a
n/a
Yes
Yes
Yes
Yes
Yes
71%
6 (6)
6 (6)
6 (6)
1 (1)
1 (1)
6 (6)
6 (6)
6 (6)
6 (6)
6 (6)
1 Based on Board members as at 31 March 2020
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
3 Tenure is measured from the date of appointment to the LondonMetric Board and as at 31 March 2020,
rounded to the nearest whole year
4 Stepped down from the Board on 11 July 2019
Information flow
The Chair, supported by the Company
Secretary, ensures that the Directors
receive clear and timely information
on all relevant matters to enable them
to discharge their responsibilities.
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 and to facilitate
robust and informed decision-making.
The Board papers contain market,
property, financial, risk and governance
updates as well as other specific papers
relating to agenda items. Specific briefing
papers were provided to the Board and
its Committees on the Mucklow acquisition
and integration, responsible business,
corporate governance, cyber security,
tenant covenants and debt.
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.
Minutes of all Board and Committee
meetings are circulated to all Directors
after each meeting and are included
in the next Board or Committee pack.
A detailed action list is prepared by
the Company Secretary, followed up
by management and reviewed at
the next meeting.
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.
The Chairs of the Audit and Remuneration
Committees communicate regularly and
independently with relevant staff and
external advisors including the Company’s
external auditors, Deloitte LLP, and
remuneration advisors, PwC.
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.
Time commitment
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.
During the year Andrew Jones stepped
down as a Non Executive Director of
The Unite Group Plc, having served on
its Board for six years.
LondonMetric Property PlcAnnual Report and Accounts 2020 Composition, succession and evaluation
Nomination Committee report
97
The Committee’s focus
this year has been the
independence of the
Non Executive Directors
and compliance
with the provisions
of the new Corporate
Governance Code.
Patrick Vaughan
Nomination Committee Chair
Membership and attendance
The number of Committee members and their attendance during the year
was as follows:
Member
Patrick Vaughan (Chair)
Andrew Livingston
Suzanne Avery
Date
appointed
1/11/2012
19/9/2018
31/1/2019
Tenure
(years)1
Meetings
attended2
7
2
1
2 (2)
2 (2)
2 (2)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2020,
rounded to the nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
Key responsibilities
Board composition, succession and appointment
– 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
– Consider succession planning for Directors and other
senior executives
– Lead the process for new Board and Committee appointments
and make recommendations regarding Board and Committee
membership changes
Diversity
– Promote the Company’s policy on diversity at Board level
and in the wider organisation
Performance evaluation
– Lead the Board and Committee performance evaluation exercise
Re-election of Directors
– Assess the time commitment required from Non Executive Directors
and consider the annual election and re-election of Directors
to the Board
Highlights in 2020
See pages
98 – 100
See pages
100 – 101
See pages
101 – 103
See page 103
– Considered independence and tenure of Non Executive Directors
and approved Robert Fowlds to succeed as Remuneration Chair
following AGM
– Led internal Board and Committee performance evaluation
Focus in 2021
– Board succession planning and refreshment
– Promote diversity at all levels of recruitment and take into consideration
for the next appointment to the Board
– Oversee talent development within the organisation
– External Board and Committee performance evaluation
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
98
Composition, succession and evaluation
Nomination Committee report continued
Dear Shareholder,
I am pleased to present the Nomination
Committee’s report for the year to
31 March 2020.
The Committee’s focus this year
has been the independence of the
Non Executive Directors and compliance
with the provisions of the 2018 Corporate
Governance Code (’Code’).
James Dean has served as a Non Executive
Director and Remuneration Committee
Chair for more than nine years which,
under provision 10 of the new Code could
appear to impair his independence.
Arrangements for his succession were
discussed and agreed last year and
further considered and refined this year,
as discussed in detail below. We are
very pleased to announce that James
has decided to continue his role as a
Non Executive Director until a suitable
replacement for him can be found,
but will step down from the Remuneration
Committee following the AGM. We believe
he brings exceptional and extensive property
expertise, sound judgement and constructive
challenge to the Board and is a highly
regarded, well respected and independent
member of the team and therefore regard
him as independent in accordance with
the Code. From a governance perspective,
71% of the Board excluding the Chair
comprises independent Non Executive
Directors in accordance with the Code.
The Committee led an evaluation of
Board and Committee performance
as described on pages 101 to 103.
The findings were collated, discussed
and recommendations for improvements
to processes agreed. I am pleased to
report that the findings concluded that
the Board and Committees continued to
operate well. Next year we will commission
an external evaluation of performance
in accordance with the current
governance regulations.
Looking forward, the Committee will
continue to focus on the Board and
Company’s succession planning and
oversee the development of talent within
the organisation, promoting diversity
in its widest sense.
Role of the Committee
Our 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 key
stakeholders and to the benefits
of diversity.
We drive succession planning and
ensure that it is properly planned and
managed to maintain stability in the
leadership team and mitigate against
business disruption.
Board composition and succession
The Committee discusses Board
and Committee composition, size
and structure at each meeting.
This year, we have continued to focus
on the independence of Non Executive
Directors in light of the new 2018 Code.
Last year we considered the tenure of
James Dean, Non Executive Director and
Chair of the Remuneration Committee,
and decided to appoint Robert Fowlds
to succeed him as Committee Chair
after he had served as a member of the
Remuneration Committee for 12 months.
It was also agreed that James would
remain as Chair and a Non Executive
Director until this time in order to facilitate
an orderly transition. The Committee
subsequently decided, having taken
the advice of PwC, the Company’s
remuneration advisor, that James should
remain as Committee Chair until the AGM
to facilitate the implementation of the
new Remuneration Policy and to provide
continuity for shareholders throughout
the communication and liaison process.
The Committee also considered James’s
independence as a Non Executive Director,
having served for more than nine years
on the Board. Both the Committee and
Board highly value his in depth property
expertise and the insight and challenge
he brings, and strongly support his
continuing service as a Non Executive
Director, notwithstanding the fact that
his tenure may be seen to compromise
his independence under the terms
of the Code. To avoid perceptions of
non-independence, James will retire from
the Committee in July 2020 although he
will remain as a Non Executive Director
of the Board until a suitable replacement
is found. The Board firmly believes that
James brings sound judgement and
an independent approach to all Board
matters and deem him independent in
accordance with the Code.
The Committee also considered the size
of the Board last year, and in July 2019,
two Executive Directors, Valentine Beresford
and Mark Stirling, stepped down from
the Board but remained Investment and
Asset Directors and members of the Senior
Leadership Team responsible for running the
day to day operations and implementing
strategy. They continue to provide valuable
contributions to Board discussions.
Following these changes, the membership
of the Board, excluding the Chair, comprises
a majority of independent Non Executive
Directors and is fully compliant with Provision
11 of the 2018 Code.
The Committee will continue its search for
James’s ultimate replacement, prioritising
candidates with a similar level of property
expertise and experience.
I have served as a Director for ten years,
the first three years as Chief Executive
and as your Chair for the last seven, since
our merger with Metric in 2013. The length
of my tenure, being more than nine years,
does not comply with Provision 19 of the
Code. However, taking into consideration
Board responses to the performance
evaluation exercise undertaken this year,
the Nomination Committee concluded
that it was in the best interests of the
Company for me to continue in office
and maintain the appropriate stability
in the leadership team.
Having worked in the UK property market
for 50 years and being co-founder and CEO
of three listed property companies before
being appointed as Chair, the Board advise
me that they value my notable experience
and industry knowledge, and do not
feel my independence, objectivity and
judgement is compromised by my length
of service.
The Nomination Committee will continue
its search for my successor but cannot set
a time limit on this as appointing the right
candidate with the necessary expertise,
character and beliefs is essential. I will
remain in office as long as necessary in
order to facilitate an orderly and planned
succession with minimal business disruption.
LondonMetric Property PlcAnnual Report and Accounts 2020 99
Below the Board, succession planning is
delegated to the Senior Leadership Team,
to ensure we retain and recruit a pipeline
of talent and suitable future leaders to serve
as the next generation of Directors and
support the Company’s longer term plans.
The Senior Leadership Team is committed
to nurturing, developing and retaining
high performing individuals. Staff appraisals
are undertaken on an annual basis and
provide a forum to discuss targets, progress
and future prospects. Regular contact
with Board members is encouraged,
both Executive and Non Executive, in and
outside of meetings, through presentations,
property tours and one to one sessions to
discuss specific issues.
Although there are no immediate vacancies
at Board or Senior Leadership Team 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 to have contingency plans for
unforeseen absences.
With this in mind and following the recent
performance evaluation exercise described
in detail on page 101, it was decided that
other members of the Senior Leadership
Team would attend investor roadshows and
presentations. This would increase awareness
of investors’ views and insights throughout
the organisation, allow investors to see
the calibre of the management team
and to support succession planning for
the Executive Directors.
Further information on the Company’s
commitment to developing and
supporting employees is included
in the Responsible Business review on
page 54
A balanced Board
Board composition
Board independence
3
1
2
1 Chair
2
3
Non Executive Directors
Executive Directors
Total
Board tenure
3
1
2
3
0-3 years
3-6 years
6-10 years
Total
Board skills (%)
Retail
Sustainability
Risk management
Finance and banking
Property
2
1
5
2
7
71%
29%
12%
63%
25%
1
2
Independent
Non independent
Total
Board gender diversity
2
25%
25%
50%
1 Male
2
Female
Total
1
75%
25%
6
2
8
1
5
2
8
2
2
4
8
1
2
13
13
13
50
75
Some Directors are represented in more than one category in terms of their expertise
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
100
Composition, succession and evaluation
Nomination Committee report continued
Board appointment,
induction and training
We are responsible for identifying and
recommending candidates to fill Board
vacancies and lead the selection process,
ensuring it is formal, rigorous and transparent.
Last year, Robert Fowlds was appointed
as a Non Executive Director and details of
his appointment and induction processes
can be found in last year’s Annual Report.
There have been no further Board
appointments this year.
On appointment, the Company arranges
a tailored induction programme to help
new Directors develop an understanding of
the business including its strategy, portfolio,
governance framework, stakeholders,
finances, risks and controls.
The selection process for new appointments
to the Board is described in the flow
chart below.
Appointment and induction process
1
2
3
4
5
6
7
8
9
Selection of external search agency
Discussion of candidate
specification and required skills
with agency
Considerations include relevant
property experience, diversity and
cultural fit
Review of potential candidates
by agency
Shortlist of candidates provided
for initial interviews with Nomination
Committee and Executive Directors
Final selection of candidates
circulated with CVs for consideration
Committee recommends
candidate to the Board
Induction programme organised
by the Finance Director
Proposed election by
shareholders at the first AGM
following appointment
Oversight of the training needs of
individual Directors is the responsibility
of the Chair. 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, information updates were
provided through briefing papers prepared
by senior management and external
advisors on regulatory and accounting
updates, the Mucklow acquisition and
integration, responsible business, corporate
governance and the 2018 Code, cyber
security, tenant covenants and debt.
This was complemented by property tours
to assets in Bedford and Birmingham as
described on page 95, providing insight
into business operations, customers and
communities and an opportunity to
engage with senior management.
Diversity
The Board recognises the importance
of diversity and the benefits it brings
to the organisation in terms of skills and
experience, wider perspectives, fresh
ideas and better decision making. It strives
to operate in a working environment of
equal opportunity and promotes a culture
of mutual respect and inclusion throughout
the organisation.
It acknowledges that performance is, to
a large extent, determined by the quality
of recruitment and the development
and commitment of employees.
The Board sets the tone on diversity and gives
full consideration to achieving a diverse
working environment when appointing new
Directors. It applies the principles of the
Company’s Diversity and Inclusion Policy,
which is publicly available on our website,
when considering any new appointments.
We encourage the recruitment,
development and retention of a diverse
workforce and the elimination of
discrimination. Current and potential
employees are offered the same
opportunities, including pay, benefits,
training and promotion, regardless of
background, gender, age, religion,
disability, nationality, ethnicity, sexual
orientation or marital status.
We actively engage with recruiters to
promote a diverse candidate selection
and will ensure that any executive search
agency we engage has signed up to the
Voluntary Code of Conduct for Executive
Search Firms, which addresses gender
and ethnic diversity.
The Board acknowledges the challenges
faced by the real estate sector in improving
gender diversity and continues to support the
Real Estate Balance group, whose objective
is to improve gender diversity by promoting
and supporting the development of a
female talent pipeline.
The Board also recognises that diversity is
not limited to just gender and supports the
Parker recommendation that FTSE 250 boards
should have at least one director from
an ethnic minority background by 2024.
However, it does not believe quotas are
appropriate given the size of the Company
and has chosen not to set formal targets.
Ultimately, all appointments to the Board
and throughout the Company are based
on merit and suitability for the role, as an
appointment on any other basis would not
be in the best interests of shareholders or the
Company. We realise that the diversity of
recruitment will be subject to the availability
of suitable candidates and vacancies within
the organisation. We are proud of our low
level of staff turnover which signifies a loyal
and content workforce, but recognise that
this also constrains the pace of change.
The charts on page 101 reflect the gender
diversity of the Board, Senior Leadership
Team and across the Company. The
Board supports the aspirational targets
of the Hampton Alexander Review of
33% female representation on FTSE 350
company boards and senior leadership
teams by 31 December 2020, and has
made good progress. There has been
an ongoing commitment to strengthen
female representation at Board level,
which has increased from 9% in 2017
to 25% today.
We believe that the current Board
composition brings suitable diversity of
skills, experience and thought to lead the
business and although we strive to meet
the Hampton Alexander target, can only
do so when a suitable vacancy exists
and an appropriate candidate can be
LondonMetric Property PlcAnnual Report and Accounts 2020 found. Our Senior Leadership Team manages
the day to day running of the business and
comprises departmental heads from all key
business functions with a diverse range
of skills and experience. Currently 22% of the
members, excluding the Executive Directors,
are female and although we are working
towards compliance with the Hampton
Alexander targets, the gender balance
of the team is likely to remain a challenge,
as increasing its size is not considered an
effective solution and there are no natural
succession changes anticipated at the
present time.
However, the Committee is focusing on
development of the talent pipeline to the
Senior Leadership Team and improving
diversity within it. 45% of all employees are
female and the culture of the organisation
promotes inclusion and equal opportunity.
The latest staff survey, discussed on
page 55, reinforces this culture with all
employees feeling proud and happy to
work at LondonMetric and recommend
the Company to others.
In addition, Andrew Livingston, as the
designated workforce Non Executive
Director, provides a valuable insight into
the behaviour throughout the organisation
and helps to assess employees well-being
through his interaction with staff across
all business functions.
Further information on the Company’s
commitment to promoting diversity and
inclusion is included in the Responsible
Business review on page 54.
Board performance evaluation
A key requirement of good governance is
to ensure that the Board operates effectively.
The annual evaluation enables us to
monitor and improve the effectiveness
of the Board and its Committees.
In line with our three year cycle, both last
year and this year’s review and evaluation
of performance was undertaken internally.
The Board is committed to undertaking
an external evaluation next year.
Progress against the key points arising
from last year’s review is reflected in
the table to the right.
A questionnaire based evaluation was
undertaken this year in January 2020,
led by me as the Chair of the Committee
and focused on the key aspects of
good governance.
The findings were collated and
summarised by the Company Secretary
and tabled for discussion by the Committee,
who reported their findings to the Board.
The key findings are summarised on
pages 102 to 103.
101
Gender balance
Board
Senior leadership team
2
2
1
1
1 Male
2
Female
Total
6
2
8
75%
25%
1 Male
2
Female
Total
78%
22%
7
2
9
All employees
Senior leadership team and direct reports
2
2
1
1 Male
2
Female
Total
18
15
33
55%
45%
1 Male
2
Female
Total
1
14
6
20
70%
30%
As Chair of the Company, I conduct one
to one discussions or meetings with each
of the Non Executive Directors.
The Senior Independent Director led a
meeting of the Non Executive Directors
to appraise my performance.
All Committees also carry out an annual
review of their performance against their
roles and responsibilities as set out in
their terms of reference.
Feedback was positive and noted continued
good leadership both in and out of meetings,
and facilitation of boardroom discussion and
debate in an open and constructive way.
Recommendation in 2019
Progress in 2020
Succession planning for the Board
Annual strategy meeting to be
a standing calendar item
Robert Fowlds to replace James Dean
as Remuneration Committee Chair
following AGM
Annual strategy lunch held in the year
Periodic information on tenant
covenant reviews to be provided
Provided at the Audit Committee
planning meeting in March
More regular updates of corporate
governance matters to be provided
Comprehensive corporate governance
update briefing paper prepared for
Board by Finance Director in March
A bi-annual dinner for Non Executive
Directors to facilitate informal discussion
To be rearranged in 2021 after the
COVID-19 restrictions have been lifted
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 102
Composition, succession and evaluation
Nomination Committee report continued
2020 Performance evaluation findings
5
The Board and
its Directors
– Board is cohesive and combines
management support with
appropriate challenge
– Board and Committees operate
effectively with good transparency
– Appropriate allocation of time
is devoted to consideration of
pertinent matters
– Attendance at meetings is very
good and on the whole the
pace and format of meetings
encourages debate and interjection
by Non Executive Directors
– Discussions are open and
constructive with appropriate
challenge, although discussions
held between individual Directors
outside of Board meetings
should not be a substitute for
Boardroom debate
– Board culture and approach
is prudent and conservative
– Directors noted the importance
of keeping up to date with market
and regulatory developments
and found the updates provided
by the Company’s advisors to be
important in this regard
– Non Executive Directors value
the opportunity to visit assets on
an opt-in basis when opportunities
arise and to meet key individuals
– Board lunches continue to be a
welcome part of the Board schedule
to facilitate further discussion and
build bonds
1
Board objectives
and strategy
– Strategy and objectives are
clear and dynamic, supported
by the Board and agreed
with management
– Management are strategy focused
and a high percentage of Board
time is spent reviewing and assessing
strategy at each meeting
– The management team were praised
for providing appropriate written
and oral updates on the property,
retail and logistics markets, trends
and economic updates at meetings
– Comprehensive market updates,
competitor analysis, investor
feedback and resources, both
in terms of people and finances,
are integral to discussions and
downside risks of changes in
strategy are highlighted
– An annual strategy specific meeting
to facilitate a deeper review,
which may not be practical at
each meeting, is beneficial
2
Performance
– Board takes collective responsibility
for performance through an
ownership culture
– Board reporting is regular and timely
and provided in a comprehensive
yet succinct matter, making it easy
to review and digest
– Detailed reviews of individual
investment performance post
acquisition was suggested
as helpful
3
Relationships
with shareholders
– The Company’s relationship with
shareholders continues to be a
key focus for the Chief Executive,
supported by a widening group
of senior colleagues
– There is an extensive programme
of investor meetings and strongest
investor coverage amongst UK REITs
– Feedback on investor engagement
at meetings by the Chief Executive
is both regular and informative
– Directors agreed shareholder
relationships are strong, possibly
best in class and investor
sentiment is positive and highly
supportive of strategy, evidenced by
its strong share price performance
4
Risk management
– The Board is risk aware and gets early
warning signals of problems that
may adversely affect the business
– Directors are satisfied that risks are
taken into account in all decision
making processes
– Risk management is considered
at each Board meeting via a risk
dashboard. Emerging risks and
uncertainties are also raised as part
of the Chief Executive’s overview
and market briefings to the Board
– The process for identifying and
reporting risk is sound, suitable
and relevant to the business
– There is good debate at each
meeting on market risk and impact
on strategy
– Management was praised for its
analysis and review of the Mucklow
acquisition, particularly the
identification of risks, the integration
process and the provision of regular
and informative updates
LondonMetric Property PlcAnnual Report and Accounts 2020
6
Board composition
and succession
– Board and Committees are well
balanced and have a broad range
of skills and experience to discharge
their duties and face current and
future challenges
– Diverse perspectives make the Board,
as a collective, greater than the sum
of its individual parts
– Directors have a deep interest in
the business, its people, purpose
and ambition
– Robert Fowlds was seen as an
excellent addition to the Board
– Management are considered to
be exceptionally well connected,
respected and trusted and
well positioned to see market
opportunities and challenges
– Non Executive Directors have real
confidence in the management
team, who are responsive
and accessible
103
Overall the results concluded that
the Board continues to work well together,
within a climate of openness and trust,
and with the appropriate complement
of skills and expertise required to monitor
performance, challenge management
and develop strategy. The Directors
agreed that the Chair and Chief Executive
continue to have a very strong, supportive
and respectful working relationship
providing clear and effective leadership
and focus that is instrumental to the
long term success of the Company.
No significant issues or areas of
weakness were noted. The Board
welcomed the recommendations for
continued development to its practices
and procedures noted below and will
report progress at future meetings.
Areas of focus for 2021
• Involvement of other Senior
Leadership Team members in
the investor relations programme
• Dinners to be arranged for Non
Executive Directors only and for the
whole Board, outside of scheduled
meetings, to facilitate informal
discussion and debate
• Discussions between individual
Directors outside of scheduled
meetings to be relayed at
Board meetings
• Continue with succession planning
for the Board
Re-election of Directors
Following the Board evaluation and
appraisal process, the Committee
concluded that each of the Directors
seeking re-election continues to make
an effective and valuable 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. The Committee
considers the time commitment required
of the Directors and other external
appointments they have.
All Directors will offer themselves for
re-election at the forthcoming AGM on
22 July 2020 and I encourage shareholders
to support us and vote in favour of
these resolutions.
Patrick Vaughan
Chair of the Nomination Committee
10 June 2020
7
Board Committees
– Committees are very well supported
by external advisors and continue
to have open and good working
relationships with them, although
greater transparency, control and
understanding of advisory fees
would be welcomed
– The Finance Director and team
provide good and detailed
information to the Audit Committee
– A challenge for the Nomination
Committee is balancing
independence and diversity with
the desire to protect the Company’s
culture, retain the wealth of
experience and stay small
– Diversity of thinking is paramount
and should continue to be at the
forefront of Nomination Committee
discussions and decisions
8
Chair
– The Chair continues to be praised
for his exceptional guidance
to the management team and
leadership of the Board
– He listens, encourages Directors
to share their views and fosters
an inclusive, thorough and open
debate before decisions are made
– Meetings with other Non Executive
Directors are arranged although
not regular or frequent and
considered beneficial
– His continuing service beyond nine
years was considered beneficial to
the Company although succession
planning arrangements and
proposals are necessary
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
104
Audit, risk and internal control
Audit Committee report
The Committee continues
to assist the Board and
ensure that stakeholder
interests are protected by
monitoring the processes
that support the integrity
and accuracy of
financial reporting.
Rosalyn Wilton
Audit Committee Chair
Membership and attendance
The number of Committee members and their attendance during the year
was as follows:
Member
Rosalyn Wilton (Chair)
Andrew Livingston
Suzanne Avery
Robert Fowlds
Date
appointed
25/3/2014
31/5/2016
22/3/2018
31/3/2019
Tenure
(years)1
Meetings
attended2
6
4
2
1
5 (5)
5 (5)
5 (5)
5 (5)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2020,
rounded to the nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
Key responsibilities
Financial reporting
– Monitor the integrity of the financial reporting process
– Scrutinise the full and half year financial statements
– Consider and challenge the key financial judgements
Risk management and internal control
– Oversee the internal control processes
– Assess the need for an internal audit function
– Review the risk management framework
– Ensure risks are carefully identified, assessed and mitigated
External auditor
– Review the performance, independence and effectiveness
of the external auditor and audit process
Regulatory compliance
– Review the Viability Statement and going concern basis
of preparation
– Consider whether the Annual Report is ‘fair, balanced
and understandable’
– Monitor compliance with applicable laws and regulations
Highlights in 2020
See pages
106 – 108
See pages
108 – 109
See pages
109 – 110
See pages
110 – 111
– Considered accounting for the acquisition of A&J Mucklow Group
as a business combination
– Reviewed adoption of IFRS 16 Lease Accounting and disclosures
– Reviewed implementation of 2018 Code and the S172 Statement
Focus in 2021
– Continue to monitor the integrity of financial reporting
– Monitor the impact of the COVID-19 pandemic on strategy
and working practices
LondonMetric Property PlcAnnual Report and Accounts 2020
105
Dear Shareholder,
I am pleased to present the Audit
Committee report on behalf of the Board,
which describes the work we have
undertaken and our key areas of focus
this year.
Our remit is unchanged from previous years,
primarily to oversee and independently
challenge the integrity of the financial
reporting processes at LondonMetric
which support and ensure the accuracy
of the financial results. Alongside this, we
review the risk management framework
and internal control procedures in place
to ensure they remain robust and are
implemented effectively.
At our planning meeting in March, we
undertook a comprehensive review of
the principal and emerging risks facing the
Company as discussed on pages 60 to 75.
This included updates on cyber security
and responsible business, and also the
impact of the COVID-19 pandemic and
lockdown restrictions in place.
The business implications of the pandemic
and disruption were further discussed
by the Board and have been a priority
for the Executive Directors and Senior
Leadership Team, who have adapted
to changes in remote working practices
without disruption.
We will continue to monitor the impact this
pandemic may have on our strategy and
working practices over the coming year.
Each year we also consider the
independence and effectiveness of the
external audit plan and team to ensure they
provide the appropriate level of challenge
and support to the executive team.
Following our review, on pages 109
to 110, we have recommended the
reappointment of Deloitte LLP (‘Deloitte’)
at the AGM in July. Deloitte have been
in office for seven years now and we will
be required to re-tender the audit after
they have served for ten years.
As reported throughout the Strategic
report and as summarised in the case
study on page 18, the corporate acquisition
of the A&J Mucklow Group was the most
significant transaction in the year and
dominated much of the management
team’s focus and time.
We have reviewed the accounting
implications of the acquisition and have
concluded that it has been correctly
reflected as a business combination in
accordance with IFRS 3, as set out in our
review of significant financial judgements
on page 107.
In addition to its recurring business, the
Committee also received briefing papers
and considered the implementation of
the 2018 Corporate Governance Code,
which became effective for the first time
this year, and the Board’s responsibility
under S172 of the Companies Act 2006
and its S172 Statement which addresses
this on page 52.
Membership
The Committee comprised throughout the
year of four independent Non Executive
Directors. There were no membership
changes this year.
The Board is satisfied that Rosalyn Wilton,
Suzanne Avery and Robert Fowlds all bring
recent and relevant financial experience
to the Committee as required by the Code.
Andrew Livingston also brings financial
acumen and a wealth of corporate, retail
and management expertise.
The Board considers that the Committee
as a whole has considerable commercial
and industry specific knowledge and
competence to enable it to discharge
its duties through the positions members
currently or have previously held.
Biographies of the Committee members
which set out the relevant skills, knowledge
and sector experience they bring can be
found on pages 80 and 81.
Meetings
The Committee met five times last year,
following an annual programme which is
agreed at the start of the year.
Meetings are aligned to the Company’s
financial reporting timetable, with the
May and November meetings 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
reviews risk management and internal
control processes and considers the
year end audit plan.
The Group’s external auditor, independent
property valuers, Finance Director and Head
of Finance attend meetings by invitation,
as well as other members of the Senior
Leadership Team who present on specialist
topics. We find this extremely useful as, not
only does it allow us to focus on important
and topical issues, but it exposes us to
the pool of talent within the organisation
below Board level. This year, the Head
of Investor Relations presented an update
on responsible business and the Head of
Finance joined meetings and discussed
significant accounting matters and
cyber security.
Time is allocated for the Committee to
meet the external auditor and property
valuers independently of management.
In addition to formal Committee meetings,
I have regular contact and meetings
with the Finance Director and Senior
Leadership Team. This allows me to
gain a good understanding of key and
emerging issues in advance of Committee
meetings, facilitating informed and
constructive debate.
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.
As Chair of the Committee, I report to
the Board any matters considered and
conclusions reached after each meeting.
Committee effectiveness
During the year the Board, led by the
Nomination Committee, carried out
an internally facilitated evaluation of its
performance and that of its Committees
and concluded that the Committee
continued to operate effectively and
provided the appropriate level of
independent challenge and scrutiny.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 106
Audit, risk and internal control
Audit Committee report continued
Our work in 2020
Throughout the year, the Committee acted in accordance with its Terms of Reference,
which were last reviewed and updated in March 2020 and can be found at
www.londonmetric.com
The work undertaken this year has included the consideration, review and approval
of the following:
Financial
reporting
– Interim and full year results announcements
and Annual Report
– Accounting treatment of significant transactions and
areas of judgement including the corporate acquisition
of A&J Mucklow Group
– The valuation process, the half yearly valuations
and the independence of the Group’s valuers
– Implementation of IFRS 16 Lease Accounting
– Processes undertaken to ensure that the financial
statements are fair, balanced and understandable
Risk
management
and internal
control
– The Group’s risk register, principal and emerging risks
including cyber security and COVID-19
– The adequacy and effectiveness of the Group’s
internal controls
– The appropriateness of the going concern assumption
– The Viability Statement and longer term forecast
– The need for an internal audit function
External audit
– Scope of the external audit plan
– The independence and objectivity of the external auditor
– Performance of the external auditor and effectiveness
of the audit process
– Auditor’s fee
– Reappointment of Deloitte LLP as external auditor
– Non audit services and ratio of fees
Regulatory
compliance
– Committee’s composition, performance,
terms of reference and constitution
– The implementation of the new 2018 Code
– S172 Statement and stakeholder engagement
– Responsible business including climate change
– Tax strategy and whistleblowing policy
Financial reporting
One of our principal responsibilities is
to monitor the integrity of the financial
information published in the interim and
annual statements and the overall tone,
messaging and clarity of reporting.
In conducting its review, the
Committee considers:
• The extent to which suitable
accounting policies and practices
have been adopted, consistently
applied and disclosed;
• Significant matters by virtue of their
size, complexity, level of judgement
and potential impact on the financial
statements; and
• Compliance with relevant accounting
standards and other regulatory
reporting requirements including
the Code.
The significant matters considered
by the Committee, discussed with the
external auditor and addressed during
the year are set out on page 107.
Further details can be found in note 1
to the financial statements on pages
158 to 159.
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, as reported
in their independent report on
page 146.
LondonMetric Property PlcAnnual Report and Accounts 2020 107
Property valuations
Reporting Issue
The property valuation as the largest item
on the balance sheet remains a critical
part of the Group’s reported performance.
It continues to be the most significant
matter for consideration, being a key
determinant of the Group’s profitability,
net asset value, total property return and
a variable element of remuneration.
Property valuations are inherently subjective
as they are based on assumptions and
judgements made by external valuers
and underpinned by transactional market
evidence, which may not prove to be
accurate. In a market where trends are
volatile and fast changing, this empirical
data may be less relevant and valuations
may become more subjective.
It remains a principal recurring risk for the
Group as reported in the Risk management
section on pages 72 to 73. The Group and
its share of joint ventures has property assets
of £2.3 billion as reflected in the Financial
review and as detailed in Supplementary
note ix on page 186.
The Committee’s role
All investment properties, including
those held in joint ventures, are externally
valued each half year by three independent
property valuers, CBRE Limited, Savills (UK)
Limited and Cushman & Wakefield Debenham
Tie Leung Limited.
The Committee met twice during the year
with the property valuers, as part of the interim
and year end reporting process, to scrutinise
and challenge the integrity of the valuation
process, methodologies and results.
The key judgements applied and any issues
raised with management were considered
to ensure that the valuers remained
independent and objective throughout
the process and had not been subjected
to undue influence from management.
Supporting market evidence was provided
to enable the Committee to benchmark
assets and conclude that the assumptions
applied were appropriate. We reviewed
key assumptions including future rental
growth, market yield, capital expenditure,
letting timeframes, void costs and
incentive packages and were content
with those applied.
Any valuations requiring a greater level
of judgement were debated, including
property under development and valuation
movements that were not broadly in line
with the IPD benchmark. The Committee
challenged assumptions and discussed
the impact on values should key
assumptions change.
As part of their audit work, Deloitte use
their own valuation specialists to assess
and independently challenge the
valuation approach, assumptions and
judgements. They meet separately with
the valuers and report their findings
and conclusions to the Committee.
The COVID-19 pandemic has led to
a heightened degree of uncertainty
surrounding our year end valuations
and our three external valuers have
included material uncertainty clauses
in their valuation reports which is in
line with RICS guidance.
Conclusion
The Committee confirmed to the Board
that it was satisfied that the external
property valuation included within
the financial statements had been
carried out appropriately, independently
and in accordance with industry
valuation standards.
Significant transactions
Reporting Issue
The Group transacted on £793 million
of property acquisitions and sales in the
year, as discussed in detail in the Property
review on page 26. Certain transactions
are large and/or complex in nature and
require management to make judgements
when considering the appropriate
accounting treatment including how
and when a transaction should be
recognised. There is an inherent risk that
an inappropriate approach could lead
to a material misstatement in the Group’s
financial statements.
The most significant transaction this year
was the corporate acquisition of A&J
Mucklow Group, a largely distribution
and industrial REIT with a complementary
portfolio of assets located predominantly
in the West Midlands. The acquisition
was implemented by way of a Scheme
of Arrangement under Part 26 of the
Companies Act 2006. The entire issued
share capital was acquired for a total
consideration of £413.0 million, representing
cash of 204.5p and 2.19 LondonMetric
shares for each Mucklow share held,
which resulted in 138.6 million new shares
in the Company being issued.
The Committee’s role
The Committee, in conjunction with the
external auditor, received and challenged
management’s accounting proposals in
relation to the corporate acquisition, which
were presented in Board and Committee
briefing papers and discussed at meetings.
As part of this transaction, the Group
acquired a significant portfolio of assets
along with external fixed rate debt and a
team of employees located in Birmingham.
The business has continued to be
supported by a small team of dedicated
employees in Birmingham, who have
extensive knowledge of the Mucklow
portfolio and operations.
Accounting for the transaction as a business
combination under IFRS 3 requires us to fair
value the assets acquired and consideration
paid. As reflected in note 15 to the financial
statements, this resulted in goodwill arising
as the consideration paid generated a
surplus of £48.3 million over the fair value
of assets acquired.
As this goodwill was created predominantly
by the strong performance of the
LondonMetric share price up to the final
offer price being determined and was
not supported by separately identifiable
assets, it has been fully impaired and
charged to the income statement
in the year.
Full details of the acquisition and
integration process can be found in
the case study on page 18 and details
of the net assets acquired is provided
in note 15 to the financial statements
on page 174.
Conclusion
Having considered the details of the
transaction, the nature of operations post
the Group’s acquisition and the view of
the external auditor, the Committee was
satisfied that the acquisition represented
a business combination in accordance
with IFRS 3 and the goodwill arising
was correctly charged to the income
statement in the year.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 108
Audit, risk and internal control
Audit Committee report continued
The Committee also reviewed the impact
of adopting IFRS 16 Lease Accounting,
which requires lessees to recognise
operating leases on the balance sheet
as both a right of use asset and an
associated liability.
The Group’s only operating leases are
at its London office in Curzon Street
and a small number of property head
leases. The Committee reviewed and
agreed with the accounting treatment
applied, as set out in notes 1 and 16 to
the financial statements.
Risk management
and internal control
The Board takes seriously its responsibility
for establishing and maintaining the
Company’s framework of risk management
and internal control and for identifying
the emerging and 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 its decision
making process and key to long term
sustainable success and growth.
The risk management 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 60 to 75.
The system is designed to give the Board
confidence that the risks are managed or
mitigated as far as possible, acknowledging
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.
There is a culture of risk awareness
embedded into the decision making
process and robust processes in place
to support the identification and
management of risk.
The Board considers risk at each meeting
via a dashboard, which ensures that new
and emerging risks are identified early on
with appropriate action taken to remove
or reduce their likelihood and impact.
This year has been particularly turbulent,
both politically and economically, with the
implications of Brexit still being negotiated
and implemented. The Board’s focus
has rightly focused on broader market
conditions and property trends.
More recently the COVID-19 pandemic
has dominated much of the Board’s time,
with a focus on new remote working
arrangements, our tenants and rent
collection, working capital and capital
allocation. This is discussed in detail in the
Risk management section on pages 64
to 65.
The Board has delegated responsibility
for reviewing the effectiveness of the
risk management framework and
internal control environment to the
Audit Committee.
Each year the Committee carries out
an in depth review of the risk register
and reports its findings to the Board.
The risk register was last updated and
presented to the Audit Committee in
March 2020.
In addition, the Committee received
a cyber security update paper from the
Finance Director, which described the
penetration, social engineering and
disaster recovery testing undertaken in
the year to ensure that the IT infrastructure
and systems in place continue to be robust
and fit for purpose in an ever changing
technological environment.
Risk register
As in previous years, the risk register
identifies the following for each
corporate, property 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; and
– Allocated owner of the risk and
management of safeguards.
The Senior Leadership Team
is responsible for the ongoing
identification and assessment of risks.
Short reporting lines and a small team
facilitates the early identification
of risks and development of
mitigation strategies. The Committee
concluded that risks were properly
categorised, understood and acted
upon as necessary.
The Audit Committee also reviews the
effectiveness of the Group’s internal
controls including all material financial,
operational and compliance controls.
It receives an annual internal control
evaluation report which is completed
by the Finance Director and which
was last updated and presented to
the Committee in March 2020.
The report highlighted improvements
made to financial accounting and
reporting processes following the
acquisition of A&J Mucklow Group
as a result of the systems migration
exercise recently undertaken.
Both offices in London and Birmingham
are now operating from one
secure IT environment and on the
same accounting and property
management platforms.
Further improvements were made
in the year to our forecast model,
enhancing its capabilities and
flexibility, facilitating sensitivity analysis.
LondonMetric Property PlcAnnual Report and Accounts 2020 109
Internal control framework
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
and development;
– A comprehensive and robust system
of financial budgeting, forecasting
and reporting;
– Weekly cash flow forecasting
that is reviewed by the Senior
Leadership Team;
– An integrated financial and
property management system;
– A simple and transparent
organisational structure with
clearly defined roles, responsibilities
and limits of authority that
facilitates effective and efficient
decision making;
– Most staff work in close proximity
to the Senior Leadership Team
members, who are involved in all
day to day operations and decision
making, facilitating supervision
and monitoring;
– Disciplined monthly meetings
of the management committees
below Board;
– The maintenance of a risk register
and risk dashboard highlighting
movements in principal and
emerging risks and mitigation
strategies; and
– A formal whistleblowing policy
and annual performance reviews
to enable staff to voice concerns
Based on its review and assessment,
the Audit Committee is satisfied
that no significant weaknesses in
the Group’s internal control structure
were identified during the year and
an effective risk management system
is in place, and has reported these
findings to the Board.
Internal audit
The Group does not have a dedicated
internal audit function and the Committee
reviews the requirement for one each year.
Due to the size of the organisation, relatively
simple structure of the Group and close
involvement of the Senior Leadership Team
in day to day operations, the Committee
did not feel an internal audit function was
either appropriate or necessary. However,
from time to time external advisors are
engaged to carry out reviews to supplement
existing arrangements and provide
further assurance, which during the year
included testing of IT systems and security
including penetration tests and disaster
recovery testing.
The Committee agreed that external
assurance would be sought for any
complex, specialist or high risk issue.
External audit
Deloitte has been the external auditor for
the past seven years since 2013 following
a formal tender process. Georgina Robb,
our current lead partner was appointed
for the 2018 year end.
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.
The Committee anticipates that the next
competitive tender will be conducted
no later than 2023 and the next partner
rotation no later than 2023.
We have no contractual obligation to
remain with Deloitte as auditor and the
choice of audit firm will be kept under
review to allow sufficient time for the
re-tender process.
The Company has complied with the
provisions of the Competition and Markets
Authority Order 2014 in relation to audit
tendering and the FRC’s Ethical Standard
which became effective in March 2020
in relation to provision of non audit services
for the year under review.
Oversight
As in previous years, Deloitte presented
their audit plan to the Committee in March.
The key audit risk areas and materiality
levels were highlighted and approved.
This year, the key risk areas identified were
in relation to the valuation of property
and accounting for the acquisition of the
A&J Mucklow Group. Their detailed audit
findings were presented ahead of the
interim and full year results.
The Committee questioned and
challenged the work undertaken and
the key assumptions made in reaching
their conclusions.
As part of their work, the Committee
allocates time to meet privately with the
auditor without management present.
Effectiveness
The Committee assesses the effectiveness
of the external audit process by its review
of the following:
• Audit plan and deliverables;
• Independence and objectivity;
• Fees and reappointment.
In making its assessment, the Committee
considers the expertise and consistency
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 matters and accounting judgements.
It also considered the interaction
with and views of management, which
included feedback received following the
audit clearance meeting held between
management and the audit team.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 110
Audit, risk and internal control
Audit Committee report continued
Audit and non audit fees
Year to 31 March
Audit fees
Review of interim results
Other non audit fees
Total
Ratio of non audit fees
(including interim review) to audit fees
2020
£000
184
30
–
214
16%
2019
£000
122
28
–
150
23%
2018
£000
115
27
2
144
25%
Audit fees paid to the external auditor in respect of joint ventures totalled £16,000 at share (2019: £22,000 at share)
The table above sets out the fees
payable to Deloitte for each of the past
three years. The three year average ratio
of non audit fees (primarily the cost of
the interim review) to audit fees is just 21%,
supporting the Committee’s conclusion
that Deloitte remains independent.
Having undertaken its review, in the opinion
of the Audit Committee, this year’s audit
was appropriately planned, executed
and of a consistently high quality.
There continues to be a constructive
working relationship between
management and Deloitte, who provide
appropriate professional challenge
and remain independent and objective.
As such, the Committee has recommended
to the Board that Deloitte be appointed
for another year. A resolution to this effect
will be proposed at the AGM in July.
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. 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; and
• Certain services are prohibited from
being undertaken by the external auditor
including bookkeeping, preparing
financial statements, design and
implementation of financial information
systems, valuation, remuneration and
legal services.
All taxation services and remuneration
advice is provided separately by
PwC. Corporate due diligence work is
undertaken by BDO LLP, which included
the work associated with the Mucklow
acquisition in the year.
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 auditor
and to ensure the objectivity of their
audit report.
Regulatory compliance
S172 (1) Statement
The Board of Directors, both individually
and collectively, is aware of its duty
under Section 172 Companies Act to
act in the way it considers, in good faith,
would be most likely to promote the
success of the Company for the benefit
of its members as a whole, having
regard to:
– The likely consequences of decisions
in the long term;
– The interests of its employees;
– The Company’s relationships with
suppliers, customers and others;
– The impact of Company’s operations
on the community and environment
– The Company’s reputation and
maintaining high standards of
business conduct; and
– The need to act fairly as between
members of the Company
These considerations have underpinned
our normal business practices for
many years, but the new requirement
to report on them has formalised
some of our processes, as described
in more detail on page 52.
The Committee continues to focus on
the long term success of the business
and its stakeholders through its work
on the following key areas:
– Assessing whether the Annual Report
is fair, balanced and understandable
to provide shareholders and other
stakeholders with clear information
on the Company and its long term
outlook. Our review is set out on
page 111
– Reviewing the appropriateness
of the going concern assumption
and assessing the Company’s
viability and longer term prospects.
Our work is set out on page 111 and
the Board’s Viability Statement is
on page 63
– Ensuring the Company’s risk
management framework is
sufficiently robust to safeguard
its future for the benefit of
its stakeholders
LondonMetric Property PlcAnnual Report and Accounts 2020 111
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 the
analysis prepared to support the Board’s
longer term Viability Statement required
by the Code.
Its assessment included a review of the
principal risks and risk appetite, the chosen
period of assessment, headroom under
loan covenants, liquidity, investment
commitments and the level of stress
testing of financial forecasts undertaken.
Particular attention was paid to the time
horizons 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
in note 1 to the financial statements on
page 158 and its Viability Statement is
set out on page 63.
Fair, balanced and understandable
At the request of the Board, the Audit
Committee considered whether this
Annual Report was a fair, balanced and
understandable assessment of the Group’s
position and prospects.
In reaching its decision, the Committee
considered the procedures in place and
adopted by management in preparing
the Annual Report, which included
the following:
• The establishment of a team of
experienced senior managers, drawn
from finance, investor relations and
property with clear responsibilities
for the preparation and review of
relevant sections of the report;
• Regular team liaison during the
drafting stages to ensure consistency
of tone and message, balanced
content and appropriate linking
of the various sections;
• A technical briefing update given
by the external auditor covering
corporate governance and
accounting regulations attended
by relevant staff in January 2020;
• Early input from Chief Executive and
Senior Leadership Team to the overall
message and tone of the report;
• Close involvement of the Executive
Directors throughout with extensive
review of drafting;
• A verification exercise was undertaken
by the finance team to ensure factual
accuracy and consistency throughout
the report; and
• Review by the Audit Committee
before being presented to the
Board for approval.
In carrying out its review, the Committee
had considered the following:
Fair
– Does it include relevant
transactions and balances?
– Does it include the required
regulatory disclosures?
– Does it provide shareholders
information to assess the Group’s
position and performance,
business model and strategy?
– Is it honest, reporting success
and opportunities alongside
challenges to the business?
Balanced
– Is it consistent throughout with
sufficient linkage?
– Is there an appropriate mix
of statutory and alternative
performance measures?
– Are alternative performance
measures explained
and reconciled to the
financial statements?
Understandable
– Is it written in straightforward
language and without
unnecessary repetition?
– Does it use diagrams, charts,
tables and case studies to
break up lengthy narrative?
– Is there a clear contents
page to aid navigation and
sufficient signposting?
The Committee concluded that the
Annual Report was fair, balanced and
understandable, allowing the Board
to make its statement on page 144.
Whistleblowing procedures,
anti-corruption and anti-bribery
As a company, we seek to operate
in an honest and professional manner,
with integrity and respect for others.
We do not tolerate inappropriate
behaviour or malpractice of any kind.
Employees are encouraged to speak
out if they witness any wrongdoings
and are provided with a compliance
procedures manual on joining which
sets out our whistleblowing policy
and anti-corruption procedures.
Our policies on anti-corruption,
diversity and inclusion are available
on our website. During the year,
a companywide training session was
arranged covering anti-bribery and
anti-corruption principles and practices
as well as anti-money laundering and
corporate culture.
Responsibility for reviewing and monitoring
whistleblowing rests with the Board and
the Committee will report to the Board any
incidents that are brought to its attention.
During the year under review, there were
no whistleblowing incidents to report
to the Board.
Finally, I would like to take this opportunity
to thank my fellow Committee members,
management team and Deloitte for their
support and guidance during the year.
Due to the COVID-19 pandemic, this
year’s AGM will be a closed meeting in
accordance with the latest guidance
and so I will not be attending. However,
I would welcome any questions from
shareholders by email as outlined in
the Notice on page 191.
Rosalyn Wilton
Chair of the Audit Committee
10 June 2020
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 112
Remuneration
Remuneration Committee report
Our remuneration
framework is designed to
align executive pay with
the Company’s strategic
goals and wider workforce
pay and to encourage and
reward exceptional overall
and individual performance.
James Dean
Remuneration Committee Chair
Membership and attendance
The number of Board and Committee members and their attendance during the
year was as follows:
Member
James Dean (Chair)
Rosalyn Wilton
Suzanne Avery
Robert Fowlds
Date
appointed
1/10/2010
14/7/2016
19/9/2018
31/1/2019
Tenure
(years)1
Meetings
attended2
10
4
2
1
7 (7)
7 (7)
7 (7)
7 (7)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2020,
rounded to the nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
Key responsibilities
Remuneration Policy
– Setting and reviewing the Group’s overall Remuneration Policy
and strategy
Remuneration packages and payouts
– Determining and reviewing individual remuneration packages
– Approving salaries, bonuses and LTIP awards
Variable incentives
– Determining and reviewing the Long Term Incentive Plan (‘LTIP’)
and Annual Bonus Plan arrangements and approving targets
and outcomes
See page 119
See page 130
See page 130
Highlights in 2020
– Reviewed proposed new Remuneration Policy taking into consideration
views of management, advisors and major shareholders, following
an extensive consultation exercise
– Considered wider workforce pay when setting Executive Directors’
and the Senior Leadership Team’s remuneration
– Considered the impact of acquiring A & J Mucklow, being a material
corporate event, on the LTIP and annual bonus performance targets
for 2020
– COVID-19 considerations including share price fall and impact on
2020 LTIP award and 20% salary waiver by the Board and senior
executives for COVID-19 charitable giving
Focus in 2021
– Oversee the implementation of the 2020 Remuneration Policy
following shareholder approval at the AGM
LondonMetric Property PlcAnnual Report and Accounts 2020
Remuneration
Introduction from the Chair
113
This report is structured as follows:
Chair’s introduction
page 113
Directors’ Remuneration
at a glance
Implementation of Policy
next year
Directors’ Remuneration
Policy
Annual Report on
Remuneration
page 116
page 117
page 119
page 130
Chair’s introduction
I am pleased to present the Remuneration
Committee’s report on Directors’
remuneration for the year to 31 March 2020.
It was agreed last year that Robert Fowlds,
who joined in January 2019 as a Non
Executive Director, would take on the role
of Chair after serving as a member of the
Committee for 12 months. However, the
Board subsequently decided that, having
commenced the process, it was in the best
interests of shareholders and the Company
for me to oversee the development and
implementation of the new Remuneration
Policy and provide the necessary insight
and continuity throughout the shareholder
liaison process. Following the AGM in July,
I will step down from the Remuneration
Committee but remain as a Non Executive
Director until a suitable replacement can
be found.
Valentine Beresford and Mark Stirling
stepped down from the Board in July 2019
but remained as Investment and Asset
Directors respectively and members of the
Senior Leadership Team. Their remuneration
included in the table on page 131
has been pro-rated for their time as
Executive Directors.
The primary role of the Remuneration
Committee is unchanged from previous
years, namely to determine and
recommend a fair reward structure
that incentivises the Executive Directors
to deliver the Group’s strategy whilst
maintaining stability in the management
of its long term business. The Group’s
Remuneration Policy (‘Policy’) is designed
to be simple and transparent and one
which aligns executive pay and incentives
with the Company’s goals. It aims to
encourage and reward exceptional
overall and individual performance.
The Policy we have operated for the past
three financial years was approved by
shareholders at the 2017 AGM and our new
Policy, which is presented on pages 119
to 129, is being put forward for a binding
vote at the forthcoming AGM. We are
not proposing any significant changes to
the current framework, which we believe
continues to incentivise management to
support the delivery of business strategy
and the creation of shareholder value.
The proposed refinements take account
of the changes to the UK Corporate
Governance Code and feedback from
shareholders and is explained in further
detail in the Directors’ Remuneration
Policy report.
Our Annual Report on Remuneration
contains details of payments during
the financial year and how we intend
to implement the Remuneration Policy
for the next financial year. This part
of the report is subject to an advisory
vote at the forthcoming AGM.
This year we are reporting against the
provisions of the new 2018 Corporate
Governance Code, which is effective for
the Company from 1 April 2019. With the
help of our remuneration advisor, we have
reviewed the new provisions and taken
these into consideration when developing
the new Policy. We extended the remit
of the Committee last year to set the
remuneration of the Senior Leadership
Team. It has also had oversight of the
remuneration arrangements of the wider
workforce and their alignment with
the Executive Directors’ arrangements.
The employee voice was strengthened
last year by the appointment of Andrew
Livingston as designated workforce
Non Executive Director and his work
this year is discussed on page 90.
Remuneration aligned to strategy
Our remuneration framework is aligned
with the Company’s strategic direction
and performance as well as the interest of
our shareholders as reflected in the chart
on page 127. Success against our strategic
objectives is measured using our key
performance metrics which underpin the
variable elements of remuneration, being
EPRA Earnings per Share (‘EPS’), Total Property
Return (‘TPR’), Total Accounting Return
(‘TAR’) and Total Shareholder Return (‘TSR’).
Performance during the year
The Company has delivered strong
returns to shareholders this year despite
the continued political and economic
uncertainty. Its focus on investing in the
structurally supported and resilient sectors
of distribution and long income assets,
which together represent 94% of the
portfolio, has delivered earnings growth
and a progressive and well covered
dividend for shareholders.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 114
Remuneration
Introduction from the Chair continued
EPRA earnings per share has grown by
5.6% to 9.3p, driven by a 24% increase in net
rental income to £116 million. The 1.8% fall
in EPRA net assets per share to 171.7p was
largely a result of the one off transaction
costs of 2.5p relating to the acquisition
of A&J Mucklow.
As reported in the Strategic report, this major
corporate acquisition in the year contributed
£15.5 million to EPRA earnings and added
64 complementary assets worth £454.7 million
to the portfolio. Operational portfolio metrics
remain robust with occupancy increasing
to 98.6%, average lease lengths of 11.2
years and 55% of income being subject
to contractual rental uplifts. Once again,
the Group’s total property return of 5.1%
outperformed the IPD Quarterly Universe
Index of -0.5% by 560 bps.
The Company has remained fully
operational throughout the COVID-19
pandemic and has collected, or is
collecting monthly, 93% of rents due
by 1 April. It has agreed short term
rent deferrals and concessions with
compensatory asset management
initiatives on a further 6%.
Shareholder support for the Company’s
investment strategy was evidenced
by the successful and over-subscribed
equity raise in May, securing £120 million
for attractive investment opportunities
that the Company has identified, even
in these challenging times.
Taking into account the Company’s
sustained strong performance and
the progressive returns enjoyed by its
shareholders, the Committee considers
it appropriate to reward the Executive
Directors with the variable elements of
this year’s annual bonus and LTIP in line
with the formulaic outcomes as detailed
below. The Committee feels that the
underlying performance of the business
is consistent with these outcomes and
therefore has not exercised its discretion
or made any adjustment due to share
price performance over the period. 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 as set
out on pages 132 to 134 including income
quality and growth, portfolio alignment to
structurally supported sectors, optimisation
of funding arrangements, maintaining
and enhancing stakeholder relationships,
meeting responsible business targets and
the delivery of developments on time
and within budget.
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 Chief Executive and
Finance Director to be at 97.5% and 95%
respectively of their respective maximum
levels. The Directors have decided to opt
out of the annual bonus deferral provision in
accordance with the Remuneration Policy,
as they have exceeded the minimum
shareholding requirement of 700% of salary.
Their annual bonuses will be paid in
June 2020.
LTIP vesting
Vesting of the LTIP awards granted to
Executive Directors in 2017 is dependent
on Company performance over the
three year period to 31 March 2020.
Performance is measured by reference to
relative TAR and TSR versus the FTSE 350 Real
Estate Super Sector excluding agencies
and operators and EPRA EPS growth.
The Committee assessed performance
and based on actual EPRA EPS of 9.3p,
and TAR and TSR over the three year
period both being in the top quartile of
the measurement index, 88% of awards
granted are expected to vest in June 2020,
subject to continued service.
Despite the current impact of COVID-19,
the average share price has risen 22%
over the vesting period. Given this strong
performance, the Committee is satisfied
that the amount payable under the
variable incentive plan is a fair reflection
of the underlying performance of the
business and appropriate. As such, no
discretion was exercised by the Committee
in relation to this outcome.
LTIP awards
The Group’s LTIP arrangements seek to
align executive pay with the delivery of
long term growth in shareholder value.
This year 829,736 share awards were
granted to the Executive Directors and
1,184,522 LTIP and deferred bonus share
awards vested. The Directors disposed
of 558,403 shares to settle tax liabilities
and retained the remaining 626,119 shares
which increased their holding in the
Company to a total of 7.0 million shares
as reflected in the table on page 137.
The former Executive Directors were
granted 609,744 share awards and 878,520
LTIP and deferred bonus share awards
vested, of which they disposed of 414,150
shares to settle tax liabilities.
Base salaries
The Board of Directors and certain key
employees are waiving 20% of salaries and
fees for three months, providing additional
funds for the Company’s wider COVID-19
charity giving. Pay reviews for the whole
workforce have been postponed until
September 2020 as a result of the pandemic
and current economic uncertainty.
Policy renewal
Last year, the Committee conducted
a comprehensive review of its executive
remuneration framework with the
assistance of its remuneration advisors,
PwC.
In October 2019, we consulted extensively
with our major shareholders representing
over 60% of issued share capital as
well as proxy voting agencies on the
proposed Policy.
The Committee concluded that the
current framework, which had overwhelming
shareholder support and approval in 2017,
continued to support the successful delivery
of strategy and drive the exceptionally high
levels of business performance achieved
over the past three years.
Therefore, we proposed only a few
minor improvements to comply with the
remuneration principles introduced in
the 2018 Corporate Governance Code,
as listed on page 115.
LondonMetric Property PlcAnnual Report and Accounts 2020 115
Initial proposal
Feedback from shareholders
Final proposal and rationale
The key improvements made were
as follows:
• Strengthening the Company’s Post-
Cessation Shareholding Requirement
(‘PCSR’) to 200% of salary for two years
following cessation of employment
from the current requirement to hold
100% of salary for one year;
• Aligning pension contributions of
both newly appointed and current
Executive Directors with that of the
wider workforce; and
• Enhancing the Company’s malus
and clawback triggers to align with
best practice.
Responses to the shareholder consultation
were largely positive. The table opposite
outlines the initial proposals outlined at the
start of the process, the feedback received
from shareholders, and the final proposal
which took account of shareholder views.
The Committee feels that the Policy to
be proposed at the 2020 AGM achieves
a balance between fairly rewarding and
incentivising the Executive Directors as
well as encouraging continued alignment
with shareholders and compliance with
the Code.
Looking forward
Our focus next year will be to oversee
the implementation of the new Policy
following shareholder approval and to
continue to monitor emerging trends and
best practice in corporate governance.
Finally, as I hand over to my colleague
Robert, I would like to thank my fellow
Committee members for all their hard
work and support throughout my
time as Chair.
Increase the
PCSR to 200%
of salary for the
first year and
100% of salary
for the second
year following
cessation
of employment.
To align pension
contributions for
newly appointed
Executive
Directors to that
of the workforce.
Maintain the
opt-out deferral
under the
current Policy
for annual
bonuses.
Shareholders appreciated
the increase and recognised
that market practice is moving
towards a two year post
employment period.
Some shareholders commented
that the level of shareholding,
in particular in the second
year, should be higher than
the proposed level.
Some shareholders expected
the alignment to also apply
to current Executive Directors.
Shareholders understood
the underlying rationale behind
the opt-out bonus deferral given
that shareholder alignment is
already achieved through the
large personal shareholdings
of the Executive Directors.
However, some shareholders
mentioned that the deferral
mechanism has benefits other
than allowing Executive Directors
to build up a shareholding and
alignment to shareholder value.
In particular, that deferred
bonuses help to facilitate
malus and clawback.
James Dean
Chair of the Remuneration Committee
10 June 2020
Introduction
of corporate
failure as a malus
and clawback
trigger.
Shareholders unanimously
supported the additional
protections and recognised
the Committee’s approach
to best practice governance.
PCSR increased to holding
200% of salary for two years
post cessation of employment.
This is the median in-employment
shareholding level for the FTSE
250 and therefore appropriate.
The Committee also decided
to align pension contributions
for the current Executive
Directors with the workforce
by reducing them from 15%
to 12.5% in June 2021 and
to 10% in June 2022.
The Committee felt that given
the large shareholdings of
the Executive Directors, the
in-employment shareholding
requirement of 700% of salary,
and the enhanced PCSR as well
as the clawback and holding
period under the LTIP provide
ample protections against
the triggers which would
normally require application
of malus or clawback. As
such, the Committee believes
the opt-out bonus deferral
remains appropriate but will
factor in a more robust malus
and clawback mechanism
on shares held post cessation.
The Committee notes that
for new Executive Directors,
mandatory bonus deferral
would or already applies
until a stretching shareholding
requirement of 400% of salary
is met.
As originally proposed.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 116
Remuneration
Directors’ Remuneration at a glance
Earnings for the financial year
Remuneration for
Executive Directors
Andrew Jones
Martin McGann
Salary
£000
544
363
Benefits
£000
Pension
£000
26
28
82
54
Bonus
£000
878
485
LTIP
£000
1,297
702
Total
20202
£000
2,827
1,632
Total
2019
£000
2,703
1,559
Illustrative change in
value of shares owned
and outstanding
share awards1
£000
615
385
1 Based on an illustrative swing in share price of 10p. For reference, the highest closing share price during the year was 241.2p and the lowest closing price was 137.0p.
The number of shares and share awards was calculated based on the year end total
2 Full details of Directors’ remuneration for the year including Valentine Beresford and Mark Stirling, who both stepped down from the Board, as well as all Non Executive
Directors can be found in the table on page 131
Annual bonus plan – targets and outcomes
Payout target
Performance measure
EPRA EPS
TPR
25%
8.8p
1.0%
50%
8.9p
1.1%
100%
9.1p
1.2%
Actual
9.3p
5.1%
%
awarded
100%
100%
Combining these outcomes
with the personal objectives
gives the following payouts:
Andrew Jones
Martin McGann
£000
878
485
% of
maximum
97.5
95
2017 LTIPs vesting – targets and outcomes
Performance measure
TSR
TAR
EPRA EPS
Payout target
25%
1.9%
1.2%
9.1p
100%
55.2%
25.0%
9.5p
Actual
58.9%
30.6%
9.3p
%
awarded
The estimated number of
shares vesting are as follows:
100%
100%
53%
Andrew Jones
Martin McGann
Number
612,747
331,746
The level of LTIP vesting in 2020 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
Shareholding of the Executive Directors
Basis of award
(% of salary)
Date
of grant
Share awards
number
Face value
per share
200%
165%
5 June 2019
5 June 2019
534,747
294,989
204.2p
204.2p
Face value
of award
£000
1,092
602
% of salary
0%
250%
500%
750%
1,000%
1,250%
1,500%
1,750%
Andrew
Jones
Shareholding requirement
Beneficially owned shares
Unvested interests over shares
Martin
McGann
Shareholding requirement
Beneficially owned shares
Unvested interests over shares
823%
700%
700%
680%
1,352%
1,342%
LondonMetric Property PlcAnnual Report and Accounts 2020 Remuneration
Implementation of Policy next year
Summary of Policy and proposed changes
Implementation in the year to 31 March 2021
117
Base salary
An Executive Director’s basic salary is set on
appointment and reviewed annually with changes
normally taking effect from 1 June or when there
is a change in position or responsibility.
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.
Proposed changes from current Policy: None
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.
Proposed changes from current Policy: Newly
appointed Executive Directors will be given a pension
contribution of 10% of salary in line with employees.
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.
Proposed changes from current Policy: None
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.
Proposed changes from current Policy: None
The Committee and Board believes that during the current COVID-19 pandemic
it is not appropriate to contemplate pay reviews and increases and therefore
determined that the pay review shall take place in September. Base salaries
for the Executive Directors therefore remain unchanged as shown in the
table below. In addition, the Directors are waiving 20% of their salary for
three months, providing additional funds for the Company’s wider COVID-19
charity giving.
Executive Director
Andrew Jones
Martin McGann
Base salary (£)
£545,870
£365,000
Executive Directors will receive the 15% of salary supplement in lieu of pension
this year. Thereafter and in line with the new Policy proposed for approval
at this year’s AGM, pension contributions will reduce to 12.5% and 10% for
periods commencing 1 June 2021 and 1 June 2022 respectively.
Proposed changes from current Policy: Contributions paid to current Executive
Directors will reduce to 12.5% and 10% of salary for periods commencing
1 June 2021 and 1 June 2022 respectively in line with employees.
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 Finance Director. 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’)
35%
Personal
objectives
30%
Weighting
Description of targets
35%
Growth in Company’s EPRA
EPS against a range of challenging targets
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
Vary between individuals and include
portfolio management, financial and people
management, investor relations, responsible
business 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 PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 118
Remuneration
Implementation of Policy next year continued
Summary of Policy and proposed changes
Implementation in the year to 31 March 2021
Long Term Incentive Plan
Annual awards of up to 200% of salary for the
Chief Executive and 165% of salary for the other
Executive Directors.
The Committee is aware of the volatility the COVID-19 pandemic can have
on the Company’s share price and will assess, for any future awards granted,
whether a reduction in quantum is warranted.
The Committee will also take a view upon vesting as to whether there have
been any windfall gains under the LTIP and will take appropriate action
if required.
Performance
measure
Weighting
Threshold
(25% vesting)
Maximum1
(100% vesting)
Total shareholder
return (TSR)
Total accounting
return (TAR)
37.5%
Equal to index
37.5%
Equal to index
Equal to upper quartile
ranked company
Equal to upper quartile
ranked company
EPRA EPS growth
25%
RPI plus 0%
over three years
RPI plus 4%
over three years
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 shareholding requirement is:
• Chief Executive – 700% of salary
• Other Executive Directors and certain members of the Senior Leadership
Team – 700% of salary
• Newly appointed Executive Directors – 400% of salary
2021
2022
2023
2024
2025
Awards will normally vest at the end of a three year
period subject to:
• The Executive Director’s continued employment
at the date of vesting; and
• 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.
Proposed changes from current Policy: None
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.
Proposed changes from current Policy: increased
post-cessation shareholding requirement from
100% of salary for 1 year following cessation to
200% of salary for 2 years following cessation
Key elements and time period
Year ending March
Base salary
Pension
Benefits
Annual bonus
– Cash
– Deferred shares
LTIP
Non Executive Directors’ fees
Performance period
Vesting period
Holding period
LondonMetric Property PlcAnnual Report and Accounts 2020 Remuneration
Directors’ Remuneration Policy
119
The previous Remuneration
Policy for the Group
which was approved by
shareholders at the AGM on
11 July 2017 for a period of
three years is nearing expiry.
This section outlines the
2020 Remuneration Policy
which, subject to shareholder
approval, will take effect for
three years from the 2020
AGM on 22 July 2020.
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.
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; and
• Rewards superior performance through
the variable elements of remuneration
that are linked to performance.
Policy review
PwC, the Company’s remuneration advisor
reviewed the current Policy to ensure it
continued to remain fit for purpose and
aligned to the most recent regulatory
developments including the 2018 Code.
They took into consideration changes to
business strategy over the three year Policy
period, pay-outs earned by the Executive
Directors and the level of investor support
when identifying any areas for possible
consideration and change.
2018 Corporate Governance Code
We are required to comply with the
new 2018 Code for the first time this year
and as such, it has been a major factor
influencing the design of the 2020 Policy.
Under the headings prescribed under
provision 40 of the 2018 Code, the
following table shows the alignment
between the Policy and Code.
Changes to the Remuneration Policy
Following a review of the Policy, the Committee concluded that the current Policy worked well,
created alignment with stakeholders and the balance of metrics currently used supported
business strategy. The following changes are proposed to bring the Policy further in line
with corporate governance best practice.
Element
Current Policy
Proposed change
Rationale for change
Post-cessation
shareholding
requirement
Pensions
Post-cessation
shareholding
requirement
of 100% of salary
for 12 months
following cessation.
Post-cessation
shareholding
requirement of
200% of salary for
two years following
cessation of
employment.
Contribution of
15% of salary for
Executive Directors
(new and current).
New Executive
Director pensions
to be in line with
other employees.
Contribution of
12.5% of salary for
Executive Directors
effective from June
2021 and 10% from
June 2022, which
is aligned with
all employees.
In addition to
the current Policy,
the Committee
is proposing to
add Corporate
Failure as a trigger
for malus and
clawback.
Malus and
clawback
The following
triggers are already
contained in
the Policy:
• Material
misstatement
• Calculation error
in incentives
• Fraud or
misconduct
• Reputational
damage
To create further
alignment between
shareholders and
the executives.
To align the Policy
with the Corporate
Governance Code
and the expectation
of shareholders
around equality
of pension
contributions.
To align the Policy
with the Board
Effectiveness
Guidance under
the Code.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 120
Remuneration
Directors’ Remuneration Policy continued
2018 Corporate Governance Code
Provision 40 element
How the Remuneration Policy aligns
Clarity – remuneration arrangements
should be transparent and promote
effective engagement with shareholders
and the workforce.
Simplicity – remuneration structures
should avoid complexity and their
rationale and operation should be
easy to understand.
Risk – remuneration arrangements
should ensure reputational and other
risks from excessive rewards, and
behavioural risks that can arise from
target-based incentive plans, are
identified and mitigated.
Predictability –the range of possible
values of rewards to individual directors
and any other limits or discretions should
be identified and explained at the time
of approving the policy.
Proportionality – the link between
individual awards, the delivery of strategy
and the long-term performance of the
company should be clear. Outcomes
should not reward poor performance.
Alignment to culture – incentive schemes
should drive behaviour consistent with
company purpose, values and strategy.
Performance measures and targets under the LTIP are disclosed before grant
and performance targets for the annual bonus are disclosed retrospectively.
Both the annual bonus and LTIP measures are based on core elements of the
strategy and therefore there is a clear link to all stakeholders between their delivery
and Executive Director reward.
This alignment and transparency allows us to effectively engage with shareholders
and the workforce on remuneration.
The Remuneration Policy is designed with simplicity in mind and its operation aligns
with that of the majority of the FTSE 350 and is therefore easy to understand.
The selection of performance measures and calibration of targets ensures that
incentives will only pay-out where strategic goals have been met. The mix of relative
and absolute performance measures help to balance the effect of external market
factors (whether positive or negative).
The Remuneration Policy contains strict minimum shareholding requirements as well
as a post-cessation of employment shareholding requirement which ensures that
the wealth of Executive Directors is linked to the long-term stability and growth of the
share price which discourages short-term excessive risk taking which could negatively
impact on long-term value.
The Policy contains sufficient flexibility to adjust payments through malus and clawback
and an overriding discretion on the part of the Committee to depart from formulaic
outcomes if it appears that the criteria on which the award was based does not
reflect the underlying performance of the Company.
The Remuneration Policy sets out clearly the range of values, limits and discretions
in respect of the remuneration of management.
The remuneration package is weighted in favour of variable pay. This combined
with the Committee’s approach to target setting including the use of relative
performance measures means that total remuneration will be reduced in the event
of poor performance.
Pay-outs at maximum will only be available for delivery of the strategy and strong
underlying performance.
The overall structure of the Remuneration Policy including the incentive schemes
is consistent with the principles of the Policy which encourage share ownership.
Furthermore, the elements of the Executive Director remuneration package is
cascaded further down the organisation, as is the culture of share ownership.
LondonMetric Property PlcAnnual Report and Accounts 2020 121
Executive Directors’ Remuneration Policy Table
Base salary
Purpose and link to strategy
Operation
Maximum opportunity
Provide a competitive level of fixed pay to attract and retain Executive Directors of the required
calibre to deliver the Group’s strategy.
Level of pay reflects individuals’ skills, seniority and experience and complexity of the role.
An Executive Director’s basic salary is set on appointment and reviewed annually with changes
normally taking effect from 1 June or when there is a change in position or responsibility.
When determining an appropriate level of salary, the Committee considers:
• Pay increases to other employees
• Remuneration practices within comparable property companies
• Any change in scope, role and responsibilities
• The general performance of the Company and each individual
• The experience of the relevant Director
• The economic environment
Individuals who are recruited or promoted to the Board may, on occasion, have their salaries
set below the targeted policy level until they become established in their role. In such cases
subsequent increases in salary may be higher than the general rise for employees until the
target positioning is achieved.
The Committee ensures that maximum salary levels are positioned in line with companies of
a similar size to the Group and validated against other property companies, so that they are
competitive against the market.
The Committee intends to review the comparator group each year and will add or remove
companies as it considers appropriate.
In general, salary increases for Executive Directors will be in line with the increase for employees.
However, larger increases may be offered if there is a material change in the scope and
responsibilities of the role, including significant changes in Group size and/or complexity or if it is
necessary to remain competitive to retain a Director.
The Company will set out in the section headed Implementation of Remuneration Policy, in the
following financial year, the salaries for that year for each of the Executive Directors.
Performance measures
The Directors are subject to an annual performance assessment, the outcome of which is taken
account of in setting base salaries.
Pension
Purpose and link to strategy
Provide a competitive post-retirement benefit to attract and retain individuals.
Operation
Maximum opportunity
The Company provides a pension contribution allowance in line with practice relative to
its comparators to enable the Company to recruit and retain Executive Directors with the experience
and expertise to deliver the Group’s strategy.
This allowance will be a non-consolidated allowance and will not impact any incentive calculations.
The maximum contribution for current Executive Directors is 15% of salary, reducing to 12.5% of salary
in June 2021 and 10% of salary in June 2022. New Executive Directors will have a pension contribution
in line with other employees. No element other than base salary is pensionable.
Performance measures
None.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 122
Remuneration
Directors’ Remuneration Policy continued
Executive Directors’ Remuneration Policy Table continued
Benefits
Purpose and link to strategy
Provide a comprehensive and competitive benefit package to aid recruitment and the retention
of high quality Executive Directors.
Operation
Each Executive Director receives the following:
• Car allowance
• Private medical insurance
• Life insurance
• Permanent health insurance
Maximum opportunity
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. Additional benefits which are available to other employees on broadly
similar terms may therefore be offered.
Car allowance is £20,000 per annum for each Executive Director.
Other benefits are provided at the market rate and therefore the cost will vary from year to year
based on the cost from third party providers.
Performance measures
None.
Annual bonus
Purpose and link to strategy
Operation
Maximum opportunity
Performance measures
Incentivise the achievement of annual financial targets consistent with the Group’s business plan
for the relevant financial year with particular focus on total property return (TPR) and EPRA earnings
per share (EPS) as well as the delivery of agreed personal objectives.
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.
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%, and at least 50%, of the annual bonus will be paid in deferred shares
vesting over three years. No further performance conditions will apply to these shares other than
continued employment and dividend equivalents are paid out at the end of the vesting period.
The annual bonus contains malus and clawback provisions as noted on page 128.
The current maximum bonus for the Chief Executive is 165% of salary and 140% of salary for other
Executive Directors. Target bonus is 82.5% of salary for the CEO and 70% of salary for the other
Executive Directors, representing 50% of the maximum opportunity. The threshold for the bonus
is 25% of the maximum opportunity.
In exceptional circumstances, such as recruitment, the Committee may award a bonus opportunity
of up to 175% of salary. However, the maximum bonus limit for current Executive Directors will be
capped at 165%, i.e. no exceptional awards will be made to existing Executive Directors.
Performance is assessed against target financial and non financial measures which may vary
each year depending on the annual priorities of the business. At least half of the bonus payment
is subject to financial and/or property performance targets.
The Committee will set challenging annual targets consistent with the Group’s business strategy
that are appropriately stretching, but achievable. The Committee is of the opinion that due to
the commercial sensitivity of annual targets, targets will be disclosed retrospectively.
The Committee retains discretion to make downward or upward adjustments to the amount
of bonus payable resulting from the application of the performance measures if it believes that
the outcomes are not a fair and accurate reflection of business performance.
LondonMetric Property PlcAnnual Report and Accounts 2020 123
Executive Directors’ Remuneration Policy Table continued
Long term incentives
Purpose and link to strategy
Incentivise and reward the delivery of long term Group performance and sustained growth in
line with business strategy, thereby building a shareholding in the Group and aligning Executive
Directors’ interests with shareholders’.
Operation
The LTIP rules were approved by the shareholders at the 2013 AGM.
Awards are granted annually to Executive Directors in the form of a conditional share award or nil
cost option.
Details of the performance conditions for grants made in the year will be set out in the Annual Report
on Remuneration. If the Committee decides that the selected strategic metrics are commercially
sensitive for future grants, details will be disclosed retrospectively in the Annual Report on
Remuneration.
Awards will normally vest at the end of a three year period subject to:
• the Executive Director’s continued employment at the date 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.
The LTIP contains malus and clawback provisions as noted on page 128.
Annual awards with a maximum value of up to 200% of salary for the Chief Executive and 165%
of salary for other Executive Directors based on the market value at the date of grant set in
accordance with the rules of the LTIP.
25% of the award will vest for threshold performance.
100% of the award will vest for maximum performance. There is straight line vesting between
these points.
Maximum opportunity
Performance measures
For the awards to be made in the year to 31 March 2021, the following three year performance
measures will apply to the award:
• 37.5% Total Shareholder Return (TSR) exceeding the TSR of the FTSE 350 Real Estate Super Sector Index
(excluding agencies and operators)
• 37.5% on relative Total Accounting Return (TAR)
• 25% on EPRA EPS growth versus a base target plus RPI
The Committee may change the balance of the measures, or use different measures for subsequent
awards as appropriate.
No material change will be made to the type of performance conditions without prior shareholder
consultation.
In exceptional circumstances the Committee retains the discretion to:
• vary, substitute or waive the performance conditions applying to LTIP Awards if it considers
it appropriate and the new performance conditions are deemed reasonable and are not
materially less difficult to satisfy than the original conditions
• make downward or upward adjustments to the amount vesting under the LTIP award resulting
from the application of the performance measures if it believes that the outcomes are not a
fair and accurate reflection of business performance
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 124
Remuneration
Directors’ Remuneration Policy continued
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 level that could be achieved if all incentives were earned over the Policy period and paid in shares.
Post cessation shareholding requirement
There is a post cessation shareholding requirement for the Executive Directors, who must retain shares equivalent in value to 200% of salary
for two years post cessation of employment.
This requirement provides further long term alignment with shareholders and ensures a focus on successful succession planning.
Non Executive Directors’ Remuneration Policy Table
Fees and benefits
Purpose and link to strategy
To attract and retain suitably qualified Non Executive Directors by ensuring fees are competitive.
Non Executive Directors are not eligible to receive benefits other than travel, hospitality related
or other incidental benefits linked to the performance of their duties as a Director.
Operation
The Board is responsible for setting the remuneration of the Non Executive Directors.
The Remuneration Committee is responsible for setting the Chair’s fees.
Non Executive Directors are paid an annual fee and additional fees for the Chair of Committees
and for the Senior Independent Director. The Company retains the flexibility to pay fees for the
membership of Committees. The Chair does not receive any additional fees for membership
of Committees.
Fees are reviewed annually based on equivalent roles in the comparator group used to review
salaries paid to the Executive Directors.
Non Executive Directors and the Chair do not participate in any variable remuneration
arrangements or other benefits arrangements.
Maximum opportunity
The fees for Non Executive Directors and the Chair 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 Chair will be set
taking account of any change in responsibility. The aggregate fee for Non Executive Directors
and the Chair will not exceed £1 million.
The Company will pay reasonable expenses incurred by the Non Executive Directors and
Chair and may settle any tax incurred in relation to these.
LondonMetric Property PlcAnnual Report and Accounts 2020 125
Recruitment remuneration arrangements for Executive Directors
Remuneration element
Recruitment Policy
Salary, Benefits and Pension
These will be set in line with the policy for existing Executive Directors.
Annual Bonus
LTIP
Maximum annual participation will be set in line with the Company’s policy for existing Executive
Directors and will not exceed 165% of salary (175% of salary in exceptional circumstances).
Maximum annual participation will be set in line with the Company’s policy for existing Executive
Directors and will not exceed 200% of salary.
Maximum Variable
Remuneration
The maximum variable remuneration which may be granted in normal circumstances is 365% of salary
(375% of salary in exceptional circumstances). This excludes in both cases the value of any buyouts.
‘Buyout’ of incentives forfeited
on cessation of employment
Relocation Policies
Where the Committee determines that the individual circumstances of recruitment justifies the
provision of a buyout, the equivalent value of any incentives that will be forfeited on cessation of
an Executive Director’s previous employment (the lapsed valued) will be calculated taking into
account the following:
• the proportion of the performance period completed on the date of the Executive Director’s
cessation of employment
• the performance conditions attached to the vesting of these incentives and the likelihood
of them being satisfied
• any other terms and conditions having a material effect on their value
The Committee may then grant up to the same value as the lapsed value under the Company’s
incentive plans. To the extent that it was not possible or practical to provide the buyout within
the terms of the Company’s existing incentive plans, a bespoke arrangement would be used.
In instances where the new Executive Director is required to relocate or spend significant time away
from their normal residence, the Company may provide one-off compensation to reflect the cost
of relocation for the Executive Director. The level of the relocation package will be assessed on
a case by case basis but will take into consideration any cost of living differences and schooling.
Service contracts and payment for loss of office
Remuneration element
Treatment on cessation of employment
General
The Committee will honour Executive Directors’ contractual entitlements. Service contracts do
not contain liquidated damages clauses. If a contract is to be terminated, the Committee will
determine such mitigation as it considers fair and reasonable in each case. There are no contractual
arrangements that would guarantee a pension with limited or no abatement on severance or
early retirement. There is no agreement between the Company and its Directors or employees,
providing for compensation for loss of office or employment that occurs because of a takeover bid.
The Committee reserves the right to make additional payments where such payments are made
in good faith to discharge an existing legal obligation, or by way of damages for breach of such
an obligation or by way of settlement or compromise of any claim arising in connection with
the termination of an Executive Director’s office or employment.
Salary, Benefits and Pension
These will be paid over the notice period. The Company has discretion to make a lump sum
payment in lieu.
Cash bonus
Good leaver: performance conditions will be measured at the bonus measurement date.
Bonus will normally be pro-rated for the period worked during the financial year.
Other reason: no bonus payable for year of cessation.
Discretion: the Committee has the following elements of discretion:
• to determine that an Executive Director is a good leaver. It is the Committee’s intention to only
use this discretion in circumstances where there is an appropriate business case which will
be explained in full to shareholders
• to determine whether to pro-rate the bonus to time. The Committee’s normal policy is that it
will pro-rate bonus for time. It is the Committee’s intention to use discretion to not pro-rate in
circumstances where there is an appropriate business case which will be explained in full
to shareholders
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 126
Remuneration
Directors’ Remuneration Policy continued
Service contracts and payment for loss of office continued
Remuneration element
Treatment on cessation of employment
Deferred share awards
Good leaver: all subsisting deferred share awards will vest.
Other reason: lapse of any unvested deferred share awards.
Discretion: the Committee has the following elements of discretion:
• to determine that an Executive Director is a good leaver. It is the Committee’s intention to only
use this discretion in circumstances where there is an appropriate business case which will be
explained in full to shareholders
• to vest deferred shares at the end of the original deferral period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason
resulting in the cessation
• to determine whether to pro-rate the maximum number of shares to the time from the date
of grant to the date of cessation. The Committee’s normal policy is that it will not pro-rate awards
for time. The Committee will determine whether or not to pro-rate based on the circumstances
of the Executive Director’s departure
LTIP
Good leaver: pro-rated to time and performance in respect of each subsisting LTIP award.
Other reason: lapse of any unvested LTIP awards.
Discretion: the Committee has the following elements of discretion:
• to determine that an Executive Director is a good leaver. It is the Committee’s intention to only
use this discretion in circumstances where there is an appropriate business case which will be
explained in full to shareholders
• to measure performance over the original performance period or at the date of cessation.
The Committee will make this determination depending on the type of good leaver reason
resulting in the cessation
• to determine whether to pro-rate the maximum number of shares to the time from the date of
grant to the date of cessation. The Committee’s normal policy is that it will pro-rate awards for time.
It is the Committee’s intention to use discretion to not pro-rate in circumstances where there is
an appropriate business case which will be explained in full to shareholders
The following table outlines the policy for the treatment of incentives in the event of a change of control:
Change of control
Remuneration element
Change of control
Discretion
Annual bonus
(cash)
Pro-rated to time and
performance to the date
of the change of control.
Annual bonus
(deferred shares)
Subsisting deferred share
awards will vest on a
change of control.
The Committee has discretion regarding whether to pro-rate the bonus
to time. The Committee’s normal policy is that it will pro-rate the bonus
for time. It is the Committee’s intention to use its discretion to not pro-rate
in circumstances only where there is an appropriate business case which
will be explained in full to shareholders.
The Committee has discretion regarding whether to pro-rate the award
to time. The Committee’s normal policy is that it will not pro-rate awards
for time. The Committee will make this determination depending on the
circumstances of the change of control.
LTIP
The number of shares
subject to subsisting LTIP
awards will vest on a change
of control, pro-rated to
time and performance.
The Committee has discretion regarding whether to pro-rate the LTIP
awards to time. The Committee’s normal policy is that it will pro-rate the
LTIP awards for time. It is the Committee’s intention to use its discretion
to not pro-rate in circumstances only where there is an appropriate
business case which will be explained in full to shareholders.
LondonMetric Property PlcAnnual Report and Accounts 2020 127
Illustration of application of Remuneration Policy
The charts below show the application of the Remuneration Policy in its first year and provide an indication of the potential
remuneration for each element of remuneration for each of the two current Executive Directors under various scenarios.
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. In line with the changes to the regulations, we have also shown the maximum scenario with the impact of 50% share price
appreciation over three years. For comparison, we have also shown the actual single figure for the year to 31 March 2020.
Andrew Jones
Martin McGann
3,314
18%
2,827
2,727
1,395
21%
32%
47%
652
100%
43%
35%
33%
24%
27%
20%
860
18%
30%
52%
445
100%
1,632
1,156
1,592
40%
32%
28%
1,156
1,910
17%
33%
27%
23%
Minimum
On target
Maximum
Actual
Minimum
On target
Maximum
Actual
Fixed
Bonus
LTIP
Share price growth
Fixed
Bonus
LTIP
Share price growth
Strategy link to Remuneration Policy
The Committee’s remuneration decisions are 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 key performance indicators (‘KPIs’) are aligned to its variable incentive
arrangements of the annual bonus and LTIP.
Key performance indicators
Total shareholder return
Total accounting return
EPRA earnings per share
Total property return
Link to remuneration
Link to strategy
Annual bonus
LTIP
37.5%
37.5%
25%
35%
35%
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position
as partner of choice
Generate reliable,
repetitive and growing
income-led total returns
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 128
Remuneration
Directors’ Remuneration Policy continued
Recruitment remuneration arrangements
The Company’s principle is that the
remuneration of any new recruit will be
assessed in line with the same principles
as for the existing Executive Directors, as
set out in the Remuneration Policy table.
The Committee is mindful that it wishes
to avoid paying more than it considers
necessary to secure a preferred candidate
with the appropriate calibre and experience
needed for the role.
In setting the remuneration for new
recruits, the Committee will have regard
to guidelines and shareholder sentiment
regarding one-off or enhanced short
term or long term incentive payments
as well as giving consideration for the
appropriateness of any performance
measures associated with an award.
Where an existing employee is promoted
to the Board, the Policy would apply from
the date of promotion but there would be
no retrospective application of the Policy
in relation to subsisting incentive awards
or remuneration arrangements.
Accordingly, prevailing elements of the
remuneration package for an existing
employee would be honoured and
form part of the ongoing remuneration
of the person concerned. These would
be disclosed to shareholders in the
Remuneration Committee report for
the relevant financial year.
New Non Executive Directors will be
appointed through letters of appointment
and fees set at a competitive market level
and in line with the other existing Non
Executive Directors. Letters of appointment
are normally for an initial term of three years
and are subject to a notice period of
three months by either party.
Service contracts and
payment for loss of office
The service contracts for the Executive
Directors were reviewed and revised following
the merger in 2013 of London & Stamford
and Metric Property. Service contracts
are terminable by either party with notice
of 12 months. The Committee considers
this appropriate for all existing and newly
appointed Directors.
The Non Executive Directors do not have
service contracts but are appointed under
letters of appointment.
Each Non Executive is subject to an
initial three year term followed by annual
re-election at the Company’s AGM.
The following definition of leavers will
apply to both the annual bonus and the
LTIP. A good leaver reason is defined as
cessation in the following circumstances:
• Death
• Ill-health
• Injury or disability
• Redundancy
• Retirement
• Employing company ceasing to be
a Group company
• Transfer of employment to a company
which is not a Group company
• At the discretion of the Committee
Cessation of employment in circumstances
other than those set out above is cessation
for other reasons.
Malus and clawback
The following definition of malus and
clawback will apply to both the annual
bonus (including any deferred shares)
and the LTIP.
Malus is the adjustment of the annual
bonus payments or unvested LTIP awards
because of the occurrence of one or more
circumstances listed. The adjustment may
result in the value being reduced to nil.
Clawback is the recovery of payments
made under the annual bonus or vested
LTIP awards as a result of the occurrence
of one or more circumstances listed.
Clawback may apply to all or part of a
participant’s payment under the annual
bonus or LTIP award and may be effected,
among other means, by requiring the
transfer of shares, payment of cash or
reduction of awards or bonuses.
The circumstances in which malus and
clawback could apply are as follows:
• Discovery of a material misstatement
resulting in an adjustment in the
audited accounts of the Group or any
Group company
• The assessment of any performance
condition or condition in respect of an
annual bonus payment or LTIP award
was based on error, or inaccurate or
misleading information
• The discovery that any information used
to determine the annual bonus payment
or LTIP award was based on error, or
inaccurate or misleading information
• Action or conduct of a participant which
amounts to fraud or gross misconduct
• Events or the behaviour of a participant
have led to the censure of a Group
company by a regulatory authority or
have had a significant detrimental impact
on the reputation of any Group company
provided that the Board is satisfied that
the relevant participant was responsible
for the censure or reputational damage
and that the censure or reputational
damage is attributable to the participant
• Where, as a result of an appropriate review
of accountability, the Remuneration
Committee determines that the Executive
Director has caused wholly or in part a
corporate failure of the Company
The following table outlines the time periods during which these recovery provisions may
apply for each element of remuneration:
Remuneration element
Malus
Clawback
Annual bonus
(cash)
Annual bonus
(deferred shares)
LTIP
Up to the date of
the cash payment
To the end of the three
year vesting period
To the end of the three
year vesting period
Two years post the date
of any cash payment
n/a
Two years post vesting
LondonMetric Property PlcAnnual Report and Accounts 2020 129
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. Andrew Jones was a Non
Executive Director of The Unite Group Plc
until 9 May 2019 and earned fees of £4,000
in the year to 31 March 2020. There were
no new appointments in the year. None of
the other Executive Directors held external
appointments during the year.
Statement of consideration
of shareholder views
Following a thorough review of the current
Remuneration Policy, the Committee
carried out an extensive consultation
seeking to engage with our top
shareholders representing over 60% of
issued share capital as well as proxy voting
agencies, on the changes featured in
the proposed Policy. We recognise the
heightened attention placed on executive
pay this year from both a political and
corporate governance perspective,
and have proposed a Policy which the
majority of shareholders were supportive
of during the consultation process.
The Committee remains committed to
ongoing dialogue with the Company’s
shareholder base to ensure the views of
all stakeholders are taken in to account
in order to ensure the correct decisions
are made for the Company.
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
• 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 considers employee views carefully and the Board has appointed Andrew
Livingston as the designated workforce Non Executive Director with the role of gathering
employee views, ensuring that key points raised by employees are discussed at Board
or Committee meetings and feeding back to employees how their views have been
considered in the decision making process.
The Committee is mindful of the internal pay relativities when setting pay for the
Executive Directors. The Company provides regular strategy and performance updates
to employees, including half yearly results presentations, which are used to convey
key messages.
The diagram below illustrates the cascade of pay structures throughout the business
for the Chief Executive, Finance Director and the Senior Leadership Team for the year
to 31 March 2020.
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
Finance Director
Senior Leadership Team
LTIP
Annual bonus
Pension
200% of salary
165% of salary
40% to 165% of salary
165% of salary
140% of salary
65% to 140% of salary
15% of salary
15% of salary
10% to 15% of salary
Participation
Non Executive Directors’ fees
The fees for Non Executive Directors and the Chair are broadly set at a competitive level
against the comparator group and increases take account of any change in responsibility.
The aggregate fee for Non Executive Directors and the Chair will not exceed £1 million.
The base fees for Non Executive Directors, excluding the Chair, remain unchanged and are
reflected in the table below. The Chair’s letter of appointment set his fees for the period to
31 March 2021.
Chair
Base Non Executive Director fee
Senior Independent Director additional fee
Additional fee for Audit/Remuneration Committee Chair
Additional fee for Audit/Remuneration Committee membership
£200,000
£49,500
£5,000
£10,000
£5,000
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 130
Remuneration
Annual Report on Remuneration
On the following pages we
set out the Annual Report
on Remuneration for the
year ending 31 March 2020
which provides details of
how the Remuneration Policy
was applied and how we
intend to apply the Policy
for the year ahead to
31 March 2021.
This report is subject to an advisory vote
at the forthcoming AGM on 22 July 2020
and complies with the 2018 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.
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 prerequisite 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
to the Remuneration Consultants’ Code
of Conduct and which has no connection
with the Group other than in the provision
of advice on executive and employee
remuneration matters and taxation
advice. PwC were appointed in 2017 by
the Remuneration Committee following a
competitive tender process. Total fees paid
to PwC in respect of remuneration advice
to the Committee were £156,500 calculated
on both hourly and fixed fee bases.
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 Chair of the Committee reports to
the Board on proceedings and outcomes
following each Committee meeting.
Meetings and activities
The Committee met on seven occasions during the year. The main activities of the
Committee during the year and to the date of this report were as follows:
Annual
bonus
& LTIP
Set challenging EPS targets for the 2019 LTIP awards and annual
bonus for the year to 31 March 2020
Approved Executive Directors’ share awards under the LTIP
following the announcement of the Company’s results for the
year ended 31 March 2019
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 to 31 March 2020
Salary
Determined to defer the salary review in light of the COVID-19
pandemic until September
Governance
Reviewed and approved the Remuneration Committee Report
External evaluation of its own performance and review of its
terms of reference
Reviewed and approved the CEO pay ratio
Remuneration
Policy
Conducted an independent review of the appropriateness of
the current Remuneration Policy and shaped the proposed Policy
Sought to consult with over 60% of the shareholder base on the
proposed changes to the Policy
LondonMetric Property PlcAnnual Report and Accounts 2020 131
Total
2019
£000
Single total figure of remuneration for each Director (audited)
Salary
and fees
Benefits1
Pension2
Total
Fixed
Annual
bonus3
LTIP4
Total
Variable
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
2019
£000
2020
£000
Director
Executive
Andrew Jones
Martin McGann
Valentine Beresford5
Mark Stirling5
Non Executive
544
363
104
104
533
350
337
368
26
28
7
7
24
26
25
25
Patrick Vaughan6
215
230
14
11
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Alec Pelmore
Philip Watson
Rosalyn Wilton
59
64
64
54
–
–
69
57
63
9
56
53
58
68
–
–
–
–
–
–
–
–
–
–
–
–
–
–
82
54
16
16
–
–
–
–
–
–
–
–
80
52
55
55
–
–
–
–
–
–
–
–
652
445
127
127
637
428
417
448
229
241
59
64
64
54
–
–
69
57
63
9
56
53
58
68
878
485
139
134
797
444
467
467
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,297 1,269
2,175 2,066
2,827 2,703
702
–
–
–
–
–
–
–
–
–
–
687
724
724
1,187 1,131
1,632 1,559
139 1,191
266 1,608
134 1,191
261 1,639
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
229
241
59
64
64
54
–
–
69
57
63
9
56
53
58
68
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 2020 paid fully in cash as minimum shareholding requirements met
4 2017 LTIP awards expected to vest in June 2020 for the performance period to 31 March 2020. 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 2020. No discretion was applied in determining
the estimated vesting of the award as a result of changes in share price or other factors. The change in share price growth between grant and 31 March 2020 accounts for
£264,000 for Andrew Jones and £143,000 for Martin McGann as reflected in the table on page 136. The estimated figures disclosed in the previous Annual Report for 2019
vesting have been restated to reflect final vesting figures and the share price on the date of vesting. The estimated share price used was 187.2p and the actual share price
on vesting was 207.2p. The differences in value were: Andrew Jones £141,000, Martin McGann £76,000, Valentine Beresford £81,000 and Mark Stirling £81,000
5 Amounts reflected in the table for Valentine Beresford and Mark Stirling represent the time apportioned part of their total remuneration for the period they were Executive
Directors of the Company
6 Private Medical Insurance benefit has continued at the discretion of the Remuneration Committee since becoming Non Executive Chair
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 2020
The annual bonus performance targets set for the year to 31 March 2020 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 TPR 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 2020 annual bonus outcome is set out
in the table below.
Andrew Jones
Martin McGann
Valentine Beresford1
Mark Stirling1
Financial
objectives
Individual
objectives
Bonus %
of maximum
Bonus %
of salary
Total bonus
£000
70%
70%
70%
70%
28%
25%
25%
22%
97.5%
95%
95%
92%
161%
133%
133%
129%
878
485
139
134
1 The bonus reflected in the table for Valentine Beresford and Mark Stirling represents the time apportioned part of their total bonus for the period they were Executive
Directors of the Company
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
132
Remuneration
Annual Report on Remuneration continued
Group financial targets
Performance
measure
Weighting
EPRA EPS
Total property
return (‘TPR’)
35%
35%
Basis of
calculation
Growth in EPRA
EPS against a
challenging target
Growth in TPR
against IPD Quarterly
Universe index
(0%)
<8.8p
Positive
growth
Range
(25%)
8.8p
(50%)
8.9p
Maximum
(100%)
Actual
performance
%
awarded
9.1p
9.3p
100%
TPR
matches
index
1.0%
TPR is
1.1 times
index
1.1%
TPR is
1.2 times
index
1.2%
5.1%
100%
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 substantially achieved their individual personal objectives and approved payouts
for all Directors as reflected in the table on page 131.
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 2020.
Objective
Andrew Jones
Assessments
• Portfolio focus to maximise both
• Increase in EPRA EPS from 8.8p to 9.3p, providing cover for an increase in the dividend
EPS and NAV growth
for the year
• Decrease in EPRA NAV per share from 174.9p to 171.7p largely due to one off costs
of A&J Mucklow of 2.5p
• Recycling capital with sell down
of non core assets
• Investment in preferred urban logistics sector increased from 27% to 35% in the year
• Reduced exposure to megasheds and increase in quality of long income assets
• Focus on income quality to deliver
opportunities for sustainable and
progressive earnings
• Lengthen and strengthen
relationships with key stakeholders:
institutional shareholders, private
client wealth managers (‘PCM’),
occupiers and analysts
• Continue to realign the team in line
with our evolving portfolio strategy
• Growth in earnings in the year of 5.6%, supporting a continuation in dividend progression
• Increase in contracted rent from £90 million to £123 million
• Over 250 investor meetings in the year and strong share price performance
• Continuing focus on PCMs which account for 36% of the register
• Strong portfolio metrics demonstrate occupier contentment with occupancy increasing
to 98.6%
• Increased granularity of income. Top ten tenants account for 36% of rents, improved from 51%
• Focused programme in support of key analysts
• Continuing focus on the right team with the right skills. Effective integration of Mucklow
employees into the LondonMetric team
• Reinforce the position of the
• Reinforcement of growth characteristics of urban logistics continues to be well received
Company as leading investor/partner
of choice in logistics
• To provide oversight to the delivery
of development schemes during
the year
• Position the Company as an
employer of choice and continue to
generate positive employee feedback
and very low staff turnover rate
in the market and by stakeholders
• Effective shift in logistics from megasheds to urban logistics
• Completion of 436,000 sq ft of development during the year producing £3.5 million
of annual rent with a further 425,000 sq ft under construction
• Third staff survey undertaken in March with very positive results
• 100% of staff enjoy working for the Company and would recommend LondonMetric
as an employer
• Very low staff turnover rate of 6%
• Maintain and improve our ranking in
the EPRA/GRESB sustainability rankings
• GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 71% ahead of last year and peer group average of 67%
LondonMetric Property PlcAnnual Report and Accounts 2020 133
Objective
Martin McGann
• Optimising the funding structure
to support the real estate strategy
Assessments
• Incorporation of Mucklow SWIP facility into LondonMetric
• Arrangement of new HSBC facility in the year
• Increased debt provided diversification in the year
• Headroom of £220 million at the year end
• Deliver risk management/corporate
governance agenda to increasing
satisfaction of stakeholders
• Implemented new 2018 Corporate Governance Code into processes and reporting
• Continued focus on risk dashboard at Board meetings
• Consideration of emerging risks including the recent COVID-19 pandemic
• Focus on income quality to deliver
growth in our sustainable earnings
• Growth in EPRA earnings in the year of 5.6%, supporting a continuation in dividend
progression
• Increase in contracted rent from £90 million to £123 million
• Maintain and improve our ranking in
the EPRA/GRESB sustainability rankings
• GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 71% ahead of last year and peer group average of 67%
• Delivery of development schemes on
schedule and on budget, with lettings
at or above target rents and within
agreed timescales
• Maintain appropriate LTV, cost of
finance and debt maturity metrics
• Position the Company as an
employer of choice and continue to
generate positive employee feedback
and very low staff turnover rate
Valentine Beresford
• Continue to reposition portfolio
with the objective of maintaining
distribution at c.70% and reducing
retail bias to 10%
• Completion of 436,000 sq ft of development during the year producing £3.5 million
of annual rent with a further 425,000 sq ft under construction
• Lower average cost of debt of 2.9% (2019: 3.1%)
• LTV of 35.9% which reduces to 30.9% after year end equity raise
• New HSBC facility mitigating refinancing risk in the near term
• Third staff survey undertaken in March with very positive results
• 100% of staff enjoy working for the Company and would recommend LondonMetric
as an employer
• Very low staff turnover rate of 6%
• Investment in preferred urban logistics sector increased from 27% to 35% in the year
• Reduced exposure to megasheds and increase in quality of long income assets
• Sell down non core, ex-growth and
• Residential portfolio reduced to 5 flats with 2 currently under offer, 26 flats sold in the year
underperforming assets
• Continue to strengthen team and
• Continued strong performance and fine tuning of the team to ensure right people with
integrate whole Investment team into
broader Company business
• Promote Company as ‘partner of
choice’ with developers, vendors
and agents
right skills
• Integration of Mucklow staff has enhanced the team
• Evidence of ‘off market’ opportunities testament to strong reputation amongst developers
and agents
• Provide support to the development
• Completion of 436,000 sq ft of development during the year producing £3.5 million
pipeline in the year and to
the delivery of funding and
developments on schedule and
within budget
• Position the Company as an
employer of choice and continue to
generate positive employee feedback
and very low staff turnover rate
of annual rent with a further 425,000 sq ft under construction
• Third staff survey undertaken in March with very positive results
• 100% of staff enjoy working for the Company and would recommend LondonMetric
as an employer
• Very low staff turnover rate of 6%
• Maintain and improve our ranking in
the EPRA/GRESB sustainability rankings
• GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 71% ahead of last year and peer group average of 67%
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 134
Remuneration
Annual Report on Remuneration continued
Objective
Mark Stirling
Assessments
• Portfolio focus to deliver both
• Strong portfolio metrics with total property return of 5.1% exceeding the IPD benchmark
income and capital growth versus
IPD benchmark
of -0.5%
• Like for like income growth of 4%
• Continuing focus on asset
management to lengthen and
strengthen our rent roll
• Continuing to increase and improve
our development pipeline through
new opportunities and new
planning consents
• Asset management activity delivered 130 occupier transactions and rent of £5.2 million
• Average lease lengths on new lettings of 11.6 years
• New forward funded development schemes at Goole and Wallingford in the year along
with additional Mucklow development at Tyseley
• Maintain our high occupancy
• Occupancy increased to 98.6% (2019:97.8%)
• Retain our position as partner of
choice amongst key retailers
• Delivery of development schemes on
schedule and on budget, with lettings
at or above target rents and within
agreed timescales
• Position the Company as an
employer of choice and continue to
generate positive employee feedback
and very low staff turnover rate
• Our relationships with key retailers continue to be essential both within our logistics and long
income portfolios and the strength of those relationships has been evidenced in our rent
collection statistics
• Completion of 436,000 sq ft of development during the year producing £3.5 million
of annual rent with a further 425,000 sq ft under construction
• Third staff survey undertaken in March with very positive results
• 100% of staff enjoy working for the Company and would recommend LondonMetric
as an employer
• Very low staff turnover rate of 6%
• Maintain and improve our ranking in
the EPRA/GRESB sustainability rankings
• GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 71% ahead of last year and peer group average of 67%
Deferred Bonus Plan
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 vesting
based on the market value of the shares at that date.
One third of the deferred shares granted on 8 June 2016 and held at 31 March 2019, vested on 10 June 2019. One third of the deferred
shares granted on 16 June 2017 and held at 31 March 2019, vested on 18 June 2019. Further shares representing one third of the June 2017
awards are expected to vest in June 2020.
Deferred shares are held in an Employee Benefit Trust which at 31 March 2020 held 4,330,731 shares. Outstanding deferred bonus shares
held by the Executive Directors are set out in the table below.
Andrew Jones
Martin McGann
Valentine Beresford
Mark Stirling
Date
of grant
Face value
on grant1
£000
8 June 2016
16 June 2017
8 June 2016
16 June 2017
8 June 2016
16 June 2017
8 June 2016
16 June 2017
291
376
159
209
168
220
168
220
At
1 April
2019
70,434
162,622
38,519
90,551
40,562
95,354
40,562
95,354
Awarded
in the year
–
–
–
–
–
–
–
–
Notional
dividend
shares
1,643
10,208
899
5,683
946
5,986
946
5,986
Entitlement to ordinary shares
Released
in the year
At
31 March
2020
(72,077)
(82,755)
(39,418)
(46,080)
(41,508)
(48,524)
(41,508)
(48,524)
–
90,075
–
50,154
–
52,816
–
52,816
1 Face value is the weighted average share price over the five business days immediately preceding the date of the award. For 2016 this was 160.7p and for 2017
this was 168.6p
LondonMetric Property PlcAnnual Report and Accounts 2020 135
Long Term Incentive Plan
Awards granted in the year to 31 March 2020 are summarised in the table below.
Andrew Jones
Martin McGann
Valentine Beresford
Mark Stirling
Basis of award
(% of salary)
Date
of grant
Share awards
number
Face value
per share
200%
5 June 2019
165%
165%
165%
5 June 2019
5 June 2019
5 June 2019
534,747
294,989
304,872
304,872
204.2p
204.2p
204.2p
204.2p
Face value
of award
£000
1,092
602
623
623
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.
Performance condition
Vesting level
Total Shareholder Return (‘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
0%
25%
TSR between index and upper quartile ranked company
in the index1
Pro rata on a straight line basis between 25% and 100%
TSR equal to or better than the upper quartile ranked company
in the index1
100%
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
0%
25%
TAR between index and upper quartile ranked company
in the index
TAR equal to 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 0% over 3 years
Base plus RPI plus 0% over 3 years
Pro rata on a straight line basis between 25% and 100%
100%
0%
25%
Base plus RPI plus between 0% and 4% over 3 years
Pro rata on a straight line basis between 25% and 100%
Base plus RPI plus 4% over 3 years
100%
1 TSR must be positive over 3 years
The adjusted EPRA EPS base target for the three year performance periods commencing 1 April 2016, 1 April 2017, 1 April 2018 and 1 April 2019
has been set at 7.77p, 8.16p, 8.54p and 8.77p 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.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 136
Remuneration
Annual Report on Remuneration continued
Long Term Incentive Plan (continued)
Awards expected to vest in the year to 31 March 2021 in relation to the three year performance period commencing 1 April 2017 are
summarised below.
Performance measure
Weighting
Basis of calculation
Total shareholder return
(‘TSR’)
Total accounting return
(‘TAR’)
EPRA EPS
37.5%
37.5%
25%
Growth in TSR against FTSE 350
Real Estate Index
Growth in TAR against FTSE 350
Real Estate Index
Growth in EPRA EPS against
a challenging base target
(100%)
Actual performance
% awarded
Range
(25%)
1.9%
(0%)
<1.9%
55.2%
<1.2%
1.2%
25.0%
<9.1p
9.1p
9.5p
58.9%
30.6%
9.3p
Director
Andrew Jones
Martin McGann
Maximum
number of
shares
696,303
376,984
LTIP
% of
maximum
Estimated
number of
shares
Face value
at grant
£000
Share price
appreciation
£000
88%
88%
612,747
331,746
1,033
559
264
143
1 The face value is based on the average share price for the three months to 31 March 2020 of 211.8p
Outstanding LTIP awards held by the Executive Directors are set out in the table below.
Director
Date of
grant
Face value
on grant
At 1 April
2019
Granted
in year
Notional
dividend shares
Vested
in year
Lapsed
in year
At 31 March
2020
Performance
Period
Number of shares under award1
8,660
(612,552)
(116,676)
–
Andrew Jones
8.6.2016
160.7p
720,568
16.6.2017
168.6p
667,925
15.6.2018
189.5p
582,698
–
–
–
5.6.2019
204.2p
–
534,747
22,719
Martin McGann
8.6.2016
160.7p
390,122
16.6.2017
168.6p
361,620
15.6.2018
189.5p
315,477
–
–
–
5.6.2019
204.2p
–
294,989
12,533
28,378
24,757
15,364
13,403
–
–
–
–
–
–
696,303
607,455
557,466
–
–
–
–
–
–
376,984
328,880
307,522
4,688
(331,640)
(63,170)
–
1 Awards granted as nil cost options
The LTIP awards granted to Valentine Beresford and Mark Stirling on 8 June 2016 with a performance period 1 April 2016 to 31 March 2019
vested in the year. Both Valentine Beresford and Mark Stirling received 349,228 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 137.
There were no movements in Directors’ shareholdings between 31 March 2020 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 2020 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.
100%
100%
53%
Total
estimated
face value
of award1
£000
1,297
702
1.4.2016 to
31.3.2019
1.4.2017 to
31.3.2020
1.4.2018 to
31.3.2021
1.4.2019 to
31.3.2022
1.4.2016 to
31.3.2019
1.4.2017 to
31.3.2020
1.4.2018 to
31.3.2021
1.4.2019 to
31.3.2022
LondonMetric Property PlcAnnual Report and Accounts 2020 137
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 below.
Overall beneficial
Interest 31 March
2020 Ordinary
shares of 10p each
Overall beneficial
Interest 31 March
2019 Ordinary shares
of 10p each
LTIP shares
subject to
performance
conditions
Deferred
bonus
shares
Total interests
as at
31 March 2020
Share
ownership as
% of salary1
Shareholding
guideline
met
Number of shares
pledged as at
31 March 2020
4,196,699
2,785,052
3,791,072
1,861,224
90,075
6,147,998
2,564,560
1,013,386
50,154
3,848,592
1352%
1342%
Yes
Yes
3,446,072
2,341,585
Executive Directors
Andrew Jones
Martin McGann
Non Executive Directors
Patrick Vaughan
11,200,000
12,250,000
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Rosalyn Wilton
22,750
20,000
104,000
106,558
100,000
22,750
20,000
104,000
68,898
100,000
1 Based on the Company’s share price at 31 March 2020 of 175.9p and the beneficial interests of the Directors
2 Former Executive Directors, Valentine Beresford and Mark Stirling, held beneficial interests of 2,991,860 and 2.485.522 ordinary shares in the prior year
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 2020, 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.
300
270
240
210
180
150
120
90
300
270
240
210
180
150
120
90
Oct
2010
Oct
2011
Oct
2012
Oct
2013
Oct
2014
Oct
2015
Oct
2016
Oct
2017
Oct
2018
Oct
2019
Apr
2013
Oct
2013
Apr
2014
Oct
2014
Apr
2015
Oct
2015
Apr
2016
Oct
2016
Apr
2017
Oct
2017
Apr
2018
Oct
2018
Apr
2019
Oct
2019
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 PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 138
Remuneration
Annual Report on Remuneration continued
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 2020.
Year to 31 March
Total
remuneration
£000
Annual bonus
(as a % of the
maximum
payout)
LTIP vesting
(as a % of the
maximum
opportunity)
2020
2019
2018
2017
2016
2015
2014
2013 (Andrew Jones)1
2013 (Patrick Vaughan)1
2012
20112
2,827
2,703
2,392
2,506
2,792
1,167
1,296
166
583
664
323
97.5
90
79
89
77
78
100
100
100
100
100
88
84
94
100
100
–
–
–
–
–
–
1 Andrew Jones became Chief Executive and Patrick Vaughan became Chair
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:
Chief Executive
Other employees
(excluding Chief Executive)
% change
Salary
and fees
Taxable
benefits
Annual
bonus
0%
0%
6%
31%
10%
12%
The Committee and Board believes that during the current COVID-19
pandemic it is not appropriate to contemplate pay reviews and
increases and therefore determined that the pay review shall
take place in September. Base salaries and fees therefore remain
unchanged.
CEO pay ratio
Whilst the Company has fewer than 250 employees and
therefore is not required to disclose a ratio, the Committee felt
that it was appropriate to disclose the CEO to all employee pay
ratio, recognising that the Company’s investors expect to see
such disclosure.
Year
2020
2019
Pay ratio
25th
percentile
50th
percentile
75th
percentile
42:1
34:1
16:1
12:1
8:1
8:1
The Company chose to adopt the Option A methodology
when calculating the ratio as it deemed it the most appropriate
approach and had sufficient data to be able to carry out this
method. This method was used to calculate both 2019 and 2020
figures in the table above.
The Chief Executive’s single figure of remuneration for 2020 and
2019 used for the calculation ratio is as detailed on page 131.
The same methodology was used to calculate all employee pay
for the purposes of the ratios, which were calculated based on
amounts receivable up to the end of the relevant financial year for
all employees excluding the CEO and the Non Executive Directors.
As we continue to disclose the ratio in future years, we anticipate
that there are likely to be changes in the ratio as the CEO’s
total remuneration has a greater portion of pay delivered as
variable remuneration, which is consistent with the Company’s
remuneration principles.
In summary, we anticipate volatility in this ratio, and we believe
that this is caused by the following:
• Our CEO pay is made up of a higher proportion of incentive
pay than that of our employees, in line with the expectations
of our shareholders. This introduces a higher degree of variability
in his pay each year which affects the ratio;
• The value of long term incentives which measure performance
over three years is disclosed in pay in the year it vests, which
increases the CEO pay in that year, again impacting the ratio
for the year;
• Long term incentives are provided in shares, and therefore
an increase in share price over the three years magnifies the
impact of a long term incentive award vesting in a year;
• We recognise that the ratio is driven by the different structure of
the pay of our CEO versus that of our employees, as well as the
make-up of our workforce. This ratio varies between businesses
even in the same sector. What is important from our perspective
is that this ratio is influenced only by the differences in structure
and not by divergence in fixed pay between the CEO and the
wider workforce. The table showing the year on year change
of CEO remuneration and average employee remuneration
demonstrates that divergence is not occurring; and
• Where the structure of remuneration is similar, as for the Senior
Leadership Team and the CEO, the ratio is much more stable
over time.
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.
Upon stepping down from the Board, Valentine Beresford and
Mark Stirling remained employees of the Company and as such
in accordance with the Remuneration Policy and respective share
plan rules they remain entitled to vesting of deferred bonus shares
and LTIP awards which have already been granted. These awards
will vest in line with their original schedules.
LondonMetric Property PlcAnnual Report and Accounts 2020 139
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
2020
£m
11.3
64.2
2019
£m
9.6
55.6
%
change
17.7%
15.5%
1 Figures taken from note 4 Administrative costs on page 163 and are stated before
any amounts capitalised and exclude share scheme costs
2 Figures taken from note 7 Dividends on page 165
Statement of voting at AGM
At the AGM on 11 July 2019, the Annual Report on Remuneration
was approved with votes from shareholders representing 72%
of the issued share capital of the Company.
The Directors’ Remuneration Policy was approved at the AGM
on 11 July 2017 with votes from shareholders representing 71%
of the issued share capital at the time. The details of these
outcomes are below.
2019 Annual Report
on Remuneration
2017 Directors’
Remuneration Policy
For
Against
Withheld
Total
Votes cast
595,906,739
5,505,016
18,987
601,430,742
%
Votes cast
99.08
492,623,371
0.92
5,370,453
5,053,433
503,047,257
%
98.92
1.08
Statement of implementation of Remuneration Policy
for the year ending 31 March 2020
The table on pages 117 to 118 illustrates how we intend to
implement our Policy over the next financial year and gives details
of remuneration payments and targets.
Myself and my successor Robert are 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 at this year’s AGM.
James Dean
Chair of the Remuneration Committee
10 June 2020
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
140
Report of the Directors
Report of the Directors
I am pleased to present
the Report of the Directors
together with the audited
financial statements
for the year ended
31 March 2020.
Martin McGann
Finance Director
Annual General Meeting
The Annual General Meeting (‘AGM’) of the Company will be held at 10 am on 22 July 2020.
Due to the COVID-19 pandemic the AGM this year will be held as a closed meeting convened
at our offices in Curzon Street with the minimum quorum of two shareholders, being two members
of the Board, and shareholders will not be permitted to attend in person this year as to do so would
be inconsistent with Government guidance. Further details on how to vote and participate in the
AGM are included in the Notice of Meeting on pages 191 to 195 along with the proposed resolutions.
The Board considers that the resolutions proposed 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 18,535,059 shares representing approximately 2.0%
of the existing issued ordinary share capital of the Company as at 9 June 2020.
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
Principal risks
Risk management section of Strategic report
Internal financial control
Audit Committee report
Viability Statement
Directors’ details
Directors’ biographies
Directors’ interests
Remuneration Committee report
Details of long term incentive schemes
Remuneration Committee report
Stakeholder engagement
Our stakeholders section of the Governance report
and Responsible Business review
Section 172 Statement
Greenhouse gas emissions
Responsible Business review
Diversity
Nomination Committee report
Financial instruments
Note 14
Financial risk management policies
Note 14
Interest capitalised
Note 5
Shareholder waivers of dividends
Report of the Directors
Related party transactions
Note 20
Post balance sheet events
Note 21
All other subsections of LR 9.8.4R are not applicable.
See pages 01 – 75
See pages 60 – 75
See page 109
See page 63
See pages 80 and 81
See page 137
See pages 135 – 136
and on page 123
See pages 87 – 92
and pages 52 – 57
See page 52
See page 51
See page 100
See page 173
See pages 171 – 172
See page 164
See page 142
See page 176
See page 176
LondonMetric Property PlcAnnual Report and Accounts 2020 141
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 75 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 loss for the year
attributable to equity shareholders of
£5.7 million (2019: profit of £119.7 million).
The first two quarterly dividends for 2020
totalling 4.0p per share were paid in the year
as Property Income Distributions (‘PIDs’).
The third quarterly dividend of 2.0p was
paid following the year end on 16 April 2020
as a PID. The Directors have approved a
fourth quarterly dividend of 2.3p per share
payable on 22 July 2020 to shareholders
on the register at the close of business
on 19 June 2020, of which 0.75p will be
paid as a PID.
The total dividend charge for the year
to 31 March 2020 was 8.3p per share,
an increase of 1.2% over the previous year.
Of the total dividend charge for 2020
of 8.3p, 6.75p 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 1.55p 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 2020 was undertaken
by CBRE Limited, Savills (UK) Limited and
Cushman & Wakefield Debenham Tie
Leung Limited on the basis of fair value
which amounted to £2,346.5 million
including the Group’s share of joint venture
property as reflected in the Financial
review on page 38.
Share capital
As at 31 March 2020, there were
841,498,022 ordinary shares of 10p in issue,
each carrying one vote and all fully paid.
The Company issued 138,615,684 ordinary
shares as part of the consideration for
the acquisition of A&J Mucklow Group
on 27 June 2019 and a further 2,890,498
ordinary shares under the terms of its Scrip
Dividend Scheme. Since the year end the
Company issued a further 118,163 ordinary
shares in relation to the third quarterly
dividend scrip alternative.
On 7 May 2020 the Company issued
66,666,666 new ordinary shares at a price
of 180p per share, as a result of a successful
equity placing. The placing was met with
a high level of demand from both existing
shareholders and potential new investors
and the Board decided to increase the
size of the equity raise from approximately
£100 million to £120 million.
A placing is an issue of shares directly to
certain shareholders. There are regulatory
restrictions on placings designed to protect
the rights of existing shareholders which
the Company adhered to.
At the Annual General Meeting in 2019,
the Company was granted authority to
allot shares up to a maximum amount of
£27,975,917 (representing approximately
one third of the Company’s issued share
capital following the completion of
the acquisition of A&J Mucklow Group)
and to allot shares up to a maximum
nominal value of £4,196,388 (representing
approximately 5% of the Company’s
issued share capital following the
completion of the acquisition of A&J
Mucklow Group) without having to first
offer those shares to existing shareholders.
The Company was also granted authority
to allot further shares up to a maximum
nominal value of £4,196,388 (representing
approximately 5% of the Company’s issued
share capital following the completion
of the acquisition of A&J Mucklow Group)
without having to first offer those shares
to existing shareholders, where such
authority is used only for the purposes
of financing a transaction which the
Directors determine to be an acquisition
(the ‘Acquisition Authority’). The Company
used the full Acquisition Authority granted
to it to issue the shares in connection
with the placing, with the remaining
placing shares issued under the former
non-pre-emptive allotment authority.
The shares issued in connection with
the placing represented a 7.9% increase
to the issued share capital of the Company
prior to the placing and a 9.6% increase
to the issued share capital of the Company
in the three year period preceding the
placing (with the placing being the only
non-pre-emptive issue of equity securities
by the Company in such three year period).
In accordance with the Pre-Emption Group’s
Statement of Principles, this equates to
a 2.9% increase to the issued share capital
of the Company prior to the placing and
a 4.6% increase to the issued share capital
of the Company in the three year period
preceding the placing and is therefore
below the level stipulated by the
Pre-Emption Group.
The placing raised gross proceeds of
approximately £120 million and the net
cash received after deducting costs was
£116.6 million, which will be used to fund
pipeline acquisition opportunities. The price
reflected a 1.5% discount to the previous
day’s share price and a discount of 3.4%
to the intra-day price of 186.3p at the
time the placing price was agreed.
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
on page 142.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 142
Report of the Directors
Report of the Directors continued
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 2019 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
As at 31 March 2020, the Trustees of the
LondonMetric Long Term Incentive Plan
held 4,330,731 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.
Directors
The present membership of the Board
and biographical details of Directors are
set out on pages 80 and 81. The interests
of the Directors and their families in the
shares of the Company are set out in
the Remuneration Committee report
on page 137.
In accordance with the UK Corporate
Governance Code and in line with
previous years, all of the Directors will
offer themselves for re-election by the
shareholders at the forthcoming AGM
on 22 July 2020. The powers of Directors
are described in their Terms of Reference,
which are available on request.
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.
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
BlackRock Inc
Rathbones
Troy Asset Management
The Vanguard Group Inc
Standard Life Aberdeen
Cohen & Steers Inc
Ameriprise Financial Inc
Stakeholders
The Group’s long-term sustainable success
is dependent on its relationships with
key stakeholders. In the Governance
report on pages 87 to 92, we outline the
ways in which we have engaged with
our key stakeholders and how they have
influenced the Board’s decision making.
Employees
At 31 March 2020 the Group had
33 employees including the Executive
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, which this year
included a company-wide anti-bribery,
anti-corruption, money laundering
and corporate culture seminar and
weekly updates from the Chief Executive
throughout the lockdown period.
The Board recognises the importance
of attracting, developing and retaining
the right people. 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.
Number
of shares
80,520,871
49,706,941
49,339,102
40,404,981
39,661,287
36,687,125
29,676,758
%
8.86
5.47
5.43
4.45
4.37
4.04
3.27
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 provides
retirement benefits for its employees
and Executive Directors.
Andrew Livingston was appointed as
the designated workforce Non Executive
Director last year to act as a liaison
between the Board and employees
and a channel through which staff can
share their views and raise concerns.
Further details of how we engage
with employees can be found in the
Governance report on page 90 and
the Responsible Business review on
pages 54 to 55.
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 Responsible Business report
can be downloaded. An overview of
our responsible business activity can be
found on pages 45 to 59 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.
LondonMetric Property PlcAnnual Report and Accounts 2020 143
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 22 July 2020.
On behalf of the Board
We have applied
the principles of good
governance contained
in the UK Corporate
Governance Code 2018
(the ‘Code’) throughout
the year under review
and our compliance
statement is on page 79.
Further details on how
we have applied the
Code can be found in
the Governance section
on pages 76 to 139 and
should be read as part
of this report.
Martin McGann
Finance Director
10 June 2020
This year, as part of our commitment to
working with our wider stakeholder group
to improve the environment, we have
decided to use the authority in our Articles
to move away from the paper version of
this report and ask shareholders to instead
view it electronically online by visiting our
website. Those wishing to receive a hard
copy report have been accommodated
and this will be sent at least 20 working
days before the AGM.
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 51.
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 2020
was 14 days (2019: 15 days).
Charitable and political contributions
During the year, the Group made charitable
donations of £22,958 (2019: £12,252).
No political donations were made during
the year (2019: £nil).
Post year end and in response to the
COVID-19 pandemic, we have provided
assistance to our occupiers and have raised
funds for local community charities located
close to our assets and developments.
In addition, the Board of Directors and
certain key employees are waiving 20%
of their salaries and fees for three months,
providing additional funds for our wider
COVID-19 charity giving.
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 Company.
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.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 144
Report of the Directors
Directors’ Responsibility Statement
The Directors are responsible for preparing
the Annual Report and the financial
statements in accordance with applicable
law and regulations.
Company law requires the Directors
to prepare financial statements for each
financial year. Under that law the Directors
are required to prepare the Group
financial statements in accordance with
International Financial Reporting Standards
(‘IFRSs’) as adopted by the European Union
and have elected to prepare the Company
financial statements in accordance
with Financial Reporting Standard 101
(‘FRS101’) ‘Reduced Disclosure Framework’.
Under Company law the Directors must
not approve the accounts unless they
are satisfied that they give a true and fair
view of the state of affairs of the Company
and of the profit or loss of the Company
for that period.
In preparing the Company financial
statements, the Directors are required to:
• Select suitable accounting policies
and then apply them consistently
• Make judgements and accounting
estimates that are reasonable
and prudent
• State whether applicable FRS101
‘Reduced Disclosure Framework’ has
been followed, subject to any material
departures disclosed and explained
in the financial statements
• Prepare the financial statements
on the going concern basis unless it
is inappropriate to presume that the
Company will continue in business
In preparing the Group financial
statements, International Accounting
Standard 1 requires that Directors:
• Properly select and apply
accounting policies
• Present information, including
accounting policies, in a
manner that provides relevant,
reliable, comparable and
understandable information
• Provide additional disclosures
when compliance with the specific
requirements in IFRSs are insufficient
to enable users to understand the
impact of particular transactions,
other events and conditions on
the entity’s financial position and
financial performance
• Make an assessment of the Company’s
ability to continue as a going concern
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position
of the Company and to enable them to
ensure that the financial statements comply
with the Companies Act 2006. They are also
responsible for safeguarding the assets of the
Company and hence for taking reasonable
steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for
the maintenance and integrity of the
corporate and financial information
included on the Company’s website.
Legislation in the UK governing the
preparation and dissemination of financial
statements may differ from legislation
in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• The financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and
fair view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole
• The Strategic report includes a fair review
of the development and performance
of the business and the position of
the Company and the undertakings
included in the consolidation taken
as a whole, together with a description
of the principal risks and uncertainties
that they face
• The Annual Report and financial
statements, taken as a whole, are fair,
balanced and understandable and
provide the information necessary for
shareholders to assess the Company’s
performance, business model
and strategy
By order of the Board
Martin McGann
Finance Director
10 June 2020
Andrew Jones
Chief Executive
10 June 2020
LondonMetric Property PlcAnnual Report and Accounts 2020 Financial statements
145
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
146
154
158
177
179
183
189
191
196
196
The Group financial
statements that follow in
this section have been
prepared in accordance
with IFRS.
The Company financial
statements have been
prepared in accordance
with FRS 101.
The Independent Auditor’s
report that supports the
financial statements is
reflected on page 146.
Martin McGann
Finance Director
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 146
To the members of LondonMetric Property Plc
Independent Auditor’s report
We have audited the financial statements
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; and
• the related Group notes 1 to 21 and
Company notes i to ix.
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).
2. 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 Financial Reporting
Council’s (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.
Report on the audit of
the financial statements
1. Opinion
In our opinion:
• the financial statements of LondonMetric
Property Plc (the ‘Company’) and its
subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s
and of the Company’s affairs as at
31 March 2020 and of the Group’s loss
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 Financial
Reporting Standard 101 ‘Reduced
Disclosure Framework’; and
• 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.
3. Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
• Valuation of investment property; and
• Accounting for significant, unusual and complex property transactions:
Acquisition of A&J Mucklow Group Limited.
Within this report, key audit matters are identified as follows:
! Newly identified
> Increased level of risk
< > Similar level of risk
> Decreased level of risk
The materiality that we used for the Group financial statements was £28.8 million
which was determined on the basis of 2% of equity. For testing balances that
impacted EPRA earnings we used a lower materiality of £3.7 million, which was
based on 5% of that measure.
The Group is subject to a full scope audit on 100% of net assets, revenue and loss
before tax.
Consistent with last year, in identifying key audit matters, we considered the property
transactions of the Group, owing to the potential complexity and judgement in
accounting for such transactions. In the current year, our key audit matter is focused
on one particular transaction, being the acquisition of A&J Mucklow Group Limited.
Materiality
Scoping
Significant changes in our approach
LondonMetric Property PlcAnnual Report and Accounts 2020 147
4. Conclusions relating to going concern, principal risks and viability statement
4.1. 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 considered as part of our risk assessment the nature of the Group, its business model
and related risks including where relevant the impact of the COVID-19 pandemic and
Brexit, the requirements of the applicable financial reporting framework and the system of
internal control. We evaluated the Directors’ assessment of the Group’s ability to continue
as a going concern, including challenging the underlying data and key assumptions used
to make the assessment, and evaluated the Directors’ plans for future actions in relation to
their going concern assessment.
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.
4.2. 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 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 60 to 75 that describe the principal risks, procedures to identify
emerging risks, and an explanation of how these are being managed or mitigated;
• the Directors’ confirmation on pages 60 to 62 that they have carried out a robust
assessment of the principal and emerging risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity; or
• the Directors’ explanation on page 63 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.
Going concern is the basis
of preparation of the financial
statements that assumes an
entity will remain in operation
for a period of at least 12 months
from the date of approval of the
financial statements.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
Viability means the ability
of the Group to continue over
the time horizon considered
appropriate by the Directors.
We confirm that we have
nothing material to report,
add or draw attention to in
respect of these matters.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 148
To the members of LondonMetric Property Plc
Independent Auditor’s report continued
5. 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.
5.1. Valuation of Investment and development Property < >
Key audit matter
description
How the scope of our
audit responded to the
key audit matter
The Group owns a portfolio of largely distribution property assets, which is valued at £2,274 million
(2019: £1,688 million) as at 31 March 2020. 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 valuation exercise also relies on the integrity 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.
As detailed in note 9, the valuer has included a ‘material valuation uncertainty’ in their valuation
report. This is on the basis that market activity is being impacted in many sectors by the COVID-19
pandemic such that as at the valuation date they consider that they can attach less weight to
previous market evidence for comparison purposes to inform opinions of value, and that a higher
degree of caution should be attached to their valuation.
Refer to page 107 (Audit Committee report), pages 158 to 159 (accounting policy) and note 9 on
page 167 (financial disclosures).
We performed the following procedures:
• Assessed management’s process for reviewing and assessing the work of the external valuer
and development appraisals.
• Assessed the competence, capabilities and objectivity 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.
• Obtained the external valuation reports and, assisted by our internal real estate specialist,
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.
• Considered the changes made to key valuation input assumptions at a macro-level in light
of the potential impact of the COVID-19 pandemic on the properties held by the Group and
benchmarked these against changes being made in the wider market and against relevant
market evidence including specific property sales and other external data.
• Met with the external valuers of the portfolio to discuss the results of their work and, for a sample
of properties of audit interest, we further challenged the yield assumptions and valuation,
including where relevant the impact of COVID-19 on the sector and asset and the valuation
adjustments reflected as a result.
• We obtained an understanding of the relevant controls over the valuation process.
• 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.
• 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.
• Assessed management’s assessment and disclosure of the impact of Brexit and COVID-19 on
the fair value of the Group’s investment property portfolio in respect of occupier demand
and solvency, asset liquidity and the performance of assets in different property sectors.
Key observations
While we note the increased estimation uncertainty in relation to the property valuation as
a result of COVID-19, and as disclosed in note 9, we considered the assumptions applied in
arriving at the fair value of the Group’s property portfolio to be appropriate.
LondonMetric Property PlcAnnual Report and Accounts 2020 149
5.2. Accounting for significant, unusual and complex property transactions: Acquisition of A&J Mucklow Group Limited >
Key audit matter
description
How the scope of our
audit responded to the
key audit matter
On 27 June 2019, the Group acquired A&J Mucklow Group Limited. There was a judgement in
determining whether this constituted a business combination under IFRS 3 or an asset acquisition.
Management assessed that the acquisition was a business combination under IFRS 3.
There is also a level of complexity and judgement on the part of management in the determination
of appropriate fair value. If the fair value of net assets acquired is less than consideration paid then
goodwill arises, and there is additional complexity in determining whether indicators of impairment exist
for any such goodwill. A significant proportion of the net assets upon acquisition was the investment
properties held by A&J Mucklow Group Limited at 27 June 2019 and these were subject to an
external valuation.
Refer to page 107 (Audit Committee report), page 159 (accounting policy) and note 15 on
page 174 (financial disclosures).
We performed the following procedures:
• Assessed whether the acquisition constituted a business combination under IFRS 3 by
understanding and assessing the nature and fact pattern of the acquisition.
• Performed substantive procedures on the debt and properties acquired during the acquisition
and also agreed the A&J Mucklow Group Limited acquired balances to the audited financial
statements for the period ended 27 June 2019.
• Assessed the competence, capabilities and objectivity of the external valuer and read their terms
of engagement with A&J Mucklow Group Limited to determine whether there were any matters
that might have affected their objectivity or may have imposed scope limitations on their work.
• Obtained the external valuation report and, assisted by our internal real estate specialist,
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.
• Reviewed the legal due diligence report for matters arising of audit relevance.
• To test the consideration of the transaction, traced the admission of new shares and payment
of cash paid as consideration for the transaction to relevant supporting documentation.
• Performed an assessment as to whether the goodwill asset recognised upon acquisition is
supported by cash flows from a relevant cash generating unit (CGU).
Key observations
We concluded that A&J Mucklow Group Limited acquisition had been appropriately
accounted for.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 150
To the members of LondonMetric Property Plc
Independent Auditor’s report continued
6. Our application of materiality
6.1. 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:
Materiality
£28.8 million (2019: £23.9 million)
£20.2 million (2019: £18.6 million)
Group financial statements
Parent company financial statements
Basis for determining
materiality
Rationale for the
benchmark applied
Shareholders’ equity
Group materiality
Shareholders’ equity
£1,432m
We consider EPRA Earnings as a critical performance
measure for the Group and we applied a lower
threshold of £3.7 million (2019: £3.0 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 and the impairment of goodwill.
Materiality for the Group is based on 2% (2019: 2%)
of shareholders’ equity at 31 March 2020. For EPRA
Earnings the basis used is 5% of EPRA earnings (2019: 5%
EPRA earnings) of that measure on a forecasted basis.
As an investment property company, the 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.
Materiality for the Company
is based on 1.7% of net assets
(2019: 2% of net assets).
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 the
most appropriate basis for materiality.
6.2. Performance materiality
We set performance materiality at a
level lower than materiality to reduce the
probability that, in aggregate, uncorrected
and undetected misstatements exceed
the materiality for the financial statements
as a whole. Group performance materiality
was set at 70% of Group materiality for the
2020 audit (2019: 70%).
In determining performance materiality,
we considered the following factors:
6.3. Error reporting threshold
We agreed with the Audit Committee
that we would report to the Committee
all audit differences in excess of £1.4 million
(2019: £1.1 million), 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.
a. Our past experience of the audit,
which has indicated a low number
of corrected and uncorrected
misstatements identified in prior
periods; and
b. Our risk assessment, including our
assessment of the Group’s overall
control environment.
Parent
materiality
£20.2m
Group
materiality
£28.8m
Audit
Committee
reporting
threshold
£1.4m
LondonMetric Property PlcAnnual Report and Accounts 2020 151
7. An overview of the scope
of our audit
7.1. Identification and scoping
of components
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.
Our full scope audit is performed on 100%
(2019: 100%) of the Group’s net assets,
revenue and loss before tax.
The audit work in response to the risks
of material misstatement was performed
directly by the Group engagement team.
Our audit also included testing of the
consolidation process.
The Company is located in London, UK and
audited directly by the Group audit team.
For the purpose of testing the acquisition
of A&J Mucklow Group Limited, we
identified KPMG as component auditors
to report on the opening balances of
A&J Mucklow Group Limited at the date
of the acquisition, directing and supervising
their work through meetings and reviews
of work papers. KPMG reported to us on a
materiality of £12.7 million which is based on
a percentage of Group materiality. By the
year end date, A&J Mucklow Group Limited
was fully integrated into LondonMetric
Property Plc and was no longer considered
a separate component.
8. 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; or
• Audit Committee reporting – the
section describing the work of the Audit
Committee does not appropriately
address matters communicated by us
to the Audit Committee; or
• 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.
9. 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.
10. 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.
Details of the extent to which the audit
was considered capable of detecting
irregularities, including fraud and non-
compliance with laws and regulations
are set out below.
A further description of our responsibilities
for the audit of the financial statements
is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities.
This description forms part of our
auditor’s report.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 152
To the members of LondonMetric Property Plc
Independent Auditor’s report continued
11. Extent to which the audit was
considered capable of detecting
irregularities, including fraud
We identify and assess the risks of material
misstatement of the financial statements,
whether due to fraud or error, and then
design and perform audit procedures
responsive to those risks, including
obtaining audit evidence that is sufficient
and appropriate to provide a basis for
our opinion.
11.1. Identifying and assessing
potential risks related to irregularities
In identifying and assessing risks of material
misstatement in respect of irregularities,
including fraud and non-compliance
with laws and regulations, we considered
the following:
• the nature of the industry and sector,
control environment and business
performance including the design
of the Group’s remuneration policies,
key drivers for Directors’ remuneration,
bonus levels
• results of our enquiries of management
and the Audit Committee about their
own identification and assessment
of the risks of irregularities;
• any matters we identified having
obtained and reviewed the Group’s
documentation of their policies and
procedures relating to:
– identifying, evaluating and
complying with laws and regulations
and whether they were aware of
any instances of non-compliance;
– detecting and responding to the
risks of fraud and whether they
have knowledge of any actual,
suspected or alleged fraud;
– the internal controls established
to mitigate risks of fraud or
non-compliance with laws
and regulations;
• the matters discussed among the
audit engagement team and
involving relevant internal specialists,
including tax, financial instruments
and industry specialists regarding
how and where fraud might occur
in the financial statements and
any potential indicators of fraud.
As a result of these procedures,
we considered the opportunities and
incentives that may exist within the
organisation for fraud and identified
the greatest potential for fraud in
the following area: Investment and
development property valuation.
In common with all audits under ISAs (UK),
we are also required to perform specific
procedures to respond to the risk of
management override.
We also obtained an understanding of
the legal and regulatory framework that the
Group operates in, focusing on provisions
of those laws and regulations that had
a direct effect on the determination of
material amounts and disclosures in the
financial statements. The key laws and
regulations we considered in this context
included the UK Companies Act, Listing
Rules, REIT regime, tax legislation and
pensions legislation.
11.2. Audit response to risks identified
As a result of performing the above,
we identified valuation of investment
property as a key audit matter.
The key audit matters section of our
report explains the matter in more detail
and also describes specific procedures
we performed in response to that key
audit matter.
In addition to the above, our procedures
to respond to risks identified included
the following:
• reviewing the financial statement
disclosures and testing to supporting
documentation to assess compliance
with provisions of relevant laws and
regulations described as having a
direct effect on the financial statements;
• enquiring of management, the Audit
Committee and external legal counsel
concerning actual and potential
litigation and claims;
• performing analytical procedures
to identify any unusual or unexpected
relationships that may indicate risks
of material misstatement due to fraud;
• reading minutes of meetings of those
charged with governance; and
• in addressing the risk of fraud through
management override of controls,
testing the appropriateness of journal
entries and other adjustments; assessing
whether the judgements made in making
accounting estimates are indicative
of a potential bias; and evaluating the
business rationale of any significant
transactions that are unusual or outside
the normal course of business.
We also communicated relevant identified
laws and regulations and potential fraud
risks to all engagement team members
including internal specialists, and remained
alert to any indications of fraud or non-
compliance with laws and regulations
throughout the audit.
Report on other legal and
regulatory requirements
12. Opinions on other matters
prescribed by the Companies
Act 2006
In our opinion the part of the
Annual Report on Remuneration
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 Report of
the Directors for the financial year
for which the financial statements
are prepared is consistent with
the financial statements; and
• the Strategic report and the
Report of the Directors 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 Report of the Directors.
LondonMetric Property PlcAnnual Report and Accounts 2020 153
15. 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.
Georgina Robb, FCA
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
10 June 2020
13. Matters on which we are
required to report by exception
13.1. 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; or
• 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; or
• the Company financial statements are
not in agreement with the accounting
records and returns.
We have nothing to report in respect
of these matters.
13.2. 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 Annual Report on
Remuneration to be audited is not
in agreement with the accounting
records and returns.
We have nothing to report in respect
of these matters.
14. Other matters
14.1. 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
seven years covering the years ending
31 March 2014 to 31 March 2020.
14.2. 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).
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 154
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
Impairment of goodwill on acquisition of subsidiaries
Acquisition costs
(Loss)/profit on revaluation of investment properties
(Loss)/profit on sale of investment properties
Share of losses of joint ventures
Operating profit
Finance income
Finance costs
(Loss)/profit before tax
Taxation
(Loss)/profit for the year and total comprehensive income
Attributable to:
Equity shareholders
Non-controlling interest
Earnings per share
Basic
Fully diluted
EPRA earnings per share
Basic
Fully diluted
All amounts relate to continuing activities.
The notes on pages 158 to 176 form part of these financial statements.
Note
3
4
15
15
9
10
5
6
20
8
8
8
8
2020
£m
113.4
112.3
(1.2)
111.1
1.1
112.2
(15.8)
(48.3)
(8.9)
(3.8)
(4.9)
(8.9)
21.6
0.7
(29.0)
(6.7)
(0.2)
(6.9)
(5.7)
(1.2)
(0.7)p
(0.7)p
9.3p
9.2p
2019
£m
86.8
85.1
(1.2)
83.9
1.7
85.6
(13.7)
–
–
75.9
0.6
(6.4)
142.0
0.4
(22.9)
119.5
0.2
119.7
119.7
–
17.2p
17.1p
8.8p
8.7p
LondonMetric Property PlcAnnual Report and Accounts 2020 Group balance sheet
As at 31 March
Non current assets
Investment properties
Investment in equity accounted joint ventures
Other tangible assets
Current assets
Trading properties
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Non current liabilities
Borrowings
Derivative financial instruments
Lease liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital redemption reserve
Other reserve
Retained earnings
Equity shareholders’ funds
Non-controlling interest
Total equity
Net asset value per share
EPRA net asset value per share
155
2020
£m
2019
£m
2,273.6
1,688.0
54.1
0.4
98.9
0.4
2,328.1
1,787.3
1.1
7.8
81.8
90.7
–
5.8
20.6
26.4
2,418.8
1,813.7
42.6
36.4
926.7
4.7
5.9
937.3
979.9
1,438.9
84.2
106.3
9.6
488.4
743.3
1,431.8
7.1
1,438.9
171.0p
171.7p
558.9
1.6
–
560.5
596.9
1,216.8
70.0
100.8
9.6
221.7
814.7
1,216.8
–
1,216.8
174.7p
174.9p
Note
9
10
11
12
13
14
14
16
17
18
18
18
18
8
8
The financial statements were approved and authorised for issue by the Board of Directors on 10 June 2020 and were signed on its behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
The notes on pages 158 to 176 form part of these financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 156
Group statement of changes in equity
For the year ended 31 March
At 1 April 2019
Loss for the year and total
comprehensive income
Share issue on acquisition
Purchase of shares held in trust
Vesting of shares held in trust
Share based awards
Investment from non-controlling interest
Distribution to non-controlling interest
Dividends
At 31 March 2020
At 1 April 2018
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 2019
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Equity
shareholders’
funds
£m
Non-
controlling
interest
£m
Total
equity
£m
Note
70.0
100.8
9.6
221.7
814.7
1,216.8
–
1,216.8
15
7
–
13.9
–
–
–
–
–
–
–
–
–
–
–
–
0.3
84.2
5.5
106.3
–
–
–
–
–
–
–
–
–
269.5
(7.2)
4.4
–
–
–
–
9.6
488.4
(5.7)
–
–
(4.4)
2.9
–
–
(5.7)
283.4
(7.2)
–
2.9
–
–
(64.2)
743.3
(58.4)
1,431.8
(1.2)
–
–
–
–
8.7
(0.4)
–
7.1
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Equity
shareholders’
funds
£m
Non-
controlling
interest
£m
Note
69.7
96.1
9.6
222.5
751.6
1,149.5
–
–
–
–
–
–
–
–
7
0.3
70.0
4.7
100.8
–
–
–
–
–
–
(4.8)
4.0
–
–
9.6
221.7
119.7
–
(3.7)
2.7
(55.6)
814.7
119.7
(4.8)
0.3
2.7
(50.6)
1,216.8
–
–
–
–
–
–
–
(6.9)
283.4
(7.2)
–
2.9
8.7
(0.4)
(58.4)
1,438.9
Total
equity
£m
1,149.5
119.7
(4.8)
0.3
2.7
(50.6)
1,216.8
The notes on pages 158 to 176 form part of these financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020 Group cash flow statement
For the year ended 31 March
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for non cash items:
Loss/(profit) on revaluation of investment properties
Loss/(profit) on sale of investment properties
Share of post tax loss of joint ventures
Movement in lease incentives
Impairment of goodwill on acquisition
Share based payment
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)/received
Cash flows from operating activities
Investing activities
Purchase of subsidiary undertakings net of cash acquired
Purchase of investment properties
Capital expenditure on investment properties
Lease incentives paid
Sale of investment properties
Investments in joint ventures
Distributions from joint ventures
Purchase of tangible assets
Cash flows from investing activities
Financing activities
Dividends paid
Distribution to non-controlling interest
Purchase of shares held in trust
Vesting of shares held in trust
New borrowings and amounts drawn down
Repayment of loan facilities
Financial arrangement fees and break costs
Cash flows from financing activities
Net increase/(decrease) in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 158 to 176 form part of these financial statements.
157
2020
£m
2019
£m
(6.7)
119.5
3.8
4.9
8.9
(5.7)
48.3
2.9
28.3
84.7
(3.0)
(13.0)
68.7
0.2
(24.0)
(0.2)
44.7
(119.6)
(185.2)
(18.1)
(3.9)
112.2
(0.3)
15.7
–
(199.2)
(58.4)
(0.4)
(7.2)
–
304.9
(21.1)
(2.1)
215.7
61.2
20.6
81.8
(75.9)
(0.6)
6.4
(5.0)
–
2.7
22.5
69.6
0.4
–
70.0
0.1
(16.2)
0.3
54.2
–
(159.0)
(27.6)
(3.2)
261.0
(5.1)
17.5
(0.4)
83.2
(50.6)
–
(4.8)
0.3
360.0
(445.0)
(2.9)
(143.0)
(5.6)
26.2
20.6
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 158
Notes forming part of the Group
financial statements
For the year ended 31 March 2020
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 196. 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 75.
b) Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards
(‘IFRS’) as adopted by the EU, IFRIC Interpretations and the
Companies Act 2006 applicable to companies reporting
under IFRS.
c) Going concern
Given the significant impact of COVID-19 on the global economy
in which the Group is operating, the Board has paid particular
attention to the appropriateness of the going concern basis in
preparing these financial statements.
The going concern assessment considers the principal risks and
uncertainties facing the Group’s activities, future development
and performance and are discussed in detail on pages 60 to 75.
A key consideration is the Group’s financial position, cash flows
and liquidity, including its continued access to debt facilities and
its headroom under financial loan covenants. As reported in the
Viability Statement on page 63, the Group’s unsecured facilities
and private placement loan notes, which together represent 76% of
total Group borrowings including its share of joint ventures, contain
gearing and interest cover covenants. At 31 March 2020, the Group
had substantial headroom within these covenants. After adjusting
for the equity raise, gearing was 56%, substantially lower than
the maximum limit of 125% and its interest cover ratio was 4.3
times, comfortably higher than the minimum level of 1.5 times.
Property values would have to fall by 37% and rents by 58% before
banking covenants are breached.
Group borrowings, undrawn facilities and hedging are described
in note 14 and in the Financial review on pages 38 to 44.
In May 2020, the Group successfully completed an equity
raise of £120 million, strengthening the balance sheet and
financial position.
The Directors have reviewed the current and projected financial
position of the Group, making reasonable assumptions about
future trading performance including the impact of COVID-19
which is explained in detail in the Viability Statement on page 63.
Key assumptions included in the sensitivity analysis are as follows:
• rents decline by 15% across the portfolio
• capital values fall by 15% across the portfolio
• there are no new developments or uncommitted
capital expenditure
• asset sales that have exchanged or are in legals do not complete
• no new financing is assumed
Throughout this downside scenario the Group has sufficient cash
reserves to continue in operation and remain compliant with
banking covenants. On the basis of this review, together with
available market information and the Directors’ experience and
knowledge of the portfolio, they have a reasonable expectation
that the Company and the Group has adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements for the year to 31 March 2020.
d) Basis of preparation
The financial statements are prepared on a going concern basis,
as explained above.
The functional and presentational currency of the Group is sterling.
The financial statements are prepared on the historical cost basis
except that investment and development properties and derivative
financial instruments are stated at fair value.
The accounting policies have been applied consistently in all
material respects except for the adoption of new and revised
standards as noted below.
i) Significant accounting estimates and judgements
The preparation of financial statements in conformity with
IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and expenses.
The estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates.
Revisions to accounting estimates are recognised in the period in
which the estimate is revised if the revision affects only that period.
If the revision affects both current and future periods, the change
is recognised over those periods.
The accounting policies subject to significant judgements and
estimates are considered by the Audit Committee on page 107
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.
LondonMetric Property PlcAnnual Report and Accounts 2020 159
1 Significant accounting policies (continued)
Note 9(b) to the financial statements includes further information
on the valuation techniques and inputs used to determine the
fair value of the property portfolio.
The COVID-19 pandemic has led to a heightened degree of
uncertainty surrounding our year end valuations and our three
external valuers have included material uncertainty clauses in
their valuation reports which is in line with the RICS guidance.
Significant transactions
Some property transactions are large or complex and require
management to make judgements when considering the
appropriate accounting treatment. These include acquisitions of
property through corporate vehicles, which could represent either
asset acquisitions or business combinations under IFRS 3. There is a
risk that an inappropriate approach could lead to a misstatement
in the financial statements.
The acquisition of A&J Mucklow Group on 27 June 2019 has been
treated as a business combination in accordance with IFRS 3
using the acquisition method.
The cost of the acquisition is measured as the fair value of
the consideration paid for the business. Acquisition costs are
recognised in the income statement as incurred. Any excess
of the cost over the Group’s interest in the fair value of the
identifiable net assets acquired is treated as goodwill, which is
initially recognised as an asset at cost and subsequently tested
for impairment. Further information is provided in note 15.
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.
The Group and Company accounting policies were amended
following the adoption of IFRS 16 as discussed further below.
Name
IFRS 16
Description
Leases
IFRS 9 (amendments)
Financial instruments
IAS 28 (amendments)
IAS 19 (amendments)
Long term Interests in Associates
and Joint Ventures
Plan Amendment, Curtailment
or Settlement
Annual Improvements to
IFRSs: 2015 – 2017 cycle
Amendments to IFRS 3, IFRS 11,
IAS 12 and IAS 23
IFRS 16 Leases
IFRS 16 was issued in January 2016 and became effective for the
Group from 1 April 2019. It has been adopted retrospectively in
accordance with the transition provisions of the standard, with the
cumulative effect of initially applying the new standard recognised
on 1 April 2019. Comparatives have not been restated.
The standard requires lessees to recognise assets (the right to use
the leased item) and liabilities (a financial liability to pay rentals)
on the balance sheet for most leases. The accounting for lessors
under IFRS 16 is substantially unchanged from its predecessor, IAS 17.
As a lessee, the Group holds two types of operating leases:
• Head leases – a limited number of investment properties
owned by the Group are situated on land held through
leasehold arrangements where ground rent is payable
by the Group as lessee
• Office leases – the lease of the Group’s head office in London
The impact of adopting IFRS 16 has been to recognise at
31 March 2020 a £5.9 million non current lease liability and
£5.7 million right of use asset included in investment property
as a non current asset.
iii) Standards and interpretations in issue not yet adopted
The IASB and the International Financial Reporting Interpretations
Committee have issued the following standards and interpretations
that are mandatory for later accounting periods and which have
not been adopted early.
Name
IFRS 17
Description
Insurance contracts
IFRS 3 (amendments)
Definition of a Business
IAS 1 & IAS 8 (amendments) Definition of Material
IFRS 7, IFRS 9 & IAS 39
(amendments)
IAS 1 (amendments)
Amendments to
References to the
Conceptual Framework
in IFRS Standards
Interest Rate Benchmark Reform
Classification of Liabilities as Current
or Non Current
Amendments to IFRS 2, IFRS 3, IFRS 6,
IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37
and IAS 38
e) Basis of consolidation
i) Subsidiaries
The consolidated financial statements include the accounts of
the Company and its subsidiaries. Subsidiaries are those entities
controlled by the Group. Control is assumed when the Group:
• Has the power over the investee
• Is exposed, or has rights, to variable returns from its involvement
with the investee
• Has the ability to use its power to affect its returns
In the consolidated balance sheet, the acquiree’s identifiable
assets, liabilities and contingent liabilities are initially recognised
at their fair value at the acquisition date.
The results of subsidiaries are included in the consolidated
financial statements from the date that control commences
until the date that control ceases.
Where properties are acquired through corporate acquisitions
and there are no significant assets or liabilities other than property,
the acquisition is treated as an asset acquisition, in other cases
the purchase method is used.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 160
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
1 Significant accounting policies (continued)
ii) Joint ventures
Joint ventures are those entities over whose activities the Group
has joint control.
Joint ventures are accounted for under the equity method,
whereby the consolidated balance sheet incorporates the Group’s
share of the net assets of its joint ventures and the consolidated
income statement incorporates the Group’s share of joint venture
profits after tax.
The Group’s joint ventures adopt the accounting policies of the
Group for inclusion in the Group financial statements.
Joint venture management fees are recognised as income in the
accounting period in which the service is rendered.
iii) Non-controlling interest
The Group’s non-controlling interest represents an 18% shareholding in
LMP Retail Warehouse JV Holdings Limited, which owns a portfolio
of DFS assets.
The Group consolidates the results and net assets of its subsidiary
in these financial statements and reflects the non-controlling
share as a deduction in the consolidated income statement
and consolidated balance sheet.
iv) Alternative performance measures
Our portfolio is a combination of properties that are wholly
owned by the Group and part owned through joint venture
arrangements or where a third party holds a non-controlling
interest. Management reviews the performance of the Group’s
proportionate share of assets and returns, and considers the
presentation of information on this basis helpful to stakeholders
as it aggregates the results of all the Group’s property interests
which under IFRS are required to be presented across a number
of line items in the financial statements.
v) Business combinations
The acquisition of subsidiaries is accounted for using the acquisition
method. The cost of the acquisition is measured at the aggregate
of the fair values of assets and liabilities acquired and equity
instruments issued by the Group in exchange for control of
the acquiree. Acquisition costs are recognised in the income
statement as incurred.
Any excess of the purchase price of business combinations
over the fair value of the assets, liabilities and contingent liabilities
acquired is recognised as goodwill. This is recognised as an asset
and is reviewed for impairment at least annually. Any impairment
is recognised immediately in the income statement.
f) Property portfolio
i) Investment properties
Investment properties are properties owned or leased by
the Group which are held for long term rental income and for
capital appreciation. Investment property includes property that
is being constructed, developed or redeveloped for future use as
an investment property. Investment property is initially recognised
at cost, including related transaction costs. It is subsequently
carried at each published balance sheet date at fair value on
an open market basis as determined by professionally qualified
independent external valuers. Changes in fair value are included
in the income statement. Where a property held for investment
is appropriated to development property, it is transferred at
fair value. A property ceases to be treated as a development
property on practical completion.
In accordance with IAS 40 Investment Properties, no depreciation
is provided in respect of investment properties.
Investment property is recognised as an asset when:
• It is probable that the future economic benefits that are
associated with the investment property will flow to the Group
• The cost of the investment property can be measured reliably
All costs directly associated with the purchase and construction
of a development property are capitalised. Capital expenditure
that is directly attributable to the redevelopment or refurbishment
of investment property, up to the point of it being completed for
its intended use, is included in the carrying value of the property.
ii) 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.
Surrender premiums receivable are recognised on completion
of the surrender.
Where a rent free period is included in a lease, the rental income
foregone is allocated evenly over the period from the date of
lease commencement to the earlier of the first break option or
the lease termination date. Lease incentives and costs associated
with entering into tenant leases are amortised over the period
from the date of lease commencement to the earlier of the first
break option or the lease termination date.
Property operating expenses are expensed as incurred and
any property operating expenditure not recovered from tenants
through service charges is charged to the income statement.
LondonMetric Property PlcAnnual Report and Accounts 2020 161
Finance income includes interest receivable on funds invested
at the effective rate and notional interest receivable on forward
funded developments at the contractual rate.
i) Tax
Tax is included in profit or loss except to the extent that it relates
to items recognised directly in equity, in which case the related
tax is recognised in equity.
Current tax is the expected tax payable on the taxable income
for the year, using tax rates enacted or substantively enacted at
the balance sheet date, together with any adjustment in respect
of previous years.
Deferred tax is provided using the balance sheet liability method,
providing for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and their
tax bases. The amount of deferred tax provided is based on the
expected manner or realisation or settlement of the carrying
amount of assets and liabilities, using tax rates enacted or
substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is
probable that future taxable profits will be available against
which the asset can be utilised.
As the Group is a UK REIT there is no provision for deferred
tax arising on the revaluation of properties or other
temporary differences.
The Group must comply with the UK REIT regulation to benefit
from the favourable tax regime.
j) Share based payments
The fair value of equity-settled share based payments to
employees is determined at the date of grant and is expensed
on a straight line basis over the vesting period based on the
Group’s estimate of shares that will eventually vest.
k) Shares held in Trust
The cost of the Company’s shares held by the Employee
Benefit Trust is deducted from equity in the Group balance sheet.
Any shares held by the Trust are not included in the calculation
of earnings or net assets per share.
l) Dividends
Dividends on equity shares are recognised when they become
legally payable. In the case of interim dividends, this is when
paid. In the case of final dividends, this is when approved by
the shareholders at the Annual General Meeting.
1 Significant accounting policies (continued)
The Group has applied IFRS 15, Revenue from contracts with
customers, from 1 April 2018. The main impact of adopting IFRS
15 has been to recognise property transactions at the point of
completion, which is the point at which control of the property
passes, rather than on unconditional exchange of contracts,
which was the point at which significant risks and rewards were
transferred. The cumulative effect of adopting IFRS 15 at the
date of initial application was nil.
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.
g) Financial assets and financial liabilities
Financial assets and financial liabilities are recognised in
the balance sheet when the Group becomes a party to
the contractual terms of the instrument.
Financial instruments under IFRS 9
i) Trade and other receivables and payables
Trade receivables are recognised and carried at amortised
cost as the Group’s business model is to collect the contractual
cash flows due from tenants. An impairment provision is created
based on the expected credit loss model which reflects
the Group’s historical incurred credit losses and the lifetime
expected credit loss.
ii) Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held
at call with banks and other short term highly liquid investments
with original maturities of three months or less, measured at
amortised cost.
iii) 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.
Financial instruments under IAS 39
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.
h) Finance costs and income
Net finance costs include interest payable on borrowings,
net of interest capitalised and finance costs amortised.
Interest is capitalised if it is directly attributable to the acquisition,
construction or redevelopment of development properties from
the start of the development work until practical completion of
the property. Capitalised interest is calculated with reference
to the actual interest rate payable on specific borrowings for
the purposes of development or, for that part of the borrowings
financed out of general funds, with reference to the Group’s
weighted average cost of borrowings.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 162
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
2 Segmental information
As at 31 March
Property value
Distribution
Long income
Retail parks
Office
Residential
Development
Head lease and right of use assets
For the year to 31 March
Gross rental income
Distribution
Long income
Retail parks
Office
Residential
For the year to 31 March
Net rental income
Distribution
Long income
Retail parks
Office
Residential
100%
owned
£m
1,597.0
475.2
83.3
55.1
1.4
57.0
2,269.0
100%
owned
£m
76.3
25.7
7.1
3.2
–
112.3
100%
owned
£m
75.5
25.7
6.7
3.2
–
111.1
Non-
controlling
interest
£m
2020
Total
£m
100%
owned
£m
Share
of JV
£m
2019
Total
£m
(3.3)
1,593.7
1,282.9
9.7
1,292.6
(11.6)
552.5
–
–
–
–
83.3
55.1
4.9
57.0
257.0
87.0
–
1.3
59.8
132.5
–
–
16.0
–
389.5
87.0
–
17.3
59.8
(14.9)
2,346.5
1,688.0
158.2
1,846.2
Share
of JV
£m
–
88.9
–
–
3.5
–
92.4
100%
owned
£m
Share
of JV
£m
5.7
2,352.2
2020
Total
£m
76.1
30.7
7.1
3.2
0.2
Share
of JV
£m
Non-
controlling
interest
£m
–
6.1
–
–
0.2
6.3
(0.2)
(1.1)
–
–
–
63.7
15.0
6.4
–
–
62.9
14.8
6.1
–
0.1
0.6
9.4
–
–
0.4
10.4
0.6
9.2
–
–
0.1
9.9
(1.3)
117.3
85.1
Share
of JV
£m
Non-
controlling
interest
£m
–
6.1
–
–
–
(0.2)
(1.1)
–
–
–
2020
Total
£m
75.3
30.7
6.7
3.2
–
6.1
(1.3)
115.9
83.9
100%
owned
£m
Share
of JV
£m
–
1,846.2
2019
Total
£m
64.3
24.4
6.4
–
0.4
95.5
2019
Total
£m
63.5
24.0
6.1
–
0.2
93.8
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 following the acquisition of A&J Mucklow Group as discussed in note 15. A new though
comparatively small office sector has been introduced and long income now includes convenience and leisure as one of its sub categories.
3 Gross revenue
For the year to 31 March
Gross rental income
Property advisory fee income
2020
£m
112.3
1.1
113.4
2019
£m
85.1
1.7
86.8
This year, no individual tenant contributed more than 10% of gross rental income. Last year, 22% of the Group’s gross rental income was
receivable from two tenants.
LondonMetric Property PlcAnnual Report and Accounts 2020 4 Administrative costs
a) Total administrative costs
For the year to 31 March
Staff costs
Auditor’s remuneration
Depreciation
Other administrative costs
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
163
2019
£m
10.4
0.2
0.1
3.0
13.7
2019
£m
8.6
(1.9)
6.7
0.7
0.3
2.7
10.4
2020
£m
12.1
0.2
0.7
2.8
15.8
2020
£m
10.3
(2.1)
8.2
0.8
0.2
2.9
12.1
The long term share incentive plan (‘LTIP’) that was created in 2013 allows Executive Directors and eligible employees to receive an
award of shares, held in trust, dependent on performance conditions based on the earnings per share, total shareholder return and total
accounting return of the Group over a three year vesting period. The Group expenses the estimated number of shares likely to vest over
the three year period based on the market price at the date of grant. In the current year the charge was £2.9 million (2019: £2.7 million).
The Company awarded 2,034,253 LTIP shares during the year, 1,439,480 of which were awarded to the current and former Executive
Directors as shown in the Remuneration Committee report. The cost of acquiring the shares expected to vest under the LTIP of £7.2 million
has been charged to reserves this year (2019: £4.8 million).
Employee costs of £2.1 million (2019: £1.9 million) have been capitalised in respect of time spent on development projects.
The emoluments and pension benefits of the current and former Executive Directors, who are also the key management personnel
of the Company, are set out in aggregate in the table below. Further details of the emoluments of the Executive Directors can be found
in the Remuneration Committee report on page 112.
Salary and fees
Benefits
Pension
Annual bonus
Long term incentives
Short term employee benefits
2020
£m
1.7
0.1
0.2
2.3
3.5
7.8
2019
£m
2.2
0.1
0.2
2.2
3.0
7.7
In accordance with the disclosure requirements of IAS 24 Related party disclosures for key management personnel, short term employee
benefits were £7.8 million (2019: £7.7 million) and share based payments were £2.3 million (2019: £2.1 million).
c) Staff numbers
The average number of employees including Executive Directors during the year was:
Property and administration
2020
Number
34
2019
Number
28
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 164
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
4 Administrative costs (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
Total fees for audit and other services
2020
£000
179
5
30
214
In addition to the above audit fees, £35,600 (2019: £48,200) was due to the Group’s auditor in respect of its joint venture operations.
BDO LLP is responsible for the audit of other subsidiary entities at a cost to the Group of £10,400 (2019: £33,700).
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
Interest on lease liabilities
Commitment fees and other finance costs
Total borrowing costs
Less amounts capitalised on the development of properties
Net borrowing costs
Fair value loss on derivative financial instruments
Total finance costs
2020
£m
22.8
0.2
1.5
0.1
2.1
26.7
(0.9)
25.8
3.2
29.0
2019
£000
117
5
28
150
2019
£m
16.3
–
1.4
–
1.9
19.6
(1.1)
18.5
4.4
22.9
Net finance costs deducted from EPRA earnings as disclosed in Supplementary note ii exclude the fair value loss on derivative financial
instruments of £3.2 million (2019: £4.4 million) and early close out costs of £0.2 million (2019: nil).
6 Taxation
For the year to 31 March
Current tax
UK tax charge/(credit) on profit
2020
£m
0.2
The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:
2020
£m
For the year to 31 March
(Loss)/profit before tax
Tax (credit)/charge at the standard rate of corporation tax in the UK of 19% (2019: 19%)
Effects of:
Tax effect of income not subject to tax
Share of post tax losses of joint ventures
Land remediation tax credit
UK tax charge/(credit) on profit
(6.7)
(1.3)
(0.2)
1.7
–
0.2
2019
£m
(0.2)
2019
£m
119.5
22.7
(23.7)
1.2
(0.4)
(0.2)
The current tax charge relates to tax arising on income attributable to the Group’s non-controlling interest, other income that does not
qualify as property income within the REIT regulations and 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.
LondonMetric Property PlcAnnual Report and Accounts 2020 7 Dividends
For the year to 31 March
Ordinary dividends paid
2018 Third quarterly interim dividend: 1.85p per share
2018 Fourth quarterly interim dividend: 2.35p per share
2019 First quarterly interim dividend: 1.9p per share
2019 Second quarterly interim dividend: 1.9p per share
2019 Third quarterly interim dividend: 1.9p per share
2019 Fourth quarterly interim dividend: 2.5p per share
2020 First quarterly interim dividend: 2.0p per share
2020 Second quarterly interim dividend: 2.0p per share
Quarterly dividend payable
2020 Third quarterly interim dividend: 2.0p per share
2020 Fourth quarterly interim dividend: 2.3p per share
165
2019
£m
12.8
16.3
13.2
13.3
–
–
–
–
55.6
2020
£m
–
–
–
–
13.2
17.4
16.8
16.8
64.2
16.7
20.8
The Company paid its third quarterly interim dividend in respect of the financial year to 31 March 2020 of 2.0p per share, wholly as a
Property Income Distribution (‘PID’), on 16 April 2020 to ordinary shareholders on the register at the close of business on 13 March 2020.
The fourth quarterly interim dividend for 2020 of 2.3p per share, of which 0.75p is payable as a PID, will be payable on 22 July 2020
to shareholders on the register at the close of business on 19 June 2020. 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 2021.
During the year the Company issued 2.9 million ordinary shares under the terms of the Scrip Dividend Scheme, which reduced the cash
dividend payment by £5.8 million to £58.4 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.
Further EPRA performance measures are reflected in the Supplementary notes on pages 183 to 188.
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
£m
112.3
(1.2)
111.1
1.1
(15.8)
(24.9)
(0.2)
71.3
Non-controlling
interest
£m
(1.3)
–
(1.3)
–
–
0.3
0.2
(0.8)
JV
£m
6.3
(0.2)
6.1
(0.5)
(0.1)
(1.5)
–
4.0
2020
£m
117.3
(1.4)
115.9
0.6
(15.9)
(26.1)
–
74.5
Group
£m
85.1
(1.2)
83.9
1.7
(13.7)
(18.1)
0.2
54.0
JV
£m
10.4
(0.5)
9.9
(0.8)
–
(2.1)
–
7.0
2019
£m
95.5
(1.7)
93.8
0.9
(13.7)
(20.2)
0.2
61.0
1 Group net finance costs reflect net borrowing costs of £25.8 million (note 5) less early close out costs of £0.2 million (note 5) and finance income of £0.7 million
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 166
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
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
(Loss)/profit on disposal
Debt and hedging early close out costs
Impairment of goodwill
Acquisition costs
IFRS reported profit/(loss)
Group
£m
71.3
(3.8)
(3.2)
(4.9)
(0.2)
(48.3)
(8.9)
2.0
Non-controlling
interest
£m
(0.8)
2.0
–
–
–
–
–
JV
£m
4.0
(10.2)
(0.4)
(2.3)
–
–
–
(8.9)
1.2
2020
£m
74.5
(12.0)
(3.6)
(7.2)
(0.2)
(48.3)
(8.9)
(5.7)
Group
£m
54.0
75.9
(4.4)
0.6
–
–
–
JV
£m
7.0
(11.5)
(0.3)
(1.6)
–
–
–
2019
£m
61.0
64.4
(4.7)
(1.0)
–
–
–
126.1
(6.4)
119.7
b) Earnings per ordinary share attributable to equity shareholders
For the year to 31 March
Basic and diluted earnings
EPRA adjustments above
EPRA earnings
For the year to 31 March
Ordinary share capital
Shares held in the Employee Benefit Trust
Weighted average number of ordinary shares – basic
Employee share schemes
Weighted average number of ordinary shares – fully diluted
Earnings per share
Basic
Fully diluted
EPRA earnings per share
Basic
Fully diluted
c) Net assets per share attributable to equity shareholders
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 the Employee Benefit Trust
Number of ordinary shares
Net asset value per share
EPRA net asset value per share
2020
£m
(5.7)
80.2
74.5
2019
£m
119.7
(58.7)
61.0
Weighted
average
number of
shares
(millions)
Weighted
average
number of
shares
(millions)
806.7
(2.5)
804.2
6.0
810.2
(0.7)p
(0.7)p
9.3p
9.2p
2020
£m
698.4
(2.8)
695.6
5.2
700.8
17.2p
17.1p
8.8p
8.7p
2019
£m
1,431.8
1,216.8
4.7
0.7
1.6
0.3
1,437.2
1,218.7
Number of
shares
(millions)
Number of
shares
(millions)
841.5
(4.3)
837.2
171.0p
171.7p
700.0
(3.4)
696.6
174.7p
174.9p
LondonMetric Property PlcAnnual Report and Accounts 2020 9 Investment properties
a) Investment properties
As at 31 March
Opening balance
Acquisitions
Capital expenditure
Disposals
Property transfers
Revaluation movement
Movement in tenant incentives and rent free uplifts
Property portfolio
Head lease and right of use assets
Completed
£m
1,628.2
634.2
10.2
(113.1)
50.3
(7.3)
9.5
2,212.0
5.7
2,217.7
Under
development
£m
59.8
31.9
11.2
(0.3)
(50.3)
3.5
0.1
55.9
–
55.9
2020
Total
£m
Completed
£m
1,688.0
1,635.0
666.1
21.4
(113.4)
–
(3.8)
9.6
147.0
14.1
(247.2)
21.0
66.2
(7.9)
2,267.9
1,628.2
5.7
–
2,273.6
1,628.2
Under
development
£m
42.6
12.7
16.3
(0.5)
(21.0)
9.7
–
59.8
–
59.8
167
2019
Total
£m
1,677.6
159.7
30.4
(247.7)
–
75.9
(7.9)
1,688.0
–
1,688.0
Investment properties are held at fair value as at 31 March 2020 based on external valuations performed by professionally qualified valuers
CBRE Limited (‘CBRE’), Savills (UK) Limited (‘Savills’) and Cushman & Wakefield Debenham Tie Leung Limited (‘Cushman & Wakefield’).
The valuation of property held for sale at 31 March 2020 was £67.8 million (2019: £10.6 million), including £64.5 million distribution assets
and £3.3 million long income assets.
The valuations have been prepared in accordance with the RICS Valuation – Professional Standards 2014 on the basis of fair value as set
out in note 1. There has been no change in the valuation technique in the year. The total fees earned by CBRE, Savills and Cushman &
Wakefield from the Company represent less than 5% of their total UK revenues. CBRE and Savills have continuously been the signatory
of valuations for the Company since October 2007 and September 2010 respectively.
The COVID-19 pandemic has led to a heightened degree of uncertainty surrounding our year end valuations and our three external
valuers have included material uncertainty clauses in their valuation reports which is in line with the RICS guidance.
Long term leasehold values included within investment properties amount to £176.9 million (2019: £109.4 million). All other properties
are freehold.
Included within the investment property valuation is £72.1 million (2019: £62.5 million) in respect of unamortised lease incentives and rent
free periods.
The historical cost of all of the Group’s investment properties at 31 March 2020 was £1,884.0 million (2019: £1,295.6 million).
Capital commitments have been entered into amounting to £28.9 million (2019: £19.7 million) which have not been provided for in the
financial statements.
Internal staff costs of the development team of £2.1 million (2019: £1.9 million) have been capitalised, being directly attributable to the
development projects in progress.
Forward funded development costs of £9.9 million (2019: £10.4 million) have been classified within investment property as acquisitions.
At 31 March 2020, investment properties included £5.7 million for the head lease right of use assets which have been recognised following
adoption of IFRS 16 on 1 April 2019.
b) Valuation technique and quantitative information
ERV
Net initial yield
Reversionary yield
Asset type
Distribution
Long income
Retail parks
Offices
Development
Residential
Fair value
2020
£m
Valuation
technique
Weighted
average
(£ per sq ft)
1,597.0
Yield capitalisation
475.2
Yield capitalisation
Yield capitalisation
6.60
13.00
14.86
Range
(£ per sq ft)
4.00-20.10
3.00-87.20
7.00-20.70
Yield capitalisation
17.52
11.80-38.50
Residual
Comparison
6.78
n/a
5.50-16.00
n/a
83.3
55.1
55.9
1.4
Weighted
average
%
4.5
5.3
7.5
5.8
5.8
n/a
Range
%
1.9-7.9
3.6-13.2
6.2-11.7
2.9-8.4
4.2-7.3
n/a
Weighted
average
%
4.9
4.8
7.1
6.5
5.1
n/a
Range
%
2.4-8.1
2.3-10.1
6.0-11.6
5.4-8.2
4.2-7.0
n/a
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 168
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
9 Investment properties (continued)
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 2020. The fair value at 31 March 2020 represents
the highest and best use.
i) Technique
The valuation techniques described below are consistent with IFRS 13 and use significant ‘unobservable’ inputs. There have been no
changes in valuation techniques since the prior year.
Yield capitalisation – for commercial investment properties, market rental values are capitalised with a market capitalisation rate.
The resulting valuations are cross-checked against the net initial yields and the fair market values per square foot derived from recent
market transactions.
Residual – for certain investment properties under development, the fair value of the property is calculated by estimating the fair value
of the completed property using the yield capitalisation technique less estimated costs to completion and a risk premium.
Comparison – for residential properties the fair value is calculated by using data from recent market transactions.
ii) Sensitivity
A 5% increase or decrease in ERV would increase or decrease the fair value of the Group’s investment properties by £59.5 million or
£58.1 million respectively.
An increase or decrease of 25 bps to the equivalent yield would decrease or increase the fair value of the Group’s investment properties
by £90.9 million or £100.1 million respectively.
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, Savills and Cushman & Wakefield are based on:
• Information provided by the Group, such as current rents, lease terms, capital expenditure and comparable sales information, which
is derived from the Group’s financial and property management systems and is subject to the Group’s overall control environment
• Assumptions applied by the valuers such as ERVs and yields which are based on market observation and their professional judgement
10 Investment in joint ventures
At 31 March 2020, the following principal property interests, being jointly controlled entities, have been equity accounted for in these
financial statements:
Metric Income Plus Partnership
LSP London Residential Investments Limited
Country of incorporation
or registration1
England
Guernsey
Property sectors
Long income
Residential
Group share
50.0%
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 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, sold two properties in the year for £6.0 million
(Group share: £3.0 million).
LSP London Residential Investments Limited disposed of 26 residential flats at Moore House for £25.4 million (Group share: £10.2 million)
in the year. Three further flats were sold post year end, reducing the number now held to five.
The Group increased its interest in the DFS joint venture from 45% to 82% in April 2019 by acquiring its partner’s interest. The external debt
facility with M&G was repaid in full and the Group’s interest in LMP Retail Warehouse JV Holdings Limited is now accounted for as a
subsidiary and consolidated in these financial statements. The remaining partner’s 18% share is reflected as a non-controlling interest.
Further information is provided in note 20(b).
At 31 March 2020, the freehold and leasehold investment properties were externally valued by Royal Institution of Chartered Surveyors
(‘RICS’) Registered Valuers of CBRE and Savills. The valuation of property held for sale by joint ventures at 31 March 2020 was £3.9 million
(Group share: £1.5 million), (2019: £5.8 million and Group share £2.8 million).
LondonMetric Property PlcAnnual Report and Accounts 2020 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 loss in the year
Disposals¹
Distributions received2
169
2019
£m
117.6
5.1
(6.4)
–
(17.4)
98.9
2020
£m
98.9
0.3
(8.9)
(20.5)
(15.7)
54.1
1 The disposal in the year related to the increased investment in the LMP Retail Warehouse JV from 45% to 82% which has been subsequently accounted for as a subsidiary
and non-controlling interest as reflected in note 20(b)
2 Comprises profit distributions of £12.3 million and repayment of partner loans of £3.4 million
The Group’s share of the profit after tax and net assets of its joint ventures is as follows:
Summarised income statement
Gross rental income
Property costs
Net rental income
Administrative costs
Management fees
Revaluation
Finance cost
Derivative movement
Profit/(loss) on disposal
(Loss)/profit after tax
Group share of (loss)/profit after tax
EPRA adjustments:
Revaluation
Derivative movement
(Profit)/loss on disposal
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
Metric
Income Plus
Partnership
£m
LMP
Retail
Warehouse
JV PUT
£m
LSP
London
Residential
Investments
£m
11.8
(0.2)
11.6
(0.1)
(0.9)
(20.3)
(2.7)
(0.7)
0.2
(12.9)
(6.4)
20.3
0.7
(0.2)
7.9
4.0
177.7
0.9
5.6
(2.9)
(84.3)
0.9
(1.3)
96.6
48.3
0.5
–
0.5
–
–
–
(0.2)
–
–
0.3
0.1
–
–
–
0.3
0.1
–
–
–
–
–
–
–
–
–
0.3
(0.2)
0.1
–
(0.2)
(0.3)
–
–
(6.1)
(6.5)
(2.6)
0.3
–
6.1
(0.1)
(0.1)
8.9
0.1
5.7
(0.1)
–
–
–
14.6
5.8
Group
share
2020
£m
6.3
(0.2)
6.1
(0.1)
(0.5)
(10.2)
(1.5)
(0.4)
(2.3)
(8.9)
10.2
0.4
2.3
4.0
92.4
0.5
5.1
(1.5)
(42.1)
0.4
(0.7)
54.1
Total
2020
£m
12.6
(0.4)
12.2
(0.1)
(1.1)
(20.6)
(2.9)
(0.7)
(5.9)
(19.1)
(8.9)
20.6
0.7
5.9
8.1
4.0
186.6
1.0
11.3
(3.0)
(84.3)
0.9
(1.3)
111.2
54.1
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 170
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
10 Investment in joint ventures (continued)
Summarised income statement
Gross rental income
Property costs
Net rental income
Administrative costs
Management fees
Revaluation
Finance income
Finance cost
Derivative movement
Loss on disposal
Loss after tax
Group share of loss after tax
EPRA adjustments:
Revaluation
Derivative movement
Loss on disposal
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
Metric
Income Plus
Partnership
£m
LMP
Retail
Warehouse
JV PUT
£m
LSP
London
Residential
Investments
£m
13.2
(0.5)
12.7
(0.1)
(1.1)
(13.5)
0.3
(2.7)
(0.7)
–
(5.1)
(2.6)
13.5
0.7
–
9.1
4.6
202.1
0.6
4.5
(3.4)
(80.5)
1.0
(0.6)
123.7
61.9
7.7
–
7.7
–
(0.3)
(7.5)
–
(1.9)
–
–
(2.0)
(0.9)
7.5
–
–
5.5
2.4
91.4
–
1.1
(0.9)
(46.6)
0.1
–
45.1
20.3
0.8
(0.5)
0.3
–
(0.3)
(3.4)
–
–
–
(3.9)
(7.3)
(2.9)
3.4
–
3.9
–
–
40.0
0.1
1.9
(0.2)
–
–
–
41.8
16.7
Total
2019
£m
21.7
(1.0)
20.7
(0.1)
(1.7)
(24.4)
0.3
(4.6)
(0.7)
(3.9)
(14.4)
(6.4)
24.4
0.7
3.9
14.6
7.0
333.5
0.7
7.5
(4.5)
(127.1)
1.1
(0.6)
210.6
98.9
2020
£m
5.8
–
1.1
0.9
7.8
Group
share
2019
£m
10.4
(0.5)
9.9
–
(0.8)
(11.5)
0.1
(2.2)
(0.3)
(1.6)
(6.4)
11.5
0.3
1.6
7.0
158.2
0.4
3.5
(2.2)
(61.2)
0.5
(0.3)
98.9
2019
£m
0.9
3.8
1.0
0.1
5.8
All amounts fall due for payment in less than one year. Trade receivables comprise rental income which is due on contractual payment
days with no credit period. At 31 March 2020, trade receivables of £69,800 were overdue and considered at risk (2019: £44,600).
Based on the IFRS 9 Expected Credit Loss model, an impairment provision of £340,000 (2019: £140,000) has also been made against
trade receivables.
LondonMetric Property PlcAnnual Report and Accounts 2020 171
12 Cash and cash equivalents
Cash and cash equivalents include £5.4 million (2019: £5.7 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
2020
£m
4.2
0.4
19.8
1.9
4.1
12.2
42.6
2019
£m
2.3
2.1
14.7
0.9
6.5
9.9
36.4
The Group has financial risk management policies in place to ensure that all payables are settled within the required credit timeframe.
14 Borrowings and financial instruments
a) Non current financial liabilities
As at 31 March
Secured bank loans
Unsecured bank loans
Unamortised finance costs
2020
£m
192.7
740.0
932.7
(6.0)
926.7
2019
£m
130.0
435.0
565.0
(6.1)
558.9
Certain bank loans at 31 March 2020 are secured by fixed charges over Group investment properties with a carrying value of £529.7 million
(2019: £377.6 million). Secured fixed rate debt acquired as part of the acquisition of A&J Mucklow Group was reflected at fair value on
acquisition in accordance with IFRS 3, increasing secured bank loans by £2.7 million as disclosed in note 15.
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 PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 172
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
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. The Group’s funding sources are diversified across a range of banks and institutions. Weekly cash
flow forecasts are prepared for the Senior Leadership Team to ensure sufficient resources of cash and undrawn debt facilities are in place
to meet liabilities as they fall due.
The Group had cash reserves of £81.8 million (2019: £20.6 million) and available and undrawn bank loan facilities at 31 March 2020 of
£133.8 million (2019: £363.8 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 2020
Bank loans
Derivative financial instruments
As at 31 March 2019
Bank loans
Derivative financial instruments
Less than
one year
£m
One to
two years
£m
Two to
five years
£m
More than
five years
£m
24.4
1.6
26.0
120.5
1.6
122.1
588.0
–
588.0
332.8
–
332.8
Less than
one year
£m
One to
two years
£m
Two to
five years
£m
More than
five years
£m
17.8
0.8
18.6
17.8
0.8
18.6
213.0
0.8
213.8
437.7
–
437.7
Total
£m
1,065.7
3.2
1,068.9
Total
£m
686.3
2.4
688.7
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.
The Group uses interest rate swaps, caps and fixed rates to manage its interest rate exposure and hedge future interest rate risk for the term
of the bank loan.
The average interest rate payable by the Group (including share of joint ventures) on all bank borrowings at 31 March 2020 including the
cost of amortising finance arrangement fees, was 2.9% (2019: 3.1%). A 1% increase or decrease in interest rates during the year would have
increased or decreased the Group’s annual profit before tax by £1.6 million or £1.0 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.
LondonMetric Property PlcAnnual Report and Accounts 2020 173
14 Borrowings and financial instruments (continued)
c) Financial instruments
i) Categories of financial instruments
As at 31 March
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)
Measured at amortised cost
Measured at fair value
2020
£m
81.8
5.8
0.9
88.5
–
926.7
4.2
1.9
12.2
4.1
949.1
2019
£m
20.6
0.9
0.1
21.6
–
558.9
2.3
0.9
9.9
6.5
2020
£m
2019
£m
–
–
–
–
–
–
–
–
4.7
1.6
–
–
–
–
–
–
–
–
–
–
578.5
4.7
1.6
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 2020.
iii) Derivative financial instruments
Details of the fair value of the Group’s derivative financial instruments that were in place at 31 March 2020 are provided below:
As at 31 March
Average rate
Notional amount
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
Total fair value
2020
%
–
2.0
–
2.0
2020
%
–
–
1.1
1.1
2019
%
3.0
–
2.0
2.3
2020
£m
–
19.6
–
19.6
2019
£m
10.0
–
19.6
29.6
Fair value
2019
£m
–
–
–
–
2020
£m
–
–
–
–
Average rate
Notional amount
Fair value
2019
%
2.0
–
1.1
1.1
2020
£m
–
–
350.0
350.0
2019
£m
10.0
–
350.0
360.0
2020
£m
–
–
(4.7)
(4.7)
(4.7)
2019
£m
–
–
(1.6)
(1.6)
(1.6)
All derivative financial instruments are non current interest rate derivatives, and are carried at fair value following a valuation as at
31 March 2020 by Chatham Financial.
The market values of hedging products change with interest rate fluctuations, but the exposure of the Group to movements in interest rates
is protected by way of the hedging products listed above. In accordance with accounting standards, fair value is estimated by calculating
the present value of future cash flows, using appropriate market discount rates. For all derivative financial instruments this equates to a Level
2 fair value measurement as defined by IFRS 13 Fair Value Measurement. The valuation therefore does not reflect the cost or gain to the
Group of cancelling its interest rate protection at the balance sheet date, which is generally a marginally higher cost (or smaller gain) than
a market valuation.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 174
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
15 Business combination
On 27 June 2019, the Company acquired the entire issued share capital of A&J Mucklow Group, a distribution and industrial REIT with
a complementary portfolio of assets located predominantly in the West Midlands. The acquisition was implemented by way of a
Scheme of Arrangement under Part 26 of the Companies Act 2006. On 24 September 2019, following the repurchase and cancellation
of its listed preference shares for £1.1 million, A&J Mucklow Group plc was re-registered as a private limited company, changing its
name to A&J Mucklow Group Limited.
The portfolio was acquired for a total consideration of £413.0 million, representing cash of £129.4 million or 204.5p per ordinary share
acquired, and 138.6 million new ordinary shares issued at 204.6p, being the closing share price of the Company on 27 June 2019,
totalling £283.6 million.
The fair value of assets acquired was £364.7 million as reflected in the table below. The resulting goodwill on acquisition was £48.3 million,
which has been fully impaired in the period as the future cash flows arising in the form of rental income were fully incorporated into
the fair value of the assets acquired.
The goodwill arising includes exceptional transaction costs of £6.5 million which were incurred by Mucklow pre acquisition and the
fair value adjustments noted in the table below. In addition, and most significantly, the Company’s strong share price performance
and its premium to the previously reported EPRA NAV at 31 March 2019 upon which the offer was based, increased the fair value of
the consideration paid, which is calculated with reference to the Company’s share price at completion, thereby creating goodwill.
The share price increased to 204.6p on completion of the transaction, representing a 17% premium to EPRA NAV at 31 March 2019.
Investment properties
Property, plant and equipment
Trading properties
Trade and other receivables
Cash and cash equivalents
Total assets
Trade and other payables
Current tax liabilities
Borrowings
Total liabilities
Fair value of net assets acquired
Cash consideration
Equity instruments
Fair value of consideration paid
Goodwill on acquisition
Book value
£m
453.6
0.1
0.1
2.7
9.8
466.3
(18.8)
(0.7)
(79.8)
(99.3)
367.0
Fair value of
trading
properties
£m
Fair value of
fixed rate debt
£m
Fair value of
preference
shares
£m
–
–
1.0
–
–
1.0
–
–
–
–
1.0
–
–
–
–
–
–
–
–
(2.9)
(2.9)
(2.9)
–
–
–
–
–
–
–
–
(0.4)
(0.4)
(0.4)
Fair value
£m
453.6
0.1
1.1
2.7
9.8
467.3
(18.8)
(0.7)
(83.1)
(102.6)
364.7
129.4
283.6
413.0
48.3
The cost of the acquisition as reflected in the Group cash flow statement of £119.6 million reflects the cash consideration of £129.4 million
less the £9.8 million Mucklow cash balance.
Acquisition costs incurred by the Company of £9.1 million have been paid in the period (£8.9 million charged to the income statement
and £0.2 million to other reserves). In addition and subsequent to completion, the Group paid Mucklow acquisition costs of £6.5 million
and repaid the HSBC £20 million banking facility in full.
The acquisition has contributed £20.5 million to gross rental income, £15.5 million to EPRA earnings and £31.1 million to retained profit since
acquisition. Had A&J Mucklow Group been part of the Group since 1 April 2019, the combined gross rental income, EPRA earnings
and retained profit for the Group at 31 March 2020 would have been £118.4 million, £79.4 million and £2.1 million respectively.
LondonMetric Property PlcAnnual Report and Accounts 2020 175
16 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
2020
£m
113.6
421.6
399.6
240.7
121.5
32.5
2019
£m
77.9
303.9
296.0
217.8
102.3
38.7
1,329.5
1,036.6
The Group’s minimum lease payments under non cancellable operating leases in accordance with IAS 17, are as follows:
As at 31 March
Less than one year
Between one and five years
2020
£m
–
–
–
2019
£m
0.3
2.8
3.1
As set out in note 1, the Group has adopted IFRS 16 from 1 April 2019 and has recognised a right of use asset for its head office lease and other
head lease obligations. These leases are accounted for as finance leases and the Group’s minimum lease payments are due as follows:
As at 31 March
Less than one year
Between one and five years
Over five years
17 Share capital
As at 31 March
Issued, called up and fully paid
Ordinary shares of 10p each
Minimum lease
payments
£m
0.7
1.9
7.4
10.0
Interest
£m
(0.1)
(0.3)
(3.7)
(4.1)
Present value of
minimum lease
payments
2020
£m
0.6
1.6
3.7
5.9
2019
£m
–
–
–
–
2020
Number
2020
£m
2019
Number
2019
£m
841,498,022
84.2
699,991,840
70.0
As reported in note 15, the Company issued 138,615,684 ordinary shares as part of the consideration for the acquisition of A&J Mucklow
Group on 27 June 2019. In addition, the Company issued 2,890,498 ordinary shares under the terms of its Scrip Dividend Scheme during
the year.
Post year end in April, the Company issued a further 118,163 ordinary shares under the terms of its Scrip Dividend Scheme and in May,
the Company issued 66,666,666 new ordinary shares in connection with the equity raise.
In June 2019, the Company granted options over 2,034,253 ordinary shares under its Long Term Incentive Plan. In addition, 2,111,973 ordinary
shares in the Company that were granted to certain Directors and employees under the Company’s Long Term Incentive Plan in 2016
vested along with 420,394 ordinary shares in the Director’s Deferred Bonus Plan. The average share price on vesting was 207.2p.
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 112 to 139 on the basis of materiality.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 176
Notes forming part of the Group
financial statements continued
For the year ended 31 March 2020
18 Reserves
The Group statement of changes in equity is shown on page 156.
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, Metric Property Investments Plc and A&J Mucklow Group Plc by the Company, the cost of the
Company’s shares held in treasury and the cost of shares held in trust to provide for the Company’s
future obligations under share award schemes.
Retained earnings
The cumulative profits and losses after the payment of dividends.
19 Analysis of movement in net debt
As at 31 March
Opening balance
Cash movement
Debt acquired
Loan issue costs paid
Fair value of debt acquired
Amortisation of loan issue costs
Cash and cash
equivalents
£m
Borrowings
£m
Net debt
£m
Cash and cash
equivalents
£m
Borrowings
£m
Net debt
£m
2020
2019
20.6
61.2
–
–
–
–
558.9
304.9
60.0
(1.5)
2.9
1.5
538.3
243.7
60.0
(1.5)
2.9
1.5
26.2
(5.6)
–
–
–
–
643.6
(85.0)
–
(1.1)
–
1.4
617.4
(79.4)
–
(1.1)
–
1.4
81.8
926.7
844.9
20.6
558.9
538.3
20 Related party transactions
a) Joint ventures
Management fees and profit distributions receivable from the Group’s joint venture arrangements in which it had an equity interest during
the year were as follows:
Management fees
Profit distributions
For the year to 31 March
LSP London Residential Investments
Metric Income Plus Partnership
LMP Retail Warehouse JV Property Unit Trust1
1 45% interest in the prior year as explained in note 20(b)
Group interest
40.0%
50.0%
–
2020
£m
0.2
0.9
–
1.1
2019
£m
0.3
1.1
0.3
1.7
2020
£m
8.3
4.0
–
12.3
2019
£m
10.5
4.5
2.5
17.5
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
b) Non-controlling interest
The Group’s non-controlling interest represents an 18% shareholding in LMP Retail Warehouse JV Holdings Limited, which owns a portfolio
of DFS assets. On 26 April 2019, LMP Retail Warehouse JV Holdings Limited acquired its joint venture partner’s 45% interest in LMP Retail
Warehouse JV Property Unit Trust, which subsequently transferred its assets to LMP Retail Warehouse JV Holdings Limited.
The Group’s interest increased from 45% to 82%, requiring it to consolidate the results and net assets of its subsidiary in these financial
statements and reflect the non-controlling share as a deduction in the consolidated income statement and consolidated balance sheet.
As at the year end, the non-controlling interest share of losses and net assets was £1.2 million and £7.1 million respectively, with distributions
of £0.4 million paid during the year.
21 Post balance sheet events
Post period end, the Group has acquired £14.8 million of urban logistics and long income assets, and has sold two distribution centres for
£16.9 million. Further information is provided in the Property review.
On 3 April 2020, we cancelled £350 million interest rate swaps that hedged our unsecured facilities. On 7 May 2020, the Group successfully
completed the placing of 66.7 million new ordinary shares raising gross proceeds of £120 million at an issue price of 180.0p per share.
LondonMetric Property PlcAnnual Report and Accounts 2020 Company balance sheet
As at 31 March
Non current assets
Investment in subsidiaries and joint ventures
Investment properties
Amounts due from subsidiary undertakings
Other tangible assets
Current assets
Trade and other receivables
Cash at bank
Total assets
Current liabilities
Trade and other payables
Non current liabilities
Borrowings
Derivative financial instruments
Lease liabilities
Total liabilities
Net assets
Equity
Called up share capital
Share premium
Capital redemption reserve
Other reserve
Retained earnings
Equity shareholders’ funds
177
Note
2020
£m
2019
£m
iii
iv
v
vi
vii
vii
viii
1,278.6
785.0
1.9
46.6
0.3
1,327.4
570.0
71.1
641.1
–
–
0.4
785.4
566.4
14.5
580.9
1,968.5
1,366.3
11.5
10.8
736.8
4.7
2.1
743.6
755.1
1,213.4
84.2
106.3
9.6
176.5
836.8
1,213.4
431.3
1.6
–
432.9
443.7
922.6
70.0
100.8
9.6
(6.2)
748.4
922.6
The Company reported a profit for the financial year to 31 March 2020 of £70.1 million (2019: £133.1 million).
The financial statements were approved and authorised for issue by the Board of Directors on 10 June 2020 and were signed on its
behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
The notes on pages 179 to 182 form part of these financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 178
Company statement of changes in equity
For the year ended 31 March
At 1 April 2019
Profit for the year
Share issue on acquisition
Purchase of shares held in trust
Vesting of shares held in trust
Share based awards
Reserve transfer of impairment in subsidiary
Dividends
At 31 March 2020
At 1 April 2018
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
At 31 March 2019
Share
capital
£m
70.0
–
13.9
–
–
–
–
0.3
84.2
Share
capital
£m
69.7
–
–
–
–
–
0.3
70.0
Share
premium
£m
100.8
Capital
redemption
reserve
£m
9.6
–
–
–
–
–
–
5.5
106.3
Share
premium
£m
96.1
–
–
–
–
–
4.7
100.8
–
–
–
–
–
–
–
9.6
Capital
redemption
reserve
£m
9.6
–
–
–
–
–
–
9.6
Other
reserve
£m
Retained
earnings
£m
(6.2)
–
269.5
(7.2)
4.4
–
(84.0)
–
176.5
748.4
70.1
–
–
(4.4)
2.9
84.0
(64.2)
836.8
Other
reserve
£m
Retained
earnings
£m
39.7
–
(4.8)
4.0
–
(45.1)
–
(6.2)
626.8
133.1
–
(3.7)
2.7
45.1
(55.6)
748.4
Total
£m
922.6
70.1
283.4
(7.2)
–
2.9
–
(58.4)
1,213.4
Total
£m
841.9
133.1
(4.8)
0.3
2.7
–
(50.6)
922.6
The notes on pages 179 to 182 form part of these financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020 179
Notes forming part of the Company
financial statements
For the year ended 31 March 2020
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 and joint ventures
Investments in subsidiary undertakings and joint ventures 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 £70.1 million (2019: £133.1 million).
Audit fees in relation to the Company only were £172,695 in the year (2019: £116,380).
iii Fixed asset investments
At 1 April 2019
Additions
Disposals
Impairment of investment
At 31 March 2020
Subsidiary
undertakings
£m
785.0
750.5
(172.9)
(84.0)
1,278.6
The carrying value of the Company’s investments was impaired by £84.0 million following an impairment review to assess the recoverable
amount based on the net assets of the subsidiary companies and joint venture investments.
The Company is incorporated in England and is the ultimate holding company of the Group with the subsidiary undertakings and joint
venture investments detailed in the tables below. Except where disclosed, the Group owns the entire share capital of each undertaking
comprising of ordinary shares. All subsidiaries are consolidated in the Group’s consolidated financial statements.
Audit exemption taken for subsidiaries
Certain UK subsidiaries are exempt from the requirement of the Companies Act 2006 relating to the audit of individual accounts by virtue
of Section 479A of that Act.
Subsidiaries for which Section 479A Companies Act 2006
exemption taken
Country of
incorporation or
registration
Companies House
registered number
Nature of business
Metric Property Investments Limited
Metric Property Finance 1 Limited
Metric LP Income Plus Limited1
LSI (Investments) Limited
LSI Developments Limited
LondonMetric Saturn Limited
LondonMetric Saturn II Limited
LondonMetric Retail Distribution II Limited
LondonMetric Liverpool Limited
LondonMetric Swindon Limited
LondonMetric Distribution Limited
1 Undertakings held indirectly by the Company
England
England
England
England
England
England
England
England
England
England
England
07172804
Intermediate holding company
07403434
Intermediate holding company
07780077
Intermediate holding company
03539331
05697367
08336260
08565264
08644584
09335885
08989820
09269541
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 180
Notes forming part of the Company
financial statements continued
For the year ended 31 March 2020
iii Fixed asset investments (continued)
Subsidiaries for which Section 479A Companies Act 2006
exemption taken
Country of
incorporation or
registration
Companies House
registered number
09062484
09891503
08568072
10120420
11357686
07271573
07347027
07455382
10882805
09409081
01232337
00758764
04848576
00384508
LondonMetric Retail Limited
LondonMetric Edinburgh Limited
LondonMetric Derby Limited
LondonMetric Crawley Limited
LondonMetric Leisure Limited
Metric Property Launceston Limited
Metric Property Coventry Limited
Metric Property Kirkstall Limited1
LondonMetric Logistics Limited
LondonMetric Bognor Regis Limited
A & J Mucklow (Nominees) Limited1
A & J Mucklow (Properties) Limited1
A & J Mucklow (Halesowen) Limited1
A & J Mucklow & Co Limited1
Subsidiaries for which Section 479A Companies Act 2006
exemption not taken
LondonMetric Retail Distribution I Limited
Metric Property Finance 2 Limited2
A & J Mucklow Group Limited
Penbrick Limited1
A & J Mucklow (Investments) Limited1
Goresbrook Property Limited2
Barr’s Industrial Limited1,2
Belfont Homes (Birmingham) Limited1,2
A & J Mucklow (Birmingham) Limited1,2
A and J Mucklow (Lands) Limited1,2
A & J Mucklow (Estates) Limited1,2
A & J Mucklow (Ettingshall Estate) Limited1,2
A & J Mucklow (Lancashire) Limited1,2
A & J Mucklow (Wollescote Estate) Limited1,2
A & J Mucklow (Callowbrook Estate) Limited1,2
London & Stamford Property Limited3
LondonMetric Management Limited
L&S Highbury Limited2
LMP Green Park Cinemas Limited2
LMP Thrapston Limited2
LMP Bell Farm Limited2
LMP Omega II Limited2
LMP Dagenham Limited2
LMP Retail Warehouse JV Holdings Limited2,4
1 Undertakings held indirectly by the Company
2 Exempt from the requirement to file audited accounts
3
In the process of being liquidated
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Country of
Incorporation or
registration
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Nature of business
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Administrative company
Property investment
Property investment
Property trading
Nature of business
Property investment
Dormant
Intermediate holding company
Property investment
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Intermediate holding company
Management company
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
4 The Company owns 100% of the voting rights and 100% of the A ordinary shares representing 81.88% of the beneficial interest in the share capital
LondonMetric Property PlcAnnual Report and Accounts 2020 181
iii Fixed asset investments (continued)
Subsidiaries for which Section 479A Companies Act 2006
exemption not taken
LSP RI Moore House Limited5
LSP London Residential Investments Limited5
LSP London Residential Holdings Limited5
Country of
Incorporation or
registration
Guernsey
Guernsey
Guernsey
5 The Company owns ordinary shares representing 40% of the beneficial interest in the share capital
Nature of business
Property investment
Intermediate holding company
Intermediate holding company
All of the undertakings listed above are tax resident in the UK with the exception of LSP RI Moore House Limited, LSP London Residential
Investments Limited and LSP London Residential Holdings Limited which are tax resident in Guernsey.
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.
iv Investment property
At 31 March 2020, investment properties included £1.9 million for the head lease right of use assets which have been recognised following
adoption of IFRS 16 on 1 April 2019.
v Trade and other receivables
As at 31 March
Prepayments and accrued income
Amounts due from subsidiary undertakings
2020
£m
0.4
569.6
570.0
2019
£m
0.6
565.8
566.4
All amounts under receivables fall due for payment in less than one year. Based on the IFRS 9 Expected Credit Loss model, an impairment
provision of £9.8 million (2019: £0.4 million) was recognised on amounts due from Group undertakings, which are unsecured and repayable
on demand.
vi Trade and other payables
As at 31 March
Trade payables
Other accruals and deferred income
Other payables
vii Borrowings and financial instruments
Non current financial liabilities
As at 31 March
Unsecured bank loans
Unamortised finance costs
2020
£m
0.2
7.9
3.4
11.5
2020
£m
740.0
(3.2)
736.8
2019
£m
0.1
7.6
3.1
10.8
2019
£m
435.0
(3.7)
431.3
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 182
Notes forming part of the Company
financial statements continued
For the year ended 31 March 2020
vii Borrowings and financial instruments (continued)
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
£m
19.2
560.0
258.8
838.0
Derivative
financial
instruments
£m
1.6
1.6
–
3.2
2020
£m
20.8
561.6
258.8
841.2
2019
£m
15.2
218.9
306.7
540.8
Derivative financial instruments
The Company is exposed to market risk through interest rate fluctuations. It is the Company’s policy that a reasonable 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.
As at 31 March
Average rate
Notional
Fair value
Interest rate caps – expiry
Less than one year
As at 31 March
Interest rate swaps – expiry
Less than one year
Two to five years
Total fair value
2020
%
–
–
2020
%
–
1.1
1.1
2019
%
3.0
3.0
2020
£m
–
–
2019
£m
10.0
10.0
Average rate
Notional
2019
%
2.0
1.1
1.1
2020
£m
–
350.0
350.0
2019
£m
10.0
350.0
360.0
2020
£m
–
–
2020
£m
–
(4.7)
(4.7)
(4.7)
2019
£m
–
–
Fair value
2019
£m
–
(1.6)
(1.6)
(1.6)
Further information on financial risk management policies and practices can be found in note 14 to the Group financial statements.
viii Leases
As set out in note 1 to the Group financial statements, the Company has adopted IFRS 16 from 1 April 2019 and has recognised a right of use
asset for its head office lease obligations. These leases are accounted for as finance leases and the Group’s minimum lease payments are
due as follows:
As at 31 March
Less than one year
Between one and five years
Minimum lease
payments
£m
0.6
1.5
2.1
Present value of
minimum lease
payments
2020
£m
Interest
£m
–
–
–
0.6
1.5
2.1
2019
£m
–
–
–
ix Related party transactions
Related party transactions for the Company are as noted for the Group in note 20 to the Group financial statements.
LondonMetric Property PlcAnnual Report and Accounts 2020 Supplementary information
(not audited)
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 189.
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
£m
112.3
(1.2)
111.1
1.1
(15.8)
(24.9)
(0.2)
71.3
Non-controlling
interest
£m
(1.3)
–
(1.3)
–
–
0.3
0.2
(0.8)
JV
£m
6.3
(0.2)
6.1
(0.5)
(0.1)
(1.5)
–
4.0
iii EPRA proportionally consolidated balance sheet
As at 31 March
Investment property
Trading property
Gross debt
Cash
Other net liabilities
EPRA net assets
Derivatives
IFRS net assets
Loan to value
Cost of debt
Undrawn facilities
Group
£m
2,273.6
1.1
2,274.7
(932.7)
81.8
(34.3)
1,389.5
(4.7)
1,384.8
35.7%
2.9%
133.8
Non-controlling
interest
£m
JV
£m
92.4
–
92.4
(42.1)
5.1
(0.6)
54.8
(0.7)
54.1
40.0%
3.1%
–
(14.9)
–
(14.9)
–
(0.8)
8.6
(7.1)
–
(7.1)
–
–
–
2020
£m
117.3
(1.4)
115.9
0.6
(15.9)
(26.1)
–
74.5
2020
£m
2,351.1
1.1
2,352.2
(974.8)
86.1
(26.3)
1,437.2
(5.4)
1,431.8
35.9%
2.9%
133.8
Group
£m
85.1
(1.2)
83.9
1.7
(13.7)
(18.1)
0.2
54.0
Group
£m
1,688.0
–
1,688.0
(565.0)
20.6
(24.1)
1,119.5
(1.6)
1,117.9
31.8%
3.1%
363.8
183
2019
8.8p
174.9p
174.7p
2.2%
15.0%
14.1%
4.3%
4.7%
2019
£m
95.5
(1.7)
93.8
0.9
(13.7)
(20.2)
0.2
61.0
2019
£m
1,846.2
–
1,846.2
(626.2)
24.1
(25.4)
1,218.7
(1.9)
1,216.8
32.2%
3.1%
373.5
2020
9.3p
171.7p
171.0p
1.4%
14.2%
13.3%
4.3%
5.0%
JV
£m
10.4
(0.5)
9.9
(0.8)
–
(2.1)
–
7.0
JV
£m
158.2
–
158.2
(61.2)
3.5
(1.3)
99.2
(0.3)
98.9
36.5%
3.5%
9.7
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 184
Supplementary information
(not audited) continued
iv EPRA cost ratio
For the year to 31 March
Property operating expenses
Administrative costs
Share of joint venture property costs, administrative costs 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
Share of non-controlling interest 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
Trading property
Less development properties
Less residential properties
Less non-controlling interest
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 increase across the portfolio
‘Topped up’ net annualised rent (C)
EPRA net initial yield (B/A)
EPRA ‘topped up’ net initial yield (C/A)
2020
£m
1.2
15.8
0.8
(1.1)
(0.1)
16.6
(0.9)
(0.1)
15.6
112.3
6.3
(1.3)
117.3
(0.1)
117.2
14.2%
13.3%
2020
£m
2,267.9
92.4
1.1
(57.0)
(4.9)
(14.9)
2019
£m
1.2
13.7
1.3
(1.7)
(0.1)
14.4
(0.7)
(0.2)
13.5
85.1
10.4
–
95.5
(0.1)
95.4
15.0%
14.1%
2019
£m
1,688.0
158.2
–
(59.8)
(17.3)
–
2,284.6
1,769.1
155.4
18.7
2,458.7
102.1
6.0
(1.9)
–
106.2
16.0
122.2
4.3%
5.0%
120.3
14.8
1,904.2
74.5
9.4
(1.1)
(0.2)
82.6
6.6
89.2
4.3%
4.7%
LondonMetric Property PlcAnnual Report and Accounts 2020 185
2019
£m
1.9
90.1
2.2%
Total
2019
£m
1,842.0
156.3
34.3
15.0
(258.8)
64.4
(7.0)
–
20120
£m
1.7
124.4
1.4%
JV
2019
£m
164.4
9.3
5.3
0.9
(11.1)
(11.5)
0.9
–
Total
2020
£m
1,846.2
577.1
43.1
10.3
(128.2)
(12.0)
10.0
5.7
Group
2019
£m
1,677.6
147.0
29.0
14.1
(247.7)
75.9
(7.9)
–
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
vii EPRA capital expenditure analysis
As at 31 March
Opening valuation
Acquisitions1,2
Developments3
Capital expenditure4
Disposals
Revaluation
Lease incentives
Head lease right of use asset
Closing valuation
Group
2020
£m
1,688.0
635.3
43.1
10.2
(113.4)
(3.8)
9.6
5.7
2,274.7
JV
2020
£m
Non-controlling
interest
£m
158.2
(41.2)
–
0.3
(15.1)
(10.2)
0.4
–
92.4
–
(17.0)
–
(0.2)
0.3
2.0
–
–
(14.9)
2,352.2
1,688.0
158.2
1,846.2
1 Group acquisitions in the period include £634.2 million completed investment properties as reflected in note 9 and trading property of £1.1 million
2 DFS upweight from 45% to 82% has been reflected in this table as an acquisition by the Group and offset as a disposal by the joint venture
3 Group developments include acquisitions and capital expenditure on properties under development as reflected in note 9
4 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
(Decrease)/increase
Dividend paid
Net increase
Total accounting return
2020
pence
per share
2019
pence
per share
171.7
174.9
(3.2)
8.4
5.2
3.0%
174.9
165.2
9.7
8.0
17.7
10.7%
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 186
Supplementary information
(not audited) continued
ix Portfolio split and valuation
As at 31 March
Mega distribution
Regional distribution
Urban logistics
Distribution
Long income
Retail parks
Offices
Investment portfolio
Development1
Residential
Total portfolio
Head lease and right of use assets
2020
£m
349.6
419.5
824.6
1,593.7
552.5
83.3
55.1
2,284.6
57.0
4.9
2020
%
14.9
17.9
35.1
67.9
23.5
3.6
2.4
97.4
2.4
0.2
2019
£m
427.1
385.5
480.0
1,292.6
389.5
87.0
–
1,769.1
59.8
17.3
2019
%
23.1
20.9
26.0
70.0
21.2
4.7
–
95.9
3.2
0.9
2,346.5
100.0
1,846.2
100.0
5.7
2,352.2
–
1,846.2
1 Represents regional distribution £38.1 million (1.6%), urban logistics £6.2 million (0.3%), long income £10.5 million (0.5%), office £1.1 million and other land £1.1 million at
31 March 2020. Split of prior period comparatives was regional distribution £22.6 million (1.2%), urban logistics £23.9 million (1.3%), long income £13.3 million (0.7%)
x Investment portfolio yields
As at 31 March
Distribution
Long income
Retail parks
Offices
Investment portfolio
xi Investment portfolio – Key statistics
As at 31 March 2020
Distribution
Long income
Retail parks
Offices
Investment portfolio
xii Total property returns
For the year to 31 March
Capital return
Income return
Total return
EPRA NIY
%
EPRA
topped up NIY
%
2020
Equivalent
yield
%
EPRA NIY
%
EPRA
topped up NIY
%
2019
Equivalent
yield
%
3.9
5.0
6.7
5.8
4.3
4.6
5.6
7.5
5.8
5.0
Area
’000 sq ft
12,623
2,754
432
218
16,027
5.1
5.9
7.3
6.5
5.5
3.9
5.4
6.1
–
4.3
4.3
5.6
6.3
–
4.7
4.9
5.6
6.2
–
5.1
WAULT
to expiry
years
WAULT
to first break
years
Occupancy
%
Average rent
£ per sq ft
10.8
13.3
8.6
6.0
11.2
9.6
12.5
7.2
5.0
10.2
98.1
100.0
97.0
99.8
98.6
6.30
14.70
16.10
15.60
7.90
All property
2020
%
All property
2019
%
–
5.1
5.1
3.9
4.9
9.0
LondonMetric Property PlcAnnual Report and Accounts 2020 187
2019
£m
59.0
23.6
5.9
–
88.5
–
1.0
89.5
0.2
89.7
2020
£m
77.3
33.9
6.8
3.4
121.4
1.3
0.6
123.3
–
123.3
Within 3 years
%
Within 5 years
%
Within 10 years
%
Within 15 years
%
Within 20 years
%
Over 20 years
%
9.7
13.4
0.7
5.7
7.1
22.0
22.5
4.0
18.2
16.8
49.4
91.7
34.5
63.2
47.1
2020
£m
46.1
19.7
1.1
0.3
67.2
75.5
100.0
64.0
87.3
73.6
2020
%
58.7
57.2
15.7
8.5
54.5
85.6
100.0
90.7
100.0
88.2
2019
£m
42.4
12.8
1.3
–
56.5
100.0
100.0
100.0
100.0
100.0
2019
%
71.8
52.0
22.6
–
63.2
Area
’000 sq ft
1,062
454
783
657
191
357
230
364
357
51
Contracted
rent
£m
Occupancy
%
WAULT
to expiry
years
WAULT
to first break
years
5.7
4.1
4.3
4.1
1.9
2.1
1.8
2.0
1.9
1.9
100
100
100
100
100
100
100
100
100
100
20.5
23.5
12.5
14.0
8.1
11.7
5.3
17.5
15.6
11.6
20.5
23.5
12.5
14.0
8.1
11.7
5.3
17.5
15.6
7.0
xiii Contracted rental income
As at 31 March
Distribution
Long income
Retail parks
Offices
Investment portfolio
Development – distribution
Development – long income
Commercial portfolio
Residential
Total portfolio
xiv Rent subject to expiry
As at 31 March 2020
Distribution
Offices
Long income
Retail parks
Commercial portfolio
xv Contracted rent subject to RPI or fixed uplifts
As at 31 March
Distribution
Long income
Retail parks
Offices
Commercial portfolio
xvi Top ten assets (by value)
As at 31 March 2020
Primark, T2, Islip
Eddie Stobart, Dagenham
Primark, Thrapston
Argos, Bedford
Tesco, Croydon
Amazon, Warrington
DHL, Reading
Ollerton, Clipper
Oak Furniture, Swindon
New Malden
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 188
Supplementary information
(not audited) continued
xvii Top ten occupiers
As at 31 March 2020
Primark1
DFS
M&S
Argos1
Eddie Stobart
Dixons Carphone
Odeon1
DHL1
Amazon
Clipper Logistics
Top ten
Other commercial
Total commercial
1 Market capitalisation of Parent Company
2 Excludes income from sales that had exchanged but not completed by the year end
Contracted
rental income
£m
Market
capitalisation
£bn
Contracted
rental income2
%
10.0
13.7
0.4
1.8
4.2
–
0.9
0.3
28.5
946.0
0.2
5.3
4.5
4.2
4.1
3.3
3.2
3.1
2.6
2.3
42.6
76.6
119.2
8.4
4.4
3.8
3.5
3.4
2.7
2.7
2.6
2.2
2.0
35.7
64.3
100.0
LondonMetric Property PlcAnnual Report and Accounts 2020 189
Glossary
A&J Mucklow Group or
A&J Mucklow or Mucklow
A&J Mucklow Group Plc acquired
on 27 June 2019 and re-registered
as A&J Mucklow Group Limited
on 24 September 2019
Building Research Establishment
Environmental Assessment
Methodology (‘BREEAM’)
A set of assessment methods and tools
designed to help construction professionals
understand and mitigate the environmental
impacts of the developments they design
and build
Capital Return
The valuation movement on the property
portfolio adjusted for capital expenditure
and expressed as a percentage of the
capital employed over the period
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)
Underlying earnings from the Group’s
property rental business divided by the
average number of shares in issue over
the period
EPRA NAV per Share
Balance sheet net assets excluding fair
value of derivatives, divided by the number
of shares in issue at the balance sheet date
EPRA 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)
EPRA is the industry body for European
Real Estate Investment Trusts (REITs)
Gross rental income
Rental income for the period from let
properties reported under IFRS, after
accounting for lease incentives and
rent free periods. Gross rental income
will include, where relevant, turnover
based rent, surrender premiums
and car parking income
Group
LondonMetric Property Plc and
its subsidiaries
IFRS
The International Financial Reporting
Standards issued by the International
Accounting Standards Board and
adopted by the European Union
Income Return
Net rental income expressed as a
percentage of capital employed over
the period
Investment Portfolio
The Group’s property portfolio excluding
development, land holdings and
residential properties
Investment Property Databank (IPD)
IPD is a wholly owned subsidiary
of MSCI producing an independent
benchmark of property returns and
the Group’s portfolio returns
Like for Like Income Growth
The movement in contracted rental
income on properties owned through
the period under review, excluding
properties held for development
and residential
Loan to Value (LTV)
Net debt expressed as a percentage
of the total property portfolio value
at the period end, adjusted for
deferred completions on sales
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements Total Shareholder Return (TSR)
The movement in the ordinary share price
as quoted on the London Stock Exchange
plus dividends per share assuming that
dividends are reinvested at the time
of being paid
Weighted Average Interest Rate
The total loan interest and derivative costs
per annum (including the amortisation
of finance costs) divided by the total debt
in issue at the period end
Weighted Average Unexpired
Lease Term (WAULT)
Average unexpired lease term across
the investment portfolio weighted by
Contracted Rent
190
Glossary continued
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, i.e. 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 rental business under
the REIT regulations. The PID dividend is
paid after deducting withholding tax at
the basic rate
Real Estate Investment Trust (REIT)
A listed property company which qualifies
for and has elected into a tax regime which
is exempt from corporation tax on profits
from property rental income and UK capital
gains on the sale of investment properties
Total Accounting Return (TAR)
The movement in EPRA NAV per share
plus the dividend paid during the period
expressed as a percentage of the EPRA NAV
per share at the beginning of the period
Total Property Return (TPR)
Unlevered weighted capital and income
return of the property portfolio as calculated
by IPD
LondonMetric Property PlcAnnual Report and Accounts 2020 Notice of Annual General Meeting
191
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.
Following Government guidance in relation to COVID-19, it is
proposed that the Annual General Meeting be convened with
the minimum quorum of shareholders present (which will consist of
two members of the Board) in order to conduct the business of the
meeting. The format of the meeting in practice will be functional
only to comply with relevant legal requirements. Instead of
attending the Annual General Meeting, shareholders are asked
to exercise their votes by submitting their proxy electronically or by
post, as explained below. They are also encouraged to appoint the
chair of the meeting (who will be a Director who is able to attend
the Annual General Meeting) to vote on their behalf. As it will not
be possible to ask questions during the Annual General Meeting
this year, shareholders are invited to submit questions in advance
by emailing info@londonmetric.com by 10.00am on 20 July 2020.
Answers will be published on our website shortly after the Annual
General Meeting.
Notice is hereby given that the Annual General Meeting of
the members of LondonMetric Property Plc (Registered number
7124797) will be held at One Curzon Street, London, W1J 5HB
on 22 July 2020 at 10.00 am.
Resolutions 1 to 14 (inclusive) will be proposed as ordinary
resolutions and resolutions 15 to 18 (inclusive) will be proposed
as special resolutions. Voting on all resolutions will be by way of poll.
1. That the Annual Report and Accounts for the year ended
31 March 2020 be considered and approved.
2. That the Annual Report on Remuneration in the form set
out in the Annual Report and Accounts for the year ended
31 March 2020 be approved.
3. That the Directors’ Remuneration Policy in the form set out in the
Annual Report and Accounts for the year ended 31 March 2020
be approved.
4. 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.
5. That the Directors be authorised to determine the remuneration
of the auditor.
6. That Patrick Vaughan be re-elected as a Director.
7. That Andrew Jones be re-elected as a Director.
8. That Martin McGann be re-elected as a Director.
9. That James Dean be re-elected as a Director.
14. 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
£30,276,095 (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 14b
below in excess of £30,276,095; 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 aggregate nominal amount of
£60,552,190 (such amount to be reduced by any Relevant
Securities allotted or granted under paragraph 14a 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 14a and 14b 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.
10. That Rosalyn Wilton be re-elected as a Director.
15. That the Directors be and are empowered, in accordance with
11. That Andrew Livingston be re-elected as a Director.
12. That Suzanne Avery be re-elected as a Director.
13. That Robert Fowlds be re-elected as a Director.
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 14 or by way of a sale
of treasury shares as if Section 561(1) of the 2006 Act did not
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 192
Notice of Annual General Meeting continued
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 14b of resolution 14
above, by way of a rights issue only):
(i) to ordinary shareholders in proportion (as nearly as
may be practicable) to their existing holdings;
(ii) to holders of other equity securities as required 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
b. the allotment of equity securities or sale of treasury shares
(otherwise than under paragraph 15a above) up to an
aggregate nominal amount of £4,541,414,
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.
16. That the Directors be and are empowered, in addition
to any authority granted under resolution 15, to allot equity
securities (as defined in Section 560(1) of the 2006 Act) for
cash pursuant to the authority conferred by resolution 13
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 an aggregate nominal amount
of £4,541,414; 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.
17. 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 90,828,285;
b. the minimum price which may be paid for an 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.
18. 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
10 June 2020
LondonMetric Property PlcAnnual Report and Accounts 2020 193
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.
(ii) We are asking shareholders to adhere to the current Government
guidelines and not attend the Annual General Meeting in person.
We recommend appointing the chair of the meeting as your
proxy to vote on your behalf. Your proxy will vote as you instruct
and must attend the meeting for your vote to be counted.
Details of how to appoint the chair (or another person) as your
proxy are set out in the notes to the proxy form.
(iii)
(iv)
(v)
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.
You will not have received a hard copy proxy form for the
Annual General Meeting in the post. You can instead submit your
proxy vote electronically by accessing the shareholder portal
at www.signalshares.com, logging in and selecting the ‘Vote
Online Now’ link. You will require your username and password
in order to log in and vote. If you have forgotten your username
or password you can request a reminder via the shareholder
portal. If you have not previously registered to use the portal you
will require your investor code (‘IVC’) which can be found on
your share certificate or dividend notification. Proxy votes should
be submitted as early as possible and in any event, no later than
10.00 am on 20 July 2020. You may request a hard copy proxy
form directly from the Registrars, Link Asset Services by emailing
enquiries@linkgroup.co.uk or by post at Link Asset Services,
The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU.
To be valid, any hard copy proxy form must be received by post
or (during normal business hours only) by hand at the Company’s
registrars, Link Asset Services, The Registry, 34 Beckenham
Road, Beckenham, Kent BR3 4TU by no later than 10.00 am
on 20 July 2020.
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 20 July 2020. 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.
If you need help with voting online, or require a paper proxy form,
please contact our Registrar, Link Asset Services by email at:
enquiries@linkgroup.co.uk, or you may call Link on 0371 664 0391
if calling from the UK, or +44 (0) 371 664 0391 if calling from outside
of the UK. Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom will
be charged at the applicable international rate; lines are open
9.00am to 5.30pm, Monday to Friday excluding public holidays
in England and Wales.
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 20 July 2020. 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.
(vi)
(vii) CREST members who wish to appoint a proxy or proxies by
(viii)
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.
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 20 July 2020. 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.
(ix)
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.
(x) 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.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements
194
Notice of Annual General Meeting continued
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) 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.
(xii) 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 9 June 2020 (being the closest practical business
day before the publication of this Notice), the Company’s
issued share capital consisted of 908,282,851 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) Given the circumstances, if you are a shareholder and would
like to ask the Board a question, please email your question to
info@londonmetric.com by 10.00 am on 20 July 2020. Answers will
be published on our website following the AGM. 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.
b.
c.
to do so would interfere unduly with the preparation for the
meeting or involve the disclosure of confidential information;
the answer has already been given on a website in the form
of an answer to a question; or
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.
Should a shareholder wish to inspect any of these documents
please submit a request to info@londonmetric.com.
(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.
(xix) Voting on all resolutions at the Annual General Meeting will be
by way of poll. The Company believes that this is the best way
of representing the view of as many shareholders as possible
in the voting process.
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 Accounts
The Chair will present the Annual Report and Accounts for the year ended
31 March 2020 to the meeting. Resolution 1 is to consider and approve
the Report of the Directors, the financial statements and the Independent
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 2020.
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 last approved at the 2017 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 Accounts.
Resolution 3 – Directors’ Remuneration Policy
Resolution 3 is an ordinary resolution to approve the new Directors’
Remuneration Policy (which will replace the Company’s existing
Remuneration Policy). Shareholders are invited to approve the Directors’
Remuneration Policy which is set out on pages 119 to 129 of the Annual Report
and Accounts. The Policy, which sets out the Company’s forward looking
policy on Directors’ remuneration, is subject to a binding shareholder vote
by ordinary resolution at least every three years.
Once the Directors’ Remuneration Policy has been approved, all payments
by the Company to the Directors and any former Directors must be made
in accordance with the Policy (unless a payment has separately been
approved by shareholder resolution).
If the Company wishes to change the Directors’ Remuneration Policy,
it will need to put the revised Policy to a shareholder vote again before
it can implement any payments pursuant to the amended Policy. If the
Directors’ Remuneration Policy remains unchanged, the 2006 Act requires
the Company to put the Policy to shareholders for approval again no
later than 22 July 2023.
Resolutions 4 and 5 – Reappointment of auditors
Resolution 4 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 5 authorises the Directors to set their remuneration.
LondonMetric Property PlcAnnual Report and Accounts 2020
195
Resolutions 6 to 13 – Re-election of Directors
Resolutions 6 to 13 deal with re-election of the Directors. Biographies of
each of the Directors seeking re-election can be found on pages 80 and 81
of the Annual Report and Accounts. The Board has confirmed, following
a performance review, that all Directors standing for re-election continue
to perform effectively and demonstrate commitment to their role.
Resolution 14 – 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 £30,276,095 (representing approximately one third
of the Company’s issued ordinary share capital as at 9 June 2020) during
the period up to the conclusion of the next Annual General Meeting of
the Company. Such authority is sought in paragraph 14a of Resolution 14.
In accordance with the guidelines issued by the Investment Association,
paragraph 14b of Resolution 14 will allow Directors to allot, including the
shares referred to in paragraph 14a of Resolution 14, 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 £60,552,190, representing approximately
two thirds of the issued ordinary share capital of the Company as at
9 June 2020.
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 15 and 16 – 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 15 and 16 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 15 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 (i) £4,541,414 (representing 45,414,143 shares.). This aggregate nominal
amount represents 5% of the issued ordinary share capital of the Company
as at 9 June 2020.
Taking into account the template resolutions published by the UK Pre-Emption
Group in May 2016, the authority set out in Resolution 16 is limited to allotments
or sales of up to an aggregate nominal amount of (i) 4,541,414 (representing
45,414,143 shares) in addition to the authority set out in Resolution 15 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 9 June 2020.
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 17 – Authority to purchase own shares
Resolution 17 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 90,828,285
shares (representing approximately 10% of the Company’s issued ordinary
share capital as at 9 June 2020) 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 17 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 9 June 2020 (the latest practicable date before publication of this Notice),
there were share awards over 7,083,484 ordinary shares in the capital of
the Company representing approximately 0.78% 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
0.78% of the Company’s issued ordinary share capital.
Resolution 18 – Notice period for general meetings
It is proposed in Resolution 18 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 18 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.
LondonMetric Property PlcAnnual Report and Accounts 2020Strategic reportGovernanceFinancial statements 196
Financial calendar
Announcement of results
Annual General Meeting
10 June 2020
22 July 2020
Shareholder information
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
Registrar
Link Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Secretary and Registered Address
Jadzia Duzniak
One Curzon Street
London W1J 5HB
www.londonmetric.com
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
1 New Street Square
London EC4A 3HQ
Property Valuers
CBRE Limited
St Martin’s Court
10 Paternoster Row
London EC4M 7HP
Savills (UK) Limited
33 Margaret Street
London W1G 0JD
Cushman & Wakefield Debenham Tie
Leung Limited
1 Colmore Square
Birmingham B4 6AJ
Tax Advisors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
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.
LondonMetric Property PlcAnnual Report and Accounts 2020 Design and production
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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