Real estate for
reliable income
LondonMetric Property Plc
Annual Report and Accounts 2021
Inside this report
Strategic report
An overview, purpose
and strategy update
1
Creating value
20
A detailed analysis
of our property activity
26
A review of our
financial performance
40
A review of our risks
64
Our sustainability
performance
47
Governance
How we govern
the business
80
Remuneration
116
Our £2.6 billion portfolio comprises
a collection of excellent assets
that offer reliable, predictable and
growing income streams.
Andrew Jones
Chief Executive
Total Accounting Return
+16.7%
Dividend Growth
+4.2%
Our purpose drives our income
growth and value creation
Own
Manage
Collaborate
Generate
Our acquisitions activity focused
on urban logistics and long
income. We believe these sectors
continue to offer strong long term
growth prospects.
Valentine Beresford
Investment Director
We continue to focus on
strengthening our portfolio metrics
and are signing long leases and
delivering good rental growth.
Mark Stirling
Asset Director
We are reporting another very
strong set of results reflecting both
earnings and NAV progression,
which is testament to our resilient
portfolio, considered investment
decisions and proactive asset
management actions.
Martin McGann
Finance Director
Environmental
Social
Governance
Patrick Vaughan
Chair
Financial statements
Detailed financial
performance
139
Governance
Financial statements
An overview, purpose and strategy update
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.
Own
Own desirable real
estate that meets
occupiers’ needs
Manage
Manage and 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
Driving strong financial performance
EPRA EPS1
9.52p
2020: 9.26p
Total accounting return1
Dividend per share
IFRS net assets
+16.7%
2020: 2.9%
8.65p
2020: 8.3p
£1,731.3m
2020: £1,431.8m
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 40. Definitions can be found in the Glossary on page 184
See our business model to find out
about how this creates value page 22
1
Strategic reportLondonMetric Property PlcAnnual Report and Accounts 2021 An overview,
purpose and
strategy update
N
W
O
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.
• Constantly refining the portfolio to
ensure we continue to own assets that
will deliver long term outperformance.
Highlights
38.5%
Urban logistics exposure as
a proportion of our assets
£245m
Acquisitions in year
57%
Percentage of
income subject to
contractual uplifts
Amazon in Warrington
Our 357,000 sq ft regional distribution
warehouse let to Amazon for
a further 11 years.
See Property review
page 26
2
LondonMetric Property Plc
Annual Report and Accounts 2021
Strategic report
Governance
Financial statements
Own
desirable
real estate
Positioning the portfolio to benefit
from the medium and long term
drivers of return and meeting the
needs of our occupiers.
LondonMetric Property Plc
Annual Report and Accounts 2021
3
An overview,
purpose and
strategy update
E
G
A
N
A
M
What this means to our business
Occupier activity in the year
• 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
+£5.3m
Additional income from
lettings and rent reviews
13.2 years
Average lease lengths
on lettings signed
423k sq ft
BREEAM Very Good/ Excellent
certified developments
completed in the year
Completion of Unit 2 at Bedford Link
We completed further distribution
warehouse development totalling
172,000 sq ft, where we are under offer
on letting the unit.
See Responsible Business and ESG review
page 47
4
LondonMetric Property Plc
Annual Report and Accounts 2021
Strategic report
Governance
Financial statements
Manage
and enhance
responsibly
Securing and enhancing our
strong income metrics as well
as improving the quality and
sustainability of our assets.
LondonMetric Property Plc
Annual Report and Accounts 2021
5
An overview,
purpose and
strategy update
E
T
A
R
O
B
A
L
L
O
C
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.
Highlights
+13.4%
Total Property Return,
1220 bps outperformance
against IPD All Property
31
Employees
98.7%
Occupancy rate
Top 15 occupier feedback
Very collaborative and always
available to talk about how we can
work in partnership. Our strongest
landlord relationship and one we
want to not only retain, but develop.
Team are industry leaders and
individually are great to deal with.
Strong trustworthy relationship
which allows quick and easy
discussions to take place when
opportunities arise.
See Responsible Business and ESG review
page 47
6
LondonMetric Property Plc
Annual Report and Accounts 2021
Strategic report
Governance
Financial statements
Expertise and
relationships
We have a highly talented,
motivated and aligned team with
strong stakeholder relationships.
LondonMetric Property Plc
Annual Report and Accounts 2021
7
An overview,
purpose and
strategy update
E
T
A
R
E
N
E
G
What this means to our business
Some of our key customers
• 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
Net rental income
+16.7%
Total accounting return
11.4 yrs
Portfolio WAULT
+3.1%
Like for like income growth
+2.8%
Growth in EPRA earnings
per share
6 years
Of dividend progression
Our occupier base
We continue to focus strongly on the
credit strength, quality and sector
diversity of our occupiers.
See Our markets
page 20
See Property review
page 26
8
LondonMetric Property Plc
Annual Report and Accounts 2021
Strategic report
Governance
Financial statements
Generate
income
growth
In a world of zero interest rates and
negligible bond rates, high quality
real estate can deliver reliable,
repetitive and growing income.
LondonMetric Property Plc
Annual Report and Accounts 2021
9
An overview, purpose and strategy update
Performance highlights
IFRS reported profit
£257.3m
186.0
119.7
-5.7
257.3
EPRA EPS1
9.52p
2.8%
8.55
8.77
9.26
9.52
Dividend per share
8.65p
4.2%
7.9
8.2
8.3
8.65
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
IFRS net assets
£1,731.3m
20.9%
EPRA net tangible assets per share1
Total property return
1,149.5
1,216.8
1,431.8
1,731.3
190.3p
11.7%
164.6
173.7
170.3
190.3
13.4%
830 bps
13.7
9.0
5.1
13.4
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
Cost of debt
2.5%
40 bps
Average debt maturity
Loan to value ratio
2.8
3.1
2.9
2.5
2
8.2 years
3.5 years
4.8
6.4
4.7
8.2
32.3%
360 bps
34.7
32.2
35.9
32.3
2018
2019
2020
2021
2018
2019
2020
2021
2018
2019
2020
2021
1 Alternative performance measures
Practice Recommendations (BPR) reporting
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
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.
EPRA has introduced three new measures of net
asset value as disclosed in note 8 to the financial
statements. EPRA NTA is considered to be the most
relevant measure for the Group and replaces EPRA
NAV as the primary measure of net asset value.
EPRA NTA per share is on a fully diluted basis and prior
year comparatives have been presented for the new
measure accordingly.
Further details and reconciliations between EPRA
measures and IFRS equivalents can be found
in the Financial review on page 40 and in note 8
to the Group financial statements.
The definition of each EPRA measure
can be found in the Glossary page 184
2 After post year end refinancing as detailed in the
Financial review on page 46
WAULT
11.4 years
0.2 years
12.4
12.5
11.2
11.4
2018
2019
2020
2021
10
LondonMetric Property PlcAnnual Report and Accounts 2021
An overview, purpose and strategy update
Chair’s statement
Government support schemes have
allowed us to start to return to normal.
We must offer our heartfelt thanks to
the brilliant people who devised, mass
produced and delivered vast numbers of
high grade vaccines.
There are some parts of our lives that
won’t return to being as they were before.
Covid-19 continues to challenge many long
established practices and accelerated
existing structural change. There is no doubt
that some of the changes, such as routine
internet shopping and working from home
part time will continue to impact the way
we live, work and socialise.
The enormous impact that the pandemic
has had on commercial property is clear to
see. No amount of economic stimulus and
medical brilliance will undo some of the
changes that Covid-19 has accelerated.
As shopping and working patterns
have shifted, a new economic reality
has polarised sub-sector performance.
Logistics and long income property
continue to see highly supportive dynamics.
There will be some shift back to physical
shopping to animate our high streets and
bring fun back to going out, but the shift
to online shopping that was underway
before Covid-19 has been accelerated by
lockdowns and only part of that move will
return to traditional shopping. It is unclear
yet how office demand will evolve given
the now proven ability of many to work
successfully from home.
Notwithstanding potential inflationary
pressures, Covid-19 has also prolonged
the likely time horizon of very low interest
rates. Well managed real estate is an
asset class which we believe offers an
outstanding ability to provide exceptional,
compounding returns over the longer term.
The year also saw the finalisation of Brexit.
The pandemic has rather taken the
spotlight away from this major event, so its
effects are still under reported. It will lead to
demand for logistics space as firms rely less
on ‘just in time’ and more on ‘just in case’.
The UK needs to be more self-reliant, which
will be a very good thing. On the way to
that state, there will be issues to overcome.
I believe we are well placed to do so.
IPD All Property index by 1,220 bps. Our total
accounting return was 16.7%, rent collection
levels exceeded 98%, EPRA earnings per
share increased by 2.8% and EPRA net
tangible assets per share rose by 11.7%.
This performance and our confident outlook
have allowed us to increase our dividend
per share for the sixth year in a row, rising
4.2% and 110% covered by EPRA earnings.
I am pleased to know that our team can go
forward positively, without being distracted
trying to collect unpaid rent.
Over the eight years since our merger, we
have delivered a total shareholder return of
196%, significantly outperforming the FTSE
350 Real Estate Super Sector average of
59% as well as increasing our earnings by
144% to 9.52p per share.
During the year, our equity fundraising
attracted overwhelming support from
shareholders, for which I thank you. It has
allowed us to execute on some high quality
investment opportunities and enhance
our portfolio further. We were also very
well supported in the debt market, where
post year end we managed to extend
our debt maturity by 4.0 years to 8.2 years,
which gives durability and diversity to
our debt structure, at highly attractive
borrowing rates.
Despite the pandemic, we have also
maintained our strong stakeholder
relationships. We recognise that the success
of the Company depends on our people
and I would again like to warmly thank the
Board and all of our employees for their
hard work in very difficult circumstances.
We have also strengthened our Board
during the year with the appointment of
Kitty Patmore, who I would like to welcome
on your behalf.
Looking forward, we believe the portfolio
is stronger than ever. That will allow us to
grow our income and asset value over the
longer term. This, combined with the long
experience of our team and our balance
sheet discipline leaves the Company very
well placed to deliver a sustainable and
progressive dividend policy.
Our long term, disciplined approach,
aligned to the winning sectors, has
delivered a particularly strong performance
in the year. Our total property return was
13.4% which significantly outperformed the
Patrick Vaughan
Chair
27 May 2021
11
Over the year, I’m pleased
to report that our portfolio
delivered further income
growth, a strong valuation
performance and significant
outperformance
Patrick Vaughan
Chair
+196%
Total shareholder return over
eight years since merger significantly
outperformed the FTSE 350 Real Estate
Super Sector average of 59%
+4.2%
Dividend per share
Due to the pandemic, we have had to work
from home for most of the last financial
year. Thanks to the incredible efforts of
all of the team they have managed that
difficulty, and delivered record results
in testing conditions. I cannot thank
them enough.
When we reported last year, I hoped
that the world would be able to recover
in the calendar year 2020. The coming
of the variants put paid to that hope.
Thankfully, the speed and effectiveness of
the UK vaccine rollout, alongside extensive
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 An overview, purpose and strategy update
At a glance
We own structurally supported real estate
underpinned by changing consumer
shopping habits. Distribution represents
70.8% of the portfolio and our long
income exposure has grown to 24.5%.
Our focus on distribution and long income1
Assets by geography1
6 7
5
4
1
Distribution
70.8%
3
2
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
4
5
Long Income
Retail Parks
6 Offices
7
Residential
38.5%
18.7%
13.6%
24.5%
2.9%
1.7%
0.1%
1
Including developments, based on value
12
Other
2.9%
North East
& Yorkshire
5.8%
Midlands
35.5%
London &
South East
43.0%
North West
6.1%
South West
6.7%
LondonMetric Property PlcAnnual Report and Accounts 2021 Portfolio value
£2,584m
2020: £2,347m
WAULT
11.4 years
2020: 11.2 years
Total property return
+13.4%
2020: +5.1%
Top occupiers by
contracted income (%)1
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,
typically greater than 500,000 sq ft and
located close to major arterial routes.
Regional Distribution
Mid size units typically between 100,000 sq
ft and 500,000 sq ft serving as regional
hubs and creating the link in any modern
supply chain.
Long Income
Grocery & Roadside
Consists of grocery, wholesale and
roadside assets.
NNN Retail
Primarily discount, essential, electrical
& home stores.
Trade, DIY & Other
Principally building, trade & DIY
stores as well as car servicing centres.
Leisure
Five out of town cinemas & one hotel.
102 assets
6.5m sq ft
Value
£993.7m
Rent
£43.3m (£6.90 psf)
WAULT
7.9 years
14 assets
5.7m sq ft
Value
£835.4m
Rent
£34.3m (£6.10 psf)
WAULT
14.0 years
116 assets
2.7m sq ft
Value
£635.2m
Rent
£35.8m (£15.60 psf)
WAULT
14.2 years
1 Excludes income from post year end sales
8.2
3.5
3.4
3.4
3.3
3.2
2.9
2.7
2.7
2.6
13
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
An overview, purpose and strategy update
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
benefitting 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
and development
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
E
T
A
R
O
B
A
L
L
O
C
Read more
page 6
E
T
A
R
E
N
E
G
Read more
page 8
E
G
A
N
A
M
Read more
page 4
N
W
O
14
Read more
page 2
LondonMetric Property PlcAnnual Report and Accounts 2021 An overview, purpose and strategy update
Chief Executive’s review
At long last, society has reopened and lives
are returning to near normality. However,
whilst humans need real interaction with
each other to thrive, the world continues
to evolve and digitise at a rapid rate and
Covid-19 has added to the seismic shift
in the tectonic plates. The scale of these
changes can be discussed, but certain
conclusions are uncontroversial.
Firstly, online retailing took a quantum
and permanent leap. Previously high
barriers of entry were toppled in a matter
of weeks and consumers quickly realised
the convenience, safety and security of
online shopping. Consequently, online retail
sales grew by over 40% in 2020, accounting
for 28% of total sales and peaking at 36%
during the start of 2021, a level higher
than the first lockdown. The change in
online grocery has been most apparent,
accounting for over 15% of food shopping
at its peak after doubling from pre-
pandemic levels.
Secondly, an unusually large number
of retailers have failed or are seriously
wounded. Many will blame the pandemic,
but the truth is that too many failed to
embrace change with an excessive
physical estate and they failed to pivot.
The pandemic has exacerbated their
difficulties and accelerated their demise.
Supporting business models that work and
starving those that do not is how economies
adapt and evolve.
Thirdly, Covid-19 has materially changed
the way we work and has accelerated
ongoing trends towards home working.
Each day, it is becoming more apparent
that a substantially higher percentage of
office workers will spend some of their week
working from home. The pandemic has
certainly not generated any new demand
for offices.
Unsurprisingly, real estate performances
have polarised further. Logistics, healthcare
and grocery remain the standout
performers, enjoying an ever-wider margin
of victory. Conversely, the acceleration
of secular declines in physical retail has
seen downward repricing of high streets
and shopping centres to levels that may
now start to encourage alternative use or
demolition. For offices, less space is needed
and this new reality is yet to be reflected in
their yields.
After years of denial, many companies are
now experiencing the full force of these
structural changes.They are realising that
it’s not just cyclical, it’s permanent, and they
aren’t quite what they were and are now
worrying what they might become.
We continue to focus on the mega trends
and disciplined investing
Most of our real estate decisions are
influenced by trends that originate
outside the property sector but that
are fundamentally shaping its future.
We believe the secular trends affecting the
sector are as big a deal today as they were
before the vaccines arrived.
Our eyes are wide open to the changing
landscape and so, whilst we have had to
react to the pandemic, our overriding focus
has been to regularly position the portfolio
to benefit from the medium and long term
drivers of return. After all, mega trends are
generally not affected by short term or
sporadic shocks, however profound.
At 95%, our portfolio’s alignment to logistics
and long income assets puts us on the
right side of change and is delivering
an incredibly resilient performance as
demonstrated by our strong financials in
the year.
We continue to pride ourselves on our
process, discipline and rationality. Over the
year, we acquired £245 million of assets
and completed further developments in
strong geographies, let to good occupiers
on long leases with strong income growth
prospects. Whilst we could have acquired
much more, our rigorous approach
tempered our activity, ensuring that we
remain well positioned for the long term.
We would prefer to engage in the pursuit of
excellent returns than the pursuit of assets
under management.
We are obsessive about owning the
best assets and have always focused
on ‘winning the losers game’ - selling
the laggards and running the winners.
Whilst this sometimes involves unattractive
transaction costs and income interruption,
we will always do the right thing for long
term performance. In the year, we disposed
of nearly £160 million of assets that have
made their contribution but are unlikely to
excel in the future.
We are well positioned with a structurally
supported portfolio that will deliver on
our ‘collect, compound and compress’
income approach.
15
Aligned to logistics and
long income, our portfolio
is delivering an incredibly
resilient performance which
is demonstrated by our
strong financial results
Andrew Jones
Chief Executive
95%
of portfolio in logistics
and long income
Overview
We continue to live in a world of
ongoing disruption and social change
The last year has been truly extraordinary
with a global pandemic, a global recession
and bold, unprecedented central
Government intervention.
Technology and changing consumer
behaviour were already having a profound
impact, but Covid-19 has accelerated
these shifts with trends that were expected
to take years, occurring in just months and
in some cases weeks. The behavioural
changes that surged during lockdown have
been well-mapped; working from home,
online retailing, gaming, video on demand,
online banking etc. These shifts were only
possible due to an exponential increase in
technological capability.
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 An overview, purpose and strategy update
Chief Executive’s review
Urban Logistics acquisitions
£124m
12 assets with a WAULT of 16 years
Urban Logistics exposure
as a percentage of the portfolio
38.5%
Total property return
+18.3%
on our distribution assets
With this almost perfect storm, logistics
continues to generate attractive rental
growth. Whilst pockets of rent affordability
concerns have been raised, rents remain
largely affordable and still represent a very
small proportion of a company’s overall
operational costs.
Rental growth remains particularly strong
in urban logistics and we saw open market
rent reviews on our urban assets of 17%.
Warehouse demand continues to grow to
meet ever rising consumer expectations of
quicker and more accurate deliveries in an
environment where the supply response is
challenged due to competition from higher
value alternative uses. A recent survey of
online retailers reported that nearly two
thirds have expansion in urban locations as
a high priority.
The combination of further yield
compression and strong rental growth is
reflected in our total distribution property
returns for the year of 18.3%, with urban
assets again delivering another strong
performance. Urban is our largest sub
sector exposure, with c.£1 billion of assets
and remains our strongest conviction call.
Here, our ambitions remain undiminished
despite fierce investment competition.
Reflecting this competition, we undertook
£67 million of strategic urban disposals in
the year, which will position the portfolio for
better longer term success. These decisions
are driven by a belief that, even in logistics,
not all assets will outperform.
The sale proceeds were rotated into
£124 million of high quality and fairly
priced urban investments leveraging our
occupier insights and sector contacts.
Our experiences have shown that we
are more likely to benefit from positive
surprises from high quality assets in strong
geographies where returns can be levered
by time and compounding.
Own desirable real estate
Logistics continues to experience strong
tailwinds and benefit from a weight
of money
Link to strategic priorities: 1 2
Investment volumes for UK logistics in 2020
totalled £9 billion, reflecting a resilient
Covid-19 performance, strong sector
dynamics and a rotation of capital out
of legacy real estate. The sector has
benefitted from significant overseas money,
partly driven by an improved outlook for
the UK following Brexit and a stronger
than expected economy. Therefore,
unsurprisingly, yields have compressed
further and evidence suggests that prime
yields could fall further.
Occupational activity for logistics in 2020
saw another record year, with 43 million sq
ft taken up. Whilst a recent report estimated
that new warehouse supply could
double this year to 40 million sq ft, much
of this is pre-let and being immediately
absorbed by pent up and new demand, as
evidenced by vacancy rates which remain
low at just ten months’ supply. At the end
of March 2021, a record 16 million sq ft of
logistics was under offer, representing a
40% uplift on a year ago, and this year is
set to be another very strong year. For the
first time on record, supply for both second
hand and speculatively built units have
fallen below 12 months of demand.
It is clear that short term occupier
requirements experienced during Covid-19
have turned into longer term needs as
online penetration continues its inexorable
upward trajectory. Furthermore, ‘just in
case’ logistics infrastructures rather than
‘just in time’ strategies are adding an extra
layer of demand. Whilst Brexit concerns
may have eased, supply chains are
having to deal with new issues, primarily
border related, which are increasing the
need for localised inventory. A recent
survey suggested that the UK was
one of the top European markets for
manufacturers looking to expand their
occupational space.
16
LondonMetric Property PlcAnnual Report and Accounts 2021 Strategic priorities
1 Align portfolio to macro trends
5 Remain rational and disciplined
2 Focus on long-let property with rental growth
6 Use the team’s expertise and relationships
3 Improve quality and sustainability of our
assets and income
4 Enhance income and value through asset
management and development
7 Generate reliable income with income growth
8 Strong focus on diversity and credit strength
of occupiers
Own desirable real estate
(continued)
Long income property is benefitting
from zero interest rates and negligible
bond yields
Link to strategic priorities: 1 2
The long income sector has had a strong
year reflecting its defensive, long dated,
growing and collateral backed cash flow
characteristics. Long income assets with low
operational requirements and let to high
quality occupiers at yields 400bps higher
than Government bonds are an attractive
proposition and increasingly sought after
in a yield starved world.
Our investment in this sector is a simple one
that we take seriously. In contrast to the
scoring system used in diving competitions,
you are not awarded bonus points in
business for ‘degree of difficulty’. We believe
this ‘alternative’ sector is and will continue
to be less alternative and will be a stronger
and larger component of many real estate
investors’ portfolios.
As proponents of the sector, we were
pleased to see our ‘all weather’ long
income assets prove highly resilient to
the pandemic, reflecting their essential
or non discretionary attributes and a
low susceptibility to the migration of
spend online. Their focus on grocery and
convenience food, roadside services,
discount, trade and DIY means that they
will continue to benefit from the ongoing
changes in the way people work, shop
and live.
During the year, our long income properties
achieved very high rent collection levels
and a total property return of 8.3%.
We acquired £122 million of long income
assets let on average for 18 years to strong
credits such as Waitrose, BP and Co-op and
benefitting from guaranteed rental growth.
Growing investor demand and improved
liquidity for long income saw us sell
£75 million of long income properties where
the rental growth outlook was less certain.
Despite the yield compression that this
sector has experienced, we believe there
is more to come as investors increasingly
appreciate the simplicities of collecting rent
and compounding returns.
Physical retail continues to reprice but
remains largely a value trap
Link to strategic priorities: 1 2
The pandemic has acted as a catalyst for
better integration of online and physical
shopping and, like many of our customers,
we do believe that some stores have a
role to play in the retail supply chain as
showrooms, click and collect, returns or
fulfilment facilities.
However, many of the rents that retailers
have committed to pay are completely
inappropriate for the role that their shops
are now performing. Therefore, we will
continue to see retail rents resetting as
leases expire, tenants operate break
clauses or the premises are relet following
the demise of the previous occupier. This is
no longer a prediction, it is happening.
Therefore, whilst many will talk of
repositioning opportunities or the offer
of highly attractive yields, we remain of
the opinion that the majority of UK retail is
‘over-shopped’ and ‘under-demolished’.
The simple truth is that retail stores remain
at a fundamental and irreversible
disadvantage to online competition.
Savills estimates that 142 million sq ft of
retail space in the UK, or 13% of all retail
units, currently lie empty and that without
intervention, as much as 25% of retail space
could be redundant by the end of the
decade. Furthermore, 40% of vacant units
have been empty for three or more years.
The sector appears to be in a vicious circle
as the longer the disruption continues, the
less of the underlying cash flows will be
reinvested into the assets to make them
‘fit for purpose’. We see this creating a
ticking capex timebomb as the assets
that do survive will need investment and
those that fail to invest will see value
erosion accelerate.
This disruption has a lot further to go and
we are living in a truly unprecedented
world which makes it difficult to have a
strong conviction on where it all lands.
When something is too difficult to assess with
a strong conviction, then we prefer to just
move on to another opportunity. After all,
these assets are often cheap for a reason
and the correlation between price and
value is far from perfect.
Generate income
The search for income continues to intensify
Link to strategic priorities: 7 8
We believe that income will be the defining
characteristic of this decade’s investing
environment and that income-led total return
strategies will continue to outperform.
The pandemic and a temporary recession
have lowered interest rates further and
ensured that they will inevitably stay lower
for longer as governments and central
banks are unlikely to take their foot off the
quantitative easing accelerator.
A world of zero interest rates, negligible bond
rates and lower dividends is intensifying the
demand for alternative assets that can deliver
a reliable, repetitive and growing income.
The wide availability of low cost debt, partially
correlated to the ‘lower-for-longer’ promise,
along with the re-emergence of inflationary
pressures, continues to push demand towards
real assets as capital seeks the combination
of recurring cash flow and inflation protection.
Real assets typically benefit from strong
collateral backed cash flows and these
are highly attractive assets in today’s
backdrop. Consequently, there has been
a migration from low yielding securities
towards alternatives, which have become
less alternative and are now a larger
percentage of money managers’ portfolios.
Amidst a bearish treasury market and
a volatile equity market, there are
green economic shoots taking hold.
We believe that real estate will benefit
disproportionately given its capacity to
tap into both sides of the fixed income
and equity spectrum. But smart investing
will focus on structurally supported assets,
credit strength as well as the reliability,
sustainability and trajectory of income.
The strength and resilience of our own
strategy is evidenced by our earnings and
excellent rent collection. Collecting income
is the bedrock of successful long term
investing and, whilst many will focus
on short term riches with higher risk
strategies, we appreciate the true benefit
of compounding lower risk and longer
term returns. Everything worthwhile in
investing comes from compounding and
underestimation of persistent growth is a
huge benefit to the patient investor.
17
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 An overview, purpose and strategy update
Chief Executive’s review
Manage and enhance
Expertise and relationships
Outlook
We continue to strengthen our income
and the quality of our assets
We continue to benefit from our
strong team and their relationships
Link to strategic priorities: 3 4
Link to strategic priorities: 5 6
As I have said previously, each quarter of
2020/21 has felt like a year. As the pandemic
ensued, we focused on ensuring that our
balance sheet and cash flow were robust,
maintaining our strong portfolio metrics and
conservatively progressing developments.
Our assets have performed in line with or
ahead of expectations. Rent collection was
strong at 98% and this performance reflects
the portfolio’s resilience, the reliability of our
income and the strength of our occupier
relationships. Recognising the impact that
the pandemic had on a few occupiers, we
did offer rent free concessions in exchange
for value enhancing asset management
initiatives on 1% of our rent and forgave a
further 0.4%. We also agreed some short
term rental deferrals, all of which continue
to be honoured.
Occupancy remains high at 98.7%, our gross
to net income ratio of 98.6% continues to
reflect our low operational costs and we
continue to benefit from a high degree of
contractual rental uplifts. During the year,
we concluded 173 occupier initiatives,
adding £5.3 million per annum of rent and
delivering like for like income growth of 3.1%.
Lettings were signed with a WAULT of 13.2
years, helping to increase the portfolio’s
WAULT from 11.2 years to 11.4 years.
We are pleased with progress at our
developments. At Bedford, after successfully
letting and completing phase one, we
commenced the speculative build out of
another 0.5 million sq ft and are in legals on
letting 172,000 sq ft and in discussions on
letting the last unit. At Tyseley, we also pre-let
120,000 sq ft to Amazon which will provide
a state of the art last mile facility when it
completes in the summer.
We continue to embed sustainability and
high ESG standards across our activities
driven by our own aspirations as well as
those of our customers and occupiers.
We maintained our GRESB green star over
the year, formalised our Net Zero Carbon
approach, installed further solar capacity at
our properties and increased the proportion
of the portfolio that is built to a BREEAM Very
Good or Excellent standard.
Our team’s strong economic alignment
to shareholders ensures a strong
conviction to make the right property
and financial decisions.
We maintain a highly rational and
disciplined property approach, selling
assets that don’t meet our strict investment
criteria and waiting patiently for attractive
opportunities, even where this causes
a short term disruption to our income.
As a result, we continue to benefit from our
decisions, as well as from some excellent
execution and hard work across our
investment and asset management teams.
Similarly, our finance team has performed
strongly, delivering on our equity and
debt strategy, as well as working closely
with the property teams. £120 million of
equity was raised through a significantly
oversubscribed placing which enabled
us to tap new and attractive investments
that would seldom otherwise be available
in a normalised market. Furthermore,
we significantly refinanced £780 million
of debt facilities which extended the
maturity of our debt at attractive margins,
further diversified our lending base and
added a green financing framework to
our borrowings.
Our response to the Covid-19 pandemic
has focused on keeping our people safe
and working closely with our occupiers and
stakeholders. Our experienced team of 31
successfully and seamlessly transitioned
to remote working and operated highly
effectively in an intense period. It has been
an amazing effort by all and reflects the
strength of our team. Our recent employee
survey again demonstrated our high levels
of staff satisfaction, with all employees
agreeing that they enjoy working
at LondonMetric.
It was also pleasing to see that, despite the
pandemic, we scored highly in our recent
occupier survey, with an average score of
9.0 out of 10.0 for whether occupiers would
recommend LondonMetric as a landlord.
We will continue to put our occupiers at
the forefront of our decision making.
Despite a truly unprecedented year,
lingering uncertainty and a fast
changing environment, we believe that
the macro backdrop is ideal for real
estate, underpinned by almost zero
interest rates, negligible bond yields
and an ageing population.
It is clear that structural trends that have
been accelerated by the pandemic
are having a profound impact on future
values across the sector with strategies
that assume the world returns to its
previous equilibrium severely disrupted.
Therefore, in our view, continued access
to reliable, repetitive and growing
income requires investing in the winning
sectors and the best credits.
This appreciation continues to frame
our thoughts. Our pivot over the last
eight years to logistics and long income
has put us on the right side of change
and getting the ‘big’ decisions right
is fundamental to our strategy. But, in
order to achieve sector leading returns,
we are also conscious of making smart
asset decisions and so, whilst many are
motivated by ‘fee driven’ buying, we
pride ourselves on process, discipline
and rationality, opting to pass on
supposedly ‘unique’ opportunities and
instead focusing on quality.
Today, our £2.6 billion portfolio comprises
a collection of excellent assets that
offer reliable, predictable and growing
income streams. Despite the recent
strength in our capital values, we
believe this is for all the right reasons;
high occupancy, resilient cash flows
and future rental growth.
For the time being, we think that pricing
has further to travel and therefore,
together with its strong income
characteristics, we are optimistic about
the portfolio’s future performance.
After all, when you own quality, time
creates wealth.
We believe that a focus on quality,
a strong personal alignment and
an intense belief in the power of
compounding will allow us to generate
the best possible returns for the longest
period of time and achieve our ambition
to becoming a ‘dividend aristocrat’.
18
LondonMetric Property PlcAnnual Report and Accounts 2021 An overview, purpose and strategy update
Responding to stakeholders
during Covid-19
Collaborate
Occupiers
The uncertainty caused by the pandemic
put operational and financial pressures on
some of our occupiers. Despite this, our rent
collection levels remained high, reflecting
our close occupier relationships, ongoing
dialogue with them during the difficult
period and the operational importance
of our buildings to their businesses.
Consequently, we provided appropriate
and proportionate assistance to a small
minority of our customers that were
materially affected and most in need of
short term cash flow help. This assistance
took the form of monthly rather than
quarterly rental payments, short term rental
deferrals and rental concessions in return
for asset management initiatives, namely
lease extensions.
Whilst we had very few vacancies across
our portfolio we were also able to offer short
term and rent free accommodation to assist
occupiers that were fulfilling contracts to
help in the fight against the pandemic.
Despite the pressures that our occupiers
faced, our recent occupier survey
demonstrated that we saw no decline in
occupier contentment with our average
landlord recommendation score remaining
high at 9.0/10.0.
Read more page 57
Investors
As a result of the pandemic, there was
significantly greater investor engagement
and requests for updates in the first quarter
of the year.
Furthermore, in response to a number of
potential property investment opportunities
arising from the pandemic, there was
further interaction in marketing our equity
placing which we undertook to raise
additional capital for imminent acquisitions.
In the year, we virtually met or spoke with
173 equity investors.
Read more page 60 and
pages 95 to 96
People
Our initial focus was on keeping our
people safe and seamlessly transitioning
to remote working.
Our systems and processes allowed us to
function highly effectively from home and
we found that, despite it being an intense
period, there was minimal disruption to our
operations. In some ways, we were more
productive than in the office and this is
influencing our future set up as we look to
more flexible working arrangements.
We also looked to bring all of our employees
together through regular catch ups, remote
charity and quiz events, online yoga sessions
and weekly management communication.
The strength and closeness of our 31 strong
team was reflected in the results of our
employee survey where the company
again scored highly.
Read more pages 58 to 59 and
pages 93 to 94
The Board
The Board were kept regularly apprised
of our operational performance
and progress. In addition, they were
specifically kept informed of our
equity raise discussions, rent collection,
acquisition pipeline and plans to
speculatively build further warehousing
at our Bedford project.
They were also involved in some of our
charity fundraisings and, furthermore,
agreed to waive 20% of salaries
and fees for three months to add to
LondonMetric’s charitable funds.
Read more page 81
Board site visit 2021
19
Contractors
Whilst we were on site with a limited number
of projects at the early stages of Covid-19,
it was clear that there were a number
of risks that we had to carefully monitor
and manage. In particular, we were
conscious that the supply of labour and
materials might be affected and that the
Government might close construction sites.
As a business, we work hard to develop
strong relationships with the contractors
we appoint and the wider project teams.
These relationships, together with incredibly
hard work and commitment from our
contractors ensured that we largely
mitigated these risks and managed to keep
projects broadly on time and within budget.
Read more page 60
Communities
We set up a charities and communities
committee to respond to Covid-19
and mainly target giving and support
for communities local to our assets.
Including contributions from the Board and
other senior managers waiving salary, a
fund of £127,000 was created, most of which
has been spent on giving to causes such as
local NHS trusts, foodbanks, care providers
as well as national charities such as LandAid
and Macmillan.
Read more page 61
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Creating value
Our markets
Real estate is an attractive investment class
underpinned by the search for income. Changes in
consumer behaviour caused by technology have
been accelerated by Covid-19 and this has resulted
in an even greater polarisation of real estate sector
performances. Owning the right real estate aligned
to structural change has never been more important.
Structural trends in real estate
Search for income
intensifying
The pandemic has lowered interest
rates further and ensured that they
will inevitably stay lower for longer.
Along with negligible bond rates and
suppressed corporate dividends, this is
intensifying the demand for alternative
assets that can deliver reliable,
repetitive and growing income.
There has been a migration from low
yielding assets towards real assets
such as property, which we believe
is well placed to benefit from today’s
economic environment, particularly
given its ability to provide an inflation
hedge through rental uplifts.
Technology continues
to disrupt
Technology was already having
a profound impact on consumer
behaviour, but Covid-19 has
accelerated these behavioural
changes. Online retailing took a
quantum leap with previously high
barriers of entry toppled in weeks
as consumers quickly realised the
convenience, safety and security
of online shopping.
Consequently, demand for logistics
warehousing has remained strong
at the expense of physical retail.
Essential and convenience stores
continue to complement online and
these shopping formats are also seeing
strong appetite from occupiers.
20
Demand for urban
real estate increasing
As online adoption grows and
consumer expectations rise, so the
need for smaller warehousing space
in urban areas increases to meet
quicker and more accurate deliveries.
Convenience stores complement online
delivery as consumers seek to ‘top up’
shop locally in urban areas.
However, this demand for urban sites
is competing with other alternative
uses such as residential, student
accommodation, car showroom and
service stations as well as data centres.
In an environment where the supply
response is challenged, this is leading
to strong underpinning of rents, real
estate values and leading to high
residual values.
Sustainability increasingly
impacting decisions
Occupiers are increasingly
conscious of the need to operate
in more sustainable buildings as
they work towards Net Zero Carbon
goals. They are likely to consider
sustainability factors to a far greater
extent going forward when making
leasing decisions.
Ensuring real estate is fit for purpose
in the future requires buildings to
be as energy efficient as possible,
resilient to future climate change
as well as encompassing technologies
such as solar PV and battery storage.
LondonMetric Property PlcAnnual Report and Accounts 2021 Logistics
Strong investment volumes
Investment volumes for UK logistics in
2020 were strong at £9 billion, reflecting
a resilient Covid-19 performance, strong
sector dynamics and rotation of capital
out of legacy real estate. The sector has
benefitted from significant overseas money,
an improved outlook for the UK following
Brexit and a stronger than expected
economy. Unsurprisingly, prime yields have
compressed further.
Urban logistics seeing strongest growth
Logistics continues to generate attractive
rental growth but urban logistics is seeing
the strongest rental growth due to a
perfect condition of rising demand and
falling supply with strong competition
from more valuable alternative land uses.
This is particularly the case around
major conurbations, with the South East
continuing to experience the highest
rental growth.
Attractive demand/supply dynamics
2020 was another record year for take up
at 43 million sq ft. Whilst a recent report
estimated that new warehouse supply
could double this year to 40 million sq
ft, much of this is pre-let and absorbed
by demand, as evidenced by vacancy
rates which remain low at just ten months’
supply. At the end of March 2021, a record
16 million sq ft of logistics was under offer,
representing a 40% uplift on a year ago.
Outlook remains highly supportive
It is clear that short term occupier
requirements experienced during Covid-19
have turned into longer term needs as
online penetration grows. ‘Just in case’
logistics infrastructures rather than ‘just in
time’ strategies are adding to this demand.
Whilst Brexit concerns have eased, supply
chains are having to deal with new issues,
primarily border related, which is increasing
the need for localised inventory.
43m sq ft
2020 was a record year for take up
at 43m sq ft compared to long term
average of c.25m
16m sq ft
Record 16 million sq ft of logistics
under offer at end of Q1 2021,
40% year-on-year uplift
Long Income
50 bps
Prime long-let grocery
yields compressed 50bps
over the last year
Long income real estate in demand
Structurally supported long income assets
with low operational requirements and let
to high quality occupiers at yields 400bps
higher than Government bonds are an
attractive proposition and increasingly
sought after. Driven by the pandemic,
grocery stores in particular have seen
significant investor demand with long-let
grocery yields compressing 50 bps over the
past year. Similarly, discount/essential stores
long-let to strong credits have seen high
investor demand, underpinned by their
urban locations and relatively low rents.
Consumers valuing convenience
It is inevitable that the pandemic impact
that grocery has benefitted from will
subside. However, we believe that this
impact will be most noticeably felt for
large scale grocery. With a growing trend
towards convenience and value, we
expect that smaller store formats such as
those occupied by Lidl, Aldi and Co-op
will continue to benefit from structural
changes in shopping. We also believe that
investor appetite will continue to grow for
similar convenience offerings such as petrol
filling stations with convenience or coffee
outlets attached.
21
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Creating value
Our business model
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 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 and
ESG review page 47
See Our stakeholders
page 90
Total shareholder return
outperformance (1yr)
Total accounting return (1yr)
EPRA EPS growth (1yr)
+530bps +16.7% +2.8%
Outperformance against
the FTSE 350 Real Estate
Super Sector average
Over three years, we have
delivered a total accounting
return of 30.7%
In the eight years post
merger, EPRA earnings per
share has grown from 3.9p to
9.52p per share
Dividend growth (1yr)
Sustainable improvements
Community benefits
+4.2% +423k
Sixth year of dividend
progression
Square feet of BREEAM
Very Good/Excellent
developments in the year
£127k
Covid-19 community fund
Our key stakeholders
External relationships
across all of our activities
are critical to the success
of our business.
Our actions generate
value and long term
sustainable returns.
The value we create
22
LondonMetric Property PlcAnnual Report and Accounts 2021 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 2021
13.4%
1,220 bps outperformance
of IPD All Property
Manage and enhance responsibly
Experience & relationships
We deliver real estate solutions that will help
occupiers’ businesses thrive. Our focus on
ESG and Responsible Business is helping to
grow and improve the quality of our income
and the sustainability of our assets.
Additional income
+£5.3m
from occupier transactions
in 2021
Using our expertise to work closely
with occupiers and wider stakeholders
to understand their needs results in high
satisfaction and occupancy levels.
Occupancy
98.7%
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
£123.3m
+6%
23
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Creating value
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.
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
Objective
Deliver long term
shareholder returns
Maximise long term
total accounting return
Maximise property
portfolio returns
Deliver sustainable
Drive like for like
growth in EPRA earnings
income growth
Maintain a higher than
Maintain strong
market benchmark WAULT
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 (%)
2021
2020
2019
28.7
2021
-7.6
2020
17.0
2019
16.7
2021
2.9
2020
10.4
2019
13.4
5.1
9.0
2021
2020
2019
9.52
2021
9.26
2020
8.77
2019
3.1
2021
3.8
2020
5.7
2019
11.4
2021
11.2
2020
12.5
2019
1.3
1.4
2.2
Total Shareholder Return
(‘TSR’), being the share price
movement together with the
dividend, in the eight years
post merger was 196%, over
three times that of the FTSE 350
Real Estate Super Sector index
movement of 59%.
12 month TSR delivered 28.7%
compared to the FTSE 350
Real Estate Super Sector
return of 23.4%.
Total Accounting Return
(‘TAR’) of EPRA net tangible
assets per share movement
together with dividend paid
in the year.
12 month TAR delivered
a return of 16.7%.
The full calculation can be
found in Supplementary
note viii on page 180.
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.
Under the Remuneration Policy
37.5% of LTIP awards are subject
to TAR growth compared with
the FTSE 350 Real Estate Super
Sector excluding agencies
and operators.
The TSR component of the 2017
LTIP award vested in full in the
year and the TSR component
of the 2018 LTIP award is
expected to vest in full.
The TAR component of the 2017
LTIP award vested in full in the
year and the TAR component
of the 2018 LTIP award is
expected to vest in full.
The three year TSR for the 2018
LTIPs was 40.9% compared to
the FTSE 350 Real Estate Super
Sector excluding agencies
and operators of -11.5%.
The three year TAR for the 2018
LTIPs was 30.7% compared
to the FTSE 350 Real Estate
Sector excluding agencies
and operators of -11.6%.
Three year TSR performance
to be in the upper quartile
of the FTSE 350 Real Estate
Super Sector, excluding
agencies and operators.
Three year total accounting
return to be in the upper
quartile of FTSE 350 Real
Estate Super Sector, excluding
agencies and operators.
Unlevered Total Property Return
(‘TPR’), including capital and
income return, of the portfolio
as calculated by IPD.
12 months TPR delivered
a return of 13.4% compared
to the IPD All Property
benchmark of 1.2%.
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.
EPRA earnings per share from
The movement in the
Weighted average
Occupancy rate of investment
operational activities have
grown by 2.8% over the last
12 months.
contracted rental income
unexpired lease term across
portfolio at 31 March
on properties owned through
the investment portfolio
2021 was 98.7%, reducing
the period increased by 3.1%.
(excluding residential and
our vacancy to 1.3%.
In the eight years post merger,
Additional income was
EPRA earnings per share has
grown by 144% from 3.9p to
generated from asset
management activity
9.52p per share.
following lettings, regears
and rent reviews of £5.3 million
per annum.
development) of 11.4 years
as at 31 March 2021.
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 97% 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. 53% of the
EPRA EPS component of the
2017 LTIP award vested in the
year and 100% of the EPRA EPS
component of the 2018 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%.
Performance
Remuneration
2021/22 ambition
24
LondonMetric Property PlcAnnual Report and Accounts 2021 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 123 shows how
our KPIs are reflected in and therefore
aligned to remuneration and
incentive arrangements.
ESG and Sustainability
Our Responsible Business and ESG
review on page 47 sets out our
performance over the year including
information on our Net Zero Carbon
ambitions, green financing undertaken,
EPC ratings, BREEAM rating on
our portfolio and developments,
carbon reduction performance
and stakeholder engagement.
See Financial review
page 40
See Risk management
page 64
See Remuneration Committee
report page 116
See Responsible Business and ESG
review page 47
Objective
Deliver long term
shareholder returns
Maximise long term
Maximise property
total accounting return
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 (%)
2021
2020
2019
28.7
2021
-7.6
2020
17.0
2019
16.7
2021
2.9
2020
10.4
2019
13.4
5.1
9.0
2021
2020
2019
9.52
2021
9.26
2020
8.77
2019
3.1
2021
3.8
2020
5.7
2019
11.4
2021
11.2
2020
12.5
2019
1.3
1.4
2.2
Performance
Total Shareholder Return
Total Accounting Return
Unlevered Total Property Return
(‘TSR’), being the share price
(‘TAR’) of EPRA net tangible
(‘TPR’), including capital and
movement together with the
assets per share movement
income return, of the portfolio
dividend, in the eight years
together with dividend paid
as calculated by IPD.
post merger was 196%, over
in the year.
Remuneration
Under the Remuneration Policy
Under the Remuneration Policy
35% of the annual bonus
three times that of the FTSE 350
Real Estate Super Sector index
movement of 59%.
12 month TSR delivered 28.7%
compared to the FTSE 350
Real Estate Super Sector
return of 23.4%.
12 month TAR delivered
a return of 16.7%.
The full calculation can be
found in Supplementary
note viii on page 180.
12 months TPR delivered
a return of 13.4% compared
to the IPD All Property
benchmark of 1.2%.
37.5% of LTIP awards are subject
37.5% of LTIP awards are subject
award is subject to TPR
to TSR growth compared with
to TAR growth compared with
outperforming the IPD
the FTSE 350 Real Estate Super
the FTSE 350 Real Estate Super
Quarterly Universe index.
Sector excluding agencies
Sector excluding agencies
and operators.
and operators.
This year TPR outperformed
the IPD benchmark delivering
The TSR component of the 2017
The TAR component of the 2017
a 100% bonus payout.
LTIP award vested in full in the
LTIP award vested in full in the
year and the TSR component
year and the TAR component
of the 2018 LTIP award is
expected to vest in full.
of the 2018 LTIP award is
expected to vest in full.
The three year TSR for the 2018
The three year TAR for the 2018
LTIPs was 40.9% compared to
LTIPs was 30.7% compared
the FTSE 350 Real Estate Super
to the FTSE 350 Real Estate
Sector excluding agencies
Sector excluding agencies
and operators of -11.5%.
and operators of -11.6%.
EPRA earnings per share from
operational activities have
grown by 2.8% over the last
12 months.
The movement in the
contracted rental income
on properties owned through
the period increased by 3.1%.
In the eight years post merger,
EPRA earnings per share has
grown by 144% from 3.9p to
9.52p per share.
Additional income was
generated from asset
management activity
following lettings, regears
and rent reviews of £5.3 million
per annum.
Weighted average
unexpired lease term across
the investment portfolio
(excluding residential and
development) of 11.4 years
as at 31 March 2021.
Occupancy rate of investment
portfolio at 31 March
2021 was 98.7%, reducing
our vacancy to 1.3%.
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 97% bonus payout.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 53% of the
EPRA EPS component of the
2017 LTIP award vested in the
year and 100% of the EPRA EPS
component of the 2018 LTIP
award is expected to vest.
2021/22 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%.
25
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A detailed analysis of our property activity
Overview
We invest in real estate that can deliver
repetitive, reliable and growing income returns.
Our actions aim to continuously improve the
portfolio’s quality, sustainability and income.
We continue to focus on strengthening
our portfolio metrics and are signing
long leases and delivering good
rental growth. Our portfolio delivered
a strong total return in the year with
very high levels of rent collection.
Our acquisition activity focused
on urban logistics and long
income. We believe these
sectors continue to offer strong
long term prospects with highly
reliable income and income growth.
Valentine Beresford
Investment Director
Acquisitions & Disposals
£404m
WAULT (acquisitions)
17 years
Mark Stirling
Asset Director
Occupancy (portfolio)
99%
WAULT (lettings)
13 years
26
LondonMetric Property PlcAnnual Report and Accounts 2021 Delivering strong total property
returns, driven by distribution
Very strong rent collection
despite Covid-19
Our portfolio metrics continue
to reflect our focus on income
Over the year, the portfolio delivered
a strong total property return of 13.4%,
significantly outperforming the IPD All
Property index of 1.2%:
• Distribution delivered 18.3% with
urban and regional seeing the
strongest performance;
• Long income delivered 8.3%; and
• Offices delivered 0.3% and retail
parks delivered 3.8%.
Outperformance was driven by both
management actions and through
capturing rental reversion which helped
to deliver strong capital growth of 8.0%:
• Distribution delivered a 13.7% capital
return; and
• Long income delivered a 2.6%
capital return.
The investment portfolio’s EPRA topped
up net initial yield is 4.6% and the
equivalent yield is 5.1% with a like for like
valuation yield compression of 27 bps
over the year.
ERV growth of 1.6% for the portfolio was
driven by distribution which saw a 3.2%
increase; urban logistics and regional
distribution saw growth of 3.5% and 5.0%
respectively, whilst mega was flat.
Despite the uncertainty caused by the
Covid-19 pandemic, our assets have
performed in line with or ahead of
expectations which reflects their alignment
to structurally supported sectors.
Our rent collection during the year was
strong, with 98.1% of rent demanded in the
year collected. We did, however, recognise
the negative impact that the pandemic
has had on a few of our occupiers and
offered rent free concessions in exchange
for value enhancing asset management
initiatives on 1.1% of our rent. In addition, we
forgave a further 0.4% leaving just 0.4% of
rent unpaid.
Our collection rates for the first quarter of
the new financial year are equally strong
and we have collected 99% of March
quarterly and monthly rents due.
Most of the rent that remains unpaid relates
to companies in administration, some of
which is associated with a property where
we are obtaining vacant possession for a
new letting to Lidl.
Of the total rent demanded in the
year, £1.5 million is subject to deferred
payment arrangements, all of which
are being honoured.
The portfolio’s WAULT increased from
11.2 years to 11.4 years, continuing to provide
good income security with only 8.4% of
income expiring within three years.
Occupancy remains high at 98.7% and
our gross to net income ratio of 98.6%
continues to reflect the portfolio’s very low
operational requirements.
In the year, we undertook 173 occupier
initiatives adding £5.3 million per annum
of rent and helping to deliver like for like
income growth of 3.1%. These consisted of:
• Contractual rental uplifts which apply
to 57% of our income, where 46 fixed
and RPI linked reviews were settled
delivering £0.5 million of increased rent
at an average of 8% above passing
on a five yearly equivalent basis;
• Open market rent reviews, where 26
reviews were settled delivering £1.0 million
of increased rent at an average of 18%
above passing on a five yearly equivalent
basis; and
• Leasing activity, where we signed
101 new leases and regears, mostly on
urban logistics, delivering £3.8 million
of increased rent with a WAULT of
13.2 years.
Post year end, we are in legals and
discussions on lettings, which represent
an additional £4.4 million per annum
of rent, mainly relating to our Bedford
Link development.
Total property return
Rent collection for FY 2021
Lease expiry profile
13.4% 18.3% 8.3%
2 3
5
1
Rent Collected
98%
1
13.4%
18.3%
8.3%
1 Collected
2 Asset Managed
3
Forgiven/unpaid
98.1%
1.1%
0.8%
1
2
3
1 All property
2 Distribution
3
Long income
4
Income expiring
within 3 yrs
8%
2
3
1
2
3
4
5
0-3 years
4-10 years
11-15 years
16-20 years
> 20 years
8.4%
34.5%
26.6%
21.6%
8.9%
27
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A detailed analysis of our property activity
Overview
Investment activity continues to improve
the portfolio’s quality and resilience
Continued alignment to structurally
supported distribution and long income
£2.6bn portfolio
In the year, we acquired £245 million of
assets. Over half were urban logistics
with the remainder primarily grocery-led
convenience and roadside properties.
These properties are let to strong credits for
an average of 17.1 years and acquired at a
NIY of 4.6% and a reversionary yield of 5.1%,
with 87% of income subject to contractual
rental uplifts. Reflecting our geographical
focus, 53% of acquisitions were in London
and the South East and a further 21% were
in the Midlands.
Post year end, we have acquired a further
£68 million of urban warehousing and long
income properties.
Disposals in the year totalled £159 million
and were at a NIY of 5.7%. The assets had
a WAULT of nine years and offered less
certainty of income and rental growth.
Long income assets accounted for just
under half of total disposals, whilst urban
logistics accounted for c.40% of total
disposals. Whilst we continue to build
our urban portfolio, we are prepared
to sell where the market’s future return
expectation exceeds ours.
The balance of our disposals related to
non core assets and consisted of:
• Two offices in Bristol and Birmingham let
to Regus and Highways England which
were let for a further nine years;
• Two retail assets in Kings Heath,
Birmingham and the Isle of Man; and
• Four residential flats.
Post year end, we have sold a further
£22 million of properties consisting of:
• Two long income assets for £12 million; and
• An office for £10 million let to Beiersdorf
in Birmingham which completes
in September.
We have now sold 12 former Mucklow assets
for £62 million, including nearly half of the
Mucklow office portfolio. These properties
delivered a total annualised return of 10.6%
since acquisition.
28
Assisted by a strong capital performance
and further net investment into the sector,
our distribution platform increased in value
to £1,829 million, representing 70.8% of the
portfolio and up from 69.8% last year.
4
5 6
The urban logistics sector is our key
conviction call and is our largest weighting,
representing 38.5% of the portfolio. Over the
year, our weighting to mega distribution fell
further to 13.6%, due to the completion of a
mega warehouse sale that exchanged in
the prior year.
Long income increased slightly to represent
24.5% of the portfolio, following the
significant net investment into grocery and
roadside assets, with this sub-sector now
dominating our long income exposure.
The remaining 4.7% of the portfolio is
deemed non core and split between eight
offices, five retail parks and four London
residential flats.
Including post year end activity, distribution
now represents 72% of the portfolio, long
income represents 24% and the remaining
non core assets account for 4%.
Urban logistics
38.5%
3
2
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
4
5
Long Income
Retail Parks
6 Offices & Residential
1
38.5%
18.7%
13.6%
24.5%
2.9%
1.8%
Investment activity in the year
3
5
4
Acquired*
£245m
1
Disposed**
£159m
1
2
1
2
3
Urban Logistics
£123.5m
Long Income – Grocery & Roadside £107.6m
Long Income – Other
£14.2m
3
1
2
3
2
Urban Logistics
£66.6m
Long Income – Grocery & Roadside £19.5m
Long Income – Other
£55.0m
£12.4m
£5.4m
4 Office & Residential
5
Retail Parks
* Includes £35.7 million of acquisitions, predominantly urban, that
exchanged in the year but that complete post year end
** Excludes £64.4 million of disposals, predominantly larger box
distribution, that exchanged in the previous year but completed in
the year. Includes £15.2 million of disposals that exchanged in the
year but completed post year end
LondonMetric Property PlcAnnual Report and Accounts 2021 We continue to focus on income
diversification and occupier credit
Our investment and asset management
actions over a number of years have
increased the resilience of our portfolio by
not only investing in structurally supported
sectors but also by improving our income’s
diversification, granularity and security.
We are very mindful of the credit strength
of our occupiers and this focus has been
reflected in our strong rent collection.
We have a diverse occupier base by type
of activity:
• Third Party & Retail Logistics accounts
for 37% of income;
• Business Services & Trade accounts
for 32%, spread across a broad range
of sectors;
• Grocery & Roadside accounts for 12%
• Electrical, Home & Discount Stores
account for 12%; and
• Leisure & Other sectors account for 3%
and 4% respectively.
Our top ten occupiers represent 36% of
contracted income, compared to 36%
in 2020 and 51% in 2019. In the year, we
significantly increased our exposure
to Amazon and Waitrose who are two
of our ten largest occupiers.
Contracted rent increased over the year
from £123.3 million to £124.3 million which,
together with post year end investment
activity, rises to £126.5 million.
Our latest occupier survey again
demonstrated strong contentment
Our occupier survey was carried out
in March 2021 and we received very
good feedback despite the difficult
economic backdrop.
Our top occupiers numbering 89 and
representing over 80% by income were
contacted and responses were received
from occupiers representing 55% of income.
We scored an average of 9.0 out of 10.0
in terms of whether occupiers would
recommend us as a landlord, with our top
15 occupiers scoring us higher at 9.3.
In terms of how well our properties meet our
occupiers’ needs, we scored 8.3 out of 10.0
which shows an increase on our 2019 and
2018 survey scores.
Occupier base by type of occupier (% of rental income)
1
4
3
5
2
1
Third Party & Retail Logistics
37%
3 Grocery & Roadside
Third Party Logistics / Parcel
Online & Omni Retail
Store only Retail
2
Business Services & Trade
Manufacturing & Packaging
Aerospace, Auto & Transport
Building, Trade & DIY
Food, Healthcare & Chemicals
TMT
Education
Top ten occupiers (%)*
Grocery
Roadside
4
Electrical, Home & Discount Stores
Electrical & Home
Essential/Discount
5
Leisure & Other
Leisure
Other
14%
14%
9%
32%
13%
5%
4%
4%
4%
2%
12%
8%
4%
12%
9%
3%
7%
3%
4%
Primark
DFS
Amazon
Argos
Eddie Stobart
M&S
DHL
Odeon
Waitrose
Dixons Carphone
* Excludes income from post year end sales
Income from
top ten occupiers
36%
2020: 36%
2019: 51%
8.2%
3.5%
3.4%
3.4%
3.3%
3.2%
2.9%
2.7%
2.7%
2.6%
29
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A detailed analysis of our property activity
Overview
We continue to improve our ESG focus,
particularly on environmental matters
Our aim is to minimise the environmental
impact of our business, maximise energy
efficiency and improve the resilience of our
properties. We recognise the importance of
a comprehensive ESG focus and each year
set specific corporate targets.
As part of our environmental focus, during
the year, we:
• Extended ESG related personal
objectives for all employees;
• Established a Net Zero Carbon
framework; and
• Put in place £450 million of debt
facilities with a green financing
framework that specifically targets
building improvements.
Over the year, we maintained our Green
Star status in the Global Real Estate
Sustainability Benchmark (‘GRESB’) survey.
Our score of 65% continues to compare
favourably against the peer score of
61% and is significantly up from the 34%
achieved in 2014.
We also maintained our:
• BBB rating by MSCI;
• Gold Award by EPRA sBPR; and
• Inclusion in the FTSE4Good Index.
Further reporting on ESG is provided
on pages 47 to 63
Our Net Zero Carbon (‘NZC’) framework
We set three specific NZC ambitions as part
of our longer term target of becoming NZC
well before the UK’s target date of 2050.
These ambitions will be refined regularly to
meet latest industry guidance.
1. Our operations will be net zero by 2023
Operationally, we continue to make good
progress and have achieved an 88%
reduction in our absolute landlord energy
consumption since 2015 with significant like
for like energy reductions also achieved.
We will continue to implement further
reductions where possible and ensure that
our energy supplies are all from renewable
sources, aligned to industry procurement
best practice. Furthermore, by 2023, we
have committed to offset residual carbon
to ensure our operations are NZC.
2. We will continue to reduce emissions
from development activity and new
developments will be NZC by 2030
Our development activity continues to
focus on building highly efficient buildings.
All of our large completed developments
in the year were certified as BREEAM
Very Good or Excellent and our major
developments on site at Bedford Link
and Tyseley are also expected to be
BREEAM Excellent.
As part of our efforts to reduce carbon
on developments, we are measuring
embodied carbon and challenging our
supply chains to minimise waste and select
low carbon materials.
At Bedford Link, we have reduced
embodied carbon over the different
phases of development. We have looked
to learn from the build out of phase one
and this learning is expected to generate a
c.25% reduction in embodied carbon from
on site carbon reduction measures and
amendments to material specification.
750 kW of solar PV capacity is envisaged
across units 1 and 2.
From 2022, we will introduce shadow
carbon pricing on select flagship
developments such that carbon is either
offset or an equivalent value is reinvested
into green initiatives.
3. We will assist occupiers to help them
meet their NZC targets and, from 2035,
we will offset any of their residual carbon
As part of our drive to upgrade the quality
of our assets, we continue to explore
and progress energy efficiency initiatives
including solar PV, LED lighting upgrades,
roof works and electric vehicle charging.
In our recent occupier survey, 73% of
occupiers have now upgraded LED lighting
installed. This level is higher than our own
data suggested and reflects the quick
payback achievable from LEDs, where in
some cases energy consumption has been
reduced by up to 40%.
Our activity in the year has increased the
proportion of assets built to a BREEAM
Very Good or Excellent standard from
20% to 26%. We have also increased the
proportion of our assets with an EPC ‘A - C’
rating from 71% to 74%. Furthermore, 1.5 MW
of solar PV was added with further solar
opportunities identified.
As part of progressing our NZC targets, we
are increasingly focused on understanding
how we can increase the number of NZC
ready buildings we own. An important
part of this focus is measuring emissions
from all occupiers and, in the year, we
increased occupier energy data coverage
to over 40%.
From 2035, we will aim to offset any
occupier residual carbon at our buildings.
GRESB
Green Star maintained
Net Zero
Carbon framework set in the year
26%
Percentage of assets BREEAM
Very Good/Excellent
30
LondonMetric Property PlcAnnual Report and Accounts 2021
A detailed analysis of our property activity
Distribution
Our warehouses provide critical infrastructure
to our occupiers and continue to benefit from
attractive supply/demand dynamics.
Overview
Our distribution assets are spread across
the urban, regional and mega sub-sectors.
Including developments, we increased
our exposure to distribution over the year
from £1,638 million to £1,829 million. As at
31 March 2021, this sector accounted for
70.8% of our overall portfolio with urban
logistics the largest sub-sector weighting.
The average WAULT on these assets is
11 years, which is unchanged over the year.
Occupancy remains high at 98.1%, also
unchanged from the previous year, with all
of our regional and mega assets now fully let
and just 3.3% vacancy on our urban assets.
Our distribution assets performed well
over the year, delivering a total property
return of 18.3% and driven by strong yield
compression, rental growth and further
gains on development activity.
Urban and regional delivered strong returns
of 20.1% and 17.3% respectively, whilst mega
distribution delivered a return of 14.8%.
With stronger organic rental growth in urban
logistics, we continue to prefer inflation
linked/fixed rental uplifts on our larger box
assets and open market rent review on our
urban assets.
Increased alignment to urban logistics
In urban logistics, rental growth remains
strongest, driven by severely restricted
supply and strong occupier demand.
Urban logistics has been our strongest
conviction call and one that prompted
our acquisition of Mucklow in 2019, which
materially increased our urban platform.
Over the year, the value of our urban assets
increased from £831 million to £994 million,
accounting for 54% of distribution assets
and totalling c.100 properties. At eight years,
the WAULT on our urban assets is significantly
lower than mega or regional, but these assets
benefit from higher alternative use values
and better income growth prospects, with
average ERVs 9% higher than average
passing rents of £6.90 psf.
All of our distribution investment activity in
the year related to urban warehousing.
Whilst strong investor appetite continues to
reduce the number of compelling investment
opportunities, we did acquire £124 million
of long-let assets. Strong market pricing did,
however, prompt us to sell £67 million of
shorter let buildings in poorer geographies.
Including post year end activity, over 50%
of our urban portfolio is now located in
London and the South East with a further
34% in the Midlands.
Distribution Portfolio
1
2
3
As at 31 March 2021
Urban
Regional
Mega
Typical warehouse size
Value1
WAULT
Average rent (psf)
ERV (psf)
Topped up NIY
Contractual uplifts
Total property return in 2021
1
including developments
Up to
100,000 sq ft
100,000 to
500,000 sq ft
In excess of
500,000 sq ft
£993.7m
7.9 yrs
£6.90
£7.50
4.4%
37%
20.1%
£483.5m
13.1 yrs
£6.40
£7.30
4.0%
76%
17.3%
£351.9m
15.2 yrs
£5.70
£5.60
3.8%
100%
14.8%
Distribution Portfolio1
3
2
Distribution
£1,829m
1
1
2
Urban Logistics
Regional Distribution
3 Mega Distribution
1
Including developments
54%
27%
19%
31
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A detailed analysis of our property activity
Distribution
Distribution investment activity
Acquisitions
All Urban Logistics
£124m
12 assets with a WAULT of 16 years
137,000 sq ft new urban warehouse
Acquired for £20.5 million and let for 15 years
to LSE Group Holdings, the UK’s largest pure
online retailer of home lighting. It has a
low site density and is well located in Irlam,
Manchester, between the M60 and M6.
Built to a BREEAM Very Good standard.
122,000 sq ft new urban warehouse
Acquired for £18.1 million and let for 15 years
to ERIKS, with whom LondonMetric has a
strong existing relationship. It is well located
in Oldbury close to J2 of the M5. Built to a
BREEAM Very Good standard.
500,000 sq ft portfolio disposal
Six distribution warehouses sold for
£57.3 million in various locations including
Worcester, Leamington Spa, Royston,
and Huyton. The assets are let to Hamleys,
CEVA, ITAB, Transmec and Grupo Antolin
(an automotive supplier to JLR), and have
a WAULT to first break of 7.5 years.
Post year end £53.1 million of
urban logistics was acquired,
including:
• 115,000 sq ft for £43.8 million, let to
Reynolds for 23 years in Waltham Cross.
• 28,000 sq ft for £5.3 million, let to HTC
Group for four years in Croydon.
• 19,000 sq ft for £3.0 million, let to Deralam
Laminates for four years in Dunstable.
Disposals
All Urban Logistics
£67m
9 shorter let assets with WAULT of 8 years
32
Other acquisitions
• 73,000 sq ft of warehousing acquired
for £10.4 million and let mainly to IKEA
for 6 years in Warrington.
• 66,000 sq ft warehouse acquired for
£23.9 million and let to TalkTalk for 26 years
in Milton Keynes, near the city centre.
• 46,000 sq ft new warehouse acquired
for £5.5 million and let to Heartbeat
Manufacturing for 16 years in Redditch;
built to BREEAM Very Good standard.
• 42,000 sq ft warehouse acquired for
£7.3 million and let to Speedy Hire for
10 years in Milton Keynes.
• 37,000 sq ft of vacant warehousing
acquired for £13.5 million in Streatham
and Brent Cross, London, with c.75%
pre-let for 20 years to Jacuna Kitchens,
a dark kitchens operator.
• 32,000 sq ft warehouse acquired for
£10.9 million and let at a rent of £13.40 psf
to Ocado for 8 years in Walthamstow.
• 20,000 sq ft warehouse acquired for
£7.7 million and let to Ford for 15 years in
Alperton, London near Park Royal.
• 14,000 sq ft highly reversionary warehouse
acquired for £3.2 million and let to Royal
Mail in Epsom for 5 years.
• 7,000 sq ft highly reversionary warehouse
acquired for £2.5 million and let for
15 years in Colliers Wood, London.
Other disposals
• 25,000 sq ft warehouse sold for £3.4 million
in Edinburgh with three years left to break.
• 21,000 sq ft warehouse sold for £3.5 million
let to Fenton Packaging in Hemel
Hempstead with a WAULT of less than
a year.
• 12,000 sq ft warehouse sold for £2.4 million
in Birmingham with a WAULT of less than
a year.
LondonMetric Property PlcAnnual Report and Accounts 2021 Urban logistics
acquisitions in Oldbury
LondonMetric acquired the unit in
Oldbury, Birmingham, for £18.1m in
the year. It is let on a 15 year lease to
ERIKS, an international industrial service
provider with whom we have a strong
existing relationship.
Located in a highly urban area between
two major motorway junctions on the
M5 in Oldbury, it provides excellent
transport links.
The warehouse will have one of the
most advanced management systems
in the UK.
A457
M5
122,000 sq ft urban logistics warehouse
Highly automated building
Delivering significant productivity
The unit is a 122,000 sq ft warehouse built
on a six acre site. It is newly constructed,
has 12 dock level doors and two level
access doors with an extensive yard and
Grade A office space.
Completed at the start of 2021, ERIKS are
fitting the building out and it is expected
to be operational in summer 2021.
ERIKS will use the warehouse for their
new industrial fulfilment hub, supporting
customers in the UK and Ireland. It will
also act as their new UK HQ into which
they are consolidating their operations.
The building is built to a BREEAM Very
Good specification, has 10% natural roof
lights and four electric charging points.
ERIKS will pay a rent of £6.50 psf which
is subject to five yearly annually
compounding RPI uplifts between 1%
and 3%.
ERIKS have committed to a multi-million
pound investment in an automated
stock inventory system and racking
with the latest warehouse
management technology which
will control automated vertical
picking systems, rapid transit
conveyors and integrated vision
and weighing equipment.
30%
reduction in pick times
Intelligent
inventory
management
4.0
Industry 4.0 enabled
110%
increase in productivity
This system will dramatically increase
capability to fulfil deliveries with
accuracy, greater speed and efficiency
and ERIKS’ goal is to deliver 100% pick
accuracy, with full traceability.
The robust ‘I4.0’ configured IT infrastructure
with real-time monitoring will significantly
increase productivity by 110%.
The new computerised system will
offer customers far greater visibility of
orders, from sale through to delivery,
400
metres of high speed conveyors
3x
the traceability
1
Goods scan-in
and weigh-check
2
Pick scan-check
at multiple stages
3
Pack scan and
weigh-check
21
automated vertical lifts
33
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A detailed analysis of our property activity
Distribution
Distribution asset
management activity
Distribution lettings and regears
Distribution lettings and regears in the year
were signed on 1.1 million sq ft. These deals
added £4.2 million per annum of income,
with a WAULT of 9.8 years and incentives
equivalent to four months’ rent free.
Distribution rent reviews
Distribution rent reviews in the year were
settled across 3.0 million sq ft, adding
£1.2 million per annum of income at
12% above previous passing rent*.
These consisted of:
• 23 urban reviews settled at 15% above
passing rent*, with open market reviews
achieving 17% uplifts on average;
New lettings were signed on 0.5 million sq ft
adding £4.0 million per annum of rent with a
WAULT of 9.6 years. All deals apart from one
were on urban warehouses and included:
• Three regional reviews settled at 19%
above passing rent*, with two open
market reviews settled with DHL and
Royal Mail achieving 27% uplifts; and
• 141,000 sq ft to Pets at Home at our
• Two mega reviews, both contractual
previously vacant regional warehouse
in Stoke;
• 120,000 sq ft to Amazon at our Tyseley
development where they have signed
a 15 year pre-let;
uplifts, settled at 8% above passing rent*.
Unsurprisingly, open market rent review
increases in urban logistics were strongest in
London and the South East at an average
uplift of 28% and as high as 39%.
• 38,000 sq ft to Network Rail at Star Gate
* On a five yearly equivalent basis
Distribution lettings and regears
(Additional Income p.a.)
+£4.2m
Distribution rent reviews
(Additional Income p.a.)
+£1.2m
Key occupier activity
in Birmingham;
• 34,000 sq ft to online pharmacy Echo
at a recently refurbished property
in Greenford;
• 30,000 sq ft to National Grid at Nexus
Point in Birmingham, where we have
relet a vacant and recently refurbished
warehouse on a ten year lease; and
• 16,000 sq ft to Nicoman at our completed
development at Tyseley.
Regears were signed across 0.6 million
sq ft generating additional income of
£0.2 million per annum and increasing
the WAULT from six years to ten years.
These regears included:
• 78,000 sq ft in Thorne;
• 70,000 sq ft in Barton;
• 51,000 sq ft in Ashby-de-la Zouch;
• 49,000 sq ft at Star Gate in Birmingham;
• 48,000 sq ft in Fareham, where we also
settled a rent review;
• 41,000 sq ft in Milton Keynes; and
• 35,000 sq ft in Wednesbury.
Distribution rent review uplifts (%)
40
35
30
25
20
15
10
5
0
Epsom
Crawley
Reading
Milton Keynes
Fareham
Leicester
Coventry
Rugby (x2)
Worcester (x2)
Birmingham (x7)
Avonmouth
Lichfield
Dudley (x2)
Oldbury (x2)
Crick
Ollerton
Kettering
34
Urban
Regional
Mega
LondonMetric Property PlcAnnual Report and Accounts 2021 Letting at our urban logistics development in Tyseley
Phase 2 overview
120,000 sq ft
Pre-letting to Amazon
Our Tyseley development was acquired
through the purchase of Mucklow in
2019. 135,000 sq ft of urban logistics was
developed as part of phase one and
completed in summer 2019, leaving further
development potential of up to 180,000 sq
ft on the remaining six acres.
In December 2020, we agreed a pre-let
on the site to Amazon for a new 15 year
lease. Amazon required significant room
for vehicle parking and movement which
significantly reduced the warehousing
space to 120,000 sq ft, representing a very
low site cover of 24%. In return for a lower
rentalised area, they agreed a higher rent.
Rent is £1.6 million per annum, inflation
linked, delivering a yield on cost of 6.0%.
Amazon’s new ‘last mile’
delivery station
• Will serve customers based in the
Birmingham area.
• Create more than 60 permanent
jobs, in addition to hundreds of
driver opportunities.
Building features
The development is expected
to complete and be fully operational
in summer 2021 and is expected
to have the following features:
• BREEAM Excellent building;
• Solar PV with 105 kW capacity;
• Space for 341 vans, all with future EV
charging capacity;
• 126 staff parking spaces; and
• Packages will be shipped to this
• 40 cycling spaces.
delivery station from neighbouring
Amazon fulfilment and sortation
centres, loaded into delivery vehicles
and delivered to customers.
• The development has sufficient
available power to support a full
Electric Vehicle delivery fleet which
aligns with Amazon’s plans to build
the most sustainable transportation
fleet in the world.
Location
Mucklow Park, Tyseley is strategically
located within three miles of central
Birmingham with easy access to J6
of the M6 and J5 of the M42 and close
to Birmingham Airport.
Raised van
charging
deck area
Covered van
loading area and
staff parking
Solar PV array
11 dock doors
35
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A detailed analysis of our property activity
Long income
Our long income assets offer long dated
income with income growth aligned to
grocery, roadside, trade and essential/
discount shopping.
Our long income assets are typically
single tenant assets with low operational
requirements that are benefitting from
the changes in the way people live and
shop. They are insulated from structural
dislocation, predominantly focused on
grocery, wholesale, roadside services,
discount and essential retail, trade and DIY.
The value of our long income assets is
£635 million, representing 24.5% of our
portfolio. They are 100% let to strong
occupiers with a WAULT of 14.2 years,
average rents of £15.60 psf and a topped
up NIY of 5.4%. Average asset size is
c.£5 million with 63% of income subject
to contractual rental uplifts.
Long Income portfolio breakdown
As at 31 March 2021
Value1
WAULT
Average Rent (psf)
Topped up NIY
Contractual uplifts
Total property return in 2021
1
Including developments
1
Grocery &
Roadside
£285.4m
16.5 years
£18.40
4.7%
89%
7.9%
Long income portfolio split1
4
3
Long income
£635m
1
2
1 Grocery & Roadside
2 NNN Retail
Trade, DIY & Other
3
4
45%
28%
19%
8%
4
Leisure2
£52.1m
3
Trade, DIY
& Other
£122.0m
14.1 years
20.8 years
£8.50
5.0%
52%
14.1%
£17.10
6.2%
100%
-13.8%
Leisure
2
NNN
Retail
£175.7m
9.8 years
£20.70
6.5%
29%
10.0%
2 Leisure consists of five out of town cinemas let to Odeon and one Premier Inn hotel
Grocery & Roadside
NNN Retail
Trade, DIY & Other
Grocery-led convenience forms c.70% of
this segment with the remainder made up
of convenience stores with attached petrol
filling stations, drive through coffee outlets
and automated car washes, all located in
high density urban areas. We have been
significant net acquirers in this segment.
These are primarily single or cluster assets
let to discount, essential, electrical and
home retail occupiers. 49% of the assets are
located in London and the South East, with
the largest located in New Malden, London.
These assets typically benefit from high
alternative use values.
A significant proportion of this segment
consists of assets that are trade/DIY
focused. A recent addition to this sub-sector
has been prominent roadside service
centres concentrated around the South
East, let at low rents to Kwik Fit, with high
alternative use values.
Key occupiers
Key occupiers
Key occupiers
Aldi
BP
Co-op
Costco
Euro Garages
B&M
Halfords
Lidl
M&S
Waitrose
Currys PC World
Home Bargains
DFS
Dunelm
Pets at Home
The Range
Howdens
Jewson
Kwik Fit
MKM
Safestore
Selco
Topps Tiles
Wickes
36
LondonMetric Property PlcAnnual Report and Accounts 2021 7.4 years
WAULT arbitrage on investment activity
Post year end, £14.9 million of assets were
acquired at a NIY of 6.0% and with a
WAULT of 11 years. They consist of a Range
store in Truro for £6.6 million, a portfolio of
Halfords Autocentres for £5.8 million and a
trade park in Bognor Regis for £2.5 million.
We have also disposed of £12.2 million with
a WAULT of 9 years, consisting of an M&S
Foodhall in Derby and a NNN Retail asset
in North Shields.
*
The properties in Leicester, Halesowen and
Hull, along with three of the Kwik Fits were sold
as a £40.9 million portfolio to Realty Income.
Combined, they delivered an ungeared IRR of 8%
pa and were sold at a 7% premium to book value.
21.1 years
WAULT on regear and letting activity
Long Income investment activity
Acquisitions – £121.8 million
• £4.0 million asset let to MFG in
£121.8 million of long income assets
were purchased at a NIY of 4.9% and
a reversionary yield of 5.3%. They were
mainly grocery and roadside assets, had a
WAULT of 18.3 years and mostly benefitted
from contractual rental uplifts.
They have strong residual value supported
by alternative use, principally residential
and, in some cases, the vacant possession
value is above the purchase price.
Grocery acquisitions consisted of:
• £62.0 million sale and leaseback
portfolio let to Waitrose in Keynsham,
Malmesbury, Paddock Wood, Towcester
and Yateley. The assets are also used for
online fulfilment; and
• £5.9 million M&S Food Hall development
in Derby.
Worcester; and
• £2.0 million asset in Rushden let to Euro
Garages with a drive through Starbucks.
Other acquisitions included:
• £9.6 million sale and leaseback portfolio
of five London service centres let to Kwik
Fit; and
• £4.6 million Wickes store in Wigston.
Disposals – £74.5 million
£74.5 million* was sold at a NIY of 5.6% and
with a WAULT of 10.9 years, consisting of:
• An asset in Leicester predominantly let
to B&Q, sold for £26.3 million;
• M&S food stores in Haslemere and
Ferndown, sold for £14.7 million at a NIY
of 4.0%;
• 13 Kwik Fit service centres, sold for
Convenience service station acquisitions
consisted of:
£10.8 million at yields c.100bps better
than paid at purchase;
• £12.5 million portfolio of four Co-op
assets in Basingstoke, Dagenham and
South Wales;
• £10.8 million portfolio of BP/M&S assets
in Brentwood, Pevensey and Lewes;
• £5.4 million sale and leaseback of two
London assets let to TG Convenience;
• Two Wickes stores in Derby and
Halesowen, sold for £9.9 million;
• A NNN retail asset in Llanelli, sold for
£9.2 million (LondonMetric share:
£4.6 million);
• An Aldi store in Hull, sold for £4.1 million;
• A Matalan unit in Leicester, sold for
• £5.0 million Co-op asset in Lymington;
£3.4 million; and
• An IMO car wash, sold for £0.7 million.
Long income – asset management activity
Lettings and regears
In the year, we signed 11 deals with an
overall WAULT of 21.1 years.
Ten of the deals were regears where
leases were extended by five years to
21 years:
• On our five Odeon cinemas, in response
to the pandemic, we agreed to extend
leases by four years in return for a rent
free period;
• On our NNN retail portfolio, we signed
ten year lease extensions on three of our
six DFS stores in exchange for a rebase
of the rent. These assets were historically
over rented and the new 19 year term
certain significantly extends our security
of income; and
• On two Co-op stores, we signed a nine
year lease extension. which lengthens the
leases on those properties to 20 years.
We signed one new lease with Lidl for 25
years at our repositioned asset in Orpington.
Rent reviews
Rent reviews were settled on 39 assets in the
year generating an uplift of £0.3 million at
9% above previous passing on a five yearly
equivalent basis.
Nearly all of these reviews were RPI or fixed
uplifts, mostly relating to our Grocery and
Roadside assets.
37
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A detailed analysis of our property activity
Developments
In the year, we completed 445,000 sq ft of
developments representing £3.2 million of
additional rent per annum at a yield on
cost of 5.9%. A further 470,000 sq ft is under
development that is expected to generate
£4.1 million of additional rent per annum,
reflecting a yield on cost of 7.3%.
Completed in year
445k sq ft
In construction
470k sq ft
Completed in the year
Croda, Goole (funding)
Bedford (Unit 2)1
Wallingford (funding)
Weymouth (Aldi)
Total
Under construction at year end
Bedford (Unit 1)1
Tyseley (Phase 2)
Total
1 Anticipated yield on cost and rents.
Croda funding
Completed development in the year of a
232,000 sq ft distribution warehouse pre-let
to Croda for 20 years which was forward
funded. The building is BREEAM Very Good.
Bedford - Unit 1
We are in discussions on a pre-let of the
unit. The building is expected to complete
in Q4 2021 and be BREEAM Excellent, with a
500kW solar PV scheme envisaged.
Bedford - Unit 2
Construction completed of a 172,000 sq
ft distribution warehouse. We are under
offer on a pre-let with an ecommerce
packaging company on a long lease.
The building is BREEAM Excellent, with
a 250kW solar PV scheme envisaged.
Tyseley
Construction underway of a 120,000 sq
ft distribution warehouse. The warehouse
has been pre-let to Amazon on a new
Area sq ft
’000
Income
£m
Yield
on cost
%
232
172
22
19
445
350
120
470
1.3
1.3
0.3
0.3
3.2
2.5
1.6
4.1
5.2
7.3
5.0
5.7
5.9
8.5
6.0
7.3
15 year lease with inflation linked rent
reviews. The building is expected to be
BREEAM Excellent and a solar PV scheme
is envisaged. Completion of the building is
expected in summer 2021. The warehouse
has a low site cover of 24% and forms part
of a wider scheme which extends to over
250,000 sq ft.
Weymouth
A 19,000 sq ft convenience store let to
Aldi completed in July 2020. The building
is BREEAM Very Good and a 11kW solar
PV system was installed. There is further
development potential at the site of up
to 70,000 sq ft.
Wallingford funding
We completed the forward funding
development of a 22,000 sq ft trade counter
in Wallingford let to MKM and Howdens
with a WAULT of 18 years. The building is
BREEAM Good.
Other smaller redevelopment
opportunities
Many of our long income assets are well
located in suburban locations with strong
alternative use, such as residential, and
have the potential to be repurposed over
time. We continually look to upgrade
existing long income assets and exploit
potential opportunities.
Near term developments include
reconfiguration of:
• A 51,000 sq ft long income NNN retail
asset in New Malden, London, which
is predominantly let to Dixons and
where planning has been received
to accommodate an additional
convenience food store;
• A 48,000 sq ft asset in Orpington,
London, previously let to Carpetright,
where we have agreed a new 25 year
lease with Lidl to accommodate them
alongside a smaller Carpetright unit.
Planning has been received and works
have commenced; and
• A 32,000 sq ft long income trade asset
in Ashford, Surrey, where we are securing
vacant possession and where planning
is in progress to accommodate an
additional store let to Lidl on a
25 year lease.
38
LondonMetric Property PlcAnnual Report and Accounts 2021 Building on the success of Phase 1
Following the completion of Phase 1
in 2019, where 188,000 sq ft of urban
warehousing was built and let, we started
construction of a further 0.5 million sq ft.
At the start of the year, despite
Covid-19, along with our development
partner Graftongate, we commenced
speculative construction of Unit 2, totalling
172,000 sq ft. In taking that decision,
we took confidence from the strength
of the occupational market and the
very low availability of comparable
warehousing nearby. At the same time,
we commenced enabling works for the
final and larger Unit 1.
As occupational demand increased
further over the year, we decided to
speculatively develop Unit 1 as well, which
totals c.350,000 sq ft of warehousing and
completes construction in Q4 2021.
Construction of Unit 2 completed
in February and is under offer to an
ecommerce packaging company on a
long lease and we expect to conclude
that letting shortly.
Delivering a high quality logistics park
Once complete, this will be one of our
flagship assets totalling 0.7 million sq ft
of five high quality BREEAM Very Good
or Excellent buildings. It is expected to
generate £5.2 million per annum of rent
and deliver a yield on cost of 7.5%.
Throughout, our contractor Winvic,
along with the wider project team, have
performed to very high standards with
excellent community engagement.
They have also helped us to advance
our Responsible Business credentials, with
a c.25% expected reduction in carbon
from the development of Unit 1 and Unit
2, the planned installation of solar PVs
and electric vehicle charging. This should
facilitate our occupiers to deliver net zero
carbon at the building.
Bedford
A1
12 MINS
A428
Unit 2
Under offer
Unit 1
In discussions
A421
M1
8 MINS
39
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A review of our financial performance
Financial review
Our financial results this
year are exceptionally
strong, with IFRS reported
profit of £257.3 million and
EPRA earnings per share
increasing 2.8% to 9.52p.
We were delighted with
the support of investors, as
both our £120 million equity
placing and £380 million
private placement were
significantly oversubscribed.
Martin McGann
Finance Director
The Covid-19 pandemic has dominated
every aspect of our business and personal
lives this past year. Our employees, tenants
and other stakeholders have all faced
unprecedented challenges with enforced
lockdown restrictions impacting the way we
live and work.
Despite this backdrop, we are reporting
another very strong set of results reflecting
both earnings and NAV progression,
which is testament to our resilient portfolio,
considered investment decisions and
proactive asset management actions.
Our banking relationships have helped us
agree new debt facilities and refinance
existing short dated unsecured loans.
EPRA earnings per share increased by 2.8%
to 9.52p, driven by a 6.4% increase in net
rental income and a 13.8% reduction in net
finance costs. Earnings growth includes
a full year’s contribution from the A&J
Mucklow Group, which we acquired in
June 2019.
Rent collection has been a key priority
and our collection rates have been
exceptionally good, with 98.1% of rent due
in the year collected.
We have continued to pay a dividend
throughout the pandemic and to grow
the total dividend. Our dividend for the
year of 8.65p is 1.1 times covered by EPRA
earnings and represents a 4.2% increase
over last year.
IFRS reported profit is £257.3 million
compared to a loss of £5.7 million last
year and is predicated on a very strong
portfolio performance and revaluation
uplift of £173.7 million. The reported loss last
year included one-off costs relating to the
Mucklow acquisition of £57.2 million and a
revaluation loss of £12.0 million.
IFRS net assets have increased by 20.9% to
£1,731.3 million. Our portfolio continues to
be well positioned to weather any ongoing
disruption, with 95.3% of our assets in the
structurally supported logistics and long
income sectors.
EPRA has introduced new reporting
metrics for net asset value this year and
we have adopted EPRA net tangible
assets (‘NTA’) as our primary measure and
key performance indicator to replace
EPRA net asset value. EPRA NTA per share
is on a fully diluted basis and prior year
comparatives have been presented for the
new measure accordingly.
EPRA NTA per share increased 11.7% this
year to 190.3p (2020: 170.3p per share).
Our financial position was strengthened by
the £120 million equity placing in May 2020,
which alongside asset disposals and the
portfolio revaluation gain, has helped to
reduce LTV to 32.3% (2020: 35.9%).
This level of gearing provides flexibility to
take advantage of investment opportunities
whilst maintaining significant headroom
under banking covenants.
Post year end in April, we entered into a
new £380 million private debt placement
with a number of institutional investors in
North America and the UK. The placement,
which was upsized from an initial
£150 million due to demand, has a blended
maturity of 11.1 years, coupon of 2.27% and
a £50 million tranche that is subject to a
green use of proceeds framework.
Also in April, we entered into two new
revolving credit facilities with three and five
year terms for £225 million and £175 million
respectively, both of which incorporate a
green framework.
Taken together with the placement, we
have completed £780 million of new debt,
replacing the existing revolving credit
facilities and other existing debt facilities
that are approaching maturity. Our debt
maturity has lengthened from 4.2 years at
the year end to 8.2 years and our hedging
has increased from 45% at year end to 83%.
Following the refinancing, we have
substantial headroom of £338 million
(2020: £220 million) and our average debt
cost is low at 2.6% (2020: 2.9%).
IFRS net assets
IFRS reported profit
EPRA earnings per share
£1.7bn
2020: £1.4bn
40
£257m
2020: £(5.7)m
9.52p
2020: 9.26p
LondonMetric Property PlcAnnual Report and Accounts 2021 NCI
£m
(1.3)
–
(1.3)
–
–
0.3
0.2
(0.8)
£m
13.4
(8.1)
2020
£m
117.3
(1.4)
115.9
0.6
(15.9)
(26.1)
–
74.5
£m
115.9
1.4
1.9
5.3
(0.8)
(0.4)
123.3
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
Other
EPRA earnings
100%
owned
£m
121.3
(1.6)
119.7
0.9
(15.8)
(21.5)
(0.1)
83.2
JV
£m
5.3
(0.2)
5.1
(0.4)
–
(1.2)
–
3.5
NCI
£m
(1.5)
–
(1.5)
–
–
0.2
0.2
(1.1)
2021
£m
125.1
(1.8)
123.3
0.5
(15.8)
(22.5)
0.1
85.6
100%
owned
£m
112.3
(1.2)
111.1
1.1
(15.8)
(24.9)
(0.2)
71.3
JV
£m
6.3
(0.2)
6.1
(0.5)
(0.1)
(1.5)
–
4.0
Net rental income
Growing our earnings and delivering
dividend progression for our shareholders
continues to be a strategic priority.
Supporting this is the growth in underlying
net rental income which increased 6.4%
to £123.3 million this year, largely due to
the Mucklow portfolio contributing fully
and delivering gross rental income of
£26.2 million compared with £20.5 million
for nine months last year.
Other movements in net rental income are
reflected in the table opposite.
Additional income from lettings, rent
reviews and regears of existing properties
and developments generated additional
rent of £3.3 million this year, which
included £1.2 million additional surrender
premium receipts.
Income from net acquisitions of £5.3 million
included the additional Mucklow
contribution of £5.7 million and the impact
of other net disposals which reduced
income by £0.4 million compared to the
previous year.
Property costs have increased by
£0.4 million reflecting additional
transactional charges for rent reviews and
lettings compared to last year. However,
our property cost leakage remains low at
1.4% (2020: 1.2%).
Net rental income
£123.3m
2020: £115.9m
Net rental income 2020
Additional rent from existing properties1
Additional rent from developments1
Additional rent from acquisitions1
Rent lost through disposals1
Additional rent from net acquisitions
Increase in rent provision2
Increase in property costs
Net rental income 2021
1 Properties held, developments completed and acquisitions and disposals since 1 April 2019
2 Represents increases in provisions against Group trade debtors of £0.5 million (as reflected in note 11 to the
financial statements) and against MIPP JV rent debtors of £0.3 million
Presentation of financial information
The Group financial statements have been prepared in accordance with IFRS.
Management monitors the performance of the business principally on a proportionately
consolidated basis, which includes the Group’s share of joint ventures (‘JV’) and excludes
any non-controlling interest (‘NCI’) on a line by line basis. The figures and commentary
in this review are presented on a proportionately consolidated basis, consistent with our
management approach, as we believe this provides a meaningful analysis of overall
performance. These measures are alternative performance measures, as they are not
defined under IFRS.
The Group uses alternative performance measures based on the European Public Real
Estate Association (‘EPRA’) Best Practice Recommendations (‘BPR’) to supplement IFRS,
in line with best practice in our sector, as they highlight the underlying performance of
the Group’s property rental business and exclude property and derivative valuation
movements, profits and losses on disposal of properties, financing break costs, goodwill
and acquisition costs, all of which may fluctuate considerably from year to year.
These are adopted throughout this report and are key business metrics supporting the
level of dividend payments.
EPRA has introduced three new measures of net asset value as disclosed in note 8 to the
financial statements. EPRA NTA is considered to be the most relevant measure for the
Group and replaces EPRA NAV as the primary measure of net asset value. EPRA NTA per
share is on a fully diluted basis and prior year comparatives have been presented for the
new measure accordingly.
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 184.
41
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A review of our financial performance
Financial review
Quarter commencing
Rent received
Asset management
initiatives
Rent forgiven
Outstanding arrears
March
2020
%
94.0
4.7
0.9
0.4
June
2020
%
September
2020
%
December
2020
%
Total for
2021
%
March
2021
%
99.3
99.3
99.6
98.1
99.0
–
0.4
0.3
–
0.3
0.4
–
–
0.4
100.0
1.1
0.4
0.4
100.0
–
–
1.0
100.0
Total
100.0
100.0
100.0
Rent collection
Rent collection levels across the real estate
sector have been significantly impacted by
the Covid-19 pandemic.
Our collection rates have been exceptionally
strong and reflect the tireless efforts of our
dedicated team who have worked closely
with customers to proactively support those
who have been most affected by lockdown
restrictions implemented in the year.
We have agreed deferred payment plans
and initiatives on a case by case basis,
which offer short term rental concessions
in exchange for value enhancing asset
management initiatives and have permitted
monthly rental payments for some tenants.
The table above shows our rent collection
statistics by quarter. In respect of the full
year to March 2021, we have collected
98.1% of rents due and just 0.8% remains
unpaid or has been forgiven, some of which
relates to a property where we are securing
vacant possession for a new letting to Lidl.
The remaining 1.1% has been subject to asset
management initiatives.
Of the total rent demanded in the
year, £1.5 million is subject to deferred
payment arrangements, all of which are
being honoured.
However, we have assessed the recoverability
of our year end trade debtor and lease
incentive balances in accordance with
IFRS 9 and have increased our rent provision
by £0.8 million to £1.4 million.
This reflects a Group provision against trade
debtors at 31 March 2021 of £0.9 million,
comprising an allowance for specific trade
debtors of £0.1 million and an expected
credit loss charge of £0.8 million, and also
a provision of £0.5 million against joint
venture debtors.
This level of provisioning takes into account
the ongoing disruption and challenges our
tenants face as lockdown restrictions ease
and the continued uncertainty caused by
the global pandemic anticipated over the
next 12 months.
Administrative costs
Administrative costs have reduced marginally
by £0.1 million to £15.8 million this year and
are stated after capitalising staff costs of
£2.2 million (2020: £2.1 million) in respect of
time spent on development projects.
EPRA cost ratio
We continue to use the EPRA cost ratio to
measure our effective management of
operational costs. Having fallen 60 bps over
the year to 13.6%, it remains one of the lowest
in our sector.
For the year to 31 March
2021
%
2020
%
EPRA cost ratio
including direct
vacancy costs
EPRA cost ratio
excluding direct
vacancy costs
13.6
14.2
13.0
13.3
The ratio reflects total operating costs as a
percentage of gross rental income. The full
calculation is shown in Supplementary note iv.
42
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 £22.5 million,
a decrease of £3.6 million over last year.
This reflected lower interest charges as the
average interest rate payable over the
year was lower than in the previous year,
due primarily to the cancellation in April
2020 of £350 million interest rate swaps that
hedged our unsecured facilities at a cost of
£4.9 million. This reduced the proportion of
our drawn debt hedged and our average
cost of debt, which at the year end were 45%
(2020: 77%) and 2.5% (2020: 2.9%) respectively.
Further detail is provided in notes 5 and 10 to
the financial statements.
Share of joint ventures
EPRA earnings from joint venture investments
were £3.5 million, a decrease of £0.5 million
over the comparative period 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
2021
£m
2020
£m
3.6
–
4.0
0.1
(0.1)
3.5
(0.1)
4.0
As reported last year, our interest in DFS is now
consolidated in the Group accounts and
our partner’s 18% share reflected as a non-
controlling interest.
Income from our MIPP joint venture fell by
£0.4 million due to an increase in the rent
provision for one property where we are
securing vacant possession for a new letting
to Lidl, and the development of a property
in Orpington, where we have agreed a new
25 year lease with Lidl, alongside a smaller
Carpetright unit.
The Group received net management fees
of £0.5 million for acting as property advisor
to each of its joint ventures, which have fallen
by £0.1 million as a result of movements in
property valuations and sales.
LondonMetric Property PlcAnnual Report and Accounts 2021 IFRS reported profit/(loss)
For the year to 31 March
EPRA earnings
Revaluation of property
Fair value of derivatives
Profit/(loss) on disposal
Debt/hedging break costs
IFRS reported profit before
exceptional costs
Impairment of goodwill
Acquisition costs
100%
owned
£m
83.2
169.9
4.7
0.8
(7.5)
251.1
–
–
IFRS reported profit/(loss)
251.1
JV
£m
3.5
3.4
0.1
(0.1)
–
6.9
–
–
6.9
NCI
£m
(1.1)
0.4
–
–
–
2021
£m
85.6
173.7
4.8
0.7
(7.5)
(0.7)
257.3
–
–
–
–
(0.7)
257.3
100%
owned
£m
71.3
(3.8)
(3.2)
(4.9)
(0.2)
59.2
(48.3)
(8.9)
2.0
JV
£m
4.0
(10.2)
(0.4)
(2.3)
–
(8.9)
–
–
(8.9)
NCI
£m
(0.8)
2.0
–
–
–
1.2
–
–
1.2
2020
£m
74.5
(12.0)
(3.6)
(7.2)
(0.2)
51.5
(48.3)
(8.9)
(5.7)
Taxation
IFRS reported profit
As the Group is a UK REIT, any income
and capital gains from our qualifying
property rental business are exempt from UK
corporation tax. Any UK income that does
not qualify as property income within the
REIT regulations is subject to UK tax in the
normal way.
The Group’s tax strategy is compliance
oriented: to account for tax on an
accurate and timely basis and meet all
REIT compliance and reporting obligations.
We seek to minimise the level of tax risk
and to structure our affairs based on sound
commercial principles. We strive to maintain
an open dialogue with HMRC with a view to
identifying and solving issues as they arise.
There were no issues raised in the year.
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 2020 ahead
of the deadline of 31 March 2021 and has
already paid a large part of its expected PID
for the year to 31 March 2021. The balance is
expected to be paid in July 2021 as part of
the fourth quarterly dividend. In accordance
with REIT regulations, £6.7 million was withheld
from distributions and paid directly to HMRC
in the year.
Our tax strategy was updated and approved
by the Board in the year and can be found
on our website at www.londonmetric.com.
A full reconciliation between EPRA earnings
and IFRS reported profit is provided in the
table above and also in note 8(a) to the
financial statements.
The Group’s reported profit for the year was
£257.3 million compared with £51.5 million in
the previous year before exceptional goodwill
and acquisition costs. The £205.8 million
increase was primarily due to the property
revaluation being £185.7 million higher, profit
on disposals being £7.9 million higher and
increased EPRA earnings of £11.1 million.
Property sales in the year generated a
£0.7 million profit over book value compared
with a loss of £7.2 million last year. The total
profit over original cost was £29.3 million,
representing a return of 16.4%. Disposals are
discussed in detail in the Property review.
The favourable movement in the fair value of
derivatives of £4.8 million is offset by the swap
break cost of £4.9 million and prepaid finance
costs written off of £2.6 million, resulting in a
charge of £2.7 million in the year compared
to a total charge of £3.8 million last year.
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 2021, the Company
paid the third and fourth quarterly dividends
for 2020 and the first two quarterly dividends
for 2021 at a total cost of £75.6 million or
8.5p per share as reflected in note 7 to the
financial statements.
The Company issued 1.5 million ordinary
shares under the terms of the Scrip Dividend
Scheme, which reduced the cash dividend
payment by £3.2 million to £72.4 million.
The first two quarterly payments for the
current year of 2.1p per share were paid
as Property Income Distributions (‘PIDs’) in
the year.
The third quarterly dividend was paid as a PID
in April 2021 and the Company has approved
a fourth quarterly payment of 2.35p in July
2021, of which 2.25p will be a PID.
The total dividend payable for 2021 of 8.65p
represents a 0.35p or 4.2% increase over the
previous year.
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 2021; and
• The outlook for 2022
At the year end the Company had
distributable reserves of £1,006.7 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.
43
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A review of our financial performance
Financial review
Balance sheet
As at 31 March
Investment property
Trading property
Gross debt
Cash
Other net liabilities
EPRA NTA
Derivatives
IFRS net assets
100%
owned
£m
2,504.6
1.1
2,505.7
(839.5)
51.4
(39.1)
1,678.5
–
1,678.5
JV
£m
94.4
–
94.4
(37.5)
3.4
(0.5)
59.8
(0.6)
59.2
100%
owned
£m
2,273.6
1.1
2,274.7
(932.7)
81.8
(34.3)
NCI
£m
(11.4)
–
2021
£m
2,587.6
1.1
(11.4)
2,588.7
(877.0)
54.6
(34.4)
–
(0.2)
5.2
(6.4)
–
(6.4)
1,731.9
1,389.5
(0.6)
(4.7)
1,731.3
1,384.8
JV
£m
92.4
–
92.4
(42.1)
5.1
(0.6)
54.8
(0.7)
54.1
NCI
£m
(14.9)
–
2020
£m
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
Balance sheet
EPRA net tangible assets (‘NTA’) replaces
EPRA net assets this year as a key
performance indicator that reflects both
income and capital returns. It excludes
the fair valuation of derivative instruments
that are reported in IFRS net assets.
A reconciliation between IFRS and EPRA NTA
is detailed in the table above and in note 8(c)
to the financial statements. EPRA NTA per
share is on a fully diluted basis and prior year
comparatives have been presented for the
new measure accordingly.
IFRS reported net assets have increased 20.9%
in the year to £1,731.3 million, largely as a result
of the revaluation gain of £173.7 million and
equity raise proceeds of £116.6 million.
Both IFRS NAV per share and EPRA NTA per
share have increased by 11.9% and 11.7%
in the year to 191.3p and 190.3p per share
respectively. The movement in EPRA NTA
and EPRA NTA per share is reflected in the
table below.
EPRA
NTA
£m
EPRA NTA
per share
p
EPRA NTA at 1 April 2020 1,437.2
170.3
EPRA earnings
Dividends2
Property revaluation
Equity raise
85.6
(75.6)
173.7
116.6
9.5
(8.4)
19.3
–
Other movements1
(5.6)
(0.4)
At 31 March 2021
1,731.9
190.3
1 Other movements include debt break costs (£7.5 million)
and share based awards (£2.0 million), offset by scrip share
issue savings (£3.2 million) and profit on sales (£0.7 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 8.5p as reflected in note 7 to the
financial statements
44
The increase in EPRA NTA per share was
principally due to the property revaluation
gain of 19.3p per share, as EPRA earnings per
share covered the dividend paid in the year.
The movement in EPRA NTA per share,
together with the dividend paid in the period,
results in a total accounting return of 28.5p per
share or 16.7%.
Total accounting return is a key
performance indicator and component
of the variable element of Directors’
remuneration arrangements.
The strong growth this year is significantly
ahead of last year and over a three year
period places us in the top quartile of the FTSE
350 Real Estate Super Sector.
The full calculation can be found in
supplementary note viii.
Equity raise
In May 2020, we successfully raised gross
proceeds of £120 million through an equity
placing that was substantially oversubscribed.
A total of 66.7 million new ordinary shares
were issued at a price of 180.0p per share,
representing a discount of 1.5% to the
previous day’s closing share price.
The net proceeds after issue costs of
£116.6 million were used to acquire
income producing assets as set out in the
Property review.
EPRA net tangible assets per share
190.3p
2020: 170.3p
Group cash flow
During the year, the Group’s cash balances
decreased by £30.4 million as reflected in the
table below.
For the year to 31 March
Net cash from operating
activities
Net cash used in investing
activities
Net cash (used in)/from
financing activities
Net (decrease)/increase
in cash and cash
equivalents
2021
£m
2020
£m
99.6
63.2
(46.4) (193.7)
(83.6)
191.7
(30.4)
61.2
The net cash inflow from operating activities
of £99.6 million reflects an increase of
£20.8 million compared to last year, after
adjusting for exceptional acquisition costs
paid last year of £15.6 million. This was
primarily due to changes in working capital of
£18.6 million.
The Group spent £229.0 million acquiring
property in the year and received net
cash proceeds of £210.2 million from
property disposals and joint ventures.
Capital expenditure on asset management
and development activities cost the Group
£27.7 million and interest received was
£0.1 million.
Cash outflows from financing activities reflect
net loan repayments of £93.0 million, dividend
and distribution payments of £73.8 million,
financing costs of £27.6 million and share
purchases and awards of £5.8 million, offset
by the net proceeds from the equity raise of
£116.6 million. Further detail is provided in the
Group cash flow statement.
LondonMetric Property PlcAnnual Report and Accounts 2021
Portfolio valuation
Portfolio movement in the year
Our property portfolio including share of
joint ventures grew by £237.1 million or 10.1%
in the year to £2.58 billion as reflected in the
table opposite.
The Group invested £212.4 million in the
year in our preferred sectors, acquiring
£94.6 million distribution and £117.8 million long
income assets.
We completed 35 commercial property
disposals and four residential flat sales
generating net proceeds of £206.1 million
at share and reducing the book value of
property by £205.4 million (including the cost
of lease incentives written off of £6.1 million).
During the year, we also exchanged to sell
four assets for £15.2 million and to acquire
three assets for £35.7 million, all of which
will be accounted for on completion next
year. Further information is provided in the
Property review.
Property values have increased by
£173.7 million in the year, driven by both
management actions and through capturing
rental reversion, representing 43% and 57%
of the uplift respectively. The portfolio has
delivered a strong total property return of
13.4%, significantly outperforming the IPD
All Property Index of 1.2%, with distribution
assets delivering the largest increase of 18.3%.
A breakdown of the property portfolio by
sector is reflected in the table opposite.
Investment in our preferred sectors of
distribution and long income has increased
to 95.3%, from 93.8% in March 2020.
Our development exposure remains modest
at 2.3% of the portfolio and includes the last
remaining 350,000 sq ft unit at Bedford and
our 120,000 sq ft Tyseley development site
acquired as part of the Mucklow portfolio.
Our forward funded pre-let developments
in Goole and Wallingford, our convenience
store in Weymouth pre-let to Aldi and one of
our distribution units in Bedford completed
in the year and have been transferred to
investment properties.
The Group had capital commitments of
£93.3 million as reported in note 9 to the
financial statements, relating primarily
to remaining expenditure at Bedford
and Tyseley.
Further detail on property acquisitions, sales,
asset management and development can
be found in the Property review.
Opening valuation
Acquisitions1
Developments2
Capital
expenditure3
Disposals
Revaluation
Lease incentives4
Property portfolio
value
Head lease and
ROU assets
Closing valuation
100%
owned
£m
2,269.0
212.4
37.9
4.9
(200.8)
169.9
7.3
2,500.6
5.1
2,505.7
JV
£m
92.4
–
–
0.3
(1.8)
3.4
0.1
94.4
–
94.4
NCI
£m
2021
£m
2020
£m
(14.9)
2,346.5
1,846.2
–
–
(0.1)
3.3
0.4
(0.1)
212.4
37.9
5.1
(199.3)
173.7
7.3
577.1
43.1
10.3
(128.2)
(12.0)
10.0
(11.4)
2,583.6
2,346.5
–
5.1
5.7
(11.4)
2,588.7
2,352.2
1 Group acquisitions include purchase costs and represent completed investment properties as shown in note 9
to the financial statements
2 Group developments include acquisitions and capital expenditure on properties under development as
reflected in note 9 to the financial statements
3 Capital expenditure on completed properties
4 Comprises incentives and rent frees of £13.4 million (2020: £15.4 million) less amounts written off on disposal of
£6.1 million (2020: £5.4 million)
Property portfolio by sector
As at 31 March
Distribution
Long income
Retail Parks
Offices
Investment portfolio
Development1
Residential
Property portfolio value
Head lease and right of use assets
2021
£m
1,777.3
629.4
73.9
41.1
2,521.7
59.8
2.1
2,583.6
5.1
2,588.7
2021
%
68.8
24.3
2.9
1.6
97.6
2.3
0.1
2020
£m
1,593.7
552.5
83.3
55.1
2,284.6
57.0
4.9
2020
%
67.9
23.5
3.6
2.4
97.4
2.4
0.2
100.0
2,346.5
100.0
5.7
2,352.2
1 Represents urban logistics £51.8 million (2.0%), long income £5.8 million (0.2%), office and other land £2.2 million
(0.1%) at 31 March 2021. Split of prior year comparatives was regional distribution £38.1 million (1.6%), urban
logistics £6.2 million (0.3%), long income £10.5 million (0.5%), office and other land £2.2 million.
Property portfolio
Distribution
£2.6bn
2020: £2.3bn
70.8%
2020: 69.8%
45
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A review of our financial performance
Financial review
Financing
The key performance indicators used to
monitor the Group’s debt and liquidity
position are shown in the table opposite.
The Group and joint venture split is shown in
Supplementary note iii on page 178.
Net debt has decreased by £66.3 million in
the year, as proceeds from disposals and the
equity raise exceeded property acquisitions
in the year. Loan to value has fallen to
32.3% (2020: 35.9%) and our average debt
cost at the year end remained low at 2.5%
(2020: 2.9%).
Post year end, we entered into a new
£380 million private debt placement with
a number of institutional investors in North
America and the UK. The placement, which
was upsized from an initial £150 million due
to demand, has a blended maturity of 11.1
years, coupon of 2.27% and a £50 million
tranche that is subject to a green use of
proceeds framework. The additional funds
raised will be used to repay our £130 million
secured facility with Helaba, extending the
maturity by eight years on an unsecured
basis and at a lower all in cost of debt.
Alongside this, we entered into two new
revolving credit facilities for £400 million,
which also incorporates a green framework.
Taken together with the placement, we
have completed £780 million of new debt,
replacing the existing revolving credit facilities
and other existing debt facilities that are
approaching maturity. These new facilities
demonstrate the strength of our banking
relationships and have lengthened our debt
maturity from 4.2 years at the year end to
8.2 years and increased our hedging from
45% to 83%. Following this refinancing, we
have substantial headroom of £338 million
(2020: £220 million), providing operational
optionality and flexibility and ample cover
for our contracted capital commitments
of £93.3 million, and our average debt cost
remains low at 2.6%. The new facilities have
the same financial covenants as existing
unsecured and private placement loans.
As at the date of this report, we have total
debt facilities of £1.2 billion, including 35%
or £0.4 billion unsecured revolving credit
facilities, providing operational flexibility at
low average costs.
The Group has comfortably complied
throughout the year with the financial
covenants contained in its debt funding
arrangements and has substantial levels of
46
As at 31 March
Gross debt
Cash
Net debt
Loan to value1
Cost of debt2
Undrawn facilities
Average debt maturity
Hedging3
Proforma post
refinancing
£m
877.0
54.6
822.4
32.3%
2.6%
283.0
2021
£m
877.0
54.6
822.4
32.3%
2.5%
170.5
2020
£m
974.8
86.1
888.7
35.9%
2.9%
133.8
8.2 years
4.2 years
4.7 years
83%
45%
77%
1 LTV at 31 March 2021 includes the impact of sales and acquisitions that exchanged in the year of £15.2 million
and £35.7 million respectively (2020: sales of £64.4 million), and excludes the fair value debt adjustment of
£2.5 million (2020: £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 drawn
headroom. Covenant compliance is regularly
stress tested for changes in capital values
and income.
The Group’s unsecured facilities and private
placement loan notes together account for
92% of our total debt facilities as at the date of
this report and following the refinancing, and
contain gearing and interest cover financial
covenants. At 31 March 2021, the Group’s
gearing ratio as defined within these funding
arrangements was 46% which is significantly
lower than the maximum limit of 125%, and its
interest cover ratio was 5.5 times, comfortably
higher than the minimum level of 1.5 times.
Property values would have to fall by 43%
and rents by 65% before banking covenants
are breached.
The Group’s policy is to de-risk the impact
of movements in interest rates by entering
into hedging and fixed rate arrangements.
However, in April this year we took advantage
of the low interest environment and
cancelled £350 million interest rate swaps
that hedged our unsecured facilities and
were due to expire in 2022. This reduced
the proportion of our drawn debt hedged
to 45% at the year end, mainly through
our fixed coupon private placement and
Scottish Widows’ debt and has contributed to
interest cost savings in the year and a lower
average cost of debt of 2.5% at the year end.
Following the refinancing post year end, the
proportion of debt hedged by fixed coupon
private placement facilities and existing fixed
rate debt has increased to 83%.
We are advised by Chatham Financial and
continue to monitor our hedging profile in
light of interest rate projections.
Average debt maturity
3
1
Years
8.2
2
1 Debt expiring within 0-5 years
2 Debt expiring within 5-10 years
3 Debt expiring 10+ years
25%
37%
38%
Total facilities
5
4
3
2
Total
£1.2bn
1
1
2
3
4
Private placement
Unsecured RCF
Unsecured Wells Fargo facility
Secured SWIP fixed rate debt
5 MIPP joint venture
57%
20%
15%
5%
3%
LondonMetric Property PlcAnnual Report and Accounts 2021 Responsible Business
and ESG review
Overview and progress
Environmental
Social (including Section 172 Statement)
Governance (including TCFD)
48
50
56
62
Our Responsible Business activities are
embedded into our investment, asset
management, development and corporate
activities and aim to deliver on our ESG targets.
We work with all our stakeholders to bring
benefits to society more widely
Martin McGann
Finance Director & Responsible Business
Board representative
LondonMetric Property Plc
Annual Report and Accounts 2021
47
Our sustainability performance
Responsible Business and ESG review
Our Responsible Business activities aim to address
the material ESG risks and opportunities that
impact our business.
The Company recognises the need to
consider and address all environmental,
social and governance issues relevant to its
business. It has put in place a Responsible
Business framework that, in essence, seeks
to mitigate climate change and other
sustainability risks, identify and progress
environmental and stakeholder related
opportunities as well as provide a high
standard of corporate governance.
Responsible Business is embedded
across all of its corporate, investment,
asset and development activities with a
clear policy in place and ESG targets set
every year. As well as meeting regulation,
environmental improvements are starting to
translate into real asset value enhancement
as occupiers value these improvements
more highly than before and valuers
begin to differentiate assets based on
environmental criteria.
Progress against our targets 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 ESG performance is reported to
the Board at regular intervals with the Audit
Committee responsible for overseeing
ESG progress.
Executive Directors and all employees are
set individual ESG targets with remuneration
partly linked to achieving those targets.
We continually review our approach to
ESG and look to improve on our disclosure
each year.
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 climate change and
the impact of transitioning to a low
carbon economy.
Our actions consider the
long term interests of all our
stakeholders including those of our
employees, suppliers, customers
and local communities as well
as ensuring that we maintain a
high standard of business conduct.
The Board is committed to
upholding high standards of
corporate governance. In particular,
it ensures that appropriate health
and safety procedures and supply
chains are in place.
Key progress in 2021
Key progress in 2021
Key progress in 2021
• Net Zero Carbon framework formalised.
• Green debt financing put in place.
• Employee wide ESG objectives set and
• Further like for like reduction in our
• Strong occupier and investor ESG
ESG corporate workshop held.
carbon footprint.
feedback from surveys.
• 100% compliance by contractors with
• 100% of main developments BREEAM
• Continued high staff satisfaction levels
Very Good/Excellent.
from recent survey.
• Significant reduction in embodied
carbon seen on developments.
• Covid-19 charity fund created with
good community involvement.
• Portfolio EPC & BREEAM improvements.
our RDR checklist.
• Health and safety audits undertaken
on projects, with health and safety
policy updated.
• Annual contractor compliance audit.
Read more
pages 50
Read more
pages 56
Read more
pages 62
48
LondonMetric Property PlcAnnual Report and Accounts 2021 ESG benchmarking and progress against our targets
We have maintained ratings in external benchmarks,
made good progress against our internal ESG targets
and have put in place green financing solutions
External benchmarking
Our ESG targets
Green financing
Targets achieved in 2021
Sustainability linked refinancing
79%
with the remainder partially achieved or
in progress
Our 19 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;
• Formalising a Net Zero Carbon framework;
• Working in partnership with occupiers to
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 and policies;
• Developing community and other
stakeholder relationships; and
• Setting employee wide ESG objectives.
We made good progress against these
targets with 79% achieved, a further 16%
partially achieved and 5% in progress.
A full review of performance against
our 2021 targets will be detailed in our
Responsible Business and ESG report for FY
2021 which will be available on our website.
Many of the targets remain relevant for
next year and are being rolled forward
with modifications to better align with our
new Net Zero Carbon framework. Once set,
these updated targets will be available on
our website.
Maintained our Green Star
Achieved a score of 65% in the 2020 Global
Real Estate Sustainability Benchmark survey,
maintaining our Green Star status. This score
is up from 34% in 2014 and continues to
exceed the peer average of 61%.
Continued inclusion in the
FTSE4Good Index
In the latest assessment, we achieved a
score of 3.4 out of 5.0 compared to 2.6
for the peer group and continue to be
included in the index.
BBB rating
In the latest assessment we continued
to be rated BBB, which is in line with the
sector average.
Maintained our Gold
In EPRA’s last review, we maintained our
Gold Award in their Sustainability Best
Practice Recommendation assessment.
Maintained score in line with sector
Our investor Responsible Business
survey identified ISS as an important
ESG benchmark. We continue to respond
and improved our score.
£450m
across our debt facilities
Over the year, we undertook significant
debt refinancings across over two thirds
of our debt facilities.
£50 million of Green Notes
As part of a £380 million private debt
placement with UK and US investors, a
£50 million green tranche was agreed on a
15 year term maturity. This tranche is subject
to a green framework under which spend
will be allocated to buildings which have
high sustainability standards.
The green notes were priced two basis
points inside the equivalent non green
15 year tranche and represented the first
tranche of its kind announced by a UK REIT.
£400 million of new revolving credit
facilities with a green framework
Simultaneously with the completion of the
private placement, we announced the
completion of two new revolving credit
facilities totalling £400 million.
These facilities have a green framework
structured in accordance with the Loan
Market Association’s sustainability linked
loan principles. Sustainability performance
targets (‘Targets’) were set and are aligned
to LondonMetric’s corporate ESG targets.
The Targets focus on:
• EPC ratings;
• Renewable installations; and
• Developments meeting a minimum
BREEAM Very Good standard.
The pricing of the facilities is subject to a
two basis point adjustment for compliance/
non compliance with the Targets
which is tested each year of the facility.
Where targets are met, the margin paid
will be reduced and LondonMetric will use
this saving to add to its funds allocated for
charity giving.
49
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Our sustainability performance
Responsible Business and ESG review
Our Net Zero Carbon (‘NZC’) ambitions:
#1
Our operations will be net zero by 2023.
#2
We will continue to reduce emissions
from developments which will be fully
net zero by 2030.
#3
We will work with our occupiers to ensure
our buildings are net zero by 2035.
Environmental
Overview
Through our activities we look
to minimise the environmental
impact of our business, maximise
building efficiency opportunities
whilst improving asset resilience to
climate change and the impact
of transitioning to a low carbon
economy.
Net Zero Carbon framework
We understand the importance
of addressing climate change
and the significant impact that
reducing emissions from real estate
can have on the UK’s 2050 Net Zero
Carbon target.
LondonMetric recognises that
it can have a material impact
by reducing emissions from its
activities as well as the activities
of its occupiers.
As part of our long term
sustainability strategy, during 2021,
we considered our approach to
delivering Net Zero Carbon through
internal company workshops,
adviser input and pushing the
agenda with occupiers, suppliers
and contractors.
This has prompted us to set a
Net Zero Carbon framework as
part of our longer term target of
becoming net zero well before
the UK’s published target date.
Net Zero Carbon is a rapidly
evolving area and we will refine
our strategy regularly in line with
latest industry guidance.
50
LondonMetric Property Plc
Annual Report and Accounts 2021
Environmental
#1
Our operations will be net zero by 2023*
Our operations will be NZC by 2023,
with all residual carbon offset.
Our environmental performance
Our energy consumption and greenhouse
gas emissions have fallen significantly
over recent years. This reduction has, in part,
been due to the Company’s shift away
from offices and retail parks into distribution
warehousing and long income assets that
are typically single tenanted. Consequently,
together with our portfolio actions, the
operational intensity of our portfolio where
there is landlord supply has fallen significantly
along with our carbon footprint.
Since 2015, our absolute energy consumption
has fallen by 88% from 9,056 MWh to
1,081 MWh despite the portfolio’s area
increasing by c.40% over that period. In the
year, consumption increased by 20% due
to increased energy consumption from
void assets.
However, excluding voids assets,
consumption fell by 15% over the year to
664MWh. In addition, on a like for like basis,
consumption was down 6.5% reflecting the
benefits of energy efficiency measures.
The high level of green tariff supplies now in
place have seen our GHG emissions remain
low at 1tCO2e per £million net income or
7tCO2e per million sq ft.
With only a small proportion of the portfolio
now with landlord controlled energy
supply, this limits our ability to further reduce
our energy consumption. However, we
continue to look to reduce our consumption
where possible by identifying energy
efficiency improvements, particularly on our
Mucklow assets and also assets where they
are vacant.
* 1 Offsetting excludes renewably sourced electricity
consumed and non landlord occupier activities
2 Through recognised offset schemes
Operational NZC Scope
Energy consumption (MWh)
NZC – Progress to date
• 88% reduction in absolute energy
consumption since 2015.
• 100% of our landlord supplies from
renewable sources.
• Increase in landlord supplies on
smart metering.
• Significant like for like energy
reductions, mainly from external LED
lighting replacement programmes.
• Nearly eliminated landlord water,
waste and gas consumption.
NZC – Future actions
• Extract further energy efficiencies
across our estate where there is
landlord consumption, extending
smart metering coverage.
• Ensure energy supplies are from
renewable sources (including for
void assets) aligned to industry
procurement best practice.
• Look to install solar PVs to meet our
direct electricity consumption and
explore PPA opportunities.
• Offset all residual carbon through
recognised offset schemes.
LED lighting replacement
programme on the Mucklow estate
Since we acquired Mucklow in 2019, a
full external LED lighting replacement
programme has been undertaken across
the multi-let estates with c.90% of the
replacement programme complete.
An LED upgrade was completed at
one of our larger sites at Stargate which
delivered a 63% reduction in energy usage
and cost savings to our occupiers along
with reduced maintenance costs.
We will continue to implement the
remaining upgrades over the next year.
Distribution/Industrial
Offices
Long income/Retail
LondonMetric
assets
where it has
control and
management
Corporate
(including
head office)
7000
6000
5000
4000
3000
2000
1000
0
Energy
(electricity,
fuels & heat)
Water
Waste
generated
Refrigerants
Purchaser of
goods and
services
Business travel
2017
2018
2019
2020
2021
51
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Our sustainability performance
Responsible Business and ESG review
Environmental
Environmental performance highlights for 2021
Greenhouse gas (GHG) emissions
Travel
Energy consumption
-6.5%
Over the year on a like for like basis
The reductions can be attributed to the
previous asset upgrades to incorporate
energy efficiency measures in respect of
managed supplies. All assets that were
included in like for like comparison were
owned during both the 2019/20 and
2020/21 periods and do not include void
assets. This reduction does not include
any Mucklow managed supplies as the
Mucklow assets were acquired part way
through the 2019/20 year. Therefore, this
reduction does not reflect the benefits of
energy efficiency measures implemented
on those assets.
-19%
Over the year on managed supplies
There was a reduction in location based
emissions from LondonMetric managed
supplies over the year from 192tCO2e to
156tCO2e, demonstrating a 19% reduction.
All these assets have a renewable energy
tariff and so market based emissions
would have been 0tCO2e. Including voids,
absolute emissions overall (location based)
increased from 240tCO2e to 261t CO2e.
52
GHG emissions reporting
2020/21
2019/20
Scope 1
Energy
Landlord-controlled gas
Void Energy
Void asset gas
Fugitive
emissions
Scope 2
Energy
Refrigerant emissions
Landlord-controlled
electricity
Void Energy
Void asset electricity
Scope 3
Energy
Transmission and
distribution losses
Tenant Energy
Landlord-obtained
energy sub-metered
to tenants
Emissions from employee
business travel for which
the company does not
own or control
Total
Total (Ex voids)
Intensity (Scope 1 & 2)
tCO2e/£m net income after
administration costs
Tonnes
of CO2e
(location-
based
calculation)
Tonnes
of CO2e
(market-
based
calculation)
Tonnes
of CO2e
(location-
based
calculation)
Tonnes
of CO2e
(market-
based
calculation)
12
31
12
31
20
6
20
6
De
minimis
De
minimis
De
minimis
De
minimis
127
70
17
1
3
261
159
20
42
0
0
3
108
35
105
38
17
51
4
240
196
29
12
0
0
4
71
53
2.29
1.00
1.76
0.70
Energy consumption used to calculate
Scope 1 & 2 emissions, kWh
1,080,600
899,000
Data qualifying notes
This is the Company’s eighth year of disclosure under
the Mandatory Greenhouse Gas Emissions Reporting
regulations and second under the recently introduced
Streamlined Energy and Carbon Reporting regulations.
Data for 2019/20 has been restated, including associated
intensity metrics, as additional energy consumption
data has been obtained since the previous report was
published. This statement has been prepared in line with
the main requirements of the GHG Protocol Corporate
Accounting and Reporting Standard and ISO 14064-1:2006.
Within Scope 1 emissions, refrigerant-related emissions
for the period were de minimis. Scope 2 dual reporting is
undertaken, which discloses one Scope 2 emission figure
according to a location-based method and another
according to a market-based method.
For the ‘location-based’ method of emissions calculations,
standard emissions factors from the UK Government
Emissions Conversion Factors for Greenhouse Gas
Company Reporting 2020 were used. For the ‘market-
based’ method, the Company’s contractual instruments
for the purchase of certified renewable electricity were
accounted for, resulting in a significant reduction in the
Company’s carbon footprint in practice.
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 (2020).
Emissions from employee business travel (by vehicle) have
been calculated and reported under Scope 3 emissions
for the second time. Emissions have been calculated on
a distance travelled basis, where the relevant vehicle
emissions factor has been applied to expensed mileage.
Emissions from landlord-obtained electricity sub-metered
to tenants are calculated through submeter recharge
and, for the first time this year, have been allocated
under Scope 3 for accuracy against the GHG Protocol.
These emissions are therefore not included under Scope
2 to prevent double counting. However, the relevant
sub-metered electricity is included in the total annual
landlord-obtained kWh numbers for transparency, as in
situations where sub-metering is not possible, emissions
from this type of energy would be classified as Scope 2.
An operational control consolidation approach has been
adopted. Additional information is provided on void asset
emissions to show where LondonMetric has operational
control and how void data impacts overall emissions.
LondonMetric Property PlcAnnual Report and Accounts 2021
Environmental
GHG emissions reporting
2020/21
2019/20
Refrigerant emissions
minimis
minimis
minimis
minimis
Tonnes
of CO2e
Tonnes
of CO2e
Tonnes
of CO2e
(location-
(market-
(location-
based
based
based
Tonnes
of CO2e
(market-
based
calculation)
calculation)
calculation)
calculation)
12
31
De
127
70
17
1
3
261
159
12
31
De
20
42
0
0
3
108
35
20
6
De
105
38
17
51
4
240
196
20
6
De
29
12
0
0
4
71
53
Landlord-controlled gas
Void Energy
Void asset gas
Scope 1
Energy
Fugitive
emissions
Scope 2
Energy
Travel
Landlord-controlled
electricity
Void Energy
Void asset electricity
Scope 3
Energy
Transmission and
distribution losses
Tenant Energy
Landlord-obtained
energy sub-metered
to tenants
Emissions from employee
business travel for which
the company does not
own or control
Total
Total (Ex voids)
Intensity (Scope 1 & 2)
tCO2e/£m net income after
administration costs
Energy consumption used to calculate
Scope 1 & 2 emissions, kWh
1,080,600
899,000
2.29
1.00
1.76
0.70
#2
We will continue to reduce emissions
from developments which will be fully
net zero by 2030*
We will reduce emissions from developments
and offset residual carbon to ensure
developments are fully NZC by 2030.
At Bedford Link, we have seen progressive
reductions in embodied carbon over each
of the development phases. We applied
learning from the initial phase of construction
to the second phase of the project which
totals 0.5 million sq ft. This is expected to result
in a c.25% reduction in carbon.
As part of our letting of the second phase,
we expect to incorporate c750 kW of
solar PV capacity in the tenant incentive
arrangements. This would potentially achieve
an EPC A+ rating and help to facilitate the
occupier in achieving net zero carbon
in operations.
Across the completed units at Bedford,
we have retrospectively installed energy
monitoring systems to allow us to monitor
energy performance post construction.
Our development performance
Our development activity continues to
focus on building highly efficient buildings.
All of our main completed developments
in the year were certified as BREEAM
Very Good or Excellent and, at our
developments currently on site at Bedford
Link and Tyseley, we are targeting
BREEAM Excellent.
As part of our efforts to reduce emissions,
we are measuring embodied carbon and
challenging our supply chains to minimise
waste and select low carbon materials.
* 1 Offset through recognised offset schemes
2 Initiatives across LondonMetric’s portfolio
that reduce either landlord or occupier
operational carbon
Carbon reduction at Bedford Link
Through on-site reduction measures and
material specification amendments
to more carbon friendly methods, we
expect to achieve a c.25% reduction
in carbon across the second phase
of our Bedford Link development.
Carbon reductions have been achieved
mainly from better selection of steel and
plasterboard supplies.
The percentage of recycled materials
has increased across the phases. The first
phase saw c.15% of recycled materials
used and this has increased to c.30% on
the latest phase.
Similarly, whereas we achieved a c.15%
improvement on Building Emission Rates
against Building Regulations on the
first phase, on the latest phase we are
achieving a c.40% improvement.
NZC – Progress to date
• Measuring embodied carbon, with
significant reductions seen since 2019
on our phased Bedford Link project.
• Encouraging refurbishment instead
of redevelopment.
• Challenging supply chains to minimise
waste and select low carbon materials.
• Minimum BREEAM Very Good
target and, where possible, looking
to demonstrate operational NZC
ready buildings.
NZC – Future action
• Benchmark embodied carbon,
extending to refurbishments
as appropriate.
• Undertake whole life
carbon assessments.
• Align developments to supply
chains that target minimising
embodied carbon and selection
of low carbon materials.
• Embed NZC aligned operational
performance targets in design,
monitoring asset performance
post construction.
• From 2022, introduce shadow
carbon pricing on select flagship
developments such that carbon
is either offset or an equivalent value
is reinvested into green initiatives.
BREEAM certification on main
developments
Percentage that were BREEAM Very Good/
Excellent in the year
100%
53
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Our sustainability performance
Responsible Business and ESG review
Environmental
#3
We will work with our occupiers to ensure
our buildings are net zero by 2035*
We will assist our occupiers to help them meet their
NZC targets and focus on providing NZC ready
buildings. From 2035, we will aim to offset occupier
residual carbon.
Overview
As part of our drive to upgrade the quality
of our assets, we continue to explore and
progress energy efficiency initiatives.
These include solar PV, LED upgrades,
building fabric works and EV charging
into leasing and regear opportunities to
enhance our properties and extend their
economic life.
As shown in the chart opposite, in our
recent occupier survey, 73% of occupiers
have now upgraded LED lighting installed
with a further 17% wanting to look at
installing LEDs. The level of installed LEDs is
higher than our own data suggested and
reflects the quick payback achievable
from LEDs, where in some cases energy
consumption reduced by up to 40% and
EPC ratings improved from an E to a B.
In the survey, we also noted a significant
increase in occupiers prioritising
environmental considerations compared
to previous years. Over half of responses
commented that the environment is an 8/10
or greater priority in their property decisions.
Nearly half registered an interest in installing
solar PV, 65% wanted to look at EV charging
and 33% wanted to improve their HVAC
systems. Following the survey, and in
response to feedback, we are working with
one of our larger occupiers to help them
upgrade one of their facilities.
Our activity in the year has increased the
proportion of assets built to a BREEAM Very
Good or Excellent standard to 26%, which
is up from 20% last year and 10% in 2015.
* 1 Excludes renewably sourced electricity consumed
2 Offset through recognised offset schemes
3 Where occupier hasn’t offset its operational carbon
from our building (excludes occupier’s wider
operational activity unrelated to the building)
4 Does not apply to leases signed before 2024
and where that lease hasn’t expired by 2035
54
Furthermore, 1.5 MW of solar PV was added
with further sites identified.
As part of progressing our NZC targets, we
are increasingly focused on understanding
how we can increase the number of NZC
ready buildings we own. An important part
of this focus is measuring emissions from all
of occupiers and, in the year, we increased
occupier energy data coverage to 43%.
We continue to engage with our occupiers
on a variety of improvement opportunities.
EPC rating of portfolio (by area)
We are conscious of the regulatory
changes to EPCs and are now actively
targeting a minimum ‘C’ rating on all assets.
74% of our assets have an EPC rating of
‘A’-’C’, which is up from 59% in 2015 and 71%
in 2020.
The increase in the year reflects the benefit
from our investment activity, where we
have acquired higher rated assets and
disposed of poorer quality buildings. It also
reflects our targeted efforts to improve
the rating of our Mucklow assets and
subsequently refresh EPCs. In addition, our
development activity continues to upscale
the portfolio’s quality.
With a greater proportion of EPCs classified
as unknown or expired, we will look to
reduce this number over the next year.
A
B
C
D
E
Below E
Unknown/Expired
2021
23.3%
28.5%
22.2%
10.5%
2.6%
0.0%
12.9%
2020
18.4%
24.3%
28.6%
13.3%
9.5%
0.3%
5.6%
1
2
3
4
5
NZC – Progress to date
• Upgrading quality of our assets
through investment and development
activity, owning more energy
efficient buildings.
• Improving buildings’ energy efficiency
through refurbishment and better
internal fit out such as LED lighting
and sensors.
• Engaging with occupiers to
understand their energy usage in our
buildings and how we can assist in
reducing their carbon footprint.
• Reviewing solar PV installations and
EV charge point opportunities.
NZC – Future actions
• Measure emissions across all of
portfolio by increasing occupier data
coverage (where possible through
green leases) and estimating where
data is unavailable.
• Continue programme of energy
assessments and develop energy
reduction plans with occupiers.
• Measure and monitor improvements/
progress at our buildings against NZC
targets and pilot a BREEAM In Use study.
• Increase number of NZC
ready buildings.
• Continue to progress renewable, EV
and battery storage opportunities
with occupiers.
Occupier survey environmental
improvements (%)
100
80
60
40
20
0
1
2
3
Installed
Would like to look at
4
5
Not looking at
LED
EV charging
Smart metering
Solar PV or other renewables
HVAC upgrades
LondonMetric Property PlcAnnual Report and Accounts 2021
Environmental
Improving the quality of our assets
With a portfolio aligned to distribution, our assets have a much lower carbon intensity than
other forms of real estate such as offices, residential and shopping centres. As we have
significantly increased our urban logistics exposure, our asset base has moved away from
larger, newer big box logistics to well located but typically older urban buildings.
This provides significant scope for us to make relatively cost-effective improvements that
can materially improve the building’s energy efficiency and extend its life instead of
completely redeveloping the asset.
Building certification
BREEAM Very Good/Excellent standard
26%
of portfolio (by area, including
developments) up from 10% in 2015
We also see investment activity as a key way of upgrading our assets. Through our
acquisition process and disposals analysis we factor in environmental considerations.
Internal LED lighting
Solar PV installations
In the year, 1.5MW capacity of solar PV was
installed at our facility in Warrington, taking
our total portfolio solar capacity to 2.5MW.
There are further solar opportunities at our
Bedford Link and Tyseley developments
which could total 0.9 MW. Furthermore, we
undertook a full portfolio analysis in the year
which identified a high priority list of five to
ten assets to carry out solar PV feasibility
studies and we will work to engage with our
occupiers on these.
Building works and internal LED lighting
We continue to improve buildings through
accretive expenditure to improve occupier
appeal and lease terms. In particular, in the
year, we focused on some of the Mucklow
assets where we undertook:
• Roof upgrade works;
• A number of internal LED lighting
upgrades on units that became
vacant; and
• New UPVC windows and entrances.
Upgrading through investment activity
As part of our portfolio refinement, we
continuously analyse all of our assets and
assess their environmental characteristics.
In the year, we disposed of several assets
where we felt that we would not achieve a
suitable return on the expenditure required
to modernise the building.
We also acquired a number of high quality
and well located assets such as the BREEAM
Very Good certified warehouse in Oldbury
(picture opposite).
Installed on
73%
of buildings according to responses
from occupier survey
Climate resilience
We continue to increase our
assessment of the potential
impact of physical changes on our
portfolio, such as extreme weather and
longer term shifts in climate pattern.
During the year, we progressed our
portfolio flood risk assessment, our
highest identified climate related risk.
Further analysis was carried out on
the desktop flood analysis that was
undertaken in the prior year, with more
detailed site specific analysis instructed
on assets that had been identified as
higher risk.
Following this manual review, we
identified just five assets that were at
high risk and further analysis is being
undertaken on these assets as we
believe that, in most instances, proper
flood mapping or better consideration
of building levels would lower the risk
profile. We are also manually reviewing
medium risk assets and expect to show
a material reduction in the number of
assets identified in this risk category.
Fluvial/coastal
flood risk level
High risk
Medium risk
Low risk
% of assets
by value
3%
15%
82%
55
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Our sustainability performance
Responsible Business and ESG review
Social
Companies Act 2006
Section 172 statement
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.
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; and
• 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 contractors and suppliers, our investors
and our communities. Building and
nurturing relationships with our stakeholders,
as described on pages 1 to 9, continues to
be a strategic priority and is integral to our
business model and the way we work.
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.
56
Methods of engagement
On pages 90 to 92 we explain why each
stakeholder group is important to us and
how we engage with them. Engagement is
both at Board level and through dedicated
management teams and includes one
to one meetings and roadshows, regular
liaison, 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 90 to 96 and
is supplemented in this Responsible Business
and ESG review on pages 57 to 61.
Impact on decisions made in the year
We have outlined in the table on pages 90
to 92 how we have considered the interests
of each of our stakeholder groups when
making important decisions, which this year
was dominated by the Covid-19 pandemic.
Some examples of how the Board
considered and responded to stakeholder
needs through the pandemic are as follows:
1. Provided assistance to customers
that were most affected and in need,
including monthly payment plans,
short term deferral arrangements and
rent concessions in return for asset
management initiatives.
2. 20% Board salaries and fees waived
for three months, providing additional
dedicated Covid-19 funding of £121,000
for local and national charities,
including donations to foodbanks and
NHS Trusts as well as providing rent
free accommodation.
3. Upgraded our IT systems to Microsoft
365 following a review of home
working arrangements and office
reopening plans.
4. The decision to speculatively develop
at Bedford, providing employment
opportunities, long term income growth
for investors and at least BREEAM Very
Good buildings.
5. Approved £120 million equity raise for
investment opportunities.
6.
Increased investor engagement
and trading updates providing rent
collection information.
Responding to stakeholders during Covid-19
Read more on page 19
Employee engagement and
monitoring of culture
Read more on page 93
Shareholder engagement
Read more on page 95
Our speculative development in Bedford
Read more on page 39
Last year the Board considered how to
incorporate stakeholder interests more
formally into its decision making processes
and amended standard briefing papers
and appraisals to document stakeholder
interests and views.
Board and Committee minutes record
the consideration of stakeholders in the
decision making process where relevant,
and an explanation of Directors’ duties
under S172 is provided on induction for all
newly appointed Directors.
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 the long term
Chief Executive’s review page 15
Promoting long term success page 96
Interests of its employees
Our people pages 58 to 59
Employee engagement and culture pages 93 to 94
Relationships with stakeholders
Our stakeholders pages 90 to 96
Social considerations pages 57 to 61
Impact on community and environment
Environment pages 50 to 55
Community page 61
TCFD page 63
Reputation, high standards
Monitoring of culture pages 93 to 94
Act fairly between members
Shareholder engagement pages 95 to 96
LondonMetric Property PlcAnnual Report and Accounts 2021
Social
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, rent collection
and customer satisfaction scores
demonstrate the strength of these
relationships. Extending existing
relationships and developing new
contacts continue to be 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; and
• Make quick decisions, act swiftly
and deliver on our promises
Occupier survey (March 2021)
We surveyed c90 of our top occupiers
representing 82% of rent, with responses
from 52 representing 55% of rent.
Questions were asked about occupiers’
satisfaction with our properties and their
locations, how satisfied they were with
LondonMetric and whether they would
recommend us as a landlord.
We asked specific environmental
questions and half of occupiers that
responded answered an enhanced
survey that went into greater detail about
their property.
Despite the pressures of the pandemic,
it was pleasing to see no decline in
occupier contentment with our average
landlord satisfaction score of 8.9/10.0
almost identical to the 9.0/10.0 that we
scored in 2019.
Customer satisfaction
We undertake regular surveys across
our key occupiers. Following surveys in 2018
and 2019, we undertook a further survey in
March 2021.
We received responses from occupiers
representing over half of our income and the
feedback was very strong and scoring was in
line with previous years.
The survey has provided very helpful
information for us to follow up on and include
in our wider decision making.
Impact of Covid-19
In response to the pandemic, we provided
appropriate and proportionate assistance
to a small minority of our customers that
were materially affected and most in need
of short term cash flow help. This assistance
took the form of monthly rather than
quarterly rental payments, short term rental
deferrals and rental concessions in return for
asset management initiatives.
Whilst we had very few vacancies across
our portfolio we were also able to offer short
term and rent free accommodation to assist
occupiers that were fulfilling contracts to
help in the fight against the pandemic.
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
Recommend LondonMetric as a landlord
Satisfaction with our properties
Average
9.0/10
Average
8.3/10
We scored an average of 9.0 out of
10.0 for whether our occupiers would
recommend LondonMetric as a landlord.
For our top 15 occupiers, the score
average was higher at 9.3
We scored an average of 8.3 out of
10.0 for satisfaction with our properties.
This score was higher than both the 2019
score of 8.2 and 2018 score of 7.8
57
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Our sustainability performance
Responsible Business and ESG review
Social
How we continue to improve our approach to our people
Our people
Inclusion and
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.
Our people are critical to the
success of the Company
The Company is highly focused with
31 employees and seven Non Executive
Directors. Since merger in 2013, employee
and Director numbers have fallen despite
a significant increase in assets managed.
This reflects improved efficiencies and
the lower operational requirements
of our portfolio.
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; and
• Small number of staff, which allows
a flexible and individual approach.
Impact of Covid-19 on our people
Our initial focus was on keeping our people
safe and transitioning to remote working.
We looked to regularly engage with all
employees throughout the pandemic
and were highly productive despite the
challenges. As we return to the office, we
will look at more flexible working for staff.
Employee gender diversity
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.
Clearly, during the pandemic, a number of these arrangements did not apply and we
will look to adapt our working practices to reflect the impact of the pandemic.
Fair
remuneration
Diversity
and equal
opportunity
Employee
development
and training
Health
and safety
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 33%. 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. We continue to undertake ESG training across our employees,
encourage participation in Young Property Professionals’ groups and 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 62
for further details on health and safety.
Wellbeing and
employee
satisfaction
In 2019, we significantly reduced our office space and undertook a major
refurbishment and modernisation of the office. We also undertook a wellbeing
review of the space and carried out a wider employee and office wellbeing 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 2021 employee survey are shown on the next page and reflect
further improvements against previous years. Andrew Livingston, the Company’s
designated workforce Non Executive Director, continues to be closely involved in
monitoring employee satisfaction.
Directors
Senior Leadership
All employees
The number of persons of
each sex who were Directors:
The number of persons of each
sex who were members of the
Senior Leadership Team (other
than identified as Directors):
The number of persons of each
sex who were employees:
3
6
2
7
14
17
58
LondonMetric Property PlcAnnual Report and Accounts 2021
Social
Overview of satisfaction survey
In February 2021, we undertook our fourth
annual employee survey to track changes
in staff satisfaction.
In total, we asked 40 questions receiving
responses from all employees on an
anonymous basis. This year, we focused on
two key areas being the Company and
the individual employee. Due to enforced
working from home we adapted our usual
office environment questions to focus on
home working conditions.
Results of survey
Overall the survey was very positive with
the vast majority of the responses ahead of
or in line with the 2020 results and 100% of
employees responding that they continue
to enjoy working at LondonMetric.
Employees remain highly supportive of the
Company as a whole and, in the year, we
saw further increases in the proportion of
employees that feel:
• They are treated fairly (score of 97%); and
• The organisation prioritises the long term
over the short term (score of 74%).
In terms of home working, 85% agreed that
the systems and processes at LondonMetric
work effectively whilst 87% agreed that their
home working set up was suitable.
The main areas for consideration arising
from the survey were future working from
home arrangements and flexible working,
training and staff feedback.
Board consideration
Andrew Livingston is the designated
workforce Non Executive Director.
In the year, he considered the survey
results and held a virtual call with a select
number of employees from different areas
of the Company to discuss the survey
feedback and wider employee thoughts
in more depth.
Andrew updated the Board on the
survey results and feedback from the
employee call.
Survey breakdown of scores
(percentage of employees that responded with agree or strongly agree)
y
n
a
p
m
o
C
e
e
y
o
p
m
E
l
Enjoy working
at LondonMetric
Considerate of work
life balance
Confidence in
management decisions
Feel proud to work
for LondonMetric
2021
2020
2021
2020
2021
2020
2021
2020
Make a valuable contribution
to LondonMetric
2021
2020
Recognised for the
contribution made
2021
2020
Would recommend
LondonMetric as an employer
2021
2020
100
100
87
81
100
96
100
100
94
93
84
85
90
100
59
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Our sustainability performance
Responsible Business and ESG review
Social
Contractors
and suppliers
Contractor compliance
100%
with our Responsible Development
Requirements
Our Responsible Procurement Policy
This 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 2021, we reviewed Nurture, a landscape
and gritting company that accounts for
approximately a third of maintenance
spend across our Mucklow assets and that
is sub-contracted through our Managing
Agent. The feedback was highly positive
with the company demonstrating a strong
focus on sustainability.
They have helped to implement numerous
initiatives on our sites such as bird and bat
boxes, log piles and habitat hotels (such as
shown below), and bee friendly planting
with further initiatives planned for 2022.
60
As a result of the pandemic, there was
significantly greater investor engagement
and requests for updates in the first quarter
of the year. Furthermore, in response
to a number of potential property
investment opportunities arising from the
pandemic, there was further interaction
in marketing our equity placing which we
undertook to raise additional capital for
imminent acquisitions.
Investor ESG survey
As shareholder expectations on corporate
governance and sustainability increase,
we undertook our second ESG survey of
investors in 2021, following on from our
previous survey in 2018.
We engaged with our top ten investors
representing nearly 40% of our shareholder
register and shared our Net Zero Carbon
framework with them.
Feedback was very positive with our overall
ESG performance to date seen as either
good or very good and our disclosure in line
with expectations.
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 continue to
enjoy strong relationships with our joint
venture partners.
In the year, we financed over £780 million of
debt which involved five banks and 11 other
debt investors. The refinancing added six
new lending or debt investor relationships
with most of our existing lending base
actively involved.
As set out in more detail on page 49, for
the first time, we incorporated a green
framework in respect of £450 million out
of the £780 million refinanced and we will
report on our progress against the green
framework to those institutions involved.
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.
Impact of Covid-19 on our developments
In conjunction with our contractors and
wider project teams, we had to carefully
monitor and manage a number of risks from
the pandemic relating to our development
sites. Our contractor relationships, together
with incredibly hard work and commitment
from them ensured that we largely
mitigated these risks and managed to keep
projects broadly on time and within budget.
Investors and
joint ventures
Equity investors met during the year
173
shareholders, analysts and potential investors
We value our good relationships with our
shareholders. Over the year, as covered in
detail on pages 95 to 96, we saw 173 equity
investors through individual and group
virtual meetings.
LondonMetric Property PlcAnnual Report and Accounts 2021
Social
Local
communities
We recognise the importance of supporting
our local communities and engaging with
all local stakeholders.
We have a published Communities Policy
which outlines our approach and, 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 and employment;
• 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; and
• Charitable giving, where we look to
mainly support causes local to our assets.
We also support other organisations such
as LandAid, and match employee charity
giving and events.
Our Charity and Communities Working
Group implements charity giving and co-
ordinates community involvement.
In response to Covid-19, the Working
Group was focused on responding to
the pandemic and set out a response
statement to explain how LondonMetric
would help in the fight against the impact
of the virus.
Charitable giving and community
involvement in the year
In response to Covid-19, we earmarked
£127,000 for giving to charitable causes and
local communities hit by the pandemic.
This included salaries and fees that the
Board waived amounting to £121,000. So far,
we have donated £96,375 of those funds
between various charities and causes.
A further £17,990 of non Covid-19 giving was
donated to other causes, some of which
related to matching of funds raises by
employees which we actively encourage.
For the next financial year we are setting
aside £100,000 for charity giving.
We also held a 2.6 Challenge event in
the year with employees and Directors
participating in various creative challenges.
£5,000 was raised and donated.
Example causes/charities
AHOY provides life changing activities for disadvantaged youth through rowing and
sailing. In 2020, a team of six employees planned to row the Thames for the charity
to raise funds but unfortunately the event was cancelled due to Covid. Instead, we
donated funds raised as part of our 2.6 Challenge event.
We allocated the majority of the salaries waived by Directors to two NHS Trust
charities in East London and Birmingham. The funds were used specifically for staff
wellbeing and robotic surgery.
We continued to support Kempston Challenger Academy which is close to our
Bedford Link development. Funds were used to help set up a careers platform and
provide laptops. We also supported other education organisations by donating a
number of laptops.
£3,000 was donated in toys to the ToyLink Project for Christmas run by Birmingham
City Mission. We also set up a toy drop off point at one of our nearby properties.
We donated £23,500 to food banks in our local communities throughout the year
including at Halesowen, Dagenham, Tyseley and Weymouth.
A number of other national causes were supported including LandAid, Macmillan,
PRD Foundation 500, several hospices, Crisis, Fareshare and the Royal British Legion.
Other community involvement
As part of the Mucklow acquisition, we acquired 16 acres of woodland in
Worcestershire. We engaged with Opentrail, a local charity, and are looking to
transfer the land to them for community use such as cycling and forest crafts. We
have assisted them on wider planning, construction and legal advice.
During the year, we signed up to Speakers for Schools and are hosting our first online
teach-in for school children on LondonMetric and our activities in July 2021.
61
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Our sustainability performance
Responsible Business and ESG review
Governance
Governance and compliance
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.
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 and 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 and anti-
corruption procedures;
• Responsible Procurement Policy;
• Community Policy; and
• Modern Slavery Act Statement.
For wider corporate governance
reporting please see page 80
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.
62
Health and 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 Ltd
(‘RP&P’) acts as our Corporate Health and
Safety Advisor.
Health and safety in 2021
• Quarterly internal meetings
• Half yearly project audits at Carlisle
and Tyseley were inspected by RP&P
• Zero reportable incidents on projects
• Zero accident rate for employees
• No health and safety prosecutions
or enforcements
• Health and safety policy updated
H&S risks assessment and training
and published
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 and 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. In the year, we
appointed RP&P to undertake Covid-19
risk assessments at our offices and
implemented a policy accordingly which
is reviewed regularly.
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.
• Employee Covid-19 policy in place
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 main developments on
areas including:
• Health and safety;
• BREEAM Very Good or better standard
(where appropriate);
• Considerate Constructors Scheme
compliance (where appropriate);
• Environmental impact monitoring;
• Management and reporting of progress;
• Promoting local employment
opportunities; and
• Fair remuneration for workers.
We continue to monitor compliance
and look at ways of improving our
contractors’ performance.
During 2021, we undertook an annual
contractor compliance audit of A.Surman,
one of our key contractors, to ensure that
they were adhering to our requirements.
A particular emphasis was placed on
their compliance with our supply chain
standards, including matters related to
modern slavery and anti-bribery.
LondonMetric Property PlcAnnual Report and Accounts 2021
TCFD Disclosure
This year, the Company aimed to provide the disclosure required under TCFD. Next year, we will ensure that
disclosure is fully compliance with TCFD requirements.
Recommendation
Commentary
Governance
Disclosure of
governance on
climate related risks
and opportunities
See page 80
Strategy
Disclosure of actual
and potential
impacts of climate
related risks and
opportunities on
the organisation’s
business, strategy
and financial
planning
See page 14
and page 50
Risk Management
Disclosure of the
Company’s process
for identifying,
assessing and
managing climate
related risks
See page 64
and page 72
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 ESG and Responsible Business. The monitoring of progress on Responsible Business
matters is delegated to the Audit Committee. 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.
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 much less energy
intensive and there is much greater residual value in the land underpinning capital values for these assets. Consequently, occupiers
and investors have less of a concern about the environmental performance of these buildings. We are, however, improving and
adapting our assets to be more resilient to climate change through maintenance, energy efficiency upgrades and provision
of renewable energy. Furthermore, whilst development is only a small part of our activities, we are focusing on enhancing the
sustainability features of our developments. These actions will help to future proof our buildings and allow us to take advantage of
opportunities from the shift to a low carbon economy by improving occupier contentment, command higher rents and enhance
the value of our assets. During our investment process, we are careful to review the locational and flood risks, the building fabric
and the energy efficiency of potential acquisitions and current assets to understand the climate and carbon related risks and costs
involved in mitigating those 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 the Audit Committee on climate related risks as well as
opportunities. The Company is increasing its understanding and assessing the potential impact of physical changes, such
as extreme weather and longer term shifts in climate patterns. The transitional changes are also being examined 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.
During the year, we further progressed our analysis of which acute and chronic physical climate risks are most likely to affect
our assets, specifically on flooding which we see as the highest risk area. Following the desktop flood analysis carried out
across the portfolio by WSP in the previous year, we analysed the results of that study and undertook more detailed site specific
analysis where appropriate. This further work has lowered the number of assets classified as high risk to just five, and we continue
to extend this analysis as we look to regularly monitor changes in flooding risk in the future. 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
further 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. In the year, we also
established our Net Zero Carbon framework that identified three Net Zero ambitions from an operational, development and
occupier perspective. As occupiers look to deliver on their Net Zero targets, we will look to increase the proportion of our
buildings that are net zero carbon, and pages 50 to 55 in this report set out our Net Zero approach more widely.
Metrics and Targets
Disclosure of metrics
and targets that
allow the Company
to assess and
manage climate
related risks and
opportunities
See page 49
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
50 to 55, along with BREEAM Very Good/Excellent certification both on development activity and our portfolio. 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 52: our absolute landlord-controlled carbon footprint has decreased significantly over
the last seven 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 and ESG report which is also available on our website and updated annually. Next year we will start to
report against out Net Zero Carbon deliverables and our targets will be adjusted to incorporate our Net Zero ambitions.
63
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Risk management
Effective risk management reduces the negative
impact of risk on the business and is critical to our
strategy of investing in real estate that provides reliable,
repetitive and growing income-led total returns and
long term outperformance.
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 and controls.
• Identify, assess
and quantify risk.
• Implement and
monitor risk
mitigation processes.
The Board
Audit
Committee
Senior
Leadership
Team
64
The Board’s risk management
responsibility
The Board has overall responsibility
for establishing and maintaining a risk
management framework critical to its
decision making process and key to
the long term success of the business.
This framework gives the Board confidence
that risks inherent in running the business are
successfully being identified and mitigated
to the extent possible to safeguard
stakeholders’ interests and achievement of
the Company’s strategic goals. The Board
has a low risk appetite in respect of these
objectives but acknowledges that no
system can entirely eliminate risk.
The Board considers risk in all the decisions
it makes and uses a high-level dashboard
at each of its meetings to monitor material
issues and new and emerging risks.
The Board also receives an informative
market overview from the Chief Executive
at its meetings, which highlights overarching
or longer term themes and evolving trends
within the sector, wider economy and the
risk environment that provide context for
responsive strategic decision making.
The Committee also received updated
reports and presentations on the ESG
agenda, corporate governance, cyber
security and tenant covenant monitoring
at that meeting. Based on its review
and assessment, the Audit Committee is
satisfied that no significant weaknesses
have been identified in the Group’s internal
control structure and that an effective
risk management system is in place.
These findings were reported to the Board.
The Senior Leadership Team identifies
implements and monitors
The Senior Leadership Team is responsible
for ongoing risk identification and the
design, implementation and maintenance
of the system of internal controls in light
of the risks identified. The team comprises
individuals with a breadth of skills and
experience from across the Company.
Short reporting lines, low staff numbers
and an embedded risk awareness culture
within the organisation 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 Audit Committee’s oversight role
Our risk register
The Audit Committee assists the Board by
providing a key oversight and assurance
role. It does so by appraising the risk
management framework in detail and
seeking comfort that there is a robust system
in place for the identification, assessment
and mitigation of the principal risks faced
by the Company. The Committee annually
reviews the Company’s risk register and
systems of internal controls, considers their
effectiveness and reports its findings to the
Board. The Committee also undertakes
thematic deep dives into significant or
areas of increasing risk.
At its March 2021 meeting, the Committee
scrutinised the risk register, which had
recently been comprehensively updated,
and an internal controls evaluation report
from the Finance Director.
The risk register is 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
of the safeguards against that risk are
then combined to produce a resultant
LondonMetric Property PlcAnnual Report and Accounts 2021 No significant change
Increased risk
Decreased risk
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. Owners and timelines are included
for any action points arising out of the
register’s review.
Principal risks
Our principal risks and uncertainties are
identified and reported on in pages 68 to
79. They refer to those risks with the potential
to cause material harm to our operations
and stakeholders and could affect 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
expertise, considers emerging risk with the
potential to adversely affect the business
and stakeholders. Such risks are evaluated
and monitored through Senior Leadership
Team meetings, with appropriate mitigation
measures implemented as required.
Significant emerging risks are raised and
discussed at Board level.
From a property perspective, strong
occupier relationships inform management
and help us to understand our tenant needs
and contentment and gain insights into
their businesses. These relationships are one
of the key tools used to assist us, not only in
sourcing potential off market opportunities
but also in identifying emerging risks and
trends which has been particularly useful
throughout the Covid-19 pandemic when
many businesses have undergone some
form of restructuring.
Management also have strong banking
relationships and, more broadly, regularly
meet industry representatives, shareholders
and analysts. These relationships are
also used to identify emerging risks.
In addition, reports are commissioned
and briefings arranged on wide ranging
pertinent topics to understand changes
within the real estate sector and the wider
economic outlook.
No new or emerging principal risks have
been identified this year, but the pandemic
has heightened the likelihood of some
risks occurring.
Changes in risk factors
Covid-19
Last year we introduced Covid-19 as a new
and emerging principal risk. We recognised
that the disruption and risk of a prolonged
and severe economic downturn would
present unprecedented challenges to
the business and its stakeholders, but also
potentially opportunities. As identified
then, Covid-19 has accelerated a number
of structural changes that are having a
profound and permanent impact on real
estate. Combined with a continuation of a
lower for longer interest rate environment,
negligible bond rates and suppressed
corporate dividends, it has intensified
demand for the right real estate that can
deliver reliable, repetitive and growing
income and endorses our strategy to
position the portfolio on the right side of
these structural trends. As reported in the
Chief Executive’s review on pages 15 to 18
logistics and long income, which comprise
95% of our portfolio, have been clear
beneficiaries of the pandemic as businesses
have sought to future proof their operations
in response to the rise of ecommerce
and respond to changes in the way we
live and shop. Furthermore, sustained
logistics demand is expected from Brexit
uncertainties as ‘just in time’ strategies are
replaced with ‘just in case’ as companies
adapt to how the UK operates under its new
arrangements with the EU and other trading
partners raising new border related issues,
which are increasing the need for more
localised inventory.
We expect a period of prolonged
uncertainty and continuing disruption as
a result of Covid-19, notwithstanding the
efficacy of the vaccine roll out. With strong
performing assets, closely aligned to the
structural tailwinds, we remain well placed,
though not immune, to weather this
disruption and navigate these uncertain
times and believe our risk has reduced
since this time last year. We continue to
focus on improving the quality of our
portfolio, keeping our people safe, working
closely with occupiers, suppliers and other
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
These relate
to the entire
Group
2
Property
risks
Portfolio
composition
and management,
developments,
valuation and
occupiers
3
Financing
risk
These focus
on our core
business
Investors, joint
ventures, debt and
cash management
These focus
on how we
fund our
operations
65
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Risk management
No significant change
Increased risk
Decreased risk
stakeholders, maintaining a strong financial
position and helping local communities.
This year we have incorporated the
risk posed by Covid-19 within other
principal risk categories where they are
inextricably interlinked.
Investment opportunities
In identifying investment opportunities, we
assess potential returns and weigh them
against the risks involved. Therefore, whilst
the market presents many opportunities,
as significant shareholders ourselves, we
prefer to focus on quality investments that
offer long term income, capital growth and
downside protection from strong intrinsic
value, priding ourselves on our process,
discipline and rationality as we look to
acquire the best assets, at the right price.
This rigorous approach invariably tempers
investment activity. We are mindful that
investor demand and tightening yields
for our preferred sectors make further
investment difficult whilst tightening yields
on non core and weaker assets encourage
sales for the right property reasons but
where redeployment of proceeds is difficult.
We will aim to continue to maintain a fine
balance and defer sales receipts where
possible, to allow time for reinvestment and
reduce the negative impact on earnings.
Responsible Business practices
and climate change
Stakeholder focus on responsible business
practices has continued to increase with
particular attention on climate change
and the Net Zero Carbon agenda from
an environmental perspective. If we fail
to keep pace this could have a profound
negative impact on our earnings, asset
and share liquidity. More information can
be found on our Responsible Business
objectives, initiatives undertaken and
progress against targets in our Responsible
Business and ESG review on pages 47 to 63.
Financial position
In May last year we successfully raised
gross proceeds of £120 million through
a substantially oversubscribed equity
placing in order to take advantage of
high quality investment opportunities we
were seeing early on in the pandemic.
Just before the year end we then priced
a £380 million debt placement with a
number of institutional investors in North
America and the UK. This placement was
upsized due to exceptional demand
and has a blended maturity of 11.1
years and a blended coupon of 2.27%.
The placement completed at the end of
April. Alongside this, we refinanced existing
revolving credit facilities with a three year
syndicated facility of £225 million and a five
year facility of £175 million. Both facilities are
unsecured, revolving and have two, one
year extension options. More information
on the equity placing, debt placement
and the refinancing, which have improved
our financial position, can be found in the
Financial review on pages 40 to 46.
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
Moderate
Property risks
Financing risks
y
t
i
l
i
b
a
b
o
r
P
2
Economic and political factors
5
Responsible Business approach
7
Investment
9
Valuation
8
Development
4
Systems processes and financial management
6
Regulatory framework
10
Transactions and tenants
3
Human resources
11
Capital and finance
Strategy
1
Low
Negative impact on Group
Moderate
66
LondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Viability Statement
Based on the results of their assessment which is detailed
below, 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 to 31 March 2024.
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 review and challenge the period
over which to assess viability on an annual
basis and have determined that the three
year period to 31 March 2024 remains 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 obtaining
planning permission for a development
project to practical completion of the
property. The average length of the
Group’s developments that completed
in the year at Goole, Wallingford,
Weymouth and Bedford was 14 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.
Although the Board’s review focused on
the three year viability assessment period,
it also considered a number of other factors
when assessing the Group’s longer term
assessment, including:
• The weighted average unexpired
lease length of 11.4 years;
• The weighted average debt maturity
after completion of the refinancing in
April 2021 of 8.2 years; and
• The longer term investment horizon
and nature of the property cycle.
Assessment of prospects
Assessment of viability
The Group’s strategy is reviewed by the
Board at each meeting.
The business plan is structured around the
Group’s strategy and consists of a rolling
three year profit forecast, which factors in
deals under offer, committed developments
and reinvestment plans.
It 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. They also consider the
impact to earnings and liquidity when
assessing potential investment and
development proposals.
Forecasts are reviewed against actual
performance and reported quarterly
to the Board.
Short term cash flow forecasts and rent
collection rates are closely monitored
by the Senior Leadership Team on a
weekly basis.
When assessing longer term prospects,
the Board is mindful of the following:
• Income certainty, with 57% of
the Group’s rental income benefitting
from contractual uplifts, and diversity, with
36% of rent due from our top ten occupiers;
• A proven track record of executing
transactions, making good sector
choices and growing income;
• Strong rent collection rates throughout
the Covid-19 pandemic with 98% of rents
due in the year collected;
• Strong relationships with debt providers,
evidenced by the new £780 million debt
arrangements; and
• Substantial liquidity with undrawn
debt facilities and cash of £338 million
after the refinancing.
The business plan was stress tested to ensure
it remained resilient to adverse movements
in its principal risks including:
• Changes to macro-economic conditions,
reducing rent and property values;
• Changes 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 investment and
development opportunities.
In response to the pandemic, our
scenario testing considered the longer
term impact of the disruption caused to
our occupiers, including potential rent
defaults, increased vacancy costs and
letting voids. Key assumptions included
reducing rent and property values by 15%,
removing uncommitted capital expenditure
and increasing interest rates by 1%.
Throughout the scenario testing, the Group
had sufficient reserves to continue in
operation and remain compliant with its
banking covenants.
Reverse stress testing was also undertaken.
Property values would need to fall by
approximately 43% and rental income
fall by 65% to breach the gearing
and interest cover covenants under the
Group’s unsecured and private placement
debt facilities, that together account for
92% of the Group’s borrowing including
its share of joint ventures as at the date of
this report.
This scenario testing, when combined
with the Group’s strong financial position,
rent collection evidence, and mitigation
actions available including deferring
non committed capital expenditure and
selling assets, supports the Group’s ability
to weather unexpected and adverse
economic and property market conditions
including the Covid-19 pandemic over the
longer term viability period.
67
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A review of our risks
Principal risks
Corporate risks
1.
Strategy
Risk
Impact
Mitigation
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 an ever-changing market and trends
• Investor demand for distribution assets has increased, attracted
The Board continues to view
by limited new supply and growing occupier demand fuelling
the Company’s strategic priorities
• Inappropriate
for the current
economic climate or
market cycle
• Not achieved due
to Covid-19 or Brexit
related disruption or
poor implementation
• Missed opportunities
• Deep occupier relationships and experience within our
• Ineffective
sectors shape portfolio decisions
threat management
• Commissioned research assists our strategic
• Wrong balance of
skills and resources for
ongoing success
Impact on strategy
decision making
• We have a UK based, predominantly logistics portfolio
in a world leading ecommerce 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
• The Senior Leadership Team comprises 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
• The Board and senior management team’s strong
economic alignment to shareholders ensures a
strong conviction to make the right property and
financial decisions
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• Suboptimal returns
for shareholders
• Occupier demand
and solvency may
be impacted
• Asset liquidity
may reduce
• Debt markets may
be impacted
Impact on strategy
Market downturn
or specific sector
turbulence
resulting from:
• The severe adverse
economic impact
from Covid-19
• New trade
arrangements
with the EU and
other economies
following Brexit
• Other economic and
political factors
• We remain focused on what we can control within the
business and the medium and long term drivers of returns
• We commission economic and market research to better
understand the potential impact of economic factors on
our tenants and preferred asset classes
• Our strong occupier relationships provide market
intelligence and help us better understand our tenants
needs and emerging trends
• We regularly monitor tenant and contractor
covenant strength
• We limit development, particularly speculative
development exposure and letting risk
• We maintain a high WAULT 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
2.
Economic and
political factors
68
Commentary
rental growth
• Investor demand for income has also intensified in a zero interest
rate economy. Our long income assets have defensive and income
this risk is low.
growth characteristics
as fundamental to its business
and reputation. Its appetite for
• During the year we deployed £231 million across logistics, grocery
and roadside and increased our urban logistic weighting where
supply is restricted and rental growth strongest, to 38.5% and
long-let grocery and roadside exposure with high quality
counterparties to 11.0%
• £159 million of disposals were predominantly of shorter let and poorer
located logistics assets and non core office retail and residential
assets. Receipts on the majority of sales were deferred to allow time
• Our dividend has increased and cover is strong at 1.1 times EPRA
• Our property cost leakage at 1.4% is low within the sector as assets
to reinvest proceeds
earnings per share
are operationally light
• Our fit for purpose distribution (70.8% portfolio weighting) has
benefitted from accelerated demand as a result of Covid-19
and Brexit as businesses seek to future proof their operations in
response to the rise of ecommerce and how the UK operates
with its trading partners
• The majority of our long income assets (24.5% portfolio weighting)
are considered non discretionary, less susceptible to the migration
of spend online and are benefitting from changes in how we
live and shop. Most were open for trade prior to the last Covid-19
lockdown measures lifting with strong underlying trading
performance as reflected in our high rent collection rates
• 2% of our portfolio is exposed to out-of-town leisure and hotels in
good geographies which trade strongly in more normal times.
Adversely impacted by the severity of lockdowns, these have
delivered a property return of -13.8% in the year
The Board monitors the impact
of the pandemic and political
and economic developments
which are outside of its control.
Focus remains on maintaining
a robust ‘all weather’ portfolio,
and keeping this risk to
a minimum.
Decreased risk
We have focused investment
and asset management
activity on improving the
quality of our ‘all weather’
portfolio which provides
reliable, repetitive and
growing income whilst
providing strong intrinsic
value and capital protection.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Chief Executive’s review
page 15
Property review
page 26
Financial review
page 40
Decreased risk
The majority of our
assets are in structurally
supported sectors and
performing in line with or
ahead of expectations.
We remain alert to the few
underperforming in the
extreme conditions.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Property review
page 26
LondonMetric Property PlcAnnual Report and Accounts 2021
Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
No significant change
Increased risk
Decreased risk
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 Covid-19 or Brexit
related disruption or
poor implementation
for shareholders
Board to adapt to an ever-changing market and trends
• Missed opportunities
• Deep occupier relationships and experience within our
• Ineffective
sectors shape portfolio decisions
threat management
• Commissioned research assists our strategic
• Wrong balance of
decision making
skills and resources for
• We have a UK based, predominantly logistics portfolio
ongoing success
in a world leading ecommerce market
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
• The Senior Leadership Team comprises 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
• The Board and senior management team’s strong
economic alignment to shareholders ensures a
strong conviction to make the right property and
financial decisions
2.
Risk
Economic and
political factors
Market downturn
or specific sector
turbulence
resulting from:
• Suboptimal returns
• We remain focused on what we can control within the
for shareholders
business and the medium and long term drivers of returns
• Occupier demand
• We commission economic and market research to better
and solvency may
understand the potential impact of economic factors on
• The severe adverse
be impacted
our tenants and preferred asset classes
economic impact
from Covid-19
• New trade
arrangements
with the EU and
other economies
following Brexit
• Other economic and
political factors
• Asset liquidity
may reduce
• Debt markets may
be impacted
Impact on strategy
• Our strong occupier relationships provide market
intelligence and help us better understand our tenants
needs and emerging trends
• We regularly monitor tenant and contractor
covenant strength
• We limit development, particularly speculative
development exposure and letting risk
• We maintain a high WAULT 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
Appetite
Change in the year
The Board continues to view
the Company’s strategic priorities
as fundamental to its business
and reputation. Its appetite for
this risk is low.
• Investor demand for distribution assets has increased, attracted
by limited new supply and growing occupier demand fuelling
rental growth
• Investor demand for income has also intensified in a zero interest
rate economy. Our long income assets have defensive and income
growth characteristics
• During the year we deployed £231 million across logistics, grocery
and roadside and increased our urban logistic weighting where
supply is restricted and rental growth strongest, to 38.5% and
long-let grocery and roadside exposure with high quality
counterparties to 11.0%
• £159 million of disposals were predominantly of shorter let and poorer
located logistics assets and non core office retail and residential
assets. Receipts on the majority of sales were deferred to allow time
to reinvest proceeds
• Our dividend has increased and cover is strong at 1.1 times EPRA
earnings per share
• Our property cost leakage at 1.4% is low within the sector as assets
are operationally light
Decreased risk
We have focused investment
and asset management
activity on improving the
quality of our ‘all weather’
portfolio which provides
reliable, repetitive and
growing income whilst
providing strong intrinsic
value and capital protection.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Chief Executive’s review
page 15
Property review
page 26
Financial review
page 40
Impact
Mitigation
Commentary
Appetite
Change in the year
• Our fit for purpose distribution (70.8% portfolio weighting) has
benefitted from accelerated demand as a result of Covid-19
and Brexit as businesses seek to future proof their operations in
response to the rise of ecommerce and how the UK operates
with its trading partners
• The majority of our long income assets (24.5% portfolio weighting)
are considered non discretionary, less susceptible to the migration
of spend online and are benefitting from changes in how we
live and shop. Most were open for trade prior to the last Covid-19
lockdown measures lifting with strong underlying trading
performance as reflected in our high rent collection rates
• 2% of our portfolio is exposed to out-of-town leisure and hotels in
good geographies which trade strongly in more normal times.
Adversely impacted by the severity of lockdowns, these have
delivered a property return of -13.8% in the year
The Board monitors the impact
of the pandemic and political
and economic developments
which are outside of its control.
Focus remains on maintaining
a robust ‘all weather’ portfolio,
and keeping this risk to
a minimum.
Decreased risk
The majority of our
assets are in structurally
supported sectors and
performing in line with or
ahead of expectations.
We remain alert to the few
underperforming in the
extreme conditions.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Property review
page 26
69
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Principal risks
3.
Human
resources
Corporate risks
Risk
Impact
Mitigation
• There may be
an inability to
attract, motivate
and retain high
calibre employees
• Covid-19 may be
detrimental to the
long term health of
key individuals
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
• An external Board evaluation was undertaken, its findings
necessary to deliver strategy
• Our organisational structure has clear responsibilities
• The Senior Leadership Team introduced last year promotes talent
and reporting lines
development below Board level
• 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
• 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 Non Executive refreshment plan
• Key man insurance is in place for the Chief Executive
4.
Systems,
processes
and financial
management
Risk
Impact
Mitigation
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 IT systems have allowed us to remain fully operational over the
The Board’s appetite for such
Appetite
Change in the year
risk is low and management
continually strive to monitor and
improve processes.
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
70
Commentary
extremely positive
• The appointment of Kitty Patmore to the Board and Audit
Committee brings significant property and capital markets
experience to enhance the existing skill set of the Board and
supports succession planning for Non Executive Directors which
remains high on the Board’s agenda
• Staff survey responses were highly positive with 100% of respondents
proud and happy to be working for LondonMetric and confident
in the decisions made by senior management
• Our workforce engagement Non Executive Director hosted a call
with a cross section of employees in the year to hear their views
• No staff were furloughed and turnover is low at 6% on average
• 68% of employees participate in the LTIP
and concerns
since merger
Commentary
Covid-19 lockdowns
• During the year we upgraded our operating system and completed
the integration of Mucklow onto the LondonMetric IT platform
and systems
• Further improvements were made to our integrated sales ledger
invoicing and reporting system to enable more billing to be brought
in-house and away from managing agents and to improve the
quality of credit control reports
• Increased remote working as a consequence of lockdowns has
exposed the Company to a range of cyber attacks. The Company’s
cyber security measures have provided a strong level of protection
Appetite
Change in the year
The Board believes it is vitally
important that the Company
has the appropriate level of
leadership, expertise and
experience to deliver its
No significant change
There was no significant
change in perceived risk
during the year.
objectives and adapt to change.
Its appetite for this risk is low.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Employee engagement
page 93
Management team
page 86
Our people
page 58
page 101
page 116
Nomination Committee report
Remuneration Committee report
No significant change
There was no significant
change in perceived risk
during the year.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Audit Committee report
page 108
LondonMetric Property PlcAnnual Report and Accounts 2021
Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
No significant change
Increased risk
Decreased risk
3.
Human
resources
4.
Systems,
processes
and financial
management
and supporting
strategy may be weak.
• Covid-19 may be
detrimental to the
long term health of
key individuals
Impact on strategy
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
• 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 Non Executive refreshment plan
• Key man insurance is in place for the Chief Executive
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• There may be
an inability to
attract, motivate
and retain high
The business may lack
the skill set to establish
and deliver strategy
and maintain a
calibre employees
competitive advantage.
necessary to deliver strategy
and reporting lines
• Our staffing plan focuses on experience and expertise
• An external Board evaluation was undertaken, its findings
extremely positive
• Our organisational structure has clear responsibilities
• The Senior Leadership Team introduced last year promotes talent
development below Board level
• Executive Directors and senior managers are incentivised
• The appointment of Kitty Patmore to the Board and Audit
Committee brings significant property and capital markets
experience to enhance the existing skill set of the Board and
supports succession planning for Non Executive Directors which
remains high on the Board’s agenda
• Staff survey responses were highly positive with 100% of respondents
proud and happy to be working for LondonMetric and confident
in the decisions made by senior management
• Our workforce engagement Non Executive Director hosted a call
with a cross section of employees in the year to hear their views
and concerns
• No staff were furloughed and turnover is low at 6% on average
since merger
• 68% of employees participate in the LTIP
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.
Its appetite for this risk is low.
No significant change
There was no significant
change in perceived risk
during the year.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Employee engagement
page 93
Management team
page 86
Our people
page 58
Nomination Committee report
page 101
Remuneration Committee report
page 116
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Controls for
• Compromised
• The Company has a strong controls culture
• Our IT systems have allowed us to remain fully operational over the
safeguarding assets
asset security
• We have IT security systems in place with back up
Covid-19 lockdowns
• 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
• During the year we upgraded our operating system and completed
the integration of Mucklow onto the LondonMetric IT platform
and systems
• Further improvements were made to our integrated sales ledger
invoicing and reporting system to enable more billing to be brought
in-house and away from managing agents and to improve the
quality of credit control reports
• Increased remote working as a consequence of lockdowns has
exposed the Company to a range of cyber attacks. The Company’s
cyber security measures have provided a strong level of protection
The Board’s appetite for such
risk is low and management
continually strive to monitor and
improve processes.
No significant change
There was no significant
change in perceived risk
during the year.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Audit Committee report
page 108
71
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Principal risks
Corporate risks
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 hold meetings with large numbers of shareholders,
The Board has a low tolerance for
• 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 and commission reports
• 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
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
Non-compliance
with legal or
regulatory obligations.
• Compromised
asset security
• Suboptimal returns
for shareholders
• We monitor regulatory changes that impact our business
• There have been no new significant regulatory changes
assisted by specialist support providers
• We consider the impact of legislative changes
on strategy
• Decisions made on
• We have allocated responsibility for specific obligations to
inaccurate information
individuals within the Senior Leadership Team
Impact on strategy
• 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 and REIT
compliance is monitored
analysts and potential investors, meeting 173 in the year
• We continue to score well in ESG benchmarks
• 26% of our portfolio by area is rated BREEAM Very Good or
Excellent, an increase from 20% in 2020
• c.74% of our portfolio has an EPC rating of A-C and we are
targeting a minimum C rating on all assets
• Our Net Zero Carbon framework published in May sets out our
ambitions to become a zero carbon business
• Our new revolving credit facilities incorporate a green framework
• We issued a £50 million green private placement tranche, the first
UK REIT to do so
• We have scored highly in stakeholder surveys, with 9.0 out of 10.0
occupiers recommending us as a landlord in our latest occupier
survey, despite the challenging Covid-19 backdrop
• Our Communities and Charity Committee, created in response
to the pandemic, has spent or committed most of the £127,000
funded mainly through the Board and senior managers waiving
20% of their salary and fees for three months
• ESG targets have been introduced into the wider staff
performance criteria
non-compliance with risks that
adversely impact reputation,
stakeholder sentiment towards
the Company and asset liquidity.
Increased risk
ESG significance continues
to increase for stakeholders,
particularly in relation to
climate change.
We anticipate this risk will
continue to increase over the
next 12 months.
Read more:
Responsible Business and ESG
review page 47
Shareholder engagement
page 95
TCFD page 63
Responsible Business report
www.londonmetric.com
which impact the Company this year
• We continued to undertake health and safety site audits on
our developments through an external specialist consultancy.
These included our smaller development at Carlisle this year
and Tyseley post year end. Feedback has been positive and
no significant issues were identified
• Health and Safety Policy updated in the year
The Board has no appetite
where non-compliance risks
injury or damage to its broad
range of stakeholders, assets
and reputation.
No significant change
There was no significant
change in perceived
risk during the year.
New regulations and
evolving best practice
will continue to impact
the business.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Responsible Business and ESG
review page 47
5.
Responsible
Business
approach
6.
Regulatory
framework
72
LondonMetric Property PlcAnnual Report and Accounts 2021
Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
No significant change
Increased risk
Decreased risk
5.
Responsible
Business
approach
Non-compliance
with Responsible
Business practices.
6.
Regulatory
framework
Non-compliance
with legal or
regulatory obligations.
• Compromised
asset security
• Reputational damage
• We monitor changes in law, stakeholder sentiment and
• Suboptimal returns
for shareholders
• Asset liquidity may
be impacted
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
• Reduced access to debt
and capital markets
• Poor relationships
with stakeholders
Impact on strategy
• 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 and commission reports
• 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
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 and REIT
compliance is monitored
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• We continue to hold meetings with large numbers of shareholders,
analysts and potential investors, meeting 173 in the year
• We continue to score well in ESG benchmarks
• 26% of our portfolio by area is rated BREEAM Very Good or
Excellent, an increase from 20% in 2020
• c.74% of our portfolio has an EPC rating of A-C and we are
targeting a minimum C rating on all assets
• Our Net Zero Carbon framework published in May sets out our
ambitions to become a zero carbon business
• Our new revolving credit facilities incorporate a green framework
• We issued a £50 million green private placement tranche, the first
UK REIT to do so
• We have scored highly in stakeholder surveys, with 9.0 out of 10.0
occupiers recommending us as a landlord in our latest occupier
survey, despite the challenging Covid-19 backdrop
• Our Communities and Charity Committee, created in response
to the pandemic, has spent or committed most of the £127,000
funded mainly through the Board and senior managers waiving
20% of their salary and fees for three months
• ESG targets have been introduced into the wider staff
performance criteria
The Board has a low tolerance for
non-compliance with risks that
adversely impact reputation,
stakeholder sentiment towards
the Company and asset liquidity.
Increased risk
ESG significance continues
to increase for stakeholders,
particularly in relation to
climate change.
We anticipate this risk will
continue to increase over the
next 12 months.
Read more:
Responsible Business and ESG
review page 47
Shareholder engagement
page 95
TCFD page 63
Responsible Business report
www.londonmetric.com
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• We monitor regulatory changes that impact our business
• There have been no new significant regulatory changes
assisted by specialist support providers
which impact the Company this year
• Suboptimal returns
• We consider the impact of legislative changes
for shareholders
on strategy
• Decisions made on
• We have allocated responsibility for specific obligations to
inaccurate information
individuals within the Senior Leadership Team
Impact on strategy
• Our health and safety handbook is regularly updated
and audits are carried out on developments to
• We continued to undertake health and safety site audits on
our developments through an external specialist consultancy.
These included our smaller development at Carlisle this year
and Tyseley post year end. Feedback has been positive and
no significant issues were identified
• Health and Safety Policy updated in the year
The Board has no appetite
where non-compliance risks
injury or damage to its broad
range of stakeholders, assets
and reputation.
No significant change
There was no significant
change in perceived
risk during the year.
New regulations and
evolving best practice
will continue to impact
the business.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Responsible Business and ESG
review page 47
73
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Principal risks
Property risks
Risk
Impact
Mitigation
Commentary
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
• We continue to build on our strong occupier, developer and industry
The Board continues to focus
relationships and attract off market opportunities through these
on having the right people
• We acquired £245 million of investment property over the year,
remaining disciplined and selective. This included sourcing a number
of opportunistic deals of high quality assets as a result of Covid-19
which wouldn’t ordinarily be available in a normalised market
• Post year end, we have acquired a further £68 million of urban
warehousing and long income properties
and funding in place to take
advantage of opportunities
as they arise. The Board’s aim
is to minimise this risk to the
extent possible.
Risk
Impact
Mitigation
• Excessive capital
• Poorer than
may be allocated
to activities with
development risk
• Developments
expected performance
• Reputational damage
Impact on strategy
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
• As an income focused REIT, development exposure as a
percentage of our total portfolio is limited, typically well
below 5%
• We only undertake short cycle and relatively
uncomplicated developments on a pre-let basis or where
there is high occupier demand
• 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
was 14 months
• Our procurement process includes tendering and the use
of highly regarded firms with proven track records
• We review and monitor contractor covenant strength
Appetite
Change in the year
The Board takes on limited
speculative development,
although its overall tolerance for
this risk is low.
Commentary
to Amazon
• Our current development exposure is 2.3% of the portfolio.
• Our 120,000 sq ft urban logistics development at Tyseley is pre-let
• We are under offer on the letting of the completed Unit 2 at Bedford
Link (172,000 sq ft) and in discussions on a pre-let of Unit 1
• We work with a limited number of contractors which helps us to stay
close to their operations. All are managing their cash flows and
• We have not experienced any material construction delays as a
result of the pandemic and reopened sites as soon as it was possible
Covid-19 risks well
and safe to do so
• The average length of the Group’s developments that completed in
the year from obtaining planning permission to practical completion
Increased risk
Increased investor demand
and tightening yields in the
Company’s favoured sectors
make further investment
difficult whilst tightening
yields on non core or weaker
assets encourage sales
where the redeployment of
proceeds is difficult.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Property review
page 26
No significant change
There was no significant
change in perceived risk
during the year.
Supply chain disruption
may increase as a result of
demand, Covid-19 and Brexit
over the next 12 months.
Our development exposure
remains limited.
Read more:
Developments
page 38
Bedford Link development
page 39
page 35
Tyseley development
7.
Investment
8.
Development
74
LondonMetric Property PlcAnnual Report and Accounts 2021
Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
No significant change
Increased risk
Decreased 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
• We acquired £245 million of investment property over the year,
remaining disciplined and selective. This included sourcing a number
of opportunistic deals of high quality assets as a result of Covid-19
which wouldn’t ordinarily be available in a normalised market
• Post year end, we have acquired a further £68 million of urban
warehousing and long income properties
The Board continues to focus
on having the right people
and funding in place to take
advantage of opportunities
as they arise. The Board’s aim
is to minimise this risk to the
extent possible.
Increased risk
Increased investor demand
and tightening yields in the
Company’s favoured sectors
make further investment
difficult whilst tightening
yields on non core or weaker
assets encourage sales
where the redeployment of
proceeds is difficult.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Property review
page 26
Impact
Mitigation
Commentary
Appetite
Change in the year
The Board takes on limited
speculative development,
although its overall tolerance for
this risk is low.
• Our current development exposure is 2.3% of the portfolio.
• Our 120,000 sq ft urban logistics development at Tyseley is pre-let
to Amazon
• We are under offer on the letting of the completed Unit 2 at Bedford
Link (172,000 sq ft) and in discussions on a pre-let of Unit 1
• We work with a limited number of contractors which helps us to stay
close to their operations. All are managing their cash flows and
Covid-19 risks well
• We have not experienced any material construction delays as a
result of the pandemic and reopened sites as soon as it was possible
and safe to do so
• The average length of the Group’s developments that completed in
the year from obtaining planning permission to practical completion
was 14 months
No significant change
There was no significant
change in perceived risk
during the year.
Supply chain disruption
may increase as a result of
demand, Covid-19 and Brexit
over the next 12 months.
Our development exposure
remains limited.
Read more:
Developments
page 38
Bedford Link development
page 39
Tyseley development
page 35
75
7.
Investment
Risk
We may be unable
Ability to implement
• Management’s extensive experience and their strong
to source affordable
strategy and deploy capital
network of relationships provide insight into the property
investment opportunities.
into value and earnings
market and opportunities
accretive investments is
at risk.
Impact on strategy
8.
Development
Risk
• Excessive capital
• Poorer than
• As an income focused REIT, development exposure as a
may be allocated
expected performance
percentage of our total portfolio is limited, typically well
to activities with
development risk
• Developments
• Reputational damage
below 5%
Impact on strategy
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
• We only undertake short cycle and relatively
uncomplicated developments on a pre-let basis or where
there is high occupier demand
• 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
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
A review of our risks
Principal risks
Property risks
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 predominantly in 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 and defensive
capital expenditure
• We monitor tenant covenants and trading performance
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• Property purchases
and asset
management
initiatives may
be inconsistent
with strategy
• Due diligence
may be flawed
• Tenant failure risk
Pressure on NAV,
earnings and potentially
loan covenants.
• Thorough due diligence is undertaken on all acquisitions
including legal and property, tenant covenant strength
and trading performance
Impact on strategy
• We screen all prospective tenants and undertake regular
reviews thereafter
• Portfolio tenant concentration 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
• The resilience of our portfolio is demonstrated by the £173.7 million
There is no certainty that property
valuation increase in the year, with distribution providing the strongest
values will be realised. This is
• 57% of our income has contractual uplifts, 39% of which are
valuation contribution
inflation linked
• Our portfolio metrics continue to be strong: WAULT 11.4 years, with only
an inherent risk in the industry.
The Board’s aim is to keep this
risk to a minimum through its
asset selection and active
management initiatives.
8.4% of rent expiring within three years
• Portfolio occupancy 98.7%
• 173 occupier initiatives added £5.3 million to contracted rent with an
average WAULT on new lettings of 13.2 years
• We are repurposing a number of historic triple net assets into
convenience led grocery
Decreased risk
The majority of our portfolio
remains strategically aligned
to structurally supported
sectors where the prospects
for value preservation and
growth are significant and
investor demand high.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Property review page 26
Developments page 38
• For the year to March 2021, 98.1% of the rent demanded has been
The Board has no appetite for risk
or is being collected with deferred payment arrangements over
arising out of poor due diligence
£1.5 million. 1.1% of rent has been subject to asset management
processes on acquisitions,
initiatives and 0.4% forgiven. Only 0.4% remains unpaid, some of which
disposals and lettings. A degree
relates to a property where we are obtaining vacant possession for a
of tenant covenant risk and
new letting to Lidl
• The Company has limited exposure to poorly capitalised tenants
most adversely impacted by pandemic disruption
• Dependency on our top ten occupiers is 36% and no single tenant
accounts for more than 8.2% of income
lower unexpired lease terms
are accepted on urban
logistics assets where there is
high occupational demand,
redevelopment potential
or alternative site use.
Decreased risk
Portfolio resilience has been
demonstrated through our
rent collection statistics.
We anticipate no significant
change in this risk over the
next 12 months although
further, extended Covid-19
lockdowns may change this.
Read more:
Chief Executive’s review
page 15
Property review
page 26
Financial review
page 40
9.
Valuation
10.
Transactions
and tenants
76
LondonMetric Property PlcAnnual Report and Accounts 2021 Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
No significant change
Increased risk
Decreased risk
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• The resilience of our portfolio is demonstrated by the £173.7 million
valuation increase in the year, with distribution providing the strongest
valuation contribution
• 57% of our income has contractual uplifts, 39% of which are
inflation linked
• Our portfolio metrics continue to be strong: WAULT 11.4 years, with only
8.4% of rent expiring within three years
• Portfolio occupancy 98.7%
• 173 occupier initiatives added £5.3 million to contracted rent with an
average WAULT on new lettings of 13.2 years
• We are repurposing a number of historic triple net assets into
convenience led grocery
There is no certainty that property
values will be realised. This is
an inherent risk in the industry.
The Board’s aim is to keep this
risk to a minimum through its
asset selection and active
management initiatives.
Decreased risk
The majority of our portfolio
remains strategically aligned
to structurally supported
sectors where the prospects
for value preservation and
growth are significant and
investor demand high.
We anticipate no significant
change in this risk over the
next 12 months.
Read more:
Property review page 26
Developments page 38
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
• For the year to March 2021, 98.1% of the rent demanded has been
or is being collected with deferred payment arrangements over
£1.5 million. 1.1% of rent has been subject to asset management
initiatives and 0.4% forgiven. Only 0.4% remains unpaid, some of which
relates to a property where we are obtaining vacant possession for a
new letting to Lidl
• The Company has limited exposure to poorly capitalised tenants
most adversely impacted by pandemic disruption
• Dependency on our top ten occupiers is 36% and no single tenant
accounts for more than 8.2% of income
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 potential
or alternative site use.
Decreased risk
Portfolio resilience has been
demonstrated through our
rent collection statistics.
We anticipate no significant
change in this risk over the
next 12 months although
further, extended Covid-19
lockdowns may change this.
Read more:
Chief Executive’s review
page 15
Property review
page 26
Financial review
page 40
77
9.
Valuation
Investments may fall
Pressure on NAV
• Our portfolio is predominantly in structurally
in value.
growth and potentially
supported sectors
loan covenants.
Impact on strategy
• Property purchases
Pressure on NAV,
• Thorough due diligence is undertaken on all acquisitions
earnings and potentially
including legal and property, tenant covenant strength
loan covenants.
and trading performance
Impact on strategy
• We screen all prospective tenants and undertake regular
reviews thereafter
10.
Transactions
and tenants
and asset
management
initiatives may
be inconsistent
with strategy
• Due diligence
may be flawed
• Tenant failure risk
• 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 and defensive
capital expenditure
• We monitor tenant covenants and trading performance
• Portfolio tenant concentration 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
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 A review of our risks
Principal risks
Financing risks
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
• 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 as deemed prudent following specialist
hedging advice
• We raised £120 million through an equity placing last May to fund
The Board has no appetite
a pipeline of investment opportunities
• We priced a £380 million private placement in March, upsized
following significant demand, which diversified our existing investor
base. The additional amount raised will enable us to repay our
secured Helaba facility, eliminating future refinancing risk and
extending maturity on the £130 million by eight years
• Post year end we completed the refinancing of revolving credit
facilities with a three year syndicated facility of £225 million and a five
year facility of £175 million. Both have two one year extension options
• We have substantial headroom under our loan covenants.
Loan to value is 32.3%. Interest cover on unsecured facilities is 5.5 times
for imprudently low levels of
available headroom in its
reserves or credit lines. The Board
has some appetite for interest
rate risk. Loans are not fully
hedged. This follows cost benefit
assessment and takes into
account that not all loans are
fully drawn all the time.
Decreased risk
Our significant refinancing
activity has extended debt
maturity whilst maintaining a
broadly similar cost of debt.
We anticipate no significant
change in this risk over the
next 12 months.
Read more
Financial review
page 40
Viability statement
page 67
11.
Capital and
finance risk
78
LondonMetric Property PlcAnnual Report and Accounts 2021 Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
No significant change
Increased risk
Decreased risk
Risk
Impact
Mitigation
Commentary
Appetite
Change in the year
The Company has
Strategy implementation is
• We maintain a disciplined investment approach with
• We raised £120 million through an equity placing last May to fund
a pipeline of investment opportunities
• We priced a £380 million private placement in March, upsized
following significant demand, which diversified our existing investor
base. The additional amount raised will enable us to repay our
secured Helaba facility, eliminating future refinancing risk and
extending maturity on the £130 million by eight years
• Post year end we completed the refinancing of revolving credit
facilities with a three year syndicated facility of £225 million and a five
year facility of £175 million. Both have two one year extension options
• We have substantial headroom under our loan covenants.
Loan to value is 32.3%. Interest cover on unsecured facilities is 5.5 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. Loans are not fully
hedged. This follows cost benefit
assessment and takes into
account that not all loans are
fully drawn all the time.
Decreased risk
Our significant refinancing
activity has extended debt
maturity whilst maintaining a
broadly similar cost of debt.
We anticipate no significant
change in this risk over the
next 12 months.
Read more
Financial review
page 40
Viability statement
page 67
11.
Capital and
finance risk
insufficient funds and
at risk.
available credit.
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
• The availability of debt and the terms on which it is
available is considered as part of the Company’s long
are nurtured
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
• Interest rate derivatives are used to fix or cap exposure
to rising rates as deemed prudent following specialist
making process
hedging advice
79
Strategic reportGovernanceFinancial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 How we govern the business
Governance overview
Board leadership
and Company purpose
Provides an overview of activities
in the year and how the Board has
considered its S172 responsibilities.
81-96
Chair’s introduction
Board of Directors
Management team
Our activities
Our stakeholders
Division of responsibilities
Sets out the leadership framework
and roles of Board members.
97-100
Leadership framework
Leadership roles and responsibilities
Membership and attendance
Composition, succession
and evaluation
Sets out the practices in place which
ensure the Board and its Committees
have the appropriate balance of skills
to govern the business and operate
effectively.
101-107
Nomination Committee report
Composition and succession
Appointments and induction
Diversity and inclusion
Board performance evaluation
80
Audit, risk and
internal control
Sets out how we monitor the Integrity
of the financial statements and oversee
risk management and internal control.
108-115
Audit Committee report
Financial reporting and significant matters
Risk management and internal control
Regulatory compliance
81
84
86
88
90
Remuneration
Sets out our Remuneration Policy on
executive pay and its alignment with
strategy and the wider workforce.
116-133
97
98
Remuneration Committee report
Chair’s introduction
100
Directors’ remuneration at a glance
Implementation of Policy next year
Directors’ Remuneration Policy
Annual Report on Remuneration
Report of the Directors
Sets out our regulatory compliance
and provides details of the 2021 Annual
General Meeting.
134-138
Report of the Directors
Directors’ Responsibilities Statement
101
102
104
104
106
108
110
112
114
116
117
119
120
122
125
134
138
LondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Chair’s introduction
Our clear and strong
governance framework
has been even more
critical over the past year,
in managing the disruption
and uncertainty caused
by the Covid-19 pandemic
and navigating our way
through unprecedented
and challenging times.
The strength of our
stakeholder relationships
and close-knit talented
team has helped us to
make the right decisions
and play our part in
a responsible and
considered way.
Patrick Vaughan
Chair
Good governance principles and practices
underpin the way we manage our business
and drive the delivery of our strategy and
ultimately our long term success.
The Board provides leadership and
direction to the business, establishes and
fosters the culture, values and ethics within
the organisation, and independently
oversees management’s execution
of strategy within an acceptable risk
management framework.
Our response to the Covid-19 pandemic
The impact of the pandemic on our
business, Board and stakeholders’
operations has dominated the year and this
has been reflected throughout this Annual
Report. Our priority has been the safety and
wellbeing of our employees and the needs
of our customers and suppliers, whilst also
doing the right thing for our shareholders
and communities within which we work.
Our flexible working policy meant that we
were well equipped to transition to remote
working from the onset of the first national
lockdown in March 2020 and all employees
continued to work uninterrupted. The Board
continued to operate effectively, meeting
remotely and more frequently to support
the management team and maintain close
oversight of the business and its operations.
A Covid-19 Communities and Charity
Committee was established, and additional
funding and support was provided to NHS
trusts, national charities and foodbanks.
As part of this, the Board and other senior
managers waived 20% of their salary for
three months, providing additional funding
for the Covid-19 charitable cause. It is
also worth noting that we have taken no
Government subsidies or loans, nor have
we furloughed any employees during the
pandemic. We have continued to pay
dividends, in line with our policy, throughout
the year.
Further details on our response to the
Covid-19 pandemic and how we have
considered our stakeholders can be found
on page 19 of the Strategic report and on
pages 90 to 92 of this Governance report.
Board changes and succession
I am very pleased to welcome
Kitty Patmore to the Board as a Non
Executive Director and member of the
Audit Committee. As Chief Financial
Officer of Harworth Group plc and with
15 years of finance, banking and real
estate lending experience, Kitty brings
significant property and capital markets
knowledge and the right personal qualities
to complement and enhance the existing
skill set of the Board. Following Kitty’s
appointment, Andrew Livingston has
stepped down from the Audit Committee
and been appointed to the Remuneration
Committee and Robert Fowlds has joined
the Nomination Committee.
This appointment supports our work on
succession planning for the Board, which
has otherwise been paused through
this period of extreme uncertainty and
disruption, to protect stability in the
leadership team.
Although James Dean has served as a
Non Executive Director for 11 years and his
tenure could appear to compromise his
independence under Provision 10 of the
Code, the Board firmly believes that he acts
in an independent manner at all times and
continues to value his in-depth property
expertise and sound judgement.
Highlights this year
• Oversight of the challenges posed by
the Covid-19 pandemic and impact
to strategy and working practices
• Employee engagement by
the designated workforce
Non Executive Director
• Appointment of Kitty Patmore as
a Non Executive Director
• External review of Board and
Committee performance
• Further monitoring of culture, working
arrangements and employee
wellbeing through feedback from
employee surveys
• 20% of salary waived by the Board and
other senior managers for three months
for Covid-19 related charities
• Approved £120 million equity placing
and £780 million new debt facilities
81
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Chair’s introduction
James will remain as a Non Executive
Director to help navigate through these
uncertain times in the short term.
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.
Our purpose, strategy and culture
We have set out our purpose on page
1 and how this is delivered through our
strategic priorities on page 14 and business
model on page 22.
Despite the unprecedented disruption
to our business operations this year, we
have remained focused and have had
an excellent year, successfully delivering
against our clear strategic priorities of
owning desirable real estate and growing
sustainable income.
We have spent time reviewing our strategy
in the light of the pandemic and its impact
on the global economy and real estate
market, and will continue to invest in our
preferred logistics and long income sectors
and work closely with our occupiers to
maintain occupancy and promptly collect
our rents.
Our purpose
What we do and why
Read more on
page 1
Our values
What we believe in
Read more on
pages 2 to 9
Our culture
The way we work
Read more on
page 93
82
There has never been a more important
time to engage with and look after the
wellbeing of our employees. Staff have
embraced a new way of working, utilising
technology and adopting new processes
to perform their duties remotely.
Our systems and processes allowed us
to function very effectively from home
with minimal disruption to our operations.
Every employee was issued a laptop and
no one at LondonMetric was furloughed or
required to reduce their working hours.
Staff have been encouraged and
supported by a dedicated Senior
Leadership Team, who have fostered an
inclusive working environment through
virtual team meetings, which increased
in frequency throughout the period of
home working, ensuring that the whole
office stayed connected and informed.
This inclusive and cohesive working
culture was reinforced by weekly updates
to all staff from the Chief Executive on
transactions and operational matters
including any proposed changes to
working arrangements. 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.
Having considered feedback from staff
via line managers and from the survey
responses, we decided to reopen both
the London and Birmingham offices when
the Government guidelines permitted, on
a voluntary basis, giving staff the flexibility
of working remotely from home or in the
office. We did not feel our office in central
Birmingham allowed sufficient social
distancing and instead reopened the
former Mucklow head office in Halesowen
for staff.
Feedback from our home working survey
was also instrumental to the decision we
took to upgrade our IT operating systems
to Microsoft 365 and MS Teams last year
and provide a more effective and stable
platform ahead of our return to the office.
Andrew Livingston has been proactive this
year in his role as the designated workforce
Non Executive Director and has hosted a
virtual call for a small group of employees
providing a forum for staff to share their
views, raise any concerns and improve links
between employees and the Board.
He also reviewed the results of the
employee surveys and fed back
conclusions to the Remuneration
Committee and Board. Further details
of employee engagement and wellbeing
can be found on page 93 and in the
Responsible Business and ESG review
on pages 58 to 59.
Read more on employee
engagement and monitoring of culture
page 93
S172 and engaging with our stakeholders
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. The Code
and The Companies (Miscellaneous
Reporting) Regulations 2018 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 56.
On pages 90 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.
Critical to our long term success is the
strength of our stakeholder relationships.
Our exceptional financial and operational
results achieved in this challenging year
are testament to the tireless work of our
talented team and the relationships they
have built with our key stakeholders.
We have worked closely with our tenants
and sought to provide workable solutions
to those most affected and in need.
It was pleasing to see the positive feedback
from our latest occupier survey, with 9.0
out of 10.0 occupiers recommending
LondonMetric as a landlord. We continue
to put our occupier needs at the forefront
of our decision making.
Read more on our occupier
survey page 57
LondonMetric Property PlcAnnual Report and Accounts 2021 Looking ahead
As lockdown restrictions continue to ease
and life begins to return to near normality,
our top priority is always the health and
wellbeing of our staff and we will continue
to take whatever measures are necessary
to safeguard them. We will seek to ensure
the business remains resilient and adapts
to structural, economic and regulatory
changes going forward.
We recognise that our success depends on
a small, dedicated team of individuals with
strong real estate and financial expertise
whose efforts have been unparalleled this
year. I would personally like to thank each
and every one of them for their continued
hard work and dedication during a very
difficult, challenging year and for adjusting
seamlessly to changes in working practices.
I would also like to thank my fellow Board
members for their continued support
and expertise. I am delighted to be
continuing as Chair and look forward to
the opportunities ahead.
Patrick Vaughan
Chair
27 May 2021
We value the support and engagement
we have with our shareholders and are
proud of our comprehensive investor
relations programme. This year, as well as
meeting with 173 investors, we hosted a
number of virtual presentations and calls
with potential lenders in connection with
our new private placement and unsecured
debt facilities, which extended the maturity
of our debt, diversified our lending base
and added a green financing framework
to our borrowings.
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.
Our £120 million equity placing in May 2020
was significantly oversubscribed, reflecting
the support of our investors and similarly our
strong banking relationships have helped
us agree new debt facilities.
There has been an ongoing commitment
to strengthen female representation at
Board level, which has increased this
year to 33% and now meets the Hampton
Alexander target.
External Board evaluation
In line with our three year cycle, this year’s
review and evaluation of performance was
externally facilitated by Independent Audit
Limited. 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 101.
Overall the findings were extremely positive
with no areas of concern. The Board was
praised for responding well to the Covid
challenge and working smoothly in a virtual
world, with notable alignment of thought
between the Non Executive and Executive
Directors. Notwithstanding the notable
strengths, the review guarded against
complacency and suggested that the
Directors should look to keep things fresh
and be open to doing things in a different
way in order to remain resilient. We will
keep this under review as we emerge
from the pandemic and look to learn from
our experiences.
Read more on shareholder engagement
page 95
We have seen much greater focus from
investors on the ESG agenda and have
undertaken a Companywide training
session on ESG matters in order to raise
awareness and discuss specific initiatives
and projects in hand.
On page 50 we outline our commitment to
reducing carbon emissions and our three
ambitions which will allow our operations
to become net zero. We understand the
importance of addressing climate change
and the impact of emissions from real
estate on the UK’s Net Zero Carbon targets.
We will assist our occupiers by providing
buildings that can meet their net zero
targets and will look to reduce emissions
from our developments.
Read more on Net Zero Carbon
page 50
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.
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 102 and Provision 38 in relation to pension contributions as
explained in the Remuneration Committee report on page 118. Pension contributions
for the current Executive Directors will be aligned with the all employee rate from
June 2022.
This report sets out the Company’s governance policies and practices and explains
how the Board discharges its duties, applies the principles and complies with the
provisions of the Code.
83
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Board of Directors
The Board provides leadership and direction
to the team and takes into account the
views and interests of its stakeholders when
making decisions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
84
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
Appointed: 25 January 2013
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
3. Martin McGann
Finance Director
Appointed: 13 January 2010
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 2021 4. Suzanne Avery
Independent Director
Appointed: 22 March 2018
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 together with the
sustainability strategy.
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
6. Robert Fowlds
Senior Independent Director
Chair of Remuneration Committee
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, Nomination Committee
and Remuneration Committee(Chair)
5. James Dean
Independent Director
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
7. Andrew Livingston
Independent Director
Appointed: 31 May 2016
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:
Nomination Committee
and Remuneration Committee
8. Katerina Patmore (Kitty)
Independent Director
Appointed: 28 January 2021
Skills and experience:
Kitty was appointed to the Board on 28 January
2021, joining as part of the Company’s Audit
Committee. Kitty is Chief Financial Officer
of Harworth Group plc and has 15 years of
finance, banking and real estate lending
experience drawn from roles at Harwood,
DRC Capital and Barclays Bank PLC. She was
also formerly a National Director of the
Investment Property Forum.
Board Committees:
Audit Committee
9. 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, including with AXA UK
Limited 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, and has previously worked for
Reuters Group where she was a member of the
Executive Committee.
Other appointments:
Independent Trustee and Deputy Chair of the
University of London. Chair of Finance, Trustee
and Vice Chair of the Harris Federation and
Chair of Governors of Harris Academy Bromley
Board Committees:
Audit Committee (Chair)
and Remuneration Committee
Board independence
Board gender diversity
All employee gender diversity
75%
Independent Non Executive
Directors excluding the Chair
33%
Female representation on the Board,
achieving Hampton Alexander
target this year
45%
Female representation
across the Company
85
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 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.
The team comprises departmental heads from
all key business functions with a diverse range
of skills and experience.
Since the onset of the Covid-19 pandemic
last year, the Senior Leadership Team has
met remotely each week to discuss the key
operational and financial aspects integral to
the management of the business, as reflected
in the chart on page 87.
This has facilitated talent development below
Board level and has helped to promote an
integrated and inclusive culture throughout the
organisation, as key messages and decisions
are fed down from departmental heads to the
wider workforce.
There are informal 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, risk, financial and operating targets
and performance, investment opportunities,
allocation of capital and employee matters.
It provides feedback and makes
recommendations to the Board and is
responsible for identifying and assessing
risk and implementing and monitoring
mitigation processes.
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 periods of enforced lockdown
in the UK in response to the Covid-19
pandemic, all staff have worked remotely and
Committees have met through Microsoft Teams
conference calls.
1. Andrew Jones
Chief Executive
Full biography
page 84
Management Committees:
Investment Committee
Asset Management Committee
Finance Committee
2. Martin McGann
Finance Director
Full biography
page 84
Management Committees:
Finance Committee
3. Valentine Beresford
Investment Director
Joined: 24 March 2010
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
86
LondonMetric Property PlcAnnual Report and Accounts 2021
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
Joined: 15 June 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 responsible day to day for the
portfolio management and performance
of the logistics portfolio. More recently,
the Company has supported Nick through
an EMBA programme.
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
11. Ritesh Patel
Forecasting and Corporate Finance
Joined: 21 November 2011
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
Acquisitions
and disposals
Asset
management,
development
and valuation
Staff
wellbeing
Senior
Leadership
Team
Risk and
mitigation
Financial
forecasts
and results
Cash flow
liquidity debt
87
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Our activities
How the Board spent its time in 2021
Strategy and
operations
Finance
and risk
People and
operations
The
Board
Governance,
leadership and
regulatory
Other
stakeholders
Our strategic priorities
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
88
Strategy and operations
• Review of strategy at each meeting and
the need for any change as a result of the
pandemic and post-lockdown recovery
• Reviewed all non essential capital
expenditure on commencement of the
first UK lockdown to preserve liquidity
• Approved the last phase of speculative
development at Bedford and the pre-let
development at Tyseley
• Approved property acquisitions and
disposals in excess of £10 million including
the portfolio acquisition of five Waitrose
assets for £62 million and the two portfolio
sales totalling £98 million
Finance and risk
• Approved the £120 million equity placing
in May 2020
• Approved the full year and half
year results, the Annual Report and
Viability Statement
• Scrutinised the interim and annual
property valuations
• Annual review of the internal
control framework, risk register and
mitigation strategies
• Considered cyber security and IT remote
working arrangements
• Approved debt refinancing
arrangements and new £780 million
private placement and revolving
credit facilities
LondonMetric Property PlcAnnual Report and Accounts 2021
Governance, leadership
and regulatory
• External Board and Committee
performance evaluation and review
of results
• Approved appointment of Kitty Patmore
as a new Non Executive Director and
member of Audit Committee
• Extended Chair’s appointment for
12 months to 31 March 2022
• Reviewed succession planning and talent
development below Board
• Approved updated tax strategy
People and operations
• Continued to monitor culture by
considering the results of the fourth
annual staff survey
• Considered the results of the
supplementary home working survey
to ensure the remote working measures
implemented in response to Covid-19
were effective
• Andrew Livingston continued proactive
engagement as designated workforce
Non Executive Director by hosting a
virtual call for a small group of employees
This year’s regular and scheduled
meetings were supplemented by a further
Board update on rent collection, operations
and transactions following the onset of the
Covid-19 pandemic.
In addition to the work of the Board noted
on pages 88 and 89, regular matters are
discussed at each meeting including:
• Property market trends focusing on logistics
and retail sectors, as well as the economic
and political backdrop including Brexit and
the Covid-19 pandemic
• Quarterly performance against budgets
• Half yearly presentation of results by
and analyst consensus
Executive Directors to all staff
• Weekly updates from the Chief Executive
throughout the pandemic and period of
remote working
• Considered training and talent
development below Board
• Considered workforce remuneration
policies and packages and alignment
to Executive Directors
Key focus in 2022
• Rolling three year financial forecasts,
liquidity and banking covenants
• Risk dashboard and emerging risks
• Quarterly dividend, scrip and PID
and the continued application of the
dividend policy
• Continue work on succession planning
for the Board and promote diversity at
all levels
• Adopt the use of Sharepoint for
Board papers to improve security
of information
• Increase interaction between the Non
Executive Directors and high potential
middle managers by involving them in
Boardroom discussions
• Promote training and talent
development through guest speakers
and a more structured identification of
training needs
• Continue to monitor the impact of the
Covid-19 pandemic on strategy and
working practices including the return
to the office and the longer term flexible
working plan
• Internal Board and Committee
performance evaluation
Other stakeholders
• Considered feedback from Executive
Directors following shareholder meetings,
roadshows and results presentations
• Met 173 investors and held virtual
presentations and calls with a number of
existing and new lenders in connection
with the new debt facilities
• Considered feedback from occupier and
investor surveys
• Received an ESG update and considered
the Company’s Net Zero Carbon
ambitions and pathway in response
to climate change and increased
investor focus
• Approved Covid-19 Communities and
Charities Committee and agreed a 20%
salary waiver for the Board and senior
manager for three months
• Reviewed and approved S172 Statement
and Directors’ duty to stakeholders
89
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Our stakeholders
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.
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 have continued to embed stakeholder
interests into our operating model and
nurture the strong relationships we have
built with tenants and suppliers to provide
workable solutions through the pandemic.
Stakeholder engagement
We set out in the table below how the
Board has considered the interests of
stakeholders in its engagement and
decision making process during the year.
More information on engagement with
employees and shareholders can be found
on pages 93 to 96. Our S172 Statement is set
out on page 56 of the Strategic report.
All significant Board decisions proposed
must demonstrate that the impact to
stakeholders has been duly considered.
Read more on the following case studies
Responding to stakeholders during
Covid-19 page 19
Bedford Link Logistics Park page 39
Our people
Why they are
important to us
What is
important
to them
How we have
engaged
with them
Our small, hardworking and dedicated team of just
31 employees are critical to our success and the
delivery of our strategy.
We strive to ensure they remain motivated, happy
and safe at work and create opportunities for their
ongoing development and progression.
• Flexible working in a safe and comfortable
• Fair and equal treatment, recognition and pay
environment
• For work to be fulfilling and rewarding
• Opportunities for learning, progression and
career development
• Clear goals and feedback
• Appropriate work-life balance
• Working from home survey undertaken during the first
• Weekly updates from Chief Executive during
lockdown last year
Covid-19 pandemic
• Fourth employee survey undertaken in the year and
results considered by the Remuneration Committee
and Board
• Annual one to one appraisal and review, this year
undertaken virtually
• All staff events including half year and annual
• Workforce NED met virtually with a small team of
results presentations
employees in the year
How they
influenced the
Board’s decision
making
Home working survey results allowed the Board to
make an informed decision about the effectiveness
of employees’ remote working set up and areas for
further improvement including providing additional
equipment and introducing weekly yoga sessions
and personal finance workshops to improve staff
wellbeing and work/life balance.
Decision taken not to furlough any staff.
Workforce NED listened to views and concerns, and
shared feedback with the Board.
A health and safety Covid-19 risk assessment of our
offices was undertaken before returning.
Outcomes
• Staff turnover of 6% over the last eight years
• Microsoft 365 implementation
• No staff furloughed
• Employee survey results pages 59 and 93
• Senior employees participate in LTIP - 68%
• The work of the designated workforce NED page 94
participation page 124
90
LondonMetric Property PlcAnnual Report and Accounts 2021 Our occupiers
Why they are
important to us
What is
important
to them
How we have
engaged
with them
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
• Dedicated CRM and regular ongoing customer
• Annual occupier satisfaction survey in March
liaison and meetings
• Specific discussions during the pandemic on rent
deferral arrangements and other concessions and
support for most affected tenants
• Provided rent free accommodation to assist occupiers
that were fulfilling contracts to help fight against
the pandemic
How they
influenced the
Board’s decision
making
Board received more regular updates on rent
collection through the pandemic.
Rental concessions were given to tenants most in
need, including monthly rent plans, rent deferrals
and rent free periods, alleviating financial pressures
during periods of forced closure and protecting the
Company’s income.
Outcomes
• Exceptionally strong rent collection with 98.1%
• Property satisfaction score of 8.3/10.0
collected in the year
• Landlord recommendation score 9.0/10.0
• Occupier survey results page 57
Our investors
Why they are
important to us
Understanding the views and priorities of our
investors, lenders and partners is fundamental to the
development of our strategy and their continued
financial support.
What is
important
to them
How we have
engaged
with them
• Financial and operational performance
• Clear strategy and consistent execution
and progression
• Dividend and dividend cover
• ESG considerations
• Clear and accurate reporting
• Held virtual calls and briefings with 173 investors
during the year after results announcements
• Head of Investor Relations responds to ESG enquiries
and benchmarks
• Annual and half yearly results presentations
• Significant shareholder contact in relation to Covid-19
• Virtual AGM held in 2020 giving shareholders the
providing trading and rent collection updates
opportunity to submit questions in advance
• Investor survey undertaken in March
• Additional virtual calls and presentations given to
existing and potential debt providers in connection
with the new £780 million private placement and
revolving credit facilities
How they
influenced the
Board’s decision
making
Investor views from roadshows and surveys fed back
to the Board.
Green framework incorporated into new private
placement and revolving credit facilities.
The increased focus on ESG by investors led to a
detailed review of our ESG framework and policy, with
an update presented to Audit Committee in March.
2020 AGM was a closed meeting due to
Government restrictions. 2021 AGM to be held,
allowing shareholders to listen in by conference call
facilities and to submit questions in advance or at
the meeting.
Outcomes
• Regular coverage by 13 analysts
• Dividend paid throughout pandemic
• Investor survey page 60
• £120 million equity raise
• £380m private placement, with £50m green tranche
• £400m revolving credit facility with green framework
91
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Our stakeholders
Stakeholder engagement
Our communities
Why they are
important to us
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.
What is
important
to them
How we have
engaged
with them
• Environmental impact of our work
• Impact on the local economy
• Disruption to daily lives and business operations
• Employment opportunities
• Communities Policy, Charity and Communities
• Charitable giving by the Company and support for
Working Group
staff charitable events
• Continued local community liaison at Bedford, where
we have installed a defibrillator for use by the public,
dog waste bins and information boards and markers
around the reservoir
• Covid-19 Communities and Charity Committee
established and specific charitable giving including
to foodbanks and NHS Trust charities in Dagenham,
Birmingham and Bedford
• Public consultations at New Malden, Weymouth,
• Working with local schools including at Kempston
Birmingham and Orpington
Challenger Academy
How they
influenced the
Board’s decision
making
A companywide ESG training workshop was
arranged for staff which provided a forum to
discuss and understand the Group’s ESG initiatives
and projects.
waive 20% of Board and senior executive salaries
for 3 months to provide further funding for specific
charitable giving.
Covid-19 Communities and Charity Committee
raised Board awareness and led to a decision to
Outcomes
• School workshop arranged through new Speakers for
• Donation towards careers platform and laptops at
Schools relationship
• Companywide ESG training
• ESG targets set for employees
Kempston Academy
• £127k fund for Covid-19 charitable causes
Our contractors and suppliers
Why they are
important to us
Being a small team, we are supported by a diverse
group of key suppliers including contractors,
professional advisors and agents.
What is
important
to them
How we have
engaged
with them
• Fair payment terms and prompt settlement
• Good, effective and stable working relationship
• Long term partnership
• Signatory to the UK Prompt Payment Code
• Annual health and safety audits
• Close involvement of development team
• Annual supplier audit undertaken on a
with contractors
key subcontractor
• Annual Contractor review at Tyseley
• Board receives regular presentations and updates
• Health and Safety Policy updated
from external advisors including valuers, auditors and
remuneration consultants
How they
influenced the
Board’s decision
making
Reviewed committed capital expenditure at onset
of the pandemic to preserve liquidity.
Supported our contractors through
lockdown restrictions.
Employment opportunities created as a result
of Board’s decision to progress with speculative
development at Bedford. See case study on
page 39.
Outcomes
• Average supplier payments settled in 12 days
• Fully complied with Responsible Development
Requirements for those completed in the year
92
LondonMetric Property PlcAnnual Report and Accounts 2021 Employee engagement and
monitoring of culture
There has never been a more important
time to engage with and look after the
wellbeing of our employees since the
onset of the Covid-19 pandemic and the
challenges and restrictions it has placed
upon each and every one of us this past
year. We are a small team of talented and
dedicated individuals who work closely
together alongside the Executive Directors
in our day to day activities. Our continual
low staff turnover rates are testament to an
extremely loyal workforce.
We have fully embraced the challenges
imposed by the pandemic and lockdown
restrictions and have enabled every
member of the team to continue in their
usual role albeit remotely, by ensuring every
employee has a laptop and the necessary
IT infrastructure in place. No one at
LondonMetric was furloughed or required
to reduce their working hours.
Virtual meetings of the various leadership,
asset management, investment and
finance teams increased in frequency,
ensuring the whole office stayed
connected and reinforced the importance
we place on having an inclusive and
cohesive working culture. The Chief
Executive sent weekly email updates
to all staff throughout the pandemic
and periods of home working to ensure
everyone was kept informed of business
developments and transactions as well
as any proposed changes to working
arrangements. The Executive Directors
kept in regular contact with individuals
and teams, enquired about staff wellbeing
and welcomed their views and feedback.
This feedback, coupled with the results of
the two surveys undertaken in the year and
as detailed below, was instrumental to the
Board’s decision to reopen the London and
Birmingham offices when the Government
guidelines permitted, and on a flexible
basis, giving employees the option of
returning to the office or continuing to work
at home, or adopting a combination of
the two. Furthermore, the Board decided
to reopen the former Mucklow head office
in Halesowen for the Birmingham team, as
the central Birmingham office that they had
occupied since December 2019 did not
allow sufficient social distancing measures
to be incorporated and adequately
protect staff.
Another outcome from our supplementary
staff home working survey that was
undertaken in May, ahead of our plans for
reopening the office, was the realisation
that our IT operating and remote working
platform might be less secure when
used for virtual meetings both inside the
London office and remotely at home.
We commissioned our IT support specialists
to investigate alternative options which
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
Formal
whistleblowing
policy
Management team
invited to Board
and Committee
meetings
Open door
culture
led to the implementation of Microsoft 365
and MS Teams over the summer. MS Teams
provides an integrated and stable
operating platform and an improved cloud
based storage solution.
More recently, the Board has decided to
reopen the London and Birmingham offices
on a voluntary basis for staff wishing to
attend, with enforced Covid-19 lateral flow
testing twice weekly being a requirement
in accordance with recommended best
practice for those who have not received
a vaccination.
Employee engagement survey
We undertook our fourth annual employee
satisfaction survey in February this year.
The feedback was very positive with all
employees feeling happy and proud
to work for LondonMetric and the vast
majority of answers being ahead or in line
with last year. The team at LondonMetric
remains highly supportive of the Company,
its strategy, management and actions.
As in previous years, the survey covered
three key areas:
• The Company
• The working environment
• The individual
Overall, 85% of the workforce were positive
about the Company, an increase of 16%
over the previous year. All employees
enjoyed working for the Company and
have confidence in the decisions made by
senior management.
This year the survey focused on home
working as opposed to office environment,
with 84% of staff agreeing that systems and
processes were working effectively and 87%
happy with their home working set up.
2021 survey
100%
enjoy working at London Metric
93
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Our stakeholders
The largest improvements in the year
included staff feeling they are treated fairly,
which at 97% was a 54% improvement on
last year, and the organisation prioritising
the long term over the short term, which
also saw a 54% increase to 74%.
There were also three main areas identified
for improvement, being the Company’s
environmental considerations, flexible
working post lockdown and staff training.
Andrew Livingston, the designated
workforce Non Executive Director, reviewed
the results with the Strategy Director
and thereafter presented to the Board
for discussion.
As a direct result of this employee feedback
and following further staff discussions, we
have improved the ESG workstreams across
the business, will work with the entire team
to define our long term work from home
policy, ensuring our processes are optimised
to support the agreed policy, and we will
seek to promote training and learning
through external speakers and a more
structured identification of training needs
through the appraisal process.
Our improved ESG workstreams have led to
the following specific actions:
• Sustainability related targets set for
all employees;
• Committed to three Net Zero Carbon
ambitions; and
• Put in place £450 million of debt facilities
with a green financing framework.
Further details can be found on page 48
There are also many ad hoc opportunities
for other Non Executive Directors to engage
with employees and monitor culture,
including as part of our Board induction
process and at property site visits.
In addition, staff below Board level are
invited to attend and present at Committee
meetings. This year the Head of Investor
Relations, Head of Finance and other
finance team members attended Board
and Committee meetings to discuss
relevant operational topics including ESG,
cyber security and tenant covenants.
94
The work of the designated NED
In 2019 Andrew Livingston was appointed
as designated workforce Non Executive
Director. His role was set out by the Board
and specifically included the following:
• Attendance at all staff results
presentations to facilitate his integration
and give staff the opportunity to get to
know and liaise with him;
• Monitor the results of employee
engagement surveys and any actions
arising; and
• Feedback to the Board at meetings any
staff concerns and the results of surveys
and other liaison at least annually.
Last year Andrew held an informal lunch
for a group of employees away from
the office.
This year, despite the challenges of the
pandemic, he has continued to be
proactive and has hosted a virtual call
for nine people across all disciplines of
the Company.
This was an opportunity for staff to speak
freely and openly and topics discussed
included the staff survey, experiences
of working from home and technical
support, the work-life balance, returning
to the office and longer term opportunities
for different ways of working and business
in general.
Some comments from staff fed back
to the Board by Andrew included
the following:
• The Mucklow integration had been a
great success;
• The business was on course with its
strategic objectives;
• Staff appreciated the Chief Executive’s
regular sharing of business updates
throughout lockdown and guest
external speakers on personal finance
arranged by the Company; and
• Staff noted the frustration of having
to juggle work and home schooling
in lockdown.
LondonMetric Property PlcAnnual Report and Accounts 2021 Shareholder engagement
Understanding the views of investors
continues to be a top priority for the
Board and vital to the Company’s
strategic direction and success.
Regular communication is undertaken by
the Chief Executive and Finance Director
who, along with the Head of Investor
Relations, are the Company’s principal
representatives and hold meetings
throughout the year to communicate the
Company’s strategy and performance.
In addition, this year the Senior
Independent Director, Robert Fowlds, also
attended five investor virtual meetings
following the year end and half year
results announcements.
We continue to enjoy strong analyst
coverage with 13 brokers covering us, which
is unchanged on the prior year.
Investor meetings
The framework of investor relations is set
around the financial reporting calendar
and at other times outside of half yearly
results announcements in response to ad
hoc requests.
This year, despite the impact of the
pandemic and our ability to physically
meet investors, we met with 173 UK and
overseas shareholders, analysts and
potential investors virtually by telephone or
video conference. The Executive Directors
presented our annual and half yearly results
via a live video webcast and Q&A sessions
for analysts.
A breakdown by type of investor seen is
shown in the chart on page 96.
Approximately 20% of investors met were
overseas based. In addition, we consulted
with a number of our larger shareholders on
our equity placing and presented to nearly
300 investors at five virtual conference
events in the year.
Presentations were also given to 44
potential debt providers in connection with
the new private placement as described
on page 49 and in the Financial review on
page 40.
The Company continues to place great
importance on and engage with its private
wealth shareholders, which represented
half of all shareholders met during the year.
Annual General
Meeting
Annual and
half year
results presentations
Investor
roadshows,
conferences and
meetings
Consultation
on equity placing
How do we
engage with our
shareholders?
Property
tours
Investor survey
Senior
Independent
Director
Corporate
website
Meetings and roadshows seek to keep
investors informed of the Company’s
performance and plans, answer questions
they may have and understand their
views. Specific topics discussed include
the development and implementation
of strategy, financial and operational
performance, property transactions, the
strength of our underlying occupiers and
rent collection, our debt structure and ESG
considerations, which are increasingly at
the top of investors’ priority lists.
Investor site visits
Tours provide an opportunity to see
our assets, understand strategy and
meet the senior management team.
However this year, due to lockdown and
social distancing restrictions, we were
unable to arrange any property visits.
We will look to restart property tours as
soon as Government guidelines allow.
Investor feedback
Investor feedback is provided by the Chief
Executive 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 conducted its
second ESG survey of investors and shared
its draft Net Zero Carbon framework in
advance of formalising it. The feedback
continued to be very supportive of our
strategy 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.
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.
95
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Board leadership and Company purpose
Our stakeholders
Scrip dividend
We continue to offer a scrip dividend
alternative to shareholders, which enables
them to opt for shares rather than cash with
no dealing costs or stamp duty. The scheme
was renewed for a further three years at the
last AGM in 2020. Full details are available
on our website.
Equity placing
In May 2020, we successfully raised
gross proceeds of £120 million through
an equity placing that was substantially
oversubscribed. A total of 66.7 million new
ordinary shares were issued at a price of
180.0p per share, representing a discount
of 1.5% to the previous day’s closing share
price. The net proceeds after issue costs of
£116.6 million were used to acquire income
producing assets.
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.
Shareholders were not able to attend the
2020 AGM due to Government guidance
in place at the time. However they were
able to submit questions in advance of the
meeting with answers available shortly after
on our website.
Equity Investors met by type of investor
4
It is intended that this year’s AGM will be
convened with the minimum quorum
of shareholders present and we would
strongly recommend that shareholders
do not attend and exercise their votes in
advance by proxy. Shareholders will be
able to listen in by conference call facilities
and to submit questions in advance by
emailing info@londonmetric.com or by
asking questions on the day through
the conferencing facilities. Details of the
resolutions to be proposed and voting
details can be found in the Notice of AGM
on pages 186 to 191. 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.
Key shareholder events
throughout the year
Q1 • Covid-19 trading update
• £120 million equity placing
• Full year 2020 results and
analysts presentation
• Investor full year roadshow
Q2 • Annual General Meeting
of shareholders
• Rent collection update
Q3 • Rent collection update
• Half year results and
analysts presentation
• Half year investor roadshow
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.
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
focuses on the Group’s longer term
strategy; and
• The risk register and dashboard
includes consideration of both short
and longer term emerging risks.
Despite the challenges imposed by the
Covid-19 pandemic, we have once
again delivered a strong set of financial
results and portfolio metrics.
The portfolio has grown by 10% 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 1 to 79 and our longer term
focus and success is evidenced by
the Performance highlights and Key
performance indicators on pages 10
and 24 respectively.
3
2
1
Q4 • Rent collection update
• Debt investor presentations
to 44 potential private
placement debt providers
1
2
Private wealth
Specialist institution
3 Generalist institution
4
Broker
96
50%
28%
18%
4%
LondonMetric Property PlcAnnual Report and Accounts 2021 Division of responsibilities
Leadership framework
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.
Board Committees
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, capital
markets, 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 1.
Read more on
Our activities page 88
Board biographies pages 84 – 85
Leadership roles & responsibilities
page 98
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
Chair: Rosalyn Wilton
Remuneration Committee
Nomination Committee
Chair: Robert Fowlds
Chair: Patrick Vaughan
The Audit Committee has oversight of the Group’s
financial 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 certain members of the
Senior Leadership Team
• 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
Read more on
page 108
Read more on
page 116
Read more on
page 101
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 three sub-committees,
focusing on different areas of the business.
•
Implementation of strategy
• Sets budgets and monitors operational and
financial performance
•
Identifies and assesses business risks and implements
mitigation strategies
• Day to day management of the business
• Responsible business and ESG workstreams
• Manage, appraise and develop staff
• Employee remuneration and wellbeing
• Manages allocation of capital
Read more on
page 86
Investment Committee
Asset Management Committee
Finance Committee
Chair: Valentine Beresford
Chair: Mark Stirling
Chair: Martin McGann
• Reviews investment and divestment opportunities
• Reviews value enhancing operational activities
and allocation of capital
and development opportunities
• Reviews budgets and forecasts, achievement
of targets, funding requirements and liquidity
• Approves transactions of less than £10 million
and recommends higher value transactions
to the Board
97
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021
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
Chair
Patrick
Vaughan
Responsibilities
• Leads the Board and ensures it operates effectively
• Sets Board culture, style and tone of discussions to promote
boardroom debate and openness
• 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
• 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
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 individual Directors
outside of formal Board meetings, which
ensures he is kept abreast of individual
views, any issues arising and fosters an
open and two way debate about Board,
Committee and individual members’
effectiveness.
During the year, the Chair hosted a virtual
meeting for the Non Executive Directors
without the Executive Directors present
to encourage and facilitate debate
and challenge.
• Monitor delivery of agreed strategy within the risk and control
Board meetings
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
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.
Whilst strategy is considered at every
Board meeting encompassing topics
such as market conditions and outlook,
investment opportunities, capital
allocation and emerging risks, one
meeting each year focuses on strategy
to ensure it remains relevant and adapts
to changing economic, political and
environmental conditions.
The focus this year was the impact of
Covid-19 and the outlook after the easing
of lockdown restrictions.
Non Executive
Directors
Suzanne Avery
James Dean
Robert Fowlds
Andrew
Livingston
Kitty Patmore
Rosalyn Wilton
Senior
Independent
Director
Robert Fowlds
Designated
Workforce NED
Andrew
Livingston
Company
Secretary
Jadzia Duzniak
98
LondonMetric Property PlcAnnual Report and Accounts 2021 The Board considers the Company’s
stakeholders in its discussions and takes
account of their views when making
decisions along with any specific feedback
from employee, occupier and investor
surveys and meetings as described in detail
on pages 90 to 92 and in the Responsible
Business and ESG review on pages 57 to 61.
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 and Committee
meetings and present on topics of
relevance, fostering talent development
below the Board and bringing fresh ideas
and wider perspectives to discussions.
This also promotes the interaction of Non
Executive Directors with senior managers
throughout the organisation.
This year the Head of Investor Relations,
Head of Finance and other members of
the finance team attended Committee
meetings to discuss relevant operational
topics including ESG, cyber security and
tenant covenants.
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 100.
Directors attended all meetings they were
eligible to attend in the year.
Non Executive Directors
The Non Executive Directors are a diverse
group with a wide range of business
experience encompassing property,
finance, banking, capital markets,
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. Although no such
requests were received from shareholders
in the year, Robert attended five investor
calls following the announcement of results.
Robert also hosted a virtual meeting of the
Non Executive Directors, to appraise the
performance of the Chair as part of the
annual performance evaluation.
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 Leadership
Team 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 property visits wherever
possible and provides further opportunity
to mix with senior management. Due to
lockdown restrictions imposed this year, only
one property tour was arranged post year
end in April. Robert Fowlds and Suzanne
Avery accompanied the Chief Executive,
Asset Director and two managers to our
development site in Bedford.
In addition, Suzanne Avery and Kitty
Patmore provided assistance to the
Finance Director and wider team in
connection with the refinancing of debt
facilities. Suzanne also liaised with the
Head of Finance on diversity reporting
and the Head of Investor Relations on the
ESG agenda.
How we make decisions
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, capital
allocation and dividend policy. In addition,
decision making for acquisitions, disposals
and capital expenditure is delegated
according to value. The delegated
authority limits throughout the business
are as follows:
Board
Over £10m
Chief Executive
Over £2.5m
Senior Leadership Team
Over £30k
Departmental manager
Under £30k
99
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Division of responsibilities
Leadership roles and responsibilities
Membership and attendance
The number of Board and Committee members and their attendance during the year was
as follows:
Date
appointed
Tenure
(years)3
Independent
Board2
Member
Chair
Patrick Vaughan
Executive Directors
Andrew Jones
Martin McGann
Non Executive Directors
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Kitty Patmore
Rosalyn Wilton
13/1/2010
25/1/2013
13/1/2010
22/3/2018
29/7/2010
31/1/2019
31/5/2016
28/1/2021
25/3/2014
11
8
11
3
11
2
5
–
7
n/a
No
No
Yes
Yes
Yes
Yes
Yes
Yes
75%
6 (6)
6 (6)
6 (6)
6 (6)
6 (6)
6 (6)
6 (6)
1 (1)
6 (6)
Percentage independent1
1 Based on Board members as at 31 March 2021
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 2021,
rounded to the nearest whole year
Independent advice
Conflicts of interest
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 auditor, Deloitte LLP, and
remuneration advisors, PwC.
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.
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 equity placing, debt refinancing,
talent development, the ESG agenda,
corporate governance, cyber security
and tenant covenants.
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.
100
LondonMetric Property PlcAnnual Report and Accounts 2021 Composition, succession and evaluation
Nomination Committee report
Our focus this year has
been the composition
and diversity of the Board
and I am pleased to
welcome Kitty Patmore
as a Non Executive
Director and member
of the Audit Committee.
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
Robert Fowlds
Date
appointed
1/11/2012
19/9/2018
31/1/2019
28/1/2021
Tenure
(years)1
Meetings
attended2
8
3
2
–
3 (3)
3 (3)
3 (3)
0 (0)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2021, 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,
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 Board and Committee membership changes
Read more
pages 102 – 104
Diversity
• Promote the Company’s policy on diversity at Board level and
Read more
pages 104 – 105
throughout the organisation
Performance evaluation
• Lead the Board and Committee performance
evaluation exercise
Read more
pages 106 – 107
Re-election of Directors
• Assess the time commitment required from Non Executive
Read more
page 107
Directors and consider their annual re-election
Highlights in 2021
• Considered Board diversity and succession and recommended the appointment
of Kitty Patmore to the Board and Audit Committee
• Led the external Board and Committee performance evaluation
• Reviewed talent development and training below Board
Focus in 2022
• Succession planning for the Board
• Continue to promote diversity, not limited to gender, throughout the
wider organisation
• Continue to develop talent below the Board and increase the interaction between
Non Executive Directors and high potential middle managers by involving them in
Boardroom discussions
• Internal Board and Committee performance evaluation
101
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Composition, succession and evaluation
Nomination Committee report
Dear Shareholder,
As Chair of the Nomination Committee,
I am pleased to present our report for
the year to 31 March 2021.
Our work this year has focused on Non
Executive Director succession planning
and Board diversity, which led to the
appointment in January 2021 of Kitty
Patmore as a Non Executive Director and
member of the Audit Committee.
The Committee also led its three yearly
externally facilitated evaluation of Board
and Committee performance as described
on pages 106 to 107.
The findings were extremely positive and we
have concluded based on the review that
the Board and Committees continued to
operate well together.
I would like to thank my fellow Board
members for their co-operation and
valuable input to this exercise and
Independent Audit Limited (‘IAL’) for their
honest and informative review.
Looking forward, our work on succession
planning and developing talent will
continue to be a key area of focus and
we will continue to promote diversity
in its widest sense and not limited
to gender as we search for suitably
experienced replacements.
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, succession
and talent development
The Committee monitors the tenure of
Directors to ensure it adequately plans in
advance of retirement and facilitates an
orderly succession.
It discusses Board and Committee
composition, size and structure at
each meeting.
This year, we have continued to focus on
the benefits diversity brings to the Board
and workforce.
We are delighted to welcome Kitty to
the team. She brings with her a wealth of
property and capital markets knowledge
through her current role as the Chief
Financial Officer of Harworth Group plc and
over 15 years of finance, banking and real
estate lending experience.
Her appointment supports our work
on succession planning and Board
refreshment, which has otherwise been
paused in order to protect the stability in
the leadership team while we navigate the
disruption and uncertainty caused by the
Covid-19 pandemic.
Following Kitty’s appointment, Andrew
Livingston has stepped down from the
Audit Committee and been appointed
to the Remuneration Committee
and Robert Fowlds has joined the
Nomination Committee.
We continue to be mindful of Provision 10 of
the Corporate Governance Code relating
to tenure and independence as James
Dean has served on the Board for over
ten years.
The Committee and Board firmly believe
that James acts in an independent
manner at all times and continue to
value his in-depth property expertise and
sound judgement.
James will remain as a Non Executive
Director in the short term to help
navigate through these uncertain and
unprecedented times.
From a governance perspective, 75% of
the Board excluding the Chair comprises
independent Non Executive Directors in
accordance with the Code.
Having served as a Board Director now for
11 years, the length of my tenure does not
comply with Provision 19 of the Code, as
set out in the Statement of Compliance on
page 83.
However, the Nomination Committee has
concluded that due to the disruption and
uncertainty caused by the pandemic, it
was in the best interests of the Company for
me to continue in office and maintain the
appropriate stability in the leadership team.
Accordingly, the Board has extended my
Contract for Services for another year to
31 March 2022 and have advised me that
they do not believe my independence,
objectivity and judgement is compromised
by the length of my service.
Following the IAL review which reported
favourably on my leadership as Chair,
Robert, as Senior Independent Director, led
a review of my performance with the other
Non Executive Directors. As part of this they
considered my tenure and independence,
as reported on page 107.
As we emerge from the pandemic and
return to more normal working conditions,
the Nomination Committee will continue its
search for my successor.
Its priority will be to appoint the right
candidate with the necessary expertise,
character and personal attributes to
complement and lead the team.
I will remain in office as long as necessary in
order to facilitate an orderly and planned
succession with minimal business disruption.
102
LondonMetric Property PlcAnnual Report and Accounts 2021 Executive succession planning
Below the Board, succession planning is
delegated to the Senior Leadership Team
which includes the Executive Directors, 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.
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 in and outside of
meetings, through presentations, property
tours when permitted and at other times
to discuss specific issues, which this year
included the ESG agenda, cyber security,
tenant covenants and refinancing.
Although there are no immediate
vacancies 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.
The Chief Executive has discussed
succession planning below Board level with
Board members and the Remuneration
Committee has also considered alignment
of pay and incentives.
Training and development of talent below
Board was considered by the Committee in
January and a short paper was prepared.
Training needs and requests can be
raised and discussed through the annual
appraisal process or at other times to line
managers. The Company has supported
one member of the Senior Leadership
Team through an MBA programme and is
currently supporting two female members
of staff, both financially and as a mentor,
through the AAT accountancy qualification
and RICS professional qualification,
supporting the Real Estate Balance initiative
of developing a female talent pipeline.
1
2
A balanced Board
Board composition
3
1 Chair
2
3
Independent Non
Executive Directors
Executive Directors
Total
Board tenure
4
3
2
1
2
3
4
0-3 years
3-6 years
6-9 years
10+ years
Total
1
6
2
9
1
3
1
2
3
9
Board gender diversity
2
11%
67%
22%
1 Male
2
Female
Total
1
6
3
9
67%
33%
Board skills (%)*
78%
56%
22%
22%
11%
1
2
3
4
5
33%
11%
22%
33%
1
2
3
4
5
Property
Finance & banking
Risk management
Sustainability
Retail
7
5
2
2
1
78%
56%
22%
22%
11%
* Some Directors are represented in more than one
category in terms of their expertise.
103
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Composition, succession and evaluation
Nomination Committee report
Board appointment and induction
At our meeting in September, we
considered the composition of the
Board, future succession planning and
tenure, and our aspiration of complying
with the Hampton Alexander diversity
targets. As a result of this review, we
began the search for a new Non
Executive Director, with particular focus
on accounting and financial skills,
exposure to our preferred retail long
income and logistics property sectors
and the right cultural fit. We decided to
first explore recommendations made
through Board contacts and advisors
to save on the substantial recruitment
costs and better assess the cultural fit,
and if no suitable candidates could be
identified then look to appoint a suitable
headhunter. Various recommendations
were considered including Kitty who was
introduced through our corporate brokers.
The Finance Director proposed Kitty as
a candidate to the Board, given her
personal attributes, values, skills and
experience. Interviews were conducted
by the Finance Director, Chief Executive,
Senior Independent Director and
Nomination Committee members, who
were very pleased with the proposal and
recommended her appointment. As Chief
Financial Officer of Harworth Group plc
and with 15 years of finance, banking and
real estate lending experience, Kitty brings
significant property and capital markets
knowledge and the right personal qualities
to complement and enhance the existing
skill set of the Board.
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.
Induction programme
Key induction events for Kitty included
the following:
• One to one meetings with the Finance
Director, Company Secretary and other
members of the Senior Leadership Team
to discuss:
• the investment portfolio, asset
selection, capital allocation
and strategy;
• financial forecasting and reporting
processes, banking and hedging
strategy, risks and internal controls
and regulatory matters; and
• shareholder engagement and
ESG matters.
• Provision of past Board and Committee
papers, minutes and finance reports
• Guidance and information on annual
Board timetables, governance
processes, S172 responsibilities and
regulatory procedures including
share dealing
• Meeting with external audit partner
• Property tours to be arranged as soon
as permitted
Kitty Patmore
Non Executive Director
and member of the
Audit Committee
Appointment process
1
2
3
4
5
6
7
Committee discussion of
candidate specification and
required skill set
Consider recommendations
through Board contacts and
advisors and/or search agency
Review a shortlist of potential
candidates for initial interviews
with Executive Directors, the
Senior Independent Director and
Nomination Committee
Final proposal circulated with CV
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
Board training
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 Corporate Governance Code,
ESG, cyber security, tenant covenants
and refinancing.
Diversity and inclusion
The Board recognises the importance
of diversity and the benefits it brings to
the organisation in terms of skills and
experience, differing perspectives, fresh
ideas and constructive challenge to
established behaviours and ultimately
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 making
appointments. It applies the principles
of the Company’s Diversity and Inclusion
Policy, which is publicly available on
our website, when considering any new
appointments. However, we also 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 at 6% on average over the
past eight years signifies a loyal and content
104
LondonMetric Property PlcAnnual Report and Accounts 2021 workforce, but recognise that this also
constrains the pace of change.
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.
The charts opposite reflect the gender
diversity of the Board, Senior Leadership
Team and across the Company.
I am delighted to report that we have
met the Hampton Alexander target of
33% female representation on FTSE 350
company boards this year. There has been
an ongoing commitment to strengthen
female representation at Board level, which
has increased from 9% in 2017 to 33% today.
We remain committed to increasing gender
diversity throughout the Senior Leadership
Team and wider organisation when
suitable vacancies exist and appropriate
candidates can be 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 results which included
questions on inclusion and wellbeing, as
discussed on pages 59 and 93, reinforces
this culture with all employees feeling proud
and happy to work at LondonMetric and
recommend the Company to others.
Further information on the Company’s
commitment to promoting diversity and
inclusion is included in the Responsible
Business and ESG review on page 58 and in
the Employee engagement section of this
report on pages 93 to 94.
Gender balance
Board
2
All employees
2
1 Male
2
Female
Total
1
6
3
9
67%
33%
1 Male
2
Female
Total
1
55%
45%
17
14
31
Senior leadership team
Senior leadership team and direct reports
2
2
1
1 Male
2
Female
Total
7
2
9
78%
22%
1 Male
2
Female
Total
1
14
6
20
70%
30%
105
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Composition, succession and evaluation
Nomination Committee report
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, this year’s
review and evaluation of performance
was externally facilitated by Independent
Audit Limited (‘IAL’). Having undertaken
our 2018 review, the Board felt that they
were best placed to consider how we have
and should continue to evolve. IAL has
no connection with the Company or
any Director.
The process involved a comprehensive
review of Board, Committee and other
financial documents and reports followed
by a series of one to one meetings with the
Directors, Company Secretary, members
of the Senior Leadership Team and
external advisors. In addition, IAL attended
a full Board, Remuneration and Audit
Committee meeting.
IAL sent their detailed report to me
as Chair and presented their findings
and recommendations to the Board in
January 2021.
Overall the results were extremely positive
with no significant areas of concern.
The review concluded that there is an
excellent level of alignment between the
Non Executive and Executive Directors
as regards the strategic direction
and execution.
Key strengths were noted as strong
leadership of the Board, a balanced
composition in terms of relevant skills,
open and transparent dialogue during
well chaired discussions, robust challenge,
effective Committees, well presented
briefing papers and good support from the
Finance Director and Company Secretary.
The Board was praised for responding
well to the Covid challenge and working
smoothly in a virtual world.
Notwithstanding these strengths, the
review guarded against complacency
and suggested that the Directors should
look to keep things fresh and be open to
doing things in a different way in order to
remain resilient.
The Board welcomed IAL’s
recommendations for continued
development to its practices and
procedures which are listed on page 107.
Progress will be reported at future meetings.
Year 1
Independent
externally
facilitated
review
Year 3
Internal review
to focus on
progress against
years 1 and 2
Year 2
Internal review
to monitor progress
and any new
issues raised
106
2021 Performance evaluation
findings and recommendations
The key findings and recommendations
from the 2021 external Board evaluation
review are listed below.
Key findings
• Non Executive Directors have an
excellent range of complementary and
relevant skills including capital markets,
risk and property, and there is good
gender diversity.
• The Chair’s leadership is held in high
regard and the Executive Directors
value his wise counsel outside of the
boardroom. All Directors agreed that it
was in the Company’s best interest to
retain him beyond the nine year best
practice limit in order to benefit from his
wisdom and experience.
• Relationships on the Board are strong,
particularly between the Chair and
the Chief Executive, but also between
the Non Executive Directors and the
Executive Directors. Management value
the input and challenge from the Non
Executive Directors and the frequent
and informal contact outside of
scheduled meetings.
• The Chief Executive continues to enjoy
the respect of the Non Executive Directors
for his outstanding leadership of a stable
and high performing team.
• The Committees continue to
function well.
• The Company Secretary and Finance
Director provide excellent support to the
Board and ensure they focus on all the
main areas of responsibility.
• There is full alignment between Non
Executive Directors and the Executive
team on strategy and the Board has
responded well to the Covid challenge
and video meetings.
• Thorough consideration is given to
balancing the needs of employees,
investors and tenants and considerable
work has been done to address
ESG matters.
LondonMetric Property PlcAnnual Report and Accounts 2021 The review of individual Directors was
outside the scope of the external review.
I met with all Non Executive Directors
individually this year to provide feedback
and discuss their contribution both in
and outside of meetings, as well as any
future expectations.
Robert Fowlds, as Senior Independent
Director, also led a discussion with the Non
Executive Directors on my performance
as Chair.
Feedback provided to the Board noted
the extensive knowledge and experience
gained through a 50 year career in the
property industry, including being co-
founder and CEO of three listed property
companies, supported by IAL’s findings
that my leadership continues to be held
in high regard and the Executive Directors
continue to value my engagement and
wise counsel outside of the Boardroom.
Election and re-election of
Directors
Following the Board evaluation and
appraisal process, the Committee
concluded that each of the Directors
seeking election and re-election
continues to make an effective 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 election
and re-election at the forthcoming AGM on
13 July 2021 and I encourage shareholders
to support us and vote in favour of
these resolutions.
Patrick Vaughan
Chair of the Nomination Committee
27 May 2021
Key recommendations in 2021
• Ensure the process for sourcing new
Non Executive Directors continues
to promote fresh perspectives and
diversity of thought and ethnicity.
• Increase opportunities for high
potential managers to participate in
Boardroom discussions and regularly
interact with Non Executive Directors.
• Ensure Board debates continue to
be focused and current, including
topics such as ESG and employee
engagement and undertake more
‘deep dives’ on relevant themes.
• Consider a new innovative approach
to the annual discussion on strategy,
refreshing the format and location
to stimulate debate on the future of
the business.
• Keep the tenure of the Chair under
review and put in place a plan to
ensure a smooth succession when the
time is right.
• Invite external speakers from time to
time to Board meetings to broaden
discussions and promote wider
thinking and a different view.
• Introduce a Board portal to improve
security of information.
Progress against the key points arising
from last year’s review is reflected in the
table below.
Recommendation in 2020
Progress in 2021
Continue with succession planning for
the Board
Board refreshment programme continued
with the appointment of Kitty Patmore to
the Board and Audit Committee
Annual strategy specific meeting would
be beneficial
Annual strategy update by the
Chief Executive in March 2021
Involvement of other Senior Leadership
Team members in the investor relations
programme
Head of Investor Relations now regularly
attends calls and meetings alongside
Chief Executive and Finance Director
Dinners to be arranged for Non
Executive Directors only and for the
whole Board, outside of scheduled
meetings, to facilitate informal discussion
and debate
Non Executive Director only virtual
meeting held in the year. A Non Executive
Director only dinner to be arranged when
restrictions allow
Discussions between individual Directors
outside of scheduled meetings to be
relayed at Board meetings
Noted by Directors and relevant matters
discussed relayed at Board and/or
Committee meetings
107
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Audit, risk and internal control
Audit Committee report
Membership and attendance
The number of Committee members and their attendance during the year was as follows:
Member
Rosalyn Wilton (Chair)
Andrew Livingston (resigned 28/2/2021)
Suzanne Avery
Robert Fowlds
Kitty Patmore
Date
appointed
25/3/2014
31/5/2016
22/3/2018
31/3/2019
28/1/2021
Tenure
(years)1
Meetings
attended2
7
5
3
2
–
5 (5)
4 (4)
5 (5)
5 (5)
1 (1)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2021, 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 and risk
management framework
• Ensure risks are carefully identified, assessed and mitigated
• Assess the need for an internal audit function
Read more
pages 110 – 112
Read more
pages 112 – 113
External auditor
• Review the performance, independence and effectiveness of
Read more
pages 113 – 114
the external auditor and audit process
Regulatory compliance
• Review the Viability Statement and going concern basis
Read more
pages 114 – 115
of preparation
• Consider whether the Annual Report is ‘fair, balanced
and understandable’
• Monitor compliance with applicable laws and regulations
Highlights in 2021
• Considered the impact of the Covid-19 pandemic on risk, internal controls, going
concern and the financial statements including rent provisions
• Considered cyber security, the ESG agenda and Net Zero Carbon ambition
• Considered the employee, occupier and investor survey responses
• Welcomed Kitty Patmore to the Committee
Focus in 2022
• Continue to monitor the impact of the pandemic and business resilience
• Specific meeting to be arranged to focus on ESG matters
The Committee continues
to play a key assurance
role for the Board, ensuring
stakeholder interests are
protected by monitoring
the processes that support
the integrity and accuracy
of financial reporting, as
well as overseeing risk
management and the
external audit relationship.
Rosalyn Wilton
Audit Committee Chair
108
LondonMetric Property PlcAnnual Report and Accounts 2021 Dear Shareholder,
As Chair of the Committee, I am pleased
to present our report on behalf of the
Board, which describes the work we have
undertaken and our key areas of focus
this year. In January 2021, we welcomed
Kitty Patmore to the Board and Audit
Committee. Kitty is the Chief Financial
Officer at Harworth Group plc and has over
15 years of finance, banking and real estate
experience and is a valuable addition to
the team.
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.
As reported throughout the Strategic
report and as summarised on page 19,
the business implications of the Covid-19
pandemic dominated much of the
management team’s focus and time
this year. The business has responded
to the challenges extremely well with
all employees adapting to a remote
working environment without disruption.
The Chief Executive and Senior Leadership
Team have kept in regular contact
with teams and individuals within the
organisation to provide support, facilitate
an inclusive working culture and make
informed decisions.
The pandemic has made our role
supporting the Board in risk management,
internal control and financial
reporting more important than ever.
Notwithstanding the challenges we have
faced and the need for remote working, the
quality of debate and challenge between
the Committee members, management
and the audit team, together with the
comprehensive information provided to us,
has allowed us to appropriately discharge
our responsibilities.
In March, as part of our annual review,
we undertook a comprehensive review
of the principal and emerging risks facing
the Company as discussed on pages 64
to 79, which included the risks imposed
by the Covid-19 pandemic and Brexit.
We considered cyber security and the
improvements made to IT systems and
reporting, including the upgrade to
Microsoft 365 and the Teams conferencing
platform and automated in house rent
collection information to assist with credit
control. We also considered the security
of information emailed to Non Executive
Directors and the use of Sharepoint as a
more secure alternative to share Board
papers and other sensitive documents.
In addition to our recurring business, we also
received briefing papers and considered
cyber security, the ESG agenda, corporate
governance, the updated Tax Strategy,
portfolio credit analysis and responses
from the employee, occupier and
investor surveys.
As certain of the Group’s revolving credit
facilities were due to expire in April 2022,
we discussed the refinancing options with
the Finance Director and considered the
proposals and new private placement and
revolving credit facilities recommended to
the Board.
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, we have
recommended the reappointment of
Deloitte LLP (‘Deloitte’) at the AGM in
July. Deloitte have been in office for eight
years now and we will be required to re-
tender the audit after they have served for
ten years.
Membership
The Committee comprised throughout the
year of four independent Non Executive
Directors, with a good diversity of experience
including property, finance, banking, capital
markets, risk management and sustainability.
On 28 January Kitty Patmore was appointed
as a Non Executive Director and member of
the Audit Committee and Andrew Livingston
stepped down. I would like to thank Andrew
for his hard work and valuable contribution to
the Committee over the past five years.
The Board is satisfied that all current
members bring recent and relevant financial
experience to the Committee as required
by the Code. 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 page 85.
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. As usual,
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 management team who present on
specialist topics such as ESG and tenant
covenants. We continue to find this
extremely valuable as, not only does it focus
a greater depth of discussion on current
topical issues, but it allows us to see the pool
of talent within the Company below Board.
This year, the Head of Investor Relations
presented an update on ESG matters 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, which helps me to understand and
keep abreast of key matters in advance
of Committee meetings, facilitating
subsequent informed and constructive
debate and challenge.
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.
109
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 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 111.
Further details can be found in note 1 to the
financial statements on pages 152 to 153.
The significant matters discussed and
reported are consistent with previous years
and no further significant matters have
arisen as a result of the Covid-19 pandemic.
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 140.
Audit, risk and internal control
Audit Committee report
Committee effectiveness
During the year the Board, led by the Nomination Committee, carried out an externally
facilitated evaluation of its performance and that of its Committees as reported on
pages 106 to 107. The review concluded that the Committee was diligent in covering all
areas of its responsibility and continued to operate effectively and to a high standard,
providing the appropriate level of independent challenge and scrutiny.
Our work in 2021
Throughout the year, the Committee acted in accordance with its terms of reference,
which were last reviewed and updated in March 2021 and can be found at
www.londonmetric.com.
The work undertaken this year has included the consideration, review and approval of
the following:
Role
Financial
reporting
Responsibilities
• Consideration of the impact of Covid-19 on risk, internal controls,
going concern and the financial statements
• Interim and full year results announcements and Annual Report
• Accounting treatment of significant transactions and areas of
judgement including property valuations
• The valuation process, the half yearly valuations and the
independence of the Group’s valuers
• 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, Covid-19 and Brexit
• The adequacy and effectiveness of the Group’s internal controls
• The appropriateness of the going concern assumption including
consideration of the debt refinancing proposals
• 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
• S172 Statement and stakeholder engagement including reviewing
responses from employee, investor and occupier surveys
• The ESG agenda and Net Zero Carbon ambition
• Tax strategy update
110
LondonMetric Property PlcAnnual Report and Accounts 2021 Property valuations
Reporting issue
The Committee’s role
The property valuation is 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
disrupted and uncertain market, as we
have seen since the onset of the Covid-19
pandemic, this empirical data may be
less relevant and valuations may become
more subjective. Property valuations are a
key area of focus for the external auditor.
It remains a principal recurring risk
for the Group as reported in the Risk
management section on pages 64 to 79.
The Group and its share of joint ventures
has property assets of £2.6 billion as
reflected in the Financial review and as
detailed in Supplementary note ix on
page 181.
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 benchmarks.
The Committee challenged assumptions
and discussed the impact on values of
changes to the key assumptions.
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.
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 £404 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.
Complexities considered this year included
assets acquired in a corporate wrapper,
rental top up payments and deferred
completion arrangements.
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 and
other significant transactions to
the extent that there were unusual
terms and conditions or judgement.
All transactions were considered to be
property acquisitions and disposals
of less complexity and not business
combinations in accordance with
IFRS 3.
Conclusion
The Committee concurred with the
approach adopted by management
in each case.
111
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Audit, risk and internal control
Audit Committee report
In addition to the significant matters discussed
above, the Committee considered a number
of other judgements made by management,
none of which were material in the context of
the Group’s results or net assets.
These included the accounting for rental
concessions and expected credit loss
provisions in light of the Covid-19 pandemic, as
discussed in the Financial review on page 42
and in note 11 to the financial statements.
We have supported a small number of our
occupiers most affected by the Covid-19
pandemic and lockdown restrictions imposed
by offering rent concessions including monthly
rental payment plans, short term rental
deferrals and rent free periods.
In many cases there were compensatory
asset management initiatives such as
extended lease lengths and the removal of
break clauses.
The Committee was satisfied that the
accounting treatment for rent waivers and
lease modifications was appropriate and in
line with IFRS.
At 31 March 2021 and as reported in note
11 to the financial statements, Group trade
receivables amounted to £4.8 million and
provisions against these arrears totalled
£0.9 million, comprising provisions against
specific arrears of £0.1 million and an
expected credit loss provision of £0.8 million.
Including share of joint ventures, the total rent
provision at the year end was £1.4 million, as
reported in the Financial review on page 42.
The external auditor and Committee
considered the consistency of the
methodology used and were satisfied with the
level of provisioning made.
They took into consideration the strong rent
collection rates in the year, as reported in the
Financial review on page 42.
Risk management
and internal control
The Board takes risk management seriously
and recognises its responsibility for
identifying the principal and emerging risks
which may affect its strategic objectives.
It recognises that risk is inherent in running
the business and understands that effective
risk management is key to long term
sustainable success and growth.
There is a culture of risk awareness
embedded into the decision making
process and robust processes are in
place to support the identification and
management of risk. The Board considers
risk at a strategic level each meeting, which
ensures that new and emerging risks are
identified early on with appropriate action
taken to remove or reduce their likelihood
and impact.
The Senior Leadership Team is responsible
for ongoing risk identification and the
design, implementation and maintenance
of the system of internal controls in light
of the risks identified. The team comprises
individuals with a breadth of skills and
experience from across the Company.
Short reporting lines, low staff numbers,
low staff turnover and an embedded
risk awareness culture facilitate the early
identification of risks and the development
of appropriate mitigation strategies.
The Covid-19 pandemic has presented
unprecedented challenges to the business
and its stakeholders, with a focus on remote
working and office safety, our tenants and
rent collection, the sufficiency of working
capital and planning for the longer term
working arrangements as lockdown
restrictions ease. This is discussed in detail in
the Risk management section on pages 64
to 79.
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
2021. 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 64 to 79.
In addition, the Committee received a
cyber security update paper from the
Finance Director, which described the
IT improvements made in the year and
the infrastructure and systems in place.
These have been more important than ever
this year to support the extensive period of
remote working and continue to be robust
and fit for purpose. Improvements made
included upgrading to Microsoft 365 and
the MS Teams conferencing platform, as
well as automated in house rent collection
information to assist with credit control.
Further details can be found in the Risk
Management section on page 70.
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.
112
LondonMetric Property PlcAnnual Report and Accounts 2021 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 and when
considered necessary, external advisors
are engaged to carry out reviews to
supplement existing arrangements and
provide further assurance.
This has 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 eight years since 2013 following a
formal tender process.
Georgina Robb, continues to be the current
lead partner and 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.
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.
As in previous years, the key risk areas
identified were in relation to the
valuation of property and accounting for
significant transactions.
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 and
continues to enjoy a constructive working
relationship with Deloitte.
Effectiveness
The Committee assesses the effectiveness
of the external audit process by its review
of the following:
• Audit plan and deliverables;
• Independence and objectivity; and
• 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.
Internal control framework
The Committee also reviews the
effectiveness of the Group’s internal
controls including all material financial,
operational and compliance controls,
and received an updated internal
control evaluation report from the
Finance Director in March 2021.
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 closely with Senior
Leadership Team members, who are
involved in all day to day operations
and decision making, facilitating
supervision and monitoring;
• Disciplined 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.
113
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Audit, risk and internal control
Audit Committee report
Audit and non audit fees
Regulatory compliance
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
2021
£000
201
35
–
236
17%
2020
£000
184
30
–
214
16%
2019
£000
122
28
–
150
23%
Audit fees paid to the external auditor in respect of joint ventures totalled £12,100 at share (2020: £16,000 at share)
S172 duties
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 the Company’s
operations on the community
and environment;
• The Company’s reputation and
maintaining high standards of
business conduct; and
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.
The table above sets out the fees payable
to Deloitte for each of the past three years.
• The need to act fairly as between
members of the Company.
The three year average ratio of non audit
fees (primarily the cost of the interim review)
to audit fees continues to be low at 18%,
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.
Deloitte continue to provide the
appropriate level of professional challenge
and remain objective and independent
and 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.
These considerations have underpinned
our normal business practices for many
years and the requirement to report on
them has only formalised some of our
processes, as described in more detail
on page 56.
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 115;
• 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 115 and the Board’s
Viability Statement is on page 67; and
• Ensuring the Company’s risk
management framework is sufficiently
robust to safeguard its future for the
benefit of its stakeholders.
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 auditor 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 and the
audit of certain subsidiary companies is
undertaken by BDO LLP.
114
LondonMetric Property PlcAnnual Report and Accounts 2021
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
potential impact of the disruption caused
by the Covid-19 pandemic to our occupiers
this year and the scenario testing which
included potential rental defaults,
increased vacancy costs and letting voids.
Following its 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 and its
Viability Statement is set out on page 67.
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;
• Tried and tested remote
working practices;
• A technical briefing update given
by the external auditor covering
corporate governance and accounting
regulations attended by relevant staff in
January 2021;
• Early input from Executive Directors to the
overall message and tone of the report;
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.
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.
Annual General Meeting
Due to the Covid-19 pandemic, we strongly
recommend that shareholders do not
attend this year’s AGM. Shareholders will be
able to listen in by conference call facilities
and to submit questions in advance or on
the day.
I would welcome any questions from
shareholders in advance by email as
outlined in the Notice on page 186.
Finally, I would like to take this opportunity
to thank my fellow Committee members,
wider management team and Deloitte for
their support, guidance and exceptional
efforts during what has been a challenging
and busy year.
Rosalyn Wilton
Chair of the Audit Committee
27 May 2021
• 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 138.
115
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Remuneration Committee report
Membership and attendance
The number of Board and Committee members and their attendance during the
year was as follows:
Member
James Dean (resigned 22 July 2020)
Rosalyn Wilton
Suzanne Avery
Robert Fowlds (Chair from 22 July 2020)
Andrew Livingston
Date
appointed
1/10/2010
14/7/2016
19/9/2018
31/1/2019
28/1/2021
Tenure
(years)1
Meetings
attended2
11
5
3
2
–
2 (2)
6 (6)
6 (6)
6 (6)
2 (2)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2021, rounded to the
nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
Key responsibilities
Remuneration Policy
• Set and review the Remuneration Policy for Directors and
Read more
page 122
ensure it is aligned to the Company’s purpose and values and
the delivery of its strategy
• Set the remuneration of the Executive Directors and certain
members of the Senior Leadership Team and oversee
workforce remuneration arrangements
Remuneration packages and payouts
• Determine and review individual remuneration packages
Read more
page 125
• Approve salaries, bonuses and LTIP awards
Variable incentives
• Determine and review the Long Term Incentive Plan (‘LTIP’)
Read more
page 125
and Annual Bonus Plan arrangements
• Approve targets and outcomes
Highlights in 2021
• Approval of new Remuneration Policy by shareholders at 2020 AGM, with 95.4% of
votes in favour
• Robert Fowlds became Chair following 2020 AGM and James Dean resigned from
the Committee
• Andrew Livingston appointed as a member on 28 January 2021
• Approved the extension of the Chair’s letter of appointment for 12 months to
31 March 2022
• Considered the impact of Covid-19 on 2020 LTIP awards
• Approved 20% salary waiver by the Board and senior executives for Covid-19
charitable giving
• Considered results of staff survey and wider workforce pay when setting Executive
Directors’ and the Senior Leadership Team’s remuneration
Focus in 2022
• Set remuneration targets for 2022
• Monitor alignment of Executive Directors’ pay with the wider workforce
• Monitor emerging trends in corporate governance
The overriding objective
of our remuneration
framework is to operate
a fair and transparent
Remuneration Policy which
motivates and retains
individuals of the highest
calibre and rewards
exceptional performance
for the delivery of the
Group’s strategic goals.
Robert Fowlds
Remuneration Committee Chair
116
LondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Chair’s introduction
This report is structured as follows:
Chair’s introduction
page 117
Directors’ Remuneration
at a glance
Implementation of Policy
next year
Directors’ Remuneration
Policy
Annual Report on
Remuneration
page 119
page 120
page 122
page 125
I am very pleased to present my first
Remuneration Committee report since
taking over as your Chair in July 2020,
having previously served as a member
since January 2019. I was closely involved
with the development of the new
Remuneration Policy last year, which
was approved at the 2020 AGM by over
95% of votes in favour for three years to
July 2023, and have been overseeing its
implementation this year.
James Dean stepped down as Chair and
Committee member following the AGM
last year and I would like to thank him for
his hard work and expert guidance over
the last 11 years. I am also delighted to
welcome Andrew Livingston, who joined
as a Committee member in January 2021.
As the Company’s workforce Non Executive
Director, Andrew brings the employee
voice to remuneration discussions and fresh
perspectives and ideas.
To recap, the primary role of the
Remuneration Committee is 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 Directors’
Remuneration Policy (‘Policy’) is designed
to be simple and transparent and one
which aligns executive pay and incentives
with the Company’s goals, wider workforce
pay arrangements and shareholder
interests. It aims to encourage and
reward exceptional overall and individual
performance. A summary of the Policy
is provided on pages 120 to 121 and the
full Policy can be found on our website at
www.londonmetric.com.
Our Annual Report on Remuneration on
page 125 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.
Last year we extended the remit of the
Committee to set the remuneration of
certain members of the Senior Leadership
Team and oversee the remuneration
arrangements of the wider workforce and
their alignment with the Executive Directors’
arrangements.
Remuneration aligned to
purpose and strategy
Our remuneration framework is strongly
aligned with the Company’s purpose,
strategy and performance as well as the
interest of our shareholders as reflected in
the chart on page 123. Success against
our strategic objectives is measured using
our key performance metrics which are
embedded within 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 scale of the disruption caused by the
Covid-19 pandemic over the last 12 months
has been considerable both to the wider
economy and to the real estate sector.
The Company has not been immune from
the challenges posed by the extensive
lockdown restrictions that have dominated
the year, and the executive team has
worked extensively with occupiers and
stakeholders to provide assistance and
workable solutions where necessary.
Despite the challenging conditions
and operational disruption to working
practices, the financial results this year are
exceptionally strong and are testament
to the hard work of the team, a strong
corporate strategy and the resilience of
the property portfolio. Staff have adapted
to long periods of home working and the
Company has remained fully operational
throughout, with no one being furloughed.
Shareholders have continued to receive
a progressive and covered dividend as
EPRA earnings per share has grown by 2.8%
to 9.52p, driven by a 6.4% increase in net
rental income to £123.3 million and a 13.8%
reduction in net finance costs. IFRS reported
profit is £257.3 million, predicated on a
£173.7 million valuation gain. EPRA net
tangible assets per share has increased
11.7% to 190.3p and total property return
at 13.4% significantly outperformed the IPD
Quarterly Universe Index benchmark of
8.4%. As we emerge from the pandemic,
the £2.58 billion portfolio is well positioned
with over 95% of assets in the structurally
supported distribution and long
income sectors.
117
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Chair’s introduction
Operational portfolio metrics remain robust
with occupancy increasing to 98.7%,
average lease lengths of 11.4 years and
57% of income being subject to contractual
rental uplifts. Rent collection has been a
particular focus for the management team
and collection rates have again been
exceptionally strong, with over 98% of rent
due in the year to March 2021 collected.
Shareholder support for the Company’s
investment strategy was evidenced by the
successful and over-subscribed £120 million
equity raise in May 2020 and the strength of
banking relationships were instrumental in
securing new unsecured private placement
and revolving credit facilities totalling
£780 million in April 2021.
Taking into account this exceptional
performance and the continued
progressive returns enjoyed by its
shareholders both in terms of dividend
yield and share price performance, the
Committee considers it entirely 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 believes that the underlying
performance of the business is consistent
with these outcomes and therefore has
not exercised its discretion or made
any adjustment.
Salary waiver
All Board members and certain key
employees waived 20% of salaries and fees
for three months last year amounting to
£121,000 to provide additional funds for the
Company’s wider Covid-19 charity giving.
Most of the additional funding has been
spent, with contributions to foodbanks, NHS
Trust charities, care providers and national
charities including LandAid and Macmillan.
The salaries and fees waived by the
Directors are excluded from the single
total figure of remuneration table on
page 126 as the amounts were not
received by the Directors. The pension
entitlement continued to be calculated
against the full contractual salary and
remained unchanged.
118
Salary increases
LTIP vesting
Last year, pay reviews for the entire
workforce were postponed due to the
uncertainty surrounding the Covid-19
pandemic and only a few employees
received increases to reflect changes
to roles and responsibilities. This year,
employees will receive salary increases of
4.2% on average. Given the exceptional
performance of the Executive Directors and
having considered the PwC comparable
sector salary review, the Committee has
approved salary increases of 4.2% for the
Executive Directors, in line with the wider
workforce average.
Pension alignment
The Executive Directors’ pension contributions
will reduce from the existing level of 15% to
12.5% from 1 June 2021 and further to 10%
from 1 June 2022 in accordance with the
new Remuneration Policy.
Annual bonus
The Executive Directors have delivered
successfully against a large number of
operational, strategic and social objectives
as set out on pages 127 to 128 including
income quality and growth, portfolio
focus and recycling capital, delivery of
developments, optimising the funding
structure, strengthening stakeholder
relationships, delivering the Responsible
Business agenda and improving
sustainability of buildings including
EPC ratings.
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% 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 this year.
Vesting of the LTIP awards granted to
Executive Directors in 2018 is dependent on
Company performance over the three year
period to 31 March 2021.
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 9.52p,
and TAR and TSR over the three year
period both being in the top quartile of
the measurement index, awards granted
are expected to vest in full in June 2021,
subject to continued service. The awards
are subject to a two year post-vesting
holding period.
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
781,983 share awards were granted to
the Executive Directors and 1,098,487 LTIP
and deferred bonus share awards vested.
The Directors disposed of 517,844 shares
to settle tax liabilities and retained the
remaining 580,643 shares which increased
their holding in the Company to a total of
7.6 million shares as reflected in the table on
page 131.
Looking forward
Given the Policy review and update last
year, the Committee believes the current
remuneration arrangements are fair and
fit for purpose. However, we will continue
to monitor emerging trends and best
practice in corporate governance as we
emerge from the pandemic and ensure
the remuneration arrangements continue
to be appropriate as well as incentivise and
motivate management.
Robert Fowlds
Chair of the Remuneration Committee
27 May 2021
LondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Directors’ remuneration at a glance
Earnings for the financial year
Remuneration for Executive Directors
Andrew Jones
Martin McGann
Salary
£000
Benefits
£000
Pension
£000
519
347
26
29
82
55
Bonus
£000
876
497
LTIP
£000
1,401
759
Total
20212
£000
2,904
1,687
Total
2020
£000
2,925
1,685
Illustrative change in
value of shares owned
and outstanding
share awards1
£000
631
393
1 Based on an illustrative swing in share price of 10p. For reference, the highest closing share price during the year was 242.8p and the lowest closing price was 172.4p.
The number of shares and share awards was calculated based on the year end total
2 Full details of Directors’ remuneration for the year can be found in the table on page 126
Annual bonus plan – targets and outcomes
Payout target
Performance measure
EPRA EPS
TPR
25%
9.26p
8.40%
50%
9.36p
9.24%
100%
9.55p
Actual
9.52p
10.08%
13.38%
%
awarded
Combining these outcomes
with the personal objectives
gives the following payouts:
92%
100%
Andrew Jones
Martin McGann
£000
876
497
% of
maximum
97
97
2018 LTIPs vesting – targets and outcomes
Performance measure
TSR
TAR
EPRA EPS
Payout target
25%
-11.5%
-11.6%
9.11p
100%
34.3%
25.5%
9.45p
Actual
40.9%
30.7%
9.52p
%
awarded
The estimated number of shares
vesting are as follows:
100%
100%
100%
Andrew Jones
Martin McGann
Number
631,098
341,681
The level of LTIP vesting in 2021 demonstrates the successful performance of the Company over the longer three year 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
Face value
of award
£000
200% 17 June 2020
155% 17 June 2020
515,069
266,914
212.0p
212.0p
1,092
566
% of salary
0%
250%
500%
750%
1,000%
1,250%
1,500%
1,750%
2,000%
Andrew
Jones
Shareholding requirement
Beneficially owned shares
Unvested interests over shares
Martin
McGann
Shareholding requirement
Beneficially owned shares
Unvested interests over shares
548%
700%
681%
700%
1,789%
1,749%
119
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Implementation of policy next year
Summary of Policy
Implementation in the year to 31 March 2022
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.
Pension
Currently, 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. This contribution reduces
to 12.5% from 1 June 2021 and further to 10% from
1 June 2022.
The maximum pension contribution for newly
appointed Executive Directors is 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.
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.
120
At the last review in June 2020, Executive Directors’ salaries were frozen due to
the uncertainty and widespread disruption caused by the Covid-19 pandemic.
This year, the Committee has decided to increase salaries in accordance with
the workforce average increase of 4.2%.
Executive Director
Andrew Jones
Martin McGann
Base salary
from 1 June
2021
£569,007
£380,470
Base salary from
1 June 2020
£545,870
£365,000
Executive Directors will receive the 15% of salary supplement in lieu of
pension until 31 May 2021. Thereafter, pension contributions will reduce in
accordance with the Remuneration Policy to 12.5% and 10% for periods
commencing 1 June 2021 and 1 June 2022 respectively.
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 2021 Summary of Policy
Implementation in the year to 31 March 2022
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.
Awards granted in 2021 to the Finance Director will be based on 145% of
salary to allow better alignment with senior managers below the Board.
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
The circumstances in which malus and clawback could apply are:
• Material misstatement
• Calculation error in incentives
• Fraud or misconduct
• Reputational damage
• Corporate failure
2022
2023
2024
2025
2026
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.
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.
Shareholding requirement
Executive Directors are encouraged to build up
and hold a shareholding equivalent to a percentage
of base salary.
Executive Directors will be required to retain at
least 50% of the post tax amount of vested shares
from incentive plans until this requirement is met
and maintained.
The post cessation shareholding requirement is 200%
of salary for two years post cessation of employment.
Malus and clawback
Malus may apply to any cash bonus up to the date
of payment and any deferred bonus or LTIP award
during their respective three year vesting periods.
Clawback may apply to any cash bonus for up
to two years following the payment of the bonus
and may apply to LTIP awards for up to two years
following vesting. Malus/clawback may result in the
value of awards being reduced to nil.
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
121
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Directors’ Remuneration Policy
The Remuneration
Policy for the Group was
approved by shareholders
at the 2020 AGM on 22
July 2020 for a period of
three years. This section
is an extract from the full
Remuneration Policy, which
is available on our website
at www.londonmetric.com.
Details of the core elements
of the Policy can be found
in the Implementation of
Policy next year section on
page 120.
Overview of our Policy
The Group’s Remuneration Policy is
designed to align executive pay and
incentives with the Company’s goals
and encourage and reward exceptional
overall and individual performance.
As well as motivating, remuneration plays
a key role in retaining highly regarded
individuals and needs to be competitive.
The principles which underpin the
Remuneration 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.
122
Alignment of Policy with the 2018 Corporate Governance Code
Under the headings prescribed under provision 40 of the 2018 Code, the following table
shows the alignment between the Policy and 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.
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.
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 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.
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.
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.
Alignment to culture –
incentive schemes should
drive behaviour consistent
with Company purpose,
values and strategy.
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 are cascaded further down the
organisation, as is the culture of share ownership.
LondonMetric Property PlcAnnual Report and Accounts 2021 Illustration of application of Remuneration Policy
The charts below show the application of the Remuneration Policy 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 2021.
Andrew Jones
Martin McGann
3,322
18%
2,904
2,724
1,376
21%
33%
46%
627
100%
44%
36%
33%
23%
27%
19%
848
19%
30%
51%
431
100%
1,687
1,590
41%
32%
27%
1,914
17%
34%
27%
22%
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
Our strategic priorities
Link to remuneration
Annual bonus
LTIP
Link to strategy
37.5%
37.5%
25%
35%
35%
1 Align portfolio to
macro trends
2 Focus on long-let
property with
rental growth
3 Improve quality and
sustainability of our
assets and income
4 Enhance income
and value through
asset management
and development
5 Remain rational
and disciplined
6 Use the team’s
expertise and
relationships
7 Generate reliable
income with
income growth
8 Strong focus on
diversity and credit
strength of occupier
123
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Directors’ Remuneration Policy
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.
None of the Executive Directors held external appointments during the year.
Employee considerations
Chief Executive
+4.2%
Salary increase
in 2021
1,789%
Of salary held in
Company shares
-0.2%
Bonus movement
in 2021
20%
Wider workforce
+4.2%
Average salary
increase in 2021
100%
+10.0%
Average bonus
increase in 2021
68%
Salary waiver for three
months amounting to £27k
Of employees received
a bonus in 2021
Of employees participate
in the LTIP in 2021
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 Andrew
Livingston is the designated workforce Non Executive Director
responsible for gathering employee views, ensuring that key points
raised by employees are discussed at Committee and Board
meetings and feeding back to employees how their views have
been considered in the decision making process.
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
LTIP
Annual
bonus
Pension
Participation
Chief
Executive
200%
of salary
161%
of salary
15%
of salary
Finance
Director
Senior
Leadership
Team
145%
of salary
40% to 145%
of salary
136%
of salary
69% to 136%
of salary
15%
of salary
10% to 15%
of salary
Non Executive Directors’ fees
Andrew fed back results of the latest employee survey to the
Committee and Board in March, noting that staff were highly
engaged and very proud to be part of the LondonMetric team.
Further details are provided on pages 93 to 94.
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 Committee is mindful of the internal pay relativities when
setting pay for the Executive Directors. The Company publishes in
the Directors Remuneration Report how executive remuneration
cascades throughout the organisation and explains that the
core remuneration principles are applicable throughout the
Company. Whilst employees are not directly consulted during the
formulation of the Remuneration Policy, the Company conducts
employee surveys throughout the year and any points raised
regarding executive remuneration is brought to the attention of the
Remuneration Committee as appropriate. The diagram opposite
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 2021.
The base fee for Non Executive Directors, excluding the Chair,
has been increased by 1.5% to £50,250 from 1 June 2021.
The Chair’s new letter of appointment set his fees for the period to
31 March 2022.
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
£50,250
£5,000
£10,000
£5,000
124
LondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Annual Report on Remuneration
On the following pages
we set out the Annual
Report on Remuneration for
the year ending 31 March
2021 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 2022.
The Annual Report on Remuneration
including the Chair’s introduction,
Remuneration at a Glance, and
Implementation of the Policy sections
are subject to an advisory vote at the
forthcoming AGM on 13 July 2021 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 Executive
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 £69,000 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 six 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 and LTIP
Set challenging EPS targets for the 2020 LTIP awards and annual
bonus for the year to 31 March 2021
Approved Executive Directors’ share awards under the LTIP
following the announcement of the Company’s results for the year
ended 31 March 2020
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 2021
Salary
Reviewed and approved annual salary increases effective from
1 June 2021
Governance
Approved Andrew Livingston as a member of the Committee
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
125
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Annual Report on Remuneration
Single total figure of remuneration for each Director (audited)
Salary and fees
Benefits1
Pension2
Total Fixed
Annual bonus3
LTIP4
Total Variable
Total
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
2021
£000
2020
£000
Director
Executive
Andrew Jones
Martin McGann
Non Executive
544
363
26
29
519
347
–
Patrick Vaughan5
206
215
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Kitty Patmore
Rosalyn Wilton
57
51
68
52
10
66
59
64
64
54
–
69
–
–
–
–
–
–
–
26
28
14
–
–
–
–
–
–
82
55
82
54
627
431
652
445
876
497
878
485
1,401 1,395
2,277 2,273
2,904 2,925
759
755
1,256 1,240
1,687 1,685
–
–
–
–
–
–
–
–
–
–
–
–
–
–
206
229
57
51
68
52
10
66
59
64
64
54
–
69
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
206
229
57
51
68
52
10
66
59
64
64
54
–
69
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 2021 paid fully in cash as minimum shareholding requirements met
4 2018 LTIP awards expected to vest in June 2021 for the performance period to 31 March 2021. 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 2021. 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 2021
accounts for £205,000 for Andrew Jones and £111,000 for Martin McGann as reflected in the table on page 130. The estimated figures disclosed in the previous Annual
Report for 2020 vesting have been restated to reflect final vesting figures and the share price on the date of vesting. The estimated share price used was 211.8p and the
actual share price on vesting was 225.3p. The differences in value were £98,000 for Andrew Jones and £53,000 for Martin McGann
5 Private Medical Insurance benefit was included last year at the discretion of the Remuneration Committee
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 2021
The annual bonus performance targets set for the year to 31 March 2021 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 2021 annual bonus outcome is set out in the
table below.
Financial
objectives
Individual
objectives
Bonus % of
maximum
Bonus % of
salary
Total bonus
£000
67%
67%
30%
30%
97%
97%
161%
136%
876
497
Andrew Jones
Martin McGann
126
LondonMetric Property PlcAnnual Report and Accounts 2021
Group financial targets
Performance
measure
Weighting Basis of calculation
EPRA EPS
35%
Growth in EPRA EPS against
a challenging target
(0%)
<9.26p
Range
(25%)
9.26p
(50%)
9.36p
Maximum
(100%)
Actual
performance
%
awarded
9.55p
9.52p
92%
Total property
return (‘TPR’)
35%
Growth in TPR against IPD
Quarterly Universe Index
Positive
growth
TPR matches
index
8.40%
TPR is 1.1 times
index
9.24%
TPR is 1.2 times
index
10.08%
13.38%
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 both Executive Directors had substantially achieved their individual personal objectives and approved payouts for
all Directors as reflected in the tables below.
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 2021.
Objective
Andrew Jones
Portfolio & financial
• Portfolio focus to maximise
both EPS and NAV growth
Assessments
• Increase in EPRA EPS from 9.26p to 9.52p, providing cover for an increase in the dividend
for the year
• Increase in EPRA NTA per share from 170.3p to 190.3p largely due to revaluation gain of
£173.7 million
• Recycling capital with sell down
of non core assets
• Investment in preferred urban logistics sector increased from 35.4% to 38.5% in the year
• Reduced exposure to non core offices, retail parks and residential assets, from 6.2% to 4.7%
• Focus on income quality to deliver
opportunities for sustainable and
progressive earnings
• Growth in EPRA earnings per share in the year of 2.8%, supporting a continuation in
dividend progression
• Increase of 0.8% in contracted rent to £124 million
• To provide oversight to the delivery of
• Completion of 445,000 sq ft of development during the year producing £3.2 million of
development schemes during the year
annual rent with a further 470,000 sq ft under construction
• Reinforce the position of the Company
as leading investor/partner of choice
in logistics
ESG
• Position the Company as an employer
of choice and continue to generate
positive employee feedback and
very low staff turnover rate
• Continue to realign the team in line
with our evolving portfolio strategy
• Reinforcement of growth characteristics of urban logistics continues to be well received
in the market and by stakeholders
• Fourth staff survey undertaken in March with very positive results
• 100% of staff enjoy working for the Company and have confidence in the decisions
made by management
• Very low staff turnover rate of 6%
• Continuing focus on the right team with the right skills. Effective integration of Mucklow
employees into the LondonMetric team
• Lengthen and strengthen relationships with
key stakeholders: institutional shareholders,
private client wealth managers (‘PCM’),
occupiers and analysts
• 173 investors met in the year, good investor feedback and strong share price performance
• Continuing focus on PCMs which account for c.35% of the register
• Strong portfolio metrics and results from the latest occupier survey demonstrate contentment,
with occupancy increasing to 98.7% and a landlord recommendation score of 9.0/10.0
• Maintain and improve our ranking in
the EPRA/GRESB sustainability rankings
• GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 65% ahead of peer group average of 61%
• Demonstrate sustainable
improvement in buildings across the
portfolio, including improvements to
EPC ratings
• BREEAM Very Good or Excellent assets represent 26% of portfolio
• EPC rating on assets acquired in year higher than on disposals with developments
adding further A-B rated properties
• Targeted EPC improvement on Mucklow assets
• 1.5 MW of solar installed on portfolio with further 750kW planned and further
opportunities identified
127
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021
Remuneration
Annual Report on Remuneration
Objective
Martin McGann
Portfolio & financial
• Optimising the funding structure to
support the real estate strategy
Assessments
• New £380 million private placement completed in April 2021
• Two new revolving credit facilities completed in April 2021 for £400 million
• Existing short dated facilities repaid and maturity extended to 8.2 years
• Headroom of £338 million following refinancing
• Focus on income quality to deliver
growth in our sustainable earnings
• Growth in EPRA EPS in the year of 2.8%, supporting a continuation in dividend progression
• Increase of 0.8% in contracted rent to £124 million
• Delivery of development schemes on
schedule and on budget, and within
agreed timescales
• Maintain appropriate LTV, cost of
finance and debt maturity metrics
ESG
• Deliver Responsible Business agenda to
increasing satisfaction of stakeholders,
including investors, tenants, suppliers,
our staff and the local communities
within which we operate
• Position the Company as an employer
of choice and continue to generate
positive employee feedback and very
low staff turnover rate
• Completion of 445,000 sq ft of development during the year producing £3.2 million of
annual rent with a further 470,000 sq ft under construction
• Lower average cost of debt after refinancing of 2.6% (2020: 2.9%)
• Lower LTV of 32.3% (2020: 35.9%)
• Increased hedging post refinancing from 45% to 83%
• Net Zero Carbon ambition formalised
• Occupier survey undertaken with high level of satisfaction
• Roll out of ESG objectives across Company
• Investor survey demonstrated we are meeting their ESG expectations on performance
and disclosure
• Covid fund and associated committee created with majority of funds allocated
• Fourth staff survey undertaken in March with very positive results
• 100% of staff enjoy working for the Company and have confidence in the decisions
made by management
• Very low staff turnover rate of 6%
• Maintain our ranking in the EPRA/
GRESB sustainability rankings
• GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 65% ahead of peer group average of 61%
• Demonstrate sustainable improvement
in buildings across the portfolio,
including improvements to EPC ratings
• BREEAM Very Good or Excellent assets represent 26% of portfolio
• EPC rating on assets acquired in year higher than on disposals with developments
adding further A-B rated properties
• Targeted EPC improvement on Mucklow assets
• 1.5 MW of solar installed on portfolio with further 750kW planned and further
opportunities identified
Deferred Bonus Plan
The Remuneration Policy allows the Directors to opt out of bonus deferral if the minimum shareholding requirement is met. At the date of
this report, both Executive Director’s shareholding exceeds the minimum requirement.
Prior to July 2017, 50% of the annual bonus awarded to Executive Directors was deferred and payable in three equal instalments over three
years, subject to continued employment. The remaining one third of the deferred shares granted on 16 June 2017 and held at 31 March
2020, vested on 19 June 2020.
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.
Movements in the deferred bonus shares held by the Executive Directors are set out in the table below.
Andrew Jones
Martin McGann
Date
of grant
16 June 2017
16 June 2017
Face value
on grant1
£000
376
209
At
1 April
2020
90,075
50,154
Awarded
in the year
–
–
Notional
dividend
shares
2,584
1,440
Released
in the year
(92,659)
(51,594)
At
31 March
2021
–
–
Entitlement to ordinary shares
1 Face value is the weighted average share price over the five business days immediately preceding the date of the award. For 2017 this was 168.6p
128
LondonMetric Property PlcAnnual Report and Accounts 2021 Long Term Incentive Plan
Awards granted in the year to 31 March 2021 are summarised in the table below.
Andrew Jones
Martin McGann
Basis of award
(% of salary)
Date of
grant
Share awards
number
Face value
per share
200% 17 June 2020
155% 17 June 2020
515,069
266,914
212.0p
212.0p
Face value
of award
£000
1,092
566
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
Pro rata on a straight line basis between 25% and 100%
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
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 three years
The adjusted EPRA EPS base target for the three year performance periods commencing 1 April 2017, 1 April 2018, 1 April 2019 and
1 April 2020 has been set at 8.16p, 8.54p, 8.77p and 9.26p 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.
129
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 100%
100%
Total estimated
face value of
award1
£000
1,401
759
Remuneration
Annual Report on Remuneration
Awards expected to vest in the year to 31 March 2021 in relation to the three year performance period commencing 1 April 2018 are
summarised below.
Performance
measure
Total shareholder
return (‘TSR’)
Total accounting
return (‘TAR’)
EPRA EPS
Weighting
Basis of calculation
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
Range
(0%)
<-11.5%
(25%)
-11.5%
(100%)
34.3%
Actual
performance
40.9%
%
awarded
100%
<-11.6%
-11.6%
25.5%
30.7%
<9.11p
9.11p
9.45p
9.52p
Director
Andrew Jones
Martin McGann
Maximum
number of
shares
631,098
341,681
LTIP
% of
maximum
100%
100%
Estimated
number of
shares
631,098
341,681
Face value
at grant
£000
Share price
appreciation
£000
1,196
647
205
111
1 The face value is based on the average share price for the three months to 31 March 2021 of 222.0p
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
2020
Granted
in year
Notional
dividend shares
Vested
in year
7,183
(619,067)
Number of shares under award1
At 31 March
2021
Performance
period
Lapsed
in year
(84,419)
Andrew Jones
16.6.2017
168.6p
696,303
15.6.2018
189.5p
607,455
5.6.2019
204.2p
557,466
–
–
–
17.6.2020
212.0p
–
515,069
14,584
Martin McGann
16.6.2017
168.6p
376,984
15.6.2018
189.5p
328,880
5.6.2019
204.2p
307,522
–
–
–
17.6.2020
212.0p
–
266,914
7,557
1 Awards granted as nil cost options
Directors’ shareholdings and share interests (audited)
–
–
–
23,643
21,698
12,801
11,969
3,889
(335,167)
(45,706)
–
–
–
–
341,681
319,491
274,471
–
631,098
579,164
529,653
1.4.2017 to
31.3.2020
1.4.2018 to
31.3.2021
1.4.2019 to
31.3.2022
1.4.2020 to
31.3.2023
1.4.2017 to
31.3.2020
1.4.2018 to
31.3.2021
1.4.2019 to
31.3.2022
1.4.2020 to
31.3.2023
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 131.
There were no movements in Directors’ shareholdings between 31 March 2021 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 2021 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.
130
LondonMetric Property PlcAnnual Report and Accounts 2021
The Executive Directors have entered into individual personal loan arrangements with Coutts & Co 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 2021
Ordinary shares
of 10p each
Overall
beneficial
Interest 31
March 2020
Ordinary shares
of 10p each
LTIP shares
subject to
performance
conditions
Deferred
bonus
shares
Total
interests as at
31 March 2021
Share
ownership as
% of salary1
Shareholding
guideline
met
Number of
shares
pledged as at
31 March 2021
4,572,907
4,196,699
2,989,487
2,785,052
1,739,915
935,643
–
–
6,312,822
3,925,130
1789%
1749%
Yes
Yes
3,446,072
2,341,585
Executive Directors
Andrew Jones
Martin McGann
Non Executive Directors
Patrick Vaughan
10,693,000
11,200,000
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Kitty Patmore
Rosalyn Wilton
22,750
20,000
104,000
106,830
–
22,750
20,000
104,000
106,558
–
100,000
100,000
1 Based on the Company’s share price at 31 March 2021 of 213.6p and the beneficial interests of the Directors
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 2021, 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.
375
325
275
225
175
125
75
340
290
240
150
120
90
Oct
2010
Oct
2011
Oct
2012
Oct
2013
Oct
2014
Oct
2015
Oct
2016
Oct
2017
Oct
2018
Oct
2019
Oct
2020
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
Apr
2020
Oct
2020
Apr
2021
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
131
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Remuneration
Annual Report on Remuneration
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 2021.
Year to 31 March
2021
2020
2019
2018
2017
2016
2015
2014
2013 (Andrew Jones)1
2013 (Patrick Vaughan)1
2012
20112
Total
remuneration
£000
Annual bonus
(as a % of the
maximum
payout)
LTIP vesting
(as a % of the
maximum
opportunity)
2,904
2,925
2,703
2,392
2,506
2,792
1,167
1,296
166
583
664
323
97
97.5
90
79
89
77
78
100
100
100
100
100
100
88
84
94
100
100
–
n/a
–
–
–
–
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
Annual percentage change in remuneration of Directors and employees
The percentage change in Director remuneration from the previous year compared to the average percentage change in remuneration
for all other employees is as follows:
Andrew Jones
Martin McGann
Patrick Vaughan
Suzanne Avery
James Dean
Robert Fowlds
Andrew Livingston
Kitty Patmore
Rosalyn Wilton
Other employees (excluding Directors)
% change
Salary
and fees
Taxable
benefits
4.2%
4.2%
–
1.5%
1.5%
1.5%
1.5%
1.5%
1.5%
4.2%
-3%
14%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
-5%
Annual
bonus
-0.2%
2.4%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
10.0%
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
2021
2020
Pay ratio
25th
percentile
50th
percentile
75th
percentile
34:1
42:1
13:1
16:1
7:1
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 2020 and 2021 figures in the table above.
The Chief Executive’s single figure of remuneration for 2021 and 2020 used for the calculation ratio is as detailed on page 126. 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.
132
LondonMetric Property PlcAnnual Report and Accounts 2021 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
Valentine Beresford and Mark Stirling stepped down from the Board on 11 July 2019 but remained employees of the Company and thus in
accordance with the Policy and relevant share plan rules are entitled to vesting of existing share awards in line with their original schedules.
The 2017 LTIP awards made to Valentine Beresford and Mark Stirling when they were Directors vested during the year on 19 June 2020 in line
with the outcomes for the current Executive Directors with no discretion applied. Upon vesting, Messrs Beresford and Stirling each received
352,942 shares. There have been no payments for loss of office in the year.
Relative importance of spend on pay
The table below shows the expenditure and percentage change in spend on employee remuneration compared to other key
financial indicators.
Employee costs1
Dividends2
2021
£m
10.8
75.6
2020
£m
11.3
64.2
%
change
-4.4%
17.8%
1 Figures taken from note 4 Administrative costs on page 157 and are stated before any amounts capitalised and exclude share scheme costs
2 Figures taken from note 7 Dividends on page 159
Statement of voting at AGM
At the AGM on 22 July 2020, the Annual Report on Remuneration was approved with votes from shareholders representing 77% of the
issued share capital of the Company.
The Directors’ Remuneration Policy was approved at the AGM on 22 July 2020 with votes from shareholders representing 77% of the issued
share capital at the time. The details of these outcomes are below.
For
Against
Withheld
Total
2020 Annual Report
on Remuneration
2020 Directors’
Remuneration Policy
Votes cast
653,449,900
43,072,911
3,877,534
700,400,345
%
93.82
6.18
Votes cast
636,778,186
30,689,708
32,932,457
700,400,351
%
95.40
4.60
Statement of implementation of Remuneration Policy for the year ending 31 March 2021
The table on pages 120 to 121 illustrates how we intend to implement our Policy over the next financial year and gives details of
remuneration payments and targets.
I am always available to shareholders to discuss the Remuneration Policy and can be contacted through the Company Secretary. I look
forward to the support of shareholders at this year’s AGM.
Robert Fowlds
Chair of the Remuneration Committee
27 May 2021
133
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Report of the Directors
Report of the Directors
Annual General Meeting
At the time of writing, Covid-19 restrictions and guidance are in place which prevent us from convening
the Annual General Meeting in the usual way. The Government’s roadmap for easing lockdown
restrictions published on 22 February 2021 envisages the lifting of restrictions by 21 June 2021 (being
prior to the date of the Annual General Meeting). However, this roadmap is subject to a number of
contingencies and there can be no guarantee that restrictions will be lifted prior to the meeting.
It is intended that this year’s Annual General Meeting will be convened with the minimum quorum
of shareholders present in our Curzon Street offices on 13 July 2021 at 10am. We would strongly
recommend that shareholders do not attend the meeting and that all shareholders exercise their
votes by submitting their proxy electronically or by post, as explained Notice of AGM on page 186.
Shareholders wishing to attend the meeting in person should pre-register their attendance by
emailing info@londonmetric.com no later than 5.00pm on 9 July 2021 and must bring photographic
identification with them in order to access the meeting.
Shareholders will be able to listen in by conference call facilities and to submit questions in advance
by emailing info@londonmetric.com by 10.00am on 9 July 2021 or by asking questions on the day
through the conferencing facilities.
The Board will keep the situation under review and may need to make further changes to
the arrangements relating to the meeting, including how it is conducted, and shareholders
should therefore continue to monitor the Company’s website (www.londonmetric.com) and
announcements for any updates.
The Board considers that the resolutions proposed promote the success of the Company and
are in the best interests of 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 18,608,974 shares representing approximately 2.0% of the existing issued
ordinary share capital of the Company as at 26 May 2021.
Additional information which is incorporated into this report by reference, including information
required in accordance with the Companies Act 2006 and Listing Rule 9.8.4R can be found on
the following pages:
Read more
Review of business and
future developments
Strategic report pages 1 – 79
Principal risks
Strategic report – Risk management
pages 64 – 79
Internal financial control
Governance – Audit Committee
report pages 112 – 113
Viability Statement
Strategic report – Risk management
page 67
Section 172 Statement
Strategic report – Responsible Business
review page 56
Greenhouse gas emissions
Strategic report – Responsible Business
review page 52
Diversity and inclusion
Governance – Nomination Committee
report pages 104 – 105
Financial instruments
Financial statements – note 14 pages 166 – 169
Directors’ details
Governance – biographies pages 84 – 85
Financial risk management policies
Financial statements – note 14 pages 167 – 168
Directors’ interests
Governance – Remuneration Committee
report page 131
Long term incentive schemes
Governance – Remuneration Committee
report pages 129 – 130
Stakeholder engagement
Strategic report – Responsible Business
review pages 56 – 61
Governance pages 90 – 96
All other subsections of LR 9.8.4R are not applicable.
Interest capitalised
Financial statements – note 5 page 158
Related party transactions
Financial statements – note 19 page 171
Post balance sheet events
Financial statements – note 20 page 171
I am pleased to present
the Report of the Directors
together with the audited
financial statements for the
year ended 31 March 2021.
Martin McGann
Finance Director
134
LondonMetric Property PlcAnnual Report and Accounts 2021 Corporate governance arrangements
Results and dividends
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 83. Further details on how we
have applied the Code can be found
in the Governance section on pages
80 to 133 and should be read as part
of this report.
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 1 to 79 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.
The Group reported a profit for the year
attributable to equity shareholders of
£257.3 million (2020: loss of £5.7 million).
The first two quarterly dividends for 2021
totalling 4.2p per share were paid in the
year as Property Income Distributions
(‘PIDs’).
The third quarterly dividend of 2.1p was
paid following the year end on 15 April 2021
as a PID. The Directors have approved a
fourth quarterly dividend of 2.35p per share
payable on 13 July 2021 to shareholders
on the register at the close of business on
11 June 2021, of which 2.25p will be paid as
a PID.
The total dividend charge for the year
to 31 March 2021 was 8.65p per share,
an increase of 4.2% over the previous
year. Of the total dividend charge for
2021 of 8.65p, 8.55p was payable as a
PID as required by REIT legislation, after
deduction of withholding tax at the basic
rate of income tax. The balance of 0.1p
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 2021 was
undertaken by CBRE Limited, Savills
(UK) Limited and Cushman & Wakefield
Debenham Tie Leung Limited on the
basis of fair value which amounted to
£2,583.6 million including the Group’s
share of joint venture property as reflected
in the Financial review on page 45.
Share capital
As at 31 March 2021, there were 909,643,040
ordinary shares of 10p in issue, each carrying
one vote and all fully paid. The Company
issued 66,666,666 new ordinary shares
in connection with an equity placing in
May 2020 that raised gross proceeds of
£120 million at an issue price of 180.0p per
share. 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.
In addition, the Company issued 1,478,352
ordinary shares under the terms of its Scrip
Dividend Scheme. Since the year end the
Company issued a further 118,874 ordinary
shares in relation to the third quarterly
dividend scrip alternative.
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.
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 136.
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 2020 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.
135
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Report of the Directors
Report of the Directors
Shares held in the Employee Benefit Trust
Employees
Andrew Livingston is the designated
workforce Non Executive Director and
acts as a liaison between the Board
and employees and a channel through
which staff can share their views and
raise concerns. His work during the year
is discussed in detail in the Governance
section of this report on page 94.
Further details of how we engage
with employees can be found in the
Governance report on page 93 and
the Responsible Business review on
pages 58 to 59.
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 47 to 63 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.
At 31 March 2021 the Group had 31
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
Companywide personal finance workshops
and ESG training and weekly updates from
the Chief Executive throughout the period
of remote working.
The Board recognises the importance
of attracting, developing and retaining
the right people. The Company operates
a non discriminatory employment policy
which provides equal opportunities for
all employees irrespective of gender,
race, colour, disability, sexual orientation,
religious beliefs and marital status.
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.
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
The Vanguard Group Inc
Troy Asset Management
Standard Life Aberdeen
Ameriprise Financial Inc
Number of shares
84,522,012
47,372,711
47,068,396
43,029,748
37,049,653
29,041,706
%
9.30
5.21
5.17
4.73
4.07
3.19
As at 31 March 2021, the Trustees of the
LondonMetric Long Term Incentive Plan
held 4,390,195 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 84 and 85. The interests
of the Directors and their families in the
shares of the Company are set out in
the Remuneration Committee report
on page 131.
On 28 January 2021, Kitty Patmore was
appointed as a Non Executive Director
of the Company and member of the
Audit Committee.
In accordance with the UK Corporate
Governance Code and in line with
previous years, all of the Directors will offer
themselves for election and re-election by
the shareholders at the forthcoming AGM
on 13 July 2021. 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.
Stakeholders
The Group’s long term sustainable success
is dependent on its relationships with key
stakeholders. In the Governance report
on pages 90 to 96, we outline the ways
in which we have engaged with our
key stakeholders, any issues raised and
how they have influenced the Board’s
decision making.
136
LondonMetric Property PlcAnnual Report and Accounts 2021 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 83.
Further details on how
we have applied the
Code can be found in
the Governance section
on pages 80 to 133 and
should be read as part
of this report.
Greenhouse gas reporting
Provisions on change of control
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 52.
We are committed to becoming a Net Zero
Carbon business and our ambitions are
outlined on page 50.
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 2021
was 12 days (2020: 14 days).
Charitable and political contributions
In response to the Covid-19 pandemic,
we provided assistance to our occupiers
and raised funds for local community
charities located close to our assets and
developments. The Board of Directors and
certain key employees waived 20% of their
salaries and fees for three months during
the year, providing additional funds for
our wider Covid-19 charity giving.
During the year, the Group made
charitable donations of £114,365
(2020: £22,958), which included spending
in response to the Covid-19 pandemic, as
discussed on page 61.
No political donations were made
during the year (2020: £nil).
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.
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 13 July 2021.
By order of the Board
Martin McGann
Finance Director
27 May 2021
137
Strategic reportGovernanceFinancial statementsGovernanceLondonMetric Property PlcAnnual Report and Accounts 2021 Report of the Directors
Directors’ Responsibilities 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 accounting standards in
conformity with the requirements of the
Companies Act 2006 and International
Financial Reporting Standards (‘IFRSs’) as
adopted pursuant to Regulation (EC) No.
1606/2002 as it applies in the European
Union. The Directors have elected to
prepare the Company financial statements
in accordance with Financial Reporting
Standard 101 (‘FRS 101’) ‘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 FRS 101
‘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
27 May 2021
Andrew Jones
Chief Executive
27 May 2021
138
LondonMetric Property PlcAnnual Report and Accounts 2021 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
140
148
152
172
174
178
184
186
192
192
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 140.
Martin McGann
Finance Director
LondonMetric Property Plc
Annual Report and Accounts 2021
139
Strategic reportGovernance Financial statements To the members of LondonMetric Property Plc
Independent Auditor’s report
Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of LondonMetric Property plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) give a true and fair view
of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2021 and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and International Financial Reporting Standards (‘IFRSs’) as adopted by the
European Union;
• the Parent 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.
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 notes 1 to 20 and i to xi for Company only.
The financial reporting framework that has been applied in the preparation of the Group financial statements is applicable law and
International Accounting Standards in conformity with the requirements of the Companies Act 2006 and IFRSs as adopted by the
European Union. The financial reporting framework that has been applied in the preparation of the Parent 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 Parent 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 Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
140
LondonMetric Property PlcAnnual Report and Accounts 2021 3. Summary of our audit approach
Key audit matters
The key audit matter that we identified in the current year was:
• Valuation of investment and development property
Materiality
Within this report, key audit matters are identified as follows:
> Decreased level of risk
The materiality that we used for the Group financial statements was £32.2 million which
was determined on the basis of 2% of forecasted net assets and comprise 1.8% of actual
net assets. For testing balances that impacted EPRA earnings we used a lower materiality
of £4.2 million, which was based on 5% of management forecasted EPRA earnings and
represents 4.9% of the actual measure.
Scoping
The Group is subject to a full scope audit on 100% of net assets, revenue and profit before tax.
Significant changes in our approach
Last year our report included a key audit matter in relation to accounting for significant,
unusual and complex property transactions, which is not included in our report this year as
there were no individually complex or significantly judgemental transactions during the year.
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent Company’s ability to continue to adopt the going concern basis
of accounting included:
• Assessing the Group’s 2021 and 2022 cash flow forecasts based on actual cash flow performance in 2020 and to date in 2021;
• Agreeing the level of committed, undrawn facilities of £283 million post refinancing to signed facility agreements;
• Recalculating the headroom within the forecasts based on the cash flow forecasts and the undrawn committed facilities;
• Recalculating covenants ratios on the year end position to ensure compliance;
• Assessing the stress test scenarios, the reverse stress test run by the Directors including the linkage of these scenarios to the Group’s
principal risks disclosed on pages 64 to 79 of the Annual Report & Accounts and impact on covenants; and
• Assessing the mitigating actions that could be taken by the Directors to maximise liquidity headroom including a reduction in capital
expenditure and a reduction in discretionary spend.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and Parent Company’s ability to continue as a going concern for a period of at
least 12 months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the Directors’ statement in the financial statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of
this report.
141
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 To the members of LondonMetric Property Plc
Independent Auditor’s report
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 £2,504.6 million
(2020: £2,273.6 million) as at 31 March 2021. 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.
Refer to page 111 (Audit Committee report), page 152 (accounting policy) and note 9 on page 162
(financial disclosures).
We performed the following procedures:
• Obtained an understanding of the relevant controls over the valuation process.
• 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, including 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.
• Assessed the valuation methodology used and considered any departures from the Red Book
guidance as well as tested the integrity of the model which is used by the external valuer.
• 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.
• 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 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
We considered the assumptions applied in arriving at the fair value of the Group’s property portfolio to
be appropriate.
142
LondonMetric Property PlcAnnual Report and Accounts 2021 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
£32.2 million (2020: £28.8 million)
27.6 million (2020: £20.2 million)
Group financial statements
Parent company financial statements
We consider EPRA earnings as a critical performance
measure for the Group and we applied a lower threshold
of £4.2 million (2020: £3.7 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 impairment
of goodwill.
Materiality for the Group is based on 2% (2020: 2%) of
shareholders’ equity at 31 March 2021 on a forecasted
basis representing 1.8% of the actual measure. For EPRA
earnings the basis used is 5% of EPRA earnings (2020: 5%
EPRA earnings) of that measure on a forecasted basis
representing 4.9% of the actual measure.
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.
Basis for determining
materiality
Rationale for the
benchmark applied
Materiality for the Company is based on
2% of net assets (2020: 1.7%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.
143
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 To the members of LondonMetric Property Plc
Independent Auditor’s report
Shareholders’ equity
Group materiality
Shareholders’ equity
£1,731.3m
Group materiality
£32.2m
Parent materiality
£27.6m
Audit Committee
reporting threshold
£1.6m
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.
Performance materiality
70% (2020: 70%) of Group materiality
70% (2020: 70%) of Parent Company
materiality
Group financial statements
Parent Company financial statements
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered
the following factors:
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.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £1.6 million
(2020: £1.4 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.
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% (2020: 100%) of the Group’s net assets, revenue and profit 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.
7.2. Our consideration of the control environment
We have obtained an understanding of the relevant controls such as those relating to the financial reporting cycle, and those in relation
to our key audit matter.
We have decided not to rely on controls as the Group does not perform significant automated processing of large volumes of data and the
control environment is predominantly manual in nature.
144
LondonMetric Property PlcAnnual Report and Accounts 2021 8. Other information
The other information comprises the information included in the annual report, other than the financial statements and our auditor’s
report thereon. The Directors are responsible for the other information contained within the Annual Report. 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.
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 course of 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 this gives rise to
a material misstatement in the financial statements themselves. 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.
We have nothing to report in this regard.
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 Parent 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 Parent 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.
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.
11. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
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 and performance targets;
• 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.
145
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 To the members of LondonMetric Property Plc
Independent Auditor’s report
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 as well as relevant provisions of tax legislation,
including the REIT rules.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements but
compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty, most notably health and
safety regulations.
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 Directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the
course of the audit, we have not identified any material misstatements in the Strategic report or the Directors’ report.
13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer term viability and that part of the
Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code
specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 152;
• the Directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate, as set out on page 67;
• the Directors’ statement on fair, balanced and understandable, as set out on page 138;
• the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks, as set out on page 64;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems, as set out
on page 112; and
• the section describing the work of the Audit Committee, as set out on page 110.
146
LondonMetric Property PlcAnnual Report and Accounts 2021 14. Matters on which we are required to report by exception
14.1. 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 Parent Company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns.
We have nothing to report in respect of these matters.
14.2. 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.
15. Other matters which we are required to address
15.1. 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 eight years covering the years ending 31 March
2014 to 31 March 2021.
15.2. 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).
16. 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
27 May 2021
147
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Group income statement
For the year ended 31 March
Revenue
Cost of sales
Net income
Administrative costs
Impairment of goodwill on acquisition of subsidiaries
Acquisition costs
Profit/(loss) on revaluation of investment properties
Profit/(loss) on sale of investment properties
Share of profits/(losses) of joint ventures
Operating profit
Finance income
Finance costs
Profit/(loss) before tax
Taxation
Profit/(loss) for the year and total comprehensive income
Attributable to:
Equity shareholders
Non-controlling interest
Earnings per share
Basic
Diluted
All amounts relate to continuing activities.
The notes on pages 152 to 171 form part of these financial statements.
Note
3
4
9
10
5
6
19
8
8
2021
£m
122.2
(1.6)
120.6
(15.8)
–
–
169.9
0.8
6.9
282.4
0.6
(24.9)
258.1
(0.1)
258.0
257.3
0.7
2020
£m
113.4
(1.2)
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)
28.6p
28.5p
(0.7)p
(0.7)p
148
LondonMetric Property PlcAnnual Report and Accounts 2021 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
IFRS net asset value per share
Note
9
10
11
12
13
14
14
15
16
17
17
17
17
2021
£m
2020
£m
2,504.6
2,273.6
59.2
0.3
54.1
0.4
2,564.1
2,328.1
1.1
9.8
51.4
62.3
1.1
7.8
81.8
90.7
2,626.4
2,418.8
46.0
42.6
837.5
–
5.2
842.7
888.7
1,737.7
91.0
219.3
9.6
487.7
923.7
1,731.3
6.4
1,737.7
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
8
191.3p
171.0p
The financial statements were approved and authorised for issue by the Board of Directors on 27 May 2021 and were signed on its behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
The notes on pages 152 to 171 form part of these financial statements.
149
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Group statement of changes in equity
For the year ended 31 March
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
84.2
106.3
9.6
488.4
743.3
1,431.8
7.1
1,438.9
At 1 April 2020
Profit for the year and total
comprehensive income
Equity placing
Purchase of shares held in Employee
Benefit Trust
Vesting of shares held in Employee
Benefit Trust
Share based awards
Distribution to non-controlling interest
Dividends
At 31 March 2021
7
0.2
91.0
3.0
219.3
–
6.6
–
110.0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5.5)
4.8
–
–
–
9.6
487.7
257.3
–
–
(5.1)
3.8
–
(75.6)
923.7
257.3
116.6
(5.5)
(0.3)
3.8
–
(72.4)
1,731.3
0.7
–
–
–
–
(1.4)
–
6.4
At 1 April 2019
Loss for the year and total
comprehensive income
Share issue on acquisition
Purchase of shares held in Employee
Benefit Trust
Vesting of shares held in Employee
Benefit Trust
Share based awards
Investment from non-controlling
interest
Distribution to non-controlling interest
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
70.0
100.8
9.6
221.7
814.7
1,216.8
–
1,216.8
–
13.9
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
269.5
(7.2)
4.4
–
–
–
–
9.6
488.4
(5.7)
–
–
(4.4)
2.9
–
–
(64.2)
743.3
(5.7)
283.4
(7.2)
–
2.9
–
–
(58.4)
1,431.8
(1.2)
–
–
–
–
8.7
(0.4)
–
7.1
(6.9)
283.4
(7.2)
–
2.9
8.7
(0.4)
(58.4)
1,438.9
258.0
116.6
(5.5)
(0.3)
3.8
(1.4)
(72.4)
1,737.7
Total
equity
£m
Dividends
At 31 March 2020
7
0.3
84.2
5.5
106.3
The notes on pages 152 to 171 form part of these financial statements.
150
LondonMetric Property PlcAnnual Report and Accounts 2021 Group cash flow statement
For the year ended 31 March
Cash flows from operating activities
Profit/(loss) before tax
Adjustments for non cash items:
(Profit)/loss on revaluation of investment properties
(Profit)/loss on sale of investment properties
Share of post tax (profit)/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
Tax paid
Cash flows from operating activities
Investing activities
Purchase of subsidiary undertakings
Purchase of investment properties
Capital expenditure on investment properties
Lease incentives paid
Sale of investment properties
Investments in joint ventures
Distributions from joint ventures
Interest received
Net cash used in investing activities
Financing activities
Dividends paid
Distribution to non-controlling interest
Proceeds from issue of ordinary shares
Purchase of shares held in Employee Benefit Trust
Vesting of shares held in Employee Benefit Trust
New borrowings and amounts drawn down
Repayment of loan facilities
Financial arrangement fees and break costs
Interest paid
Net cash (used in)/from financing activities
Net (decrease)/increase in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 152 to 171 form part of these financial statements.
Note
2021
£m
2020
£m
258.1
(6.7)
(169.9)
(0.8)
(6.9)
(11.3)
–
3.8
24.3
97.3
(1.9)
4.5
99.9
(0.3)
99.6
–
(229.0)
(25.6)
(2.1)
208.4
(4.7)
6.5
0.1
3.8
4.9
8.9
(11.0)
48.3
2.9
28.3
79.4
(3.0)
(13.0)
63.4
(0.2)
63.2
(119.6)
(185.2)
(18.1)
(3.9)
117.5
(0.3)
15.7
0.2
(46.4)
(193.7)
(72.4)
(1.4)
116.6
(5.5)
(0.3)
316.0
(409.0)
(7.5)
(20.1)
(83.6)
(30.4)
81.8
51.4
18
18
18
(58.4)
(0.4)
–
(7.2)
–
304.9
(21.1)
(2.1)
(24.0)
191.7
61.2
20.6
81.8
151
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
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 192. 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 1 to 79.
b) Statement of compliance
The consolidated financial statements have been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards (‘IFRS’) as adopted pursuant to
Regulation (EC) No. 1606/2002 as it applies in the European Union.
c) Going concern
Given the backdrop of the Covid-19 pandemic and lockdown
restrictions under which the Group is operating, the Board has
continued to pay particular attention to the appropriateness of the
going concern basis in preparing these financial statements.
The going concern assessment considers the principal risks and
uncertainties facing the Group’s activities, future development
and performance, including those arising from the pandemic and
are discussed in detail on pages 64 to 79 of the Strategic report.
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 Financial review on page 40, the Group
refinanced its unsecured debt facilities in April 2021 and entered
into two new revolving credit facilities and a new Private Placement
totalling £780 million. These new facilities contain the same gearing
and interest cover covenants as the existing unsecured and private
placement loans.
The Group’s unsecured revolving credit facilities and private
placement loan notes, which together represent 92% of the Group’s
total borrowing as at the date of this report, contain gearing and
interest cover covenants.
At 31 March 2021, the Group had substantial headroom within
these covenants. Gearing was 46%, substantially lower than
the maximum limit of 125% and its interest cover ratio was 5.5
times, comfortably higher than the minimum level of 1.5 times.
Property values would have to fall by 43% and rents by 65% before
banking covenants are breached.
Group borrowings, undrawn facilities and hedging are described
in note 14 and in the Financial review.
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.
They were mindful of the Group’s income certainty and diversity,
strong rent collection rates and long lease lengths when assessing
the Group’s going concern position.
In response to the pandemic, scenario testing considered the
potential longer term impact of the disruption caused to occupiers,
including rent defaults, increased vacancy costs and letting voids.
Key assumptions included in the scenario testing were as follows:
• Rents decline by 15% across the portfolio
• Property values fall by 15% across the portfolio
• There are no new developments or uncommitted
capital expenditure
• Interest rates increase by 1% on all floating rate loans
Throughout the scenario testing, the Group had sufficient
reserves to continue in operation and remain compliant with its
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 can meet its liabilities as they fall due and has
adequate resources to continue in operational existence for at
least 12 months from the date of signing these financial statements.
Accordingly, they continue to adopt the going concern basis in
preparing the financial statements for the year to 31 March 2021.
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 directors have changed the way in which the Group’s
performance is presented on the face of the income statement.
The underlying results have not been amended and this modified
presentation has had no effect on operating profit or profit for
the year.
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 111 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.
152
LondonMetric Property PlcAnnual Report and Accounts 2021 1 Significant accounting policies (continued)
iii) Standards and interpretations in issue not yet adopted
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 estimated rental value and current
market rental yields. 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.
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 property valuations and some real estate
markets have experienced lower transactional activity. In March
2020, our three external valuers included material uncertainty
clauses in their valuation reports. However, at the valuation date
of 31 March 2021, all of our valuers consider that there is adequate
market evidence upon which to base opinions of value and have
not included material uncertainty clauses in their valuation reports.
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.
Other complexities include conditionality inherent in transactions,
and other unusual terms and conditions. There is a risk that an
inappropriate approach could lead to a misstatement in the
financial statements.
Management applied judgement to those property acquisitions
made during the year to 31 March 2021 and determined that
they were asset acquisitions rather than business combinations as
disclosed in note 9 to the financial statements.
ii) Adoption of new and revised standards
Standards and interpretations effective in the current period
During the year, the following new and revised Standards and
interpretations have been adopted and have not had a material
impact on the amounts reported in these financial statements.
Name
Description
IFRS 3 (amendments)
Definition of a Business
IAS 1 and IAS 8
(amendments)
IFRS 7, IFRS 9 and IAS 39
(amendments)
Amendments to
references to the
Conceptual Framework
in IFRS Standards
Definition of Material
Interest Rate Benchmark Reform
Amendments to IFRS 2, IFRS 3, IFRS 6,
IFRS 14, IAS 1, IAS 8, IAS 34, IAS 37, IAS
38, IFRIC 12, IFRIC 19, IFRIC 20, IFRIC 22
and SIC 32
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
IFRS 16
IFRS 3
IAS 16
IAS 37
Description
Insurance contracts
Covid-related rent concessions
References to the conceptual
framework
Property, plant and equipment -
proceeds before intended use
Onerous contracts
IFRS 7, IFRS 9, IAS 39, IFRS 4
and IFRS 16 (amendments)
Interest Rate Benchmark Reform -
phase 2
IAS 1 (amendments)
IAS 8
IAS 12
IFRS 4
Classification of Liabilities as Current
or Non Current
Disclosure of Accounting Policies
Definition of accounting estimates
Deferred tax related to assets
and liabilities arising from a single
transaction
Applying IFRS 9 ‘Financial Instruments’
with IFRS 4 ‘Insurance Contracts’
Extension of the Temporary
Exemption from Applying IFRS 9
Annual improvements to
IFRSs: 2018 -2020 cycle
Amendments to IFRS 1, IFRS 9, IFRS 16,
and IAS 41
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 and in other cases
the acquisition accounting method is used.
Under the acquisition accounting method, the identifiable assets,
liabilities and contingent liabilities acquired are measured at
fair value at the acquisition date. The consideration transferred
is measured at fair value and includes the fair value of any
contingent consideration.
153
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
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 (‘NCI’) 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
interests’ share within equity in the consolidated balance sheet and
allocates to the non-controlling interest their share of profit or loss for
the period within the consolidated income statement.
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) Non current 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 are committed to the sale and expect
it to complete within one year from the date of classification.
Non-current assets classified as held for sale are measured at the
lower of carrying amount and the fair value less costs to sell.
iii) Tenant leases
Leases – the Group as a lessor
Rent receivable is recognised in the income statement on a
straight-line basis over the term of the lease. In the event that
a lease incentive is granted to a lessee, such incentives are
recognised as an asset, with the aggregate cost of the incentive
recognised as a reduction in rental income on a straight-line basis
over the term of the lease or to the first break option if earlier.
When the Group is an intermediate lessor, it accounts for the head
lease and the sub-lease as two separate contracts.
Leases – the Group as lessee
Where the Group is a lessee, a right of use asset and lease liability
are recognised at the outset of the lease. The lease liability is initially
measured at the present value of the lease payments based on the
Group’s expectations of the likelihood of the lease term. The lease
liability is subsequently adjusted to reflect an imputed finance charge,
payments made to the lessor and any lease modifications. The right
of use asset is initially measured at cost, which comprises the amount
of the lease liability, direct costs incurred, less any lease incentives
received by the Group. The Group has two categories of right of use
assets: those in respect of head leases related to a small number
of leasehold properties and an occupational lease for its head
office. Both right of use assets are classified as investment property
and added to the carrying value of the leasehold investment
property. The right of use asset in respect of its occupational lease is
subsequently depreciated over the length of the lease.
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
154
LondonMetric Property PlcAnnual Report and Accounts 2021 1 Significant accounting policies (continued)
The Group does not apply hedge accounting under IFRS 9.
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.
v) Profit and loss on sale of investment properties
Profits and losses on sales of investment properties are recognised at
the date of legal completion rather than exchange of contracts and
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 receivables
Trade receivables are initially recognised at their transaction price
and subsequently measured 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 lifetime
expected credit losses, which reflect the Group’s historical credit loss
experience and an assessment of current and forecast economic
conditions at the reporting date. The impact of Covid-19 has given
rise to higher estimated probabilities of default for some occupiers.
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) Trade and other payables
Trade payables and other payables are initially measured at fair
value, net of transaction costs and subsequently measured at
amortised cost using the effective interest method.
iv) Borrowings
Borrowings are recognised initially at fair value less attributable
transaction costs. Subsequently, borrowings are measured at
amortised cost with any difference between the proceeds and
redemption value being recognised in the income statement over
the term of the borrowings using the effective interest method.
v) 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.
Finance income includes interest receivable on funds invested
at the effective rate and notional interest receivable on forward
funded developments at the contractual rate.
Finance costs and income are presented in the cash flow statement
within financing and investing activities, respectively. For consistency,
the prior year comparative presentation of these balances, together
with the comparative presentation of movements in lease incentives,
was amended within the cash flow statement.
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 tangible 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.
155
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
2 Segmental information
As at 31 March
Property value
Distribution
Long income
Retail parks
Office
Residential
Development1
Head lease and right of use assets
1
Includes trading property of £1.1 million
For the year to 31 March
Gross rental income
Distribution
Long income
Retail parks
Office
Residential
Development
For the year to 31 March
Net rental income
Distribution
Long income
Retail parks
Office
Residential
Development
2021
2020
NCI
£m
Total
£m
100%
owned
£m
–
1,777.3
1,597.0
(11.4)
629.4
475.2
–
–
–
–
73.9
41.1
2.1
59.8
83.3
55.1
1.4
57.0
(11.4)
2,583.6
2,269.0
Share
of JV
£m
–
88.9
–
–
3.5
–
92.4
5.1
2,588.7
2021
Total
£m
78.0
38.6
4.7
3.5
0.1
0.2
NCI
£m
(0.1)
(1.4)
–
–
–
–
100%
owned
£m
Share
of JV
£m
76.3
25.7
7.1
3.2
–
–
–
6.1
–
–
0.2
–
6.3
2021
Total
£m
77.1
38.3
4.3
3.4
–
0.2
100%
owned
£m
Share
of JV
£m
75.5
25.7
6.7
3.2
–
–
–
6.1
–
–
–
–
NCI
£m
(0.1)
(1.4)
–
–
–
–
NCI
£m
(3.3)
(11.6)
Total
£m
1,593.7
552.5
–
–
–
–
83.3
55.1
4.9
57.0
(14.9)
2,346.5
5.7
2,352.2
2020
Total
£m
76.1
30.7
7.1
3.2
0.2
–
117.3
2020
Total
£m
75.3
30.7
6.7
3.2
–
–
NCI
£m
(0.2)
(1.1)
–
–
–
–
(1.3)
NCI
£m
(0.2)
(1.1)
–
–
–
–
100%
owned
£m
1,777.3
547.6
73.9
41.1
0.9
59.8
2,500.6
100%
owned
£m
78.1
34.7
4.7
3.5
0.1
0.2
Share
of JV
£m
–
93.2
–
–
1.2
–
94.4
Share
of JV
£m
–
5.3
–
–
–
–
100%
owned
£m
Share
of JV
£m
77.2
34.5
4.3
3.4
0.1
0.2
119.7
–
5.2
–
–
(0.1)
–
5.1
121.3
5.3
(1.5)
125.1
112.3
(1.5)
123.3
111.1
6.1
(1.3)
115.9
An operating segment is a distinguishable component of the Group that engages in business activities, earns revenue and incurs
expenses, whose results are reviewed by the Group’s Chief Operating Decision Makers (‘CODMs’) 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 and liabilities are not monitored by segment. However, property assets are
reviewed on an ongoing basis. The Group operates entirely in the UK and no geographical split is provided in information reported to
the Board.
Included within the distribution operating segment are the sub-categories of urban logistics, regional distribution and mega distribution
as reported on page 31 and throughout the Strategic report, however the sub-category results are not separately reviewed by the
CODMs as they are not considered separate operating segments. Instead the CODMs review the distribution sector as a whole as its own
operating segment.
156
LondonMetric Property PlcAnnual Report and Accounts 2021 3 Revenue
For the year to 31 March
Gross rental income
Property advisory fee income
Revenue
For the year to 31 March
Gross rental income
Cost of sales - property operating expenses
Net rental income
2021
£m
121.3
0.9
122.2
2021
£m
121.3
(1.6)
119.7
2020
£m
112.3
1.1
113.4
2020
£m
112.3
(1.2)
111.1
No individual tenant contributed more than 10% of gross rental income in the current or previous year. The contracted rental income of the
Group’s top ten occupiers is shown in Supplementary note xvii on page 183.
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 in respect of development projects
Social security costs
Pension costs
Share based payment
2021
£m
12.4
0.2
0.7
2.5
15.8
2021
£m
9.8
(2.2)
7.6
0.8
0.2
3.8
12.4
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 £3.8 million (2020: £2.9 million).
The cost of acquiring the shares expected to vest under the LTIP of £5.5 million has been charged to reserves this year (2020: £7.2 million).
Directors’ emoluments are reflected in the table below. Details of the Directors’ remuneration awards under the LTIP are given in the
Remuneration Committee report on pages 129 to 130.
Remuneration for management services
Entitlement to pension scheme contributions
2021
£m
2.8
0.1
2.9
2020
£m
2.9
0.1
3.0
157
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
4 Administrative costs (continued)
The emoluments and benefits of the key management personnel of the Company, which comprise the Directors and certain members of
the Senior Leadership Team, are set out in aggregate in the table below.
2021
£m
2020
£m
Short term employee benefits
Share based payments
8.7
2.5
11.2
7.8
2.3
10.1
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 116 to 133 on the basis of materiality.
c) Staff numbers
The average number of employees including Executive Directors during the year was:
Property and administration
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
In addition to the above audit fees, £24,200 (2020: £35,600) 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 £36,500 (2020: £10,400).
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 developments
Net borrowing costs
Fair value (gain)/loss on derivative financial instruments
Total finance costs
2021
£m
19.4
7.5
1.8
0.1
1.9
30.7
(1.1)
29.6
(4.7)
24.9
Net finance costs deducted from EPRA earnings as disclosed in Supplementary note ii exclude the fair value gain on derivative financial
instruments of £4.7 million (2020: loss of £3.2 million) and early close out costs of £7.5 million (2020: £0.2 million), and include interest
receivable of £0.6 million (2020: £0.7 million) as reflected in the income statement.
6 Taxation
For the year to 31 March
Current tax
UK tax charge on profit
158
2021
£m
0.1
2020
£m
0.2
2021
Number
32
2020
Number
34
2021
£000
201
–
35
236
2020
£000
179
5
30
214
2020
£m
22.8
0.2
1.5
0.1
2.1
26.7
(0.9)
25.8
3.2
29.0
LondonMetric Property PlcAnnual Report and Accounts 2021 6 Taxation (continued)
The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:
2021
£m
For the year to 31 March
Profit/(loss) before tax
Tax charge/(credit) at the standard rate of corporation tax in the UK of 19% (2020: 19%)
Effects of:
Tax effect of income not subject to tax
Share of post tax (profits)/losses of joint ventures
UK tax charge on profit
258.0
49.0
(47.6)
(1.3)
0.1
2020
£m
(6.7)
(1.3)
(0.2)
1.7
0.2
The current tax charge relates to tax arising on income attributable to the Group’s non-controlling interest and other income that does
not qualify as property income within the REIT regulations. As the Group is a UK REIT there is no provision for deferred tax arising on the
revaluation of properties or other temporary differences.
7 Dividends
For the year to 31 March
Ordinary dividends paid
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
2020 Third quarterly interim dividend: 2.0p per share
2020 Fourth quarterly interim dividend: 2.3p per share
2021 First quarterly interim dividend: 2.1p per share
2021 Second quarterly interim dividend: 2.1p per share
Quarterly dividend payable
2021 Third quarterly interim dividend: 2.1p per share
2021 Fourth quarterly interim dividend: 2.35p per share
2020
£m
13.3
17.4
16.7
16.8
–
–
–
–
64.2
2021
£m
–
–
–
–
16.7
20.8
19.0
19.1
75.6
19.0
21.3
The Company paid its third quarterly interim dividend in respect of the financial year to 31 March 2021 of 2.1p per share, wholly as a
Property Income Distribution (‘PID’), on 15 April 2021 to ordinary shareholders on the register at the close of business on 12 March 2021.
The fourth quarterly interim dividend for 2021 of 2.35p per share, of which 2.25p is payable as a PID, will be payable on 13 July 2021
to shareholders on the register at the close of business on 11 June 2021. 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 2022.
During the year the Company issued 1.5 million ordinary shares under the terms of the Scrip Dividend Scheme, which reduced the cash
dividend payment by £3.2 million to £72.4 million.
8 Earnings and net assets per share
Adjusted earnings and net assets per share are calculated in accordance with the Best Practice Recommendations (‘BPR’)
of the European Public Real Estate Association (‘EPRA’). The EPRA earnings measure highlights the underlying performance of the property
rental business.
The basic earnings per share calculation uses the weighted average number of ordinary shares during the year and excludes the average
number of shares held by the Employee Benefit Trust for the year. The basic 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. The fully diluted
calculations assume that new shares are issued in connection with the expected vesting of the Group’s long term incentive plan.
Further EPRA performance measures are reflected in the Supplementary notes on pages 178 to 183.
159
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
8 Earnings and net assets per share (continued)
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
Other1
EPRA earnings
Group
£m
121.3
(1.6)
119.7
0.9
(15.8)
(21.5)
(0.1)
83.2
JV
£m
5.3
(0.2)
5.1
(0.4)
–
(1.2)
–
3.5
NCI
£m
(1.5)
–
(1.5)
–
–
0.2
0.2
(1.1)
2021
£m
125.1
(1.8)
123.3
0.5
(15.8)
(22.5)
0.1
85.6
Group
£m
112.3
(1.2)
111.1
1.1
(15.8)
(24.9)
(0.2)
71.3
JV
£m
6.3
(0.2)
6.1
(0.5)
(0.1)
(1.5)
–
4.0
NCI
£m
(1.3)
–
(1.3)
–
–
0.3
0.2
(0.8)
1 Group net finance costs reflect net borrowing costs of £29.6 million (note 5) less early close out costs of £7.5 million (note 5) and finance income of £0.6 million
The reconciliation of EPRA earnings to IFRS reported profit can be summarised as follows:
For the year to 31 March
EPRA earnings
Revaluation of property
Fair value of derivatives
Profit/(loss) on disposal
Debt/hedging break costs
Impairment of goodwill
Acquisition costs
Group
£m
83.2
169.9
4.7
0.8
(7.5)
–
–
IFRS reported profit/(loss)
251.1
JV
£m
3.5
3.4
0.1
(0.1)
–
–
–
6.9
NCI
£m
(1.1)
0.4
–
–
–
–
–
2021
£m
85.6
173.7
4.8
0.7
(7.5)
–
–
(0.7)
257.3
Group
£m
71.3
(3.8)
(3.2)
(4.9)
(0.2)
(48.3)
(8.9)
2.0
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
Diluted
EPRA earnings per share
Basic
Diluted
160
2020
£m
117.3
(1.4)
115.9
0.6
(15.9)
(26.1)
–
74.5
2020
£m
74.5
(12.0)
(3.6)
(7.2)
(0.2)
(48.3)
(8.9)
(5.7)
2020
£m
(5.7)
80.2
74.5
JV
£m
4.0
(10.2)
(0.4)
(2.3)
–
–
–
NCI
£m
(0.8)
2.0
–
–
–
–
–
(8.9)
1.2
2021
£m
257.3
(171.7)
85.6
2021
Number of
shares
(millions)
2020
Number of
shares
(millions)
901.9
(2.8)
899.1
4.8
903.9
28.61p
28.46p
9.52p
9.47p
806.7
(2.5)
804.2
6.0
810.2
(0.70)p
(0.70)p
9.26p
9.19p
LondonMetric Property PlcAnnual Report and Accounts 2021 8 Earnings and net assets per share (continued)
c) Net assets per share attributable to equity shareholders
In October 2019, EPRA published new best practice recommendations for financial disclosures by public real estate companies. The best
practice recommendations introduced three new measures of net asset value: EPRA net tangible assets (‘NTA’), EPRA net reinstatement value
(‘NRV’) and EPRA net disposal value (‘NDV’).
These recommendations became effective for accounting periods commencing on 1 January 2020 and have been adopted by the Group
in the year. The three new measures have replaced the previously reported metrics of EPRA net asset value (‘NAV’) and EPRA triple net asset
value (‘NNNAV’).
EPRA NTA is considered to be the most relevant measure for the Group and replaces EPRA NAV as the primary measure of net asset value.
All three measures are calculated on a diluted basis, which assumes that new shares are issued in connection with the expected vesting of
the Group’s long term incentive plan.
A reconciliation between the three new EPRA NAV metrics to IFRS NAV and the previously reported EPRA NAV is shown in the table below.
For the Group, EPRA NDV is equivalent to EPRA NNNAV on a fully diluted basis and therefore no reconciliation is presented.
As at 31 March 2021
Equity shareholders’ funds
Fair value of group derivatives
Fair value of joint ventures’ derivatives
EPRA net asset value (as previously reported)
Fair value of derivatives
Mark to market of fixed rate debt
Purchasers’ costs1
EPRA net asset value (new measures)
1 Estimated from the portfolio’s external valuation which is stated net of purchasers’ costs of 6.8%.
As at 31 March 2020
Equity shareholders’ funds
Fair value of group derivatives
Fair value of joint ventures’ derivatives
EPRA net asset value (as previously reported)
Fair value of derivatives
Mark to market of fixed rate debt
Purchasers’ costs
EPRA net asset value (new measures)
As at 31 March
Ordinary share capital
Shares held in Employee Benefit Trust
Number of ordinary shares - basic
Employee share schemes
Number of ordinary shares – fully diluted
IFRS net asset value per share
EPRA net tangible assets per share
EPRA net disposal value per share
EPRA net reinstatement value per share
EPRA net
tangible assets
£m
EPRA net
disposal value
£m
EPRA net
reinstatement
value £m
1,731.3
1,731.3
1,731.3
–
0.6
–
0.6
–
0.6
1,731.9
1,731.9
1,731.9
–
–
–
(0.6)
(4.9)
–
1,731.9
1,726.4
–
–
176.0
1,907.9
EPRA net
tangible assets
£m
EPRA net
disposal value
£m
EPRA net
reinstatement
value £m
1,431.8
1,431.8
1,431.8
4.7
0.7
4.7
0.7
4.7
0.7
1,437.2
1,437.2
1,437.2
–
–
–
(5.4)
1.7
–
1,437.2
1,433.5
–
–
159.9
1,597.1
2021
Number of
shares
(millions)
2020
Number of
shares
(millions)
909.6
(4.4)
905.2
4.7
909.9
191.3p
190.3p
189.7p
209.7p
841.5
(4.3)
837.2
6.5
843.7
171.0p
170.3p
169.9p
189.3p
161
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Notes forming part of the Group
financial statements
For the year ended 31 March 2021
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
Under
development
£m
2021
Total
£m
Completed
£m
Under
development
£m
2,212.0
212.4
4.9
(200.8)
55.5
149.7
7.1
2,440.8
5.1
2,445.9
55.9
16.8
21.1
–
(55.5)
20.2
0.2
58.7
–
58.7
2,267.9
1,628.2
229.2
26.0
(200.8)
–
169.9
7.3
2,499.5
5.1
2,504.6
634.2
10.2
(113.1)
50.3
(7.3)
9.5
2,212.0
5.7
2,217.7
59.8
31.9
11.2
(0.3)
(50.3)
3.5
0.1
55.9
–
55.9
2020
Total
£m
1,688.0
666.1
21.4
(113.4)
–
(3.8)
9.6
2,267.9
5.7
2,273.6
Investment properties are held at fair value as at 31 March 2021 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 2021 was £22.4 million (2020: £67.8 million), representing £2.3 million distribution,
£10.5 million long income and £9.6 million office 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.
Long term leasehold values included within investment properties amount to £148.7 million (2020: £176.9 million). All other properties are
freehold. The historical cost of all of the Group’s investment properties at 31 March 2021 was £1,948.2 million (2020: £1,884.0 million).
Included within the investment property valuation is £79.4 million (2020: £72.1 million) in respect of unamortised lease incentives and rent
free periods.
Capital commitments have been entered into amounting to £93.3 million (2020: £28.9 million) which have not been provided for in the
financial statements.
Internal staff costs of the development team of £2.2 million (2020: £2.1 million) have been capitalised, being directly attributable to the
development projects in progress.
Forward funded development costs of £15.5 million (2020: £9.9 million) have been classified within investment property as acquisitions.
At 31 March 2021, investment properties included £5.1 million for the head lease right of use assets in accordance with IFRS 16
(2020: £5.7 million).
b) Valuation technique and quantitative information
ERV
Net initial yield
Reversionary yield
Asset type
Distribution
Long income
Retail parks
Office
Development
Residential
Fair value
2021
£m
Valuation
technique
Weighted
average
(£ per sq ft)
Range
(£ per sq ft)
Weighted
average
%
1,777.3
Yield capitalisation
7.06
4.00-21.40
547.6
Yield capitalisation
73.9
41.1
58.7
0.9
Yield capitalisation
Yield capitalisation
Residual
Comparison
14.00
14.03
17.38
10.21
n/a
3.00-155.70
6.00-18.70
11.50-33.90
8.35-25.00
n/a
4.1
4.9
7.5
6.0
4.2
n/a
Range
%
1.4-7.1
3.4-11.8
6.2-12.4
5.0-7.4
3.9-5.7
n/a
Weighted
average
%
4.5
4.7
6.7
6.5
3.9
n/a
Range
%
2.4-7.4
2.4-13.4
6.0-9.4
5.6-9.3
3.7-5.7
n/a
All of the Group’s properties are categorised as Level 3 in the fair value hierarchy as defined by IFRS 13 fair value measurement. There have
been no transfers of properties between Levels 1, 2 and 3 during the year ended 31 March 2021. The fair value at 31 March 2021 represents
the highest and best use.
162
LondonMetric Property PlcAnnual Report and Accounts 2021 9 Investment properties (continued)
i) Technique
The valuation techniques described below are consistent with IFRS 13 and use significant ‘unobservable’ inputs such as Expected Rental
Value (‘ERV’) and yield. 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 £75.7 million or
£73.8 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 £136.0 million or £152.0 million respectively.
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 2021, 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.
LSP London Residential Investments Limited disposed of four residential flats at Moore House for £4.5 million (Group share: £1.8 million)
in the year, reducing the number held to four.
The Metric Income Plus Partnership (‘MIPP’), in which the Company has a 50% interest, sold two properties post year end for £21.1 million
(Group share: £10.6 million).
At 31 March 2021, 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 2021 was £21.1 million
(Group share: £10.6 million), (2020: £3.9 million and Group share £1.5 million).
The movement in the carrying value of joint venture interests in the year is summarised as follows:
As at 31 March
Opening balance
Additions at cost
Share of profit/(loss) in the year
Disposals
Distributions received
2021
£m
54.1
4.7
6.9
–
(6.5)
59.2
2020
£m
98.9
0.3
(8.9)
(20.5)
(15.7)
54.1
163
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
10 Investment in joint ventures (continued)
The Group’s share of the profit after tax and net assets of its joint ventures is as follows:
Metric
Income Plus
Partnership
£m
LSP
London
Residential
Investments
£m
10.7
(0.3)
10.4
(0.1)
(0.8)
8.0
(2.5)
0.3
–
15.3
7.7
(8.0)
0.1
(0.3)
–
7.1
3.6
186.5
0.8
4.6
(2.6)
(74.9)
0.5
(1.1)
113.8
56.9
–
(0.1)
(0.1)
–
(0.1)
(1.5)
–
–
(0.2)
(1.9)
(0.8)
1.5
–
–
0.2
(0.2)
(0.1)
2.9
–
2.8
–
–
–
–
5.7
2.3
Summarised income statement
Gross rental income
Property costs
Net rental income
Administrative costs
Management fees
Revaluation
Net finance cost
Derivative movement
Loss on disposal
Profit/(loss) after tax
Group share of profit/(loss) after tax
EPRA adjustments:
Revaluation
Debt and hedging early close out costs
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
164
Total
2021
£m
10.7
(0.4)
10.3
(0.1)
(0.9)
6.5
(2.5)
0.3
(0.2)
13.4
6.9
(6.5)
0.1
(0.3)
0.2
6.9
3.5
189.4
0.8
7.4
(2.6)
(74.9)
0.5
(1.1)
119.5
59.2
Group
share
2021
£m
5.3
(0.2)
5.1
–
(0.4)
3.4
(1.2)
0.1
(0.1)
6.9
(3.4)
–
(0.1)
0.1
3.5
94.4
0.4
3.4
(1.2)
(37.5)
0.3
(0.6)
59.2
LondonMetric Property PlcAnnual Report and Accounts 2021 10 Investment in joint ventures (continued)
Metric
Income Plus
Partnership
£m
LMP
Retail
Warehouse
JV PUT
£m
LSP
London
Residential
Investments
£m
Summarised income statement
Gross rental income
Property costs
Net rental income
Administrative costs
Management fees
Revaluation
Net 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
11 Trade and other receivables
As at 31 March
Trade receivables
Prepayments and accrued income
Other receivables
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
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
2021
£m
4.8
3.5
1.5
9.8
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
2020
£m
5.8
1.1
0.9
7.8
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 2021, trade receivables of £159,200 were overdue and considered at risk (2020: £69,800). Based on
the IFRS 9 expected credit loss model, an impairment provision of £760,000 (2020: £340,000) has also been made against trade receivables.
12 Cash and cash equivalents
Cash and cash equivalents include £10.7 million (2020: £5.4 million) retained in rent and restricted accounts which are not readily available
to the Group for day to day commercial purposes.
165
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
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
2021
£m
4.6
1.3
22.6
1.3
5.3
10.9
46.0
2020
£m
4.2
0.4
19.8
1.9
4.1
12.2
42.6
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
2021
£m
192.5
647.0
839.5
(2.0)
837.5
2020
£m
192.7
740.0
932.7
(6.0)
926.7
Certain bank loans at 31 March 2021 are secured by fixed charges over Group investment properties with a carrying value of £584.9 million
(2020: £529.7 million).
As at 31 March 2021
Secured bank loans:
Helaba term loan
Scottish Widows fixed rate debt
Unsecured bank loans:
Revolving credit facility (syndicate)
HSBC revolving credit facility
Wells Fargo revolving credit facility
Private Placement 2016 (syndicate)
Private Placement 2018 (syndicate)
1
interest rate caps of £19.6 million are used to hedge the Group’s exposure to interest rate risk
As at 31 March 2020
Secured bank loans:
Helaba term loan
Scottish Widows fixed rate debt
Unsecured bank loans:
Revolving credit facility (syndicate)
Wells Fargo revolving credit facility
Private Placement 2016 (syndicate)
Private Placement 2018 (syndicate)
Floating rate1
£m
Fixed rate
£m
Total debt
£m
130.0
–
258.0
59.0
50.0
–
–
497.0
–
62.5
–
–
–
130.0
150.0
342.5
130.0
62.5
258.0
59.0
50.0
130.0
150.0
839.5
Floating rate1
£m
Fixed rate
£m
Total debt
£m
130.0
–
410.0
50.0
–
–
590.0
–
62.7
–
–
130.0
150.0
342.7
130.0
62.7
410.0
50.0
130.0
150.0
932.7
Weighted
average
maturity
(years)
3.3
10.7
1.0
2.0
4.3
3.7
9.8
4.3
Weighted
average
maturity
(years)
4.3
11.7
1.8
5.3
4.7
10.8
4.8
1 interest rate caps of £19.6 million and swaps of £350 million are used to hedge the Group’s exposure to interest rate risk
166
LondonMetric Property PlcAnnual Report and Accounts 2021 14 Borrowings and financial instruments (continued)
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. Trade receivables are presented at
amortised cost less loss allowance for expected credit losses. The loss allowance 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 held in a diverse mix of institutions with investment grade
credit ratings. The credit ratings of the banks are monitored and changes are made where necessary to manage risk.
The credit risk on liquid funds and derivative financial instruments is limited due to the Group’s policy of monitoring counterparty exposures
with a maximum exposure equal to the carrying amount of these instruments. The Group has no significant concentration of credit risk,
with exposure spread over a large number of counterparties.
ii) Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt
instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group actively maintains a mixture of long term and short term committed facilities that are designed to ensure that the Group has
sufficient available funds for operations. 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 £51.4 million (2020: £81.8 million) and available and undrawn bank loan facilities at 31 March 2021 of
£170.5 million (2020: £133.8 million).
The following table shows the contractual maturity profile of the Group’s bank loans, interest payments on bank loans and derivative
financial instruments on an undiscounted cash flow basis and assuming settlement on the earliest repayment date. Other financial
liabilities as disclosed in note 14c(i) include trade payables and accrued interest and are repayable within one year. The contractual
maturity profile of lease liabilities disclosed in the balance sheet is reflected in note 15.
As at 31 March 2021
Bank loans
As at 31 March 2020
Bank loans
Derivative financial instruments
Less than
one year
£m
20.3
Less than
one year
£m
24.4
1.6
26.0
One to
two years
£m
332.5
One to
two years
£m
120.5
1.6
122.1
Two to
five years
£m
317.4
Two to
five years
£m
588.0
–
588.0
More than
five years
£m
274.3
More than
five years
£m
332.8
–
332.8
Total
£m
944.5
Total
£m
1,065.7
3.2
1,068.9
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, caps and fixed rates 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.
In April 2020, the Group cancelled £350 million interest rate swaps that hedged its unsecured facilities and were due to expire in 2022.
At 31 March 2021, 43% of the Group’s debt drawn was hedged (45% including share of joint ventures), mainly through fixed coupon debt
arrangements. Post year end in April, we entered into new private placement and revolving credit facilities of £780 million, replacing the
existing revolving credit facilities and other existing debt as described in the Financial review on page 40. This increased the percentage of
Group and share of joint venture debt hedged to 83%.
167
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
14 Borrowings and financial instruments (continued)
The average interest rate payable by the Group (including share of joint ventures) on all bank borrowings at 31 March 2021 including the
cost of amortising finance arrangement fees, was 2.5% (2020: 2.9%). A 1% increase or decrease in interest rates during the year would have
decreased or increased the Group’s annual profit before tax by £5.1 million or £0.7 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.
The Group seeks to maintain an efficient capital structure with a balance of debt and equity as shown in the table below.
As at 31 March
Net debt
Shareholders' equity
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)
Lease liabilities (note 15)
Current liabilities
Trade payables (note 13)
Accrued interest (note 13)
2021
£m
792.6
1,731.3
2,523.9
2020
£m
857.4
1,431.8
2,289.2
Measured at amortised cost
Measured at fair value
2021
£m
51.4
4.8
1.5
57.7
–
837.5
5.2
4.6
1.3
848.6
2020
£m
81.8
5.8
0.9
88.5
–
926.7
5.9
4.2
1.9
938.7
2021
£m
2020
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4.7
–
–
–
–
4.7
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 2021.
168
LondonMetric Property PlcAnnual Report and Accounts 2021
14 Borrowings and financial instruments (continued)
iii) Derivative financial instruments
Details of the fair value of the Group’s derivative financial instruments that were in place at 31 March 2021 are provided below:
As at 31 March
Average rate
Notional amount
Interest rate caps – expiry
Less than one year
One to two years
As at 31 March
Interest rate swaps – expiry
Two to five years
Total fair value
2021
%
2.0
–
2.0
2021
%
–
2020
%
–
2.0
2.0
2021
£m
19.6
–
19.6
2020
£m
–
19.6
19.6
Fair value
2020
£m
–
–
–
2021
£m
–
–
–
Average rate
Notional amount
Fair value
2020
%
1.1
2021
£m
–
2020
£m
350.0
2021
£m
–
–
2020
£m
(4.7)
(4.7)
All derivative financial instruments are non current interest rate derivatives, and are carried at fair value following a valuation as at
31 March 2021 by Chatham Financial. In accordance with accounting standards, fair value is estimated by calculating the present value
of future cash flows, using appropriate market discount rates. For all derivative financial instruments this equates to a Level 2 fair value
measurement as defined by IFRS 13 Fair Value Measurement.
The valuation therefore does not reflect the cost or gain to the Group of cancelling its interest rate protection at the balance sheet date,
which is generally a marginally higher cost (or smaller gain) than a market valuation.
15 Leases
The Group’s minimum lease rentals receivable under non cancellable 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
2021
£m
114.2
416.8
392.6
265.8
129.4
25.3
2020
£m
113.6
421.6
399.6
240.7
121.5
32.5
1,344.1
1,329.5
In accordance with IFRS 16, the Group has recognised a right of use asset for its head office lease and other head lease obligations.
The Group’s minimum lease payments are due as follows:
As at 31 March
Less than one year
Between one and two years
Between two and five years
Over five years
Minimum lease
payments
£m
Present value of
minimum lease
payments
2021
£m
Present value of
minimum lease
payments
2020
£m
Interest
£m
0.7
0.7
0.5
7.3
9.2
(0.1)
(0.1)
(0.2)
(3.6)
(4.0)
0.6
0.6
0.3
3.7
5.2
0.6
0.6
1.0
3.7
5.9
169
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Group
financial statements
For the year ended 31 March 2021
16 Share capital
As at 31 March
Issued, called up and fully paid
Ordinary shares of 10p each
2021
Number
2021
£m
2020
Number
2020
£m
909,643,040
91.0
841,498,022
84.2
The movement in the share capital and share premium of the Company during the current and previous year is summarised below.
Share capital issued, called up and fully paid
At 1 April 2019
Share issue on acquisition
Issued under scrip share scheme
At 1 April 2020
Issued under equity placing
Issued under scrip share scheme
At 31 March 2021
Ordinary shares
Number
Ordinary shares
£m
Share premium
£m
699,991,840
138,615,684
2,890,498
841,498,022
66,666,666
1,478,352
909,643,040
70.0
13.9
0.3
84.2
6.6
0.2
91.0
100.8
–
5.5
106.3
110.0
3.0
219.3
On 7 May 2020, the Company issued 66,666,666 new ordinary shares in connection with an equity placing that raised gross proceeds of
£120 million at an issue price of 180.0p per share. In addition, the Company issued 1,478,352 ordinary shares under the terms of its Scrip
Dividend Scheme during the year. Post year end in April, the Company issued a further 118,874 ordinary shares under the terms of its Scrip
Dividend Scheme.
The movement in the shares held by the Employee Benefit Trust in the year is summarised in the table below.
Ordinary shares
Number
Shares held by the Employee Benefit Trust
Ordinary shares
£m
At 1 April 2020
Shares issued under employee share schemes
Shares acquired by the Employee Benefit Trust
At 31 March 2021
4,330,731
(2,404,362)
2,463,826
4,390,195
0.4
(0.2)
0.2
0.4
In June 2020, the Company granted options over 1,914,457 ordinary shares under its Long Term Incentive Plan. In addition, 2,151,447 ordinary
shares in the Company that were granted to certain Directors and employees under the Company’s Long Term Incentive Plan in 2017
vested along with 252,915 ordinary shares in the Director’s Deferred Bonus Plan. The average share price on vesting was 225.3p.
As at 31 March 2021, the Company’s Employee Benefit Trust held 4,390,195 shares in the Company to satisfy awards under the Company’s
Long Term Incentive and Deferred Bonus Plans.
17 Reserves
The Group statement of changes in equity is shown on page 150. The nature and purpose of each reserve within equity is described below:
Share capital
The nominal value of shares issued.
Share premium
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 and the cost of shares
held in trust to provide for the Company’s future obligations under share award schemes. A breakdown of
other reserves is provided for the Group below and for the Company on page 177.
Retained earnings
The cumulative profits and losses after the payment of dividends.
As at 31 March
Opening balance
Employee share schemes:
Purchase of shares
Vesting of shares
Acquisition of A&J Mucklow
Closing balance
170
Merger
reserve
£m
497.4
Employee
Benefit Trust
shares
£m
2021
Total other
reserves
£m
(9.0)
488.4
Merger
reserve
£m
227.9
Employee
Benefit Trust
shares
£m
2020
Total other
reserves
£m
(6.2)
221.7
–
–
–
497.4
(5.5)
4.8
–
(9.7)
(5.5)
4.8
–
487.7
–
–
269.5
497.4
(7.2)
4.4
–
(9.0)
(7.2)
4.4
269.5
488.4
LondonMetric Property PlcAnnual Report and Accounts 2021 18 Analysis of movement in net debt
Bank loans and derivatives
Interest payable and fees
Lease liabilities
Total liabilities from financing
activities
Cash and cash equivalents
Net debt
1 April 2020
£m
931.4
Financing cash
flows
£m
(97.9)
Other cash
flows
£m
–
1.9
5.9
939.2
(81.8)
857.4
(22.7)
–
(120.6)
–
(120.6)
–
–
–
30.4
30.4
As at
1 April 2019
£m
Financing cash
flows
£m
Other cash
flows
£m
Bank loans and derivatives
560.5
Interest payable and fees
Lease liabilities
Total liabilities from
financing activities
Cash and cash equivalents
Net debt
0.9
–
561.4
(20.6)
540.8
283.8
(26.1)
–
257.7
–
257.7
–
–
–
–
(61.2)
(61.2)
Non cash movements
Impact of
issue and
arrangement
costs
£m
1.4
Early close
out costs
£m
2.6
Fair value
adjustments
£m
–
Interest charge
and unwinding
of discount
£m
–
31 March
2021
£m
837.5
2.7
–
4.1
–
4.1
–
–
2.6
–
2.6
–
–
–
–
–
19.4
(0.7)
1.3
5.2
18.7
844.0
–
(51.4)
18.7
792.6
Non cash movements
Impact of
issue and
arrangement
costs
£m
Acquisitions
£m
Fair value
adjustments
£m
Interest charge
and unwinding
of discount
£m
31 March
2020
£m
–
3.5
–
3.5
–
3.5
84.0
0.8
6.0
90.8
–
90.8
3.1
–
–
3.1
–
3.1
–
931.4
22.8
(0.1)
22.7
–
22.7
1.9
5.9
939.2
(81.8)
857.4
19 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
Group interest
40.0%
50.0%
2021
£m
0.1
0.8
0.9
2020
£m
0.2
0.9
1.1
2021
£m
2.8
3.7
6.5
2020
£m
8.3
4.0
12.3
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation.
b) Non-controlling interest
The Group’s non-controlling interest (‘NCI’) represents an 18% shareholding in LMP Retail Warehouse JV Holdings Limited, which owns a
portfolio of DFS assets. The Group’s interest in LMP Retail Warehouse JV Holdings Limited is 82%, requiring it to consolidate the results and
net assets of its subsidiary in these financial statements and reflect the non-controlling share as a deduction in the consolidated income
statement and consolidated balance sheet. As at the year end, the non-controlling interest share of profits and net assets was £0.7 million
and £6.4 million respectively, with distributions of £1.4 million paid during the year.
20 Post balance sheet events
Since the year end, we have completed acquisitions totalling £78.8 million, of which £11.8 million had exchanged in the year, and
have exchanged on a further £1.0 million. We also exchanged to acquire an asset in Milton Keynes for £23.9 million which is expected
to complete in the next financial year. In addition, we exchanged in the year to sell assets totalling £10.6 million, of which £2.4 million
completed post year end, and we have also exchanged to sell a further £15.8 million of assets.
In April, we entered into a new £380 million private debt placement with a number of institutional investors in North America and the
UK. We also entered into two new revolving credit facilities with three and five year terms for £225 million and £175 million respectively.
Taken together, we have completed £780 million of new debt, replacing the existing revolving credit facilities and other existing debt
facilities that are approaching maturity.
171
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 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
Note
2021
£m
2020
£m
iii
iv
v
vi
vii
vii
viii
1,333.8
1,278.6
1.4
29.2
0.2
1.9
46.6
0.3
1,364.6
1,327.4
635.9
34.8
670.7
570.0
71.1
641.1
2,035.3
1,968.5
9.9
11.5
645.8
–
1.5
647.3
657.2
1,378.1
91.0
219.3
9.6
51.5
1,006.7
1,378.1
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
The Company reported a profit for the financial year to 31 March 2021 of £122.5 million (2020: £70.1 million).
The financial statements were approved and authorised for issue by the Board of Directors on 27 May 2021 and were signed on its
behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
The notes on pages 174 to 177 form part of these financial statements.
172
LondonMetric Property PlcAnnual Report and Accounts 2021 Company statement of changes in equity
For the year ended 31 March
At 1 April 2020
Profit for the year
Equity placing
Purchase of shares held in employee benefit trust
Vesting of shares held in employee benefit trust
Share based awards
Reserve transfer of impairment in subsidiary
Dividends
At 31 March 2021
At 1 April 2019
Profit for the year
Share issue on acquisition
Purchase of shares held in employee benefit trust
Vesting of shares held in employee benefit trust
Share based awards
Reserve transfer of impairment in subsidiary
Dividends
At 31 March 2020
Share
capital
£m
84.2
–
6.6
–
–
–
–
0.2
91.0
Share
capital
£m
70.0
–
13.9
–
–
–
–
0.3
84.2
Share
premium
£m
106.3
–
110.0
–
–
–
–
3.0
219.3
Share
premium
£m
100.8
–
–
–
–
–
–
5.5
106.3
Capital
redemption
reserve
£m
9.6
–
–
–
–
–
–
–
9.6
Capital
redemption
reserve
£m
9.6
–
–
–
–
–
–
–
9.6
Other
reserve
£m
176.5
–
–
(5.5)
4.8
–
(124.3)
–
51.5
Other
reserve
£m
(6.2)
–
269.5
(7.2)
4.4
–
(84.0)
–
176.5
Retained
earnings
£m
836.8
122.5
–
–
(5.1)
3.8
124.3
(75.6)
1,006.7
Retained
earnings
£m
748.4
70.1
–
–
(4.4)
2.9
84.0
(64.2)
836.8
Total
£m
1,213.4
122.5
116.6
(5.5)
(0.3)
3.8
–
(72.4)
1,378.1
Total
£m
922.6
70.1
283.4
(7.2)
–
2.9
–
(58.4)
1,213.4
The notes on pages 174 to 177 form part of these financial statements.
173
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Company
financial statements
For the year ended 31 March 2021
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, fair value measurement,
impairment, standards in issue and not yet effective and certain related party transactions. The key source of estimation uncertainty
relevant to the Company relates to the impairment of investment in subsidiaries. The determination of the recoverable amount of the
subsidiaries is underpinned by the valuation of the underlying properties owned by each subsidiary. In determining this recoverable
amount, the use of estimates and assumptions is required which are consistent with the key sources of estimation uncertainty disclosed in
note 1 and 9 for the Group. 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.
Amounts due from subsidiary undertakings
Amounts owed by subsidiaries are unsecured, have no fixed date of repayment and are repayable on demand. Amounts due from
subsidiary undertakings included within current assets are expected to be repaid within one year and are measured for impairment using
the simplified approach under IFRS 9.
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 £122.5 million (2020: £70.1 million).
Audit fees in relation to the Company only were £200,700 in the year (2020: £172,695).
iii Fixed asset investments
At 1 April 2020
Additions
Disposals
Impairment of investment
At 31 March 2021
Subsidiary
Cost
£m
2,204.9
185.6
(596.9)
–
1,793.6
Subsidiary
impairment
£m
Joint venture
Cost
£m
Joint venture
impairment
£m
Total
undertakings
£m
(932.2)
–
590.8
(120.7)
(462.1)
16.7
(10.8)
–
–
–
16.7
–
–
(3.6)
(14.4)
1,278.6
185.6
(6.1)
(124.3)
1,333.8
The carrying value of the Company’s investments was impaired by £124.3 million following an impairment review to assess the recoverable
amount based on the net assets of the subsidiary companies and joint venture investments. The resulting impairment loss was due to
property sales and dividend payments.
The recoverable amount of investments in subsidiary undertakings of £1,331.5 million and joint ventures of £2.3 million has been determined
based on their fair value less cost of disposal. The Directors believe that this approximates to their net assets due to the investment property
that they hold being valued using the valuation techniques and the key assumptions disclosed in the note 9 Investment property to the
Group financial statements.
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
Metric Property Investments Limited
Metric Property Finance 1 Limited
Metric LP Income Plus Limited1
LSI (Investments) Limited
Country of
incorporation or
registration
Companies House
registered number
England
England
England
England
07172804
07403434
07780077
03539331
Nature of business
Intermediate holding company
Intermediate holding company
Intermediate holding company
Property investment
174
LondonMetric Property PlcAnnual Report and Accounts 2021 iii Fixed asset investments (continued)
Subsidiaries for which Section 479A Companies Act 2006
exemption taken
Country of
incorporation or
registration
Companies House
registered number
05697367
08336260
08565264
08524540
08644584
09335885
08989820
09269541
09062484
09891503
08568072
10120420
11357686
07347027
07455382
10882805
09409081
00717658
01232337
00758764
04848576
00384508
LSI Developments Limited
LondonMetric Saturn Limited
LondonMetric Saturn II Limited
LondonMetric Retail Distribution I Limited
LondonMetric Retail Distribution II Limited
LondonMetric Liverpool Limited
LondonMetric Swindon Limited
LondonMetric Distribution Limited
LondonMetric Retail Limited
LondonMetric Edinburgh Limited3
LondonMetric Derby Limited
LondonMetric Crawley Limited
LondonMetric Leisure Limited
Metric Property Coventry Limited
Metric Property Kirkstall Limited1
LondonMetric Logistics Limited
LondonMetric Bognor Regis Limited
A & J Mucklow Group 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
Metric Property Finance 2 Limited2
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
LondonMetric Urban Limited
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
LSP RI Moore House Limited5
LSP London Residential Investments Limited5
LSP London Residential Holdings Limited5
England
England
England
England
England
England
England
England
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
Guernsey
Guernsey
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
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Intermediate holding company
Administrative company
Property investment
Property investment
Property trading
Nature of business
Dormant
Property investment
Property investment
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Dormant
Property investment
Management company
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Intermediate holding company
Intermediate holding company
1 Undertakings held indirectly by the Company
2 Exempt from the requirement to file audited accounts
3
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
5 The Company owns ordinary shares representing 40% of the beneficial interest in the share capital
In the process of being liquidated
175
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notes forming part of the Company
financial statements
For the year ended 31 March 2021
iii Fixed asset investments (continued)
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 2021, investment properties included £1.4 million (2020: £1.9 million) for the head lease right of use assets which have been
recognised following adoption of IFRS 16.
v Trade and other receivables
As at 31 March
Prepayments and accrued income
Amounts due from subsidiary undertakings
2021
£m
0.5
635.4
635.9
2020
£m
0.4
569.6
570.0
All amounts under receivables fall due for payment in less than one year. Based on the IFRS 9 Expected Credit Loss model, last year an
impairment provision of £9.8 million was recognised on amounts due from Group undertakings, which are unsecured and repayable on
demand. Following an impairment review this year, no provision was necessary.
vi Trade and other payables
As at 31 March
Trade payables
Other accruals and deferred income
Other payables
Included within other accruals and deferred income is accrued interest payable of £0.4 million (2020: £1.1 million).
vii Borrowings and financial instruments
Non current financial liabilities
As at 31 March
Unsecured bank loans
Unamortised finance costs
2021
£m
0.1
7.0
2.8
9.9
2021
£m
647.0
(1.2)
645.8
2020
£m
0.2
7.9
3.4
11.5
2020
£m
740.0
(3.2)
736.8
The Company uses interest rate swaps, caps and fixed rates to manage its interest rate exposure and hedge future interest rate risk for
the term of the bank loan. In April 2020, the Company cancelled £350 million interest rate swaps that hedged its unsecured facilities
and were due to expire in 2022. At 31 March 2021, 43% of the Company’s debt drawn was hedged, mainly through fixed coupon debt
arrangements. Post year end in April, we entered into new private placement and revolving credit facilities of £780 million, replacing the
existing revolving credit facilities and other existing debt as described in the Financial review on page 40. This increased the percentage of
the Company’s debt hedged to 81%.
The following table shows the contractual maturity profile of the Company’s financial liabilities assuming settlement on the earliest
repayment date.
As at 31 March
Less than one year
One to five years
More than five years
176
Bank
loans
£m
(0.3)
471.2
174.9
645.8
Interest
payable
£m
0.4
–
–
0.4
2021
£m
0.1
471.2
174.9
646.2
2020
£m
1.1
515.0
225.0
741.1
LondonMetric Property PlcAnnual Report and Accounts 2021 vii Borrowings and financial instruments (continued)
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.
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
Interest rate swaps – expiry
Two to five years
Total fair value
Average rate
2020
%
1.1
2021
%
–
2021
£m
–
Notional
2020
£m
350.0
2021
£m
–
–
Fair value
2020
£m
(4.7)
(4.7)
Further information on financial risk management policies and practices can be found in note 14 to the Group financial statements.
viii Leases
In accordance with FRS 16, the Group has recognised a right of use asset for its head office lease obligations. 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
0.9
1.5
Present value of
minimum lease
payments
2021
£m
Present value of
minimum lease
payments
2020
£m
Interest
£m
–
–
–
0.6
0.9
1.5
0.6
1.5
2.1
ix Related party transactions
Related party transactions for the Company are as noted for the Group in note 19 to the Group financial statements.
x Reserves
The Company statement of changes in equity is shown on page 173. The nature and purpose of each reserve within equity is described in
note 17 to the Group financial statements.
As at 31 March
Opening balance
Employee share schemes:
Purchase of shares
Vesting of shares
Acquisition of A&J Mucklow Plc
Impairment in subsidiary
Closing balance
Merger
reserve
£m
185.5
–
–
–
(124.3)
61.2
Employee
Benefit Trust
shares
£m
Total other
reserves
2021
£m
(9.0)
176.5
(5.5)
4.8
–
–
(9.7)
(5.5)
4.8
–
(124.3)
51.5
Merger
reserve
£m
Employee
Benefit Trust
shares
£m
–
–
–
269.5
(84.0)
185.5
(6.2)
(7.2)
4.4
–
–
(9.0)
Total other
reserves
2020
£m
(6.2)
(7.2)
4.4
269.5
(84.0)
176.5
xi Share capital and share premium
The movement in the share capital and share premium of the Company during the year is reflected in note 16 to the Group accounts on
page 170.
177
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Supplementary information
(not audited)
i EPRA summary table
EPRA earnings per share
EPRA net tangible assets per share
EPRA net disposal value per share
EPRA net reinstatement 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 184.
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
100%
owned
£m
121.3
(1.6)
119.7
0.9
(15.8)
(21.5)
(0.1)
83.2
JV
£m
5.3
(0.2)
5.1
(0.4)
–
(1.2)
–
3.5
NCI
£m
(1.5)
–
(1.5)
–
–
0.2
0.2
(1.1)
Total
2021
£m
125.1
(1.8)
123.3
0.5
(15.8)
(22.5)
0.1
85.6
iii EPRA proportionally consolidated balance sheet
As at 31 March
Investment property
Trading property
Gross debt
Cash
Other net liabilities
100%
owned
£m
2,504.6
1.1
2,505.7
(839.5)
51.4
(39.1)
EPRA net tangible assets
1,678.5
Derivatives
IFRS net assets
Loan to value
Cost of debt
Undrawn facilities
–
1,678.5
32.2%
2.5%
170.5
JV
£m
94.4
–
94.4
(37.5)
3.4
(0.5)
59.8
(0.6)
59.2
32.8%
3.0%
–
178
2021
9.52p
190.3p
189.7p
209.7p
1.3%
13.6%
13.0%
4.3%
4.6%
NCI
£m
(1.3)
–
(1.3)
–
–
0.3
0.2
(0.8)
NCI
£m
(14.9)
–
(14.9)
–
(0.8)
8.6
(7.1)
–
(7.1)
–
–
–
2020
9.26p
170.3p
169.9p
189.3p
1.4%
14.2%
13.3%
4.3%
5.0%
Total
2020
£m
117.3
(1.4)
115.9
0.6
(15.9)
(26.1)
–
74.5
Total
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
JV
£m
6.3
(0.2)
6.1
(0.5)
(0.1)
(1.5)
–
4.0
JV
£m
92.4
–
92.4
(42.1)
5.1
(0.6)
54.8
(0.7)
54.1
40.0%
3.1%
–
100%
owned
£m
112.3
(1.2)
111.1
1.1
(15.8)
(24.9)
(0.2)
71.3
100%
owned
£m
2,273.6
1.1
2,274.7
(932.7)
81.8
(34.3)
NCI
£m
(11.4)
–
Total
2021
£m
2,587.6
1.1
(11.4)
2,588.7
(877.0)
54.6
(34.4)
–
(0.2)
5.2
(6.4)
–
(6.4)
–
–
–
1,731.9
1,389.5
(0.6)
1,731.3
32.3%
2.5%
170.5
(4.7)
1,384.8
35.7%
2.9%
133.8
LondonMetric Property PlcAnnual Report and Accounts 2021 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
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)
2021
£m
1.6
15.8
0.6
(0.9)
(0.1)
17.0
(0.7)
–
16.3
121.3
5.3
(1.5)
125.1
(0.1)
125.0
13.6%
13.0%
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%
2021
£m
2020
£m
2,499.5
2,267.9
94.4
1.1
(59.8)
(2.1)
(11.4)
92.4
1.1
(57.0)
(4.9)
(14.9)
2,521.7
2,284.6
171.5
14.7
2,707.9
112.6
6.2
(2.3)
116.5
7.7
124.2
4.3%
4.6%
155.4
18.7
2,458.7
102.1
6.0
(1.9)
106.2
16.0
122.2
4.3%
5.0%
179
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Supplementary information
(not audited)
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
Developments2,4
Capital expenditure3
Disposals
Revaluation
Lease incentives
Head lease ROU
asset
Closing valuation
100%
owned
£m
2,274.7
212.4
37.9
4.9
(200.8)
169.9
7.3
(0.6)
2,505.7
JV
£m
92.4
–
–
0.3
(1.8)
3.4
0.1
–
94.4
NCI
£m
(14.9)
–
–
(0.1)
3.3
0.4
(0.1)
–
Total
2021
£m
2,352.2
212.4
37.9
5.1
(199.3)
173.7
7.3
(0.6)
(11.4)
2,588.7
100%
owned
£m
1,688.0
635.3
43.1
10.2
(113.4)
(3.8)
9.6
5.7
2,274.7
JV
£m
158.2
(41.2)
–
0.3
(15.1)
(10.2)
0.4
–
92.4
1 Group acquisitions in the year include completed investment properties as reflected in note 9 to the financial statements
2 Group developments include acquisitions and capital expenditure on properties under development as reflected in note 9
3 Capital expenditure on completed properties, of which £0.6 million created additional lettable space
4
Includes capitalised interest of £1.1 million (2020: £0.9 million)
viii Total accounting return
For the year to 31 March
EPRA net tangible assets per share
– at end of year
– at start of year
Increase/(decrease)
Dividend paid
Net increase
Total accounting return
180
2021
£m
1.7
127.7
1.3%
NCI
£m
–
(17.0)
–
(0.2)
0.3
2.0
–
–
2020
£m
1.7
124.4
1.4%
Total
2020
£m
1,846.2
577.1
43.1
10.3
(128.2)
(12.0)
10.0
5.7
(14.9)
2,352.2
2021
pence
per share
2020
pence
per share
190.3
170.3
20.0
8.5
28.5
16.7%
170.3
173.7
(3.4)
8.4
5.0
2.9%
LondonMetric Property PlcAnnual Report and Accounts 2021 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
2021
£m
351.9
483.5
941.9
1,777.3
629.4
73.9
41.1
2,521.7
59.8
2.1
2,583.6
5.1
2,588.7
2021
%
13.6
18.7
36.5
68.8
24.3
2.9
1.6
97.6
2.3
0.1
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
100.0
2,346.5
100.0
5.7
2,352.2
1 Represents urban logistics £51.8 million (2.0%), long income £5.8 million (0.2%), office and other land £2.2 million (0.1%) at 31 March 2021. Split of prior year comparatives
was regional distribution £38.1 million (1.6%), urban logistics £6.2 million (0.3%), long income £10.5 million (0.5%), office and other land £2.2 million.
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 2021
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
%
2021
Equivalent
yield
%
EPRA NIY
%
EPRA
topped up NIY
%
2020
Equivalent
yield
%
3.8
5.2
7.1
4.9
4.3
4.1
5.4
7.6
6.0
4.6
Area
’000 sq ft
12,150
2,719
379
164
15,412
4.7
5.7
7.1
6.5
5.1
3.9
5.0
6.7
5.8
4.3
4.6
5.6
7.5
5.8
5.0
5.1
5.9
7.3
6.5
5.5
WAULT
to expiry
years
WAULT
to first break
years
Occupancy
%
Average rent
£ per sq ft
10.6
14.2
8.6
5.4
11.4
9.5
13.1
7.5
5.1
10.3
98.1
100.0
100.0
91.8
98.7
6.50
15.60
15.80
17.50
8.30
All property
2021
%
All property
2020
%
8.0
5.1
13.4
–
5.1
5.1
181
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Supplementary information
(not audited)
2021
£m
77.6
35.8
6.0
2.6
122.0
1.7
0.6
124.3
2020
£m
77.3
33.9
6.8
3.4
121.4
1.3
0.6
123.3
Within 3 years
%
Within 5 years
%
Within 10 years
%
Within 15 years
%
Within 20 years
%
Over 20 years
%
11.6
11.6
1.8
4.7
8.4
22.5
50.1
5.9
19.7
18.1
45.9
100.0
27.1
74.6
42.9
2021
£m
46.2
22.9
0.8
0.6
70.5
75.3
100.0
52.0
85.6
69.5
2021
%
58.2
63.1
14.0
22.5
56.8
94.0
100.0
82.6
100.0
91.1
2020
£m
46.1
19.7
1.1
0.3
67.2
100.0
100.0
100.0
100.0
100.0
2020
%
58.7
57.2
15.7
8.5
54.5
Area
’000 sq ft
1062
454
658
785
191
357
230
364
357
51
Contracted
rent
£m
Occupancy
%
WAULT
to expiry
years
WAULT
to first break
years
5.8
4.1
4.1
4.3
1.9
2.1
2.3
2.0
1.9
1.9
100
100
100
100
100
100
100
100
100
100
19.5
22.5
13.0
11.5
7.1
10.7
4.3
16.5
14.6
10.6
19.5
22.5
13.0
11.5
7.1
10.7
4.3
16.5
14.6
6.0
xiii Contracted rental income
As at 31 March
Distribution
Long income
Retail parks
Offices
Investment portfolio
Development – distribution
Development – long income
Total portfolio
xiv Rent subject to expiry
As at 31 March 2021
Distribution
Offices
Long income
Retail parks
Total portfolio
xv Contracted rent subject to RPI or fixed uplifts
As at 31 March
Distribution
Long income
Retail parks
Offices
Total portfolio
xvi Top ten assets (by value)
As at 31 March 2021
Primark, T2, Islip
Eddie Stobart, Dagenham
Argos, Bedford
Primark, Thrapston
Tesco, Croydon
Amazon, Warrington
DHL, Reading
Ollerton, Clipper
Oak Furniture, Swindon
New Malden
182
LondonMetric Property PlcAnnual Report and Accounts 2021 xvii Top ten occupiers
As at 31 March 2021
Primark
DFS
Amazon
Argos
Eddie Stobart
M&S1
DHL
Odeon
Waitrose
DSG
Top ten
1 Excludes income from post year end sales
Contracted
rental income
£m
Contracted
rental income
%
10.1
4.3
4.2
4.2
4.1
3.9
3.6
3.3
3.3
3.3
8.2
3.5
3.4
3.4
3.3
3.2
2.9
2.7
2.7
2.6
44.3
35.9
183
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 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.
Chief Operating Decision Makers (‘CODMs’)
The Executive Directors, Senior Leadership
Team members and other senior managers.
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 debt drawn.
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.
184
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 net disposal value per share
Represents the shareholders’ value under a
disposal scenario, where assets are sold and/
or liabilities are not held to maturity. Therefore,
this measure includes an adjustment to mark
to market the Group’s fixed rate debt.
EPRA net reinstatement value per share
This reflects the value of net assets required
to rebuild the entity, assuming that entities
never sell assets. Assets and liabilities,
such as fair value movements on financial
derivatives that are not expected to crystallise
in normal circumstances, are excluded.
Investment property purchasers’ costs
are included.
EPRA net tangible assets per share
This reflects the value of net assets on a long
term, ongoing basis assuming entities buy
and sell assets. Assets and liabilities, such as
fair value movements on financial derivatives
that are not expected to crystallise in normal
circumstances, are excluded.
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.
IFRS net assets
The Group’s equity shareholders’ funds at the
period end, which excludes the net assets
attributable to the non-controlling interest.
IFRS net assets per share
IFRS net assets divided by the number of shares
in issue at the balance sheet date.
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.
LondonMetric Property PlcAnnual Report and Accounts 2021 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.
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.
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.
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 Net Tangible Assets
per share plus the dividend paid during the
period expressed as a percentage of the EPRA
net tangible assets 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.
185
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Notice of Annual General Meeting
This document is important and requires your immediate attention. If you are in any doubt as to the action you should take,
you should seek your own personal financial advice from your stockbroker, bank manager, solicitor, accountant, or other
financial advisor authorised under the Financial Services and Markets Act 2000.
If you have sold or otherwise transferred all your ordinary shares, please send this document, together with the accompanying
documents, as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom
the sale or transfer was effected, for delivery to the purchaser or transferee.
At the time of writing, Covid-19 restrictions and guidance are
in place which prevent us from convening the Annual General
Meeting in the usual way. The Government’s roadmap for easing
lockdown restrictions published on 22 February 2021 envisages
the lifting of restrictions by 21 June 2021 (being prior to the date of
the Annual General Meeting). However, this roadmap is subject
to a number of contingencies and there can be no guarantee
that restrictions will be lifted prior to the meeting. It is intended
that this year’s Annual General Meeting will 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. We would strongly recommend that shareholders do not
attend the meeting and that all shareholders exercise their votes by
submitting their proxy electronically or by post, as explained below.
Shareholders 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. Shareholders wishing to
attend the meeting in person should pre-register their attendance
by emailing info@londonmetric.com no later than 5.00pm on 9 July
2021 and must bring photographic identification with them in order
to access the meeting.
Shareholders will be able to listen in by conference call
facilities and to submit questions in advance by emailing
info@londonmetric.com by 10.00am on 9 July 2021 or by asking
questions on the day through the conferencing facilities.
Answers will be published on our website shortly after the Annual
General Meeting.
The Board will keep the situation under review and may need
to make further changes to the arrangements relating to the
meeting, including how it is conducted, and shareholders
should therefore continue to monitor the Company’s website
(www.londonmetric.com) and announcements for any updates.
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 13 July 2021 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 2021 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 2021 be approved.
3. 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.
4. That the Directors be authorised to determine the remuneration
of the auditor.
5. That Patrick Vaughan be re-elected as a Director.
6. That Andrew Jones be re-elected as a Director.
7. That Martin McGann be re-elected as a Director.
8. That James Dean be re-elected as a Director.
9. That Rosalyn Wilton be re-elected as a Director.
10. That Andrew Livingston be re-elected as a Director.
11. That Suzanne Avery be re-elected as a Director.
12. That Robert Fowlds be re-elected as a Director.
13. That Katerina Patmore be 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
£30,325,397 (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 £30,325,397; 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
£60,650,794 (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
186
LondonMetric Property PlcAnnual Report and Accounts 2021 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.
15. That the Directors be and are empowered, in accordance with
Sections 570 and 573 of the 2006 Act, to allot equity securities
(as defined in Section 560(1) of the 2006 Act) for cash pursuant
to the authority conferred by resolution 14 or by way of a sale
of treasury shares as if Section 561(1) of the 2006 Act did not
apply to any such allotment or sale, provided that this power
shall be limited to:
a. the allotment of equity securities and sale of treasury
shares for cash in connection with an offer of, or invitation
to apply for, equity securities made to (but in the case of
the authority conferred by paragraph 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 £4,548,810,
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 £4,548,810; and
b. used only for the purposes of financing (or refinancing,
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 90,976,191;
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
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,
Jadzia Duzniak
Company Secretary
27 May 2021
187
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Notice of Annual General Meeting
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 strongly recommending that shareholders do 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) Any person to whom this notice is sent who is a person
(iv)
(v)
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
9 July 2021.
You may request a hard copy proxy form directly from the
Registrars, Link Group by emailing enquiries@linkgroup.co.uk
or by post at Link Group, 10th Floor, Central Square, 29
Wellington Street, Leeds, LS1 4DL. 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
Group, 10th Floor, Central Square, 29 Wellington Street, Leeds,
LS1 4DL by no later than 10.00 am on 9 July 2021.
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 Group at PXS1, 10th Floor, Central Square, 29
Wellington Street, Leeds, LS1 4DL as soon as possible but, in any
event, so as to arrive no later than 10.00 am on 9 July 2021.
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 Group at PXS1,
10th Floor, Central Square, 29 Wellington Street, Leeds, LS1 4DL.
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 Group 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 9 July 2021. 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 9 July 2021.
188
LondonMetric Property PlcAnnual Report and Accounts 2021
(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 9 July 2021.
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.
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.
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 26 May 2021 (being the closest practical business
day before the publication of this Notice), the Company’s
issued share capital consisted of 909,761,914 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.
189
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021
Notice of Annual General Meeting
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 2021 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 2021.
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 2020
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.
Resolutions 3 and 4 – 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.
Resolutions 5 to 13 – Re-election and election of Directors
Resolutions 5 to 13 deal with re-election and election of the
Directors (as applicable). Biographies of each of the Directors
seeking re-election and election can be found on pages 84 and 85
of the Annual Report and Accounts. The Board has confirmed,
following a performance review, that all Directors standing
for re-election or election continue to perform effectively and
demonstrate commitment to their role.
Resolution 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 £30,325,397(representing
approximately one third of the Company’s issued ordinary share
capital as at 26 May 2021) 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 £60,650,794, representing approximately two thirds of the
issued ordinary share capital of the Company as at 26 May 2021.
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) £4,548,810 (representing
45,488,096 shares.). This aggregate nominal amount represents
5% of the issued ordinary share capital of the Company as at
26 May 2021.
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) 4,548,810 (representing 45,488,096 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 26 May 2021.
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.
190
LondonMetric Property PlcAnnual Report and Accounts 2021 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.
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 90,976,191 shares (representing approximately
10% of the Company’s issued ordinary share capital as at 26 May
2021) 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 26 May 2021 (the latest practicable date before publication of
this Notice), there were share awards over 6,448,713 ordinary shares
in the capital of the Company representing approximately 0.71%
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 0.71% of the Company’s
issued ordinary share capital.
191
Strategic reportGovernance Financial statementsLondonMetric Property PlcAnnual Report and Accounts 2021 Financial calendar
Announcement of results
Annual General Meeting
27 May 2021
13 July 2021
Shareholder information
Advisors to the Company
Joint Financial Advisors and Brokers
Peel Hunt LLP
7th Floor
100 Liverpool Street
London
EC2M 2AT
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
Tax Advisors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
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 Group
The Registry
10th Floor
Central square
29 Wellington Street
Leeds LS1 4DL
Cushman & Wakefield Debenham Tie
Leung Limited
1 Colmore Square
Birmingham B4 6AJ
Secretary and Registered Address
Jadzia Duzniak
One Curzon Street
London W1J 5HB
www.londonmetric.com
192
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 Group. Tax
vouchers will continue to be sent to the
shareholder’s registered address.
LondonMetric Property PlcAnnual Report and Accounts 2021 Design and production
Radley Yeldar – www.ry.com
Paper
This report is printed on
Revive 100 Silk which is 100%
recycled waste.
LondonMetric Property Plc
One Curzon Street
London W1J 5HB
United Kingdom
Telephone +44 (0) 20 7484 9000
Fax +44 (0) 20 7484 9001
Find us online
www.londonmetric.com