Annual report
and accounts
2013
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LondonMetric Property Plc
One Curzon Street
London
W1J 5HB
United Kingdom
Telephone: +44 (0) 20 7484 9000
Fax: +44 (0) 20 7484 9001
www.londonmetric.com
Overview
Introduction to LondonMetric Property Plc
LondonMetric brings
together two outstanding
property companies
to become top 10 UK
REIT with a broader and
complementary asset base.
Front cover image
Moore House, London
Design and Production
Radley Yeldar – www.ry.com
Paper
The report is printed on Amadeus 50% Silk
which is FSC® certified and contains
50% recycled waste and 50% virgin fibre
Net income
Underlying profit (1)
Revaluation surplus (1)
Adjusted profit before tax (2)
Portfolio value (1)
Net assets
Net debt (1)
Loan to value (1)
EPRA earnings per share
Dividend per share
NAV per share
EPRA NAV per share
Adjusted NAV per share (2)
2013
£39.6m
£21.3m
£20.3m
£39.9m
As restated
2012
£42.2m
£24.3m
£3.0m
£19.5m
£1,216.8m £1,022.4m
£676.7m £630.9m
£527.2m £353.6m
35%
4.4p
7.0p
116p
119p
119p
43%
3.9p
7.0p
108p
109p
116p
(1) Includes share of joint ventures and associates (2) After adjusting for exceptional costs of the merger, 2010 mangement internalisation and impairment of investments
Inside this report
Overview
01–21
Inside this report
Chairman’s statement
Multi-channel approach
How we’ve performed
Key performance indicators
Our business today
Our strategy and business model
Chief Executive’s review
What makes us different
Our core strengths
Performance
review
22–39
Investment
Asset management and development
Sustainability report
Finance report
Risk management
Governance
40–55
Board of Directors
Report of the Directors
Statement of Directors’ responsibilities
Corporate governance
Audit Committee report
Remuneration Committee report
Financial
statements
56–95
Independent auditor’s report
on the Group accounts
Group financial statements
Notes forming part of the
Group financial statements
Independent auditor’s report
on the Company accounts
Company financial statements
Notes forming part of the
Company financial statements
Notice of Annual General Meeting
Financial calendar
Shareholder information
01
02
04
06
07
08
09
10
14
17
22
25
29
34
37
40
42
44
45
50
51
56
57
61
81
82
83
86
94
95
Occupier-led
strategy
+
Income
+
Asset
management
Short-cycle
development
=
Desirable
real estate
Occupier
contentment
Shareholder
value
Income
growth
Capital
growth
Our strategy and business model
Find out more on page 09
Sustainability report
Find out more on page 29
Remuneration Committee report
Find out more on page 51
Notice of Annual General Meeting
Find out more on page 86
01
Annual report and accounts 2013 LondonMetric Property Plc Chairman’s statement
Patrick Vaughan
Chairman
I believe it is time to be
bolder... the changes
underway in the
balance and mix
of our business will
provide the Company
with a strong and
exciting future
02
The year to 31 March 2013 fell into two distinct halves. In the first
half, we were still seeing an environment where caution was
required while, in the second half, we began to see signs of
improvement, which augur well for the coming year. In my
predecessor’s statement for the half year to September, he
highlighted his belief that one must remain patient in our
investment approach. While we will certainly remain cautious
going forward, I believe it is also time to be bolder.
The second half of the year was very significant, because
it involved a merger with Metric Property Investments plc
(“Metric”). Since the year end, the merged business, renamed
LondonMetric Property Plc, has come together in a single office
at One Curzon Street with a dynamic “can do” approach.
I have known and worked for many years with Andrew Jones,
Valentine Beresford and Mark Stirling. I believe the addition
to our business of the Metric team will generate great progress.
It was also the moment Raymond Mould decided it was time
to retire, given this strengthening of the team. After working with
him as my close business partner and friend for 44 years, that
represents a big change, but one which I know from the early
dynamics of the merger will nonetheless allow us to move
ahead very successfully. On behalf of all of us, I offer him
our very best wishes and thanks.
Results
The income statement on page 57 of this report reflects the
activity of London & Stamford for the period from 1 April 2012
until the merger and then shows the combined activity of the
enlarged Group for the two months to 31 March 2013.
These results have been impacted over the year by an unusual
weight of exceptional items which together amount to
£49.5 million and are largely not recurring. These include the net
loss on the sale of our investment in the Meadowhall Shopping
Centre as a result of a debt mark to market adjustment which
amounted to £23.2 million. It also includes a further £26.3 million
of exceptional items, in respect of the amortisation of part
of the purchase consideration paid for the acquisition and
internalisation of LSI Management in 2010, the amortisation
of the cost of the Green Park Property Advisory Agreement,
and the merger costs. The bonds and merger costs are
non-recurring items. One more half year of amortisation
of the purchase consideration will occur this September, then
that is finished. The Green Park intangible asset of £9.6 million will
remain and will continue to be amortised to March 2015.
LondonMetric Property Plc Annual report and accounts 2013Overview Profit before the deduction of these exceptional items and tax
amounted to £39.9 million, which is an increase of £20.4 million,
or +105% on last year. If that was adjusted to include the full
year’s activity of Metric to give a real year-on-year comparison,
the total for the year would have been £45.6 million, a 39%
increase in the proforma profits of the combined business
over 2012.
With the exceptional costs falling away and the combined
business operating at full steam, I believe you will see real
progress in our current year.
Net assets at 31 March 2013 were £676.7 million for the
combined business, after our return of £100 million of capital
to shareholders, compared to £630.9 million in 2012. This is
equivalent to 108p per share on our enlarged capital
compared to 116p per share in 2012. The reduction of 8p in net
asset value includes the deduction of 9p of exceptional items,
as referred to above, and after the payment of 7p in dividend
for the year.
At property level, the total return was +8.0%, compared
to the IPD return of +3.0%. A further breakdown shows our
income return was +5.6% versus +6.0% for IPD and our
capital performance was +2.4% against –2.8% for IPD.
The Board has proposed a final dividend of 3.5p per share,
to be paid on 12 July 2013 which, when taken with the interim
dividend of the same amount paid on 7 December 2012,
will give a total dividend in respect of the year of 7p.
The portfolio
In addition to our merger, the year has been an extremely
active one. We made a number of well reported disposals,
including Meadowhall and the Triangle distribution portfolio
which delivered returns on equity of 129% and 33% respectively.
The two businesses made acquisitions totalling £522 million
(LondonMetric share: £397 million), the most significant
of which include the Saturn out-of-town retail park portfolio,
the Leatherhead offices of Unilever, a major office scheme
at Globe Park, Marlow, and a large Primark distribution centre.
The average yield of these acquisitions was 7.4% with a WAULT
of 12.9 years.
In the current year we expect to be busier. It is our primary
objective to achieve a run rate of recurring net rents at the
level of our current dividend, so we can move on from there.
We shall be undertaking major reductions in our residential
portfolio, which has grown strongly in value, but does not
support our dividend policy. The time is also fast approaching
when our business plan calls for a reduction in our City of
London investments. These are not sector or market calls; they
are the result of the planned evolution of those assets. We shall
continue to focus on out-of-town retail to take full advantage
of our expertise in the sector and we shall also concentrate
on distribution, with emphasis, such as our Primark purchase,
on where that distribution involves retail and the internet,
so we can fully deploy our sector skills.
The Board
Following the retirement of Richard Crowder at the merger,
Andrew Huntley has decided not to stand for re-election to
the Board at the AGM and Mark Burton has decided to retire.
This is obviously very sad, as they have been very strong
Non-Executive Directors and they will be much missed. It takes
us from eight to six Non-Executive Directors, alongside our three
Executive Directors. On behalf of all parties involved with the
Company, I give them our thanks.
I believe the enlarged management team together with the
changes underway in the balance and mix of our business
will provide the Company with a strong and exciting future.
Patrick Vaughan
Chairman
31 May 2013
03
Annual report and accounts 2013 LondonMetric Property Plc Multi-channel approach
We aim to rebalance the portfolio towards out of town retail and retailer distribution,
what we call our ‘multi-channel approach’. We believe as e-tailing continues to grow
and retailers’ multi-channel strategies evolve, there will be an increased emphasis
towards distribution as an integral part of the supply chain. Both our Saturn portfolio
acquisition and the Primark Distribution centre in Thrapston embody this approach.
Retail
Christchurch Retail Park
Christchurch
B&Q
Leicester
Dunstable Rd Retail Park
Luton
Mountbatten Retail Park
Southampton
Cairngorm Retail Park
Milton Keynes
B&Q/Halfords units
Tonbridge
Saturn portfolio
February 2013
Cost:
£92.4m
Other activities
London Residential
London Residential
Offices
Moore House, Chelsea
July 2012 Cost: £147.1m (1)
(1) LondonMetric 40.0% share £58.9m
04
Clerkenwell Quarter, Islington
December 2012 Cost: £45.7m
Unilever, Leatherhead
June 2012 Cost: £61.2m
LondonMetric Property Plc Annual report and accounts 2013Overview LondonMetric invests in Retail and Distribution real estate across the UK
as well as Office & Residential opportunities in London & the South East,
with a £1,217 million portfolio across 6.2 million sq ft (578,600 m2).
Distribution
Other activities
Primark Distribution Centre,
Thrapston
March 2013
Key:
Acquisition
Disposal
Cost:
£60.5m
Offices
Retail – MIPP JV (1)
Retail
Marlow International, Marlow
July 2012 Cost: £50.2m
(1) Image of Faustina Retail Park, Londonderry
(3) LondonMetric 33.3% share £18.1m
Portfolio of six assets (2)
Cost: £54.3m (3)
Meadowhall Shopping Centre, Sheffield
October 2012 Gross proceeds: £1,525m (4)
(2) Includes acquisitions in Londonderry, Camborne, Lichfield, Nottingham, Haverhill & Ashford
(4) LondonMetric 15.7% share £239.4m
05
Annual report and accounts 2013 LondonMetric Property Plc
How we’ve performed
Our customer-centric approach ensures that we invest in and develop properties with
enduring occupier appeal, that over time deliver superior income and capital growth
opportunities for the benefits of our shareholders.
2013
LondonMetric
£21.3m
£39.9m
£20.3m
7.0p
43%
3.5%
8.0%
2.4%
95%
2013
LondonMetric
3.9p
109p
6.3%
6.3%
5%
As restated
2012
London &
Stamford
£24.3m
£19.5m
£3.0m
7.0p
35%
–6.1%
6.6%
–6.8%
94%
As restated
2012
London &
Stamford
4.4p
119p
5.6%
5.6%
6%
How we’ve performed
Underlying profit (1)
Adjusted profit before tax (1)
Portfolio revaluation surplus (1)
Dividend per share
Loan to value (1)
Like-for-like income growth (2,3)
Total portfolio return (2)
Total shareholder return
Occupancy (3)
EPRA performance measures
EPRA earnings per share
EPRA NAV per share
EPRA net initial yield
EPRA topped up net initial yield
EPRA vacancy rate
(1) Including share of joint ventures and associates
(2) Includes Metric for the full year to March 2013
(3) Calculated for commercial investment portfolio excluding properties under development
06
LondonMetric Property Plc Annual report and accounts 2013Overview Key performance indicators
We use five principal measures against which we benchmark and monitor the
performance of the Group and our Joint Ventures.
Like-for-like income growth (%)
Total shareholder return (%)
3.5%
2012
2013
2.4%
2013
2012
–6.1%
–6.8%
Total shareholder return measures share
price growth, with dividends deemed to
be reinvested on the ex-dividend date.
The Company’s total shareholder return
in 2013 was 2.4%, compared to –6.8%
in 2012.
This measures contracted rental income
growth on commercial properties,
excluding those under development,
which have been consistently owned
throughout the current and previous
periods. Being the key contributor to
sustainable income, growth in like-for-like
income measures the success of our
asset management initiatives to retain
tenants and add value. Like-for-like
income in the year increased by 3.5%
(2012 decreased by 6.1%).
Total portfolio return (%)
Occupancy (%)
Underlying profit (£m)
8.0%
6.6%
95%
94%
£24.3m
£21.3m
2013
2012
2013
2012
2013
2012
This measures the overall return
generated by our investment portfolio
on a leveraged basis calculated
in accordance with and benchmarked
against IPD All Property Quarterly Index
of 3.0%.
Total property returns were 8.0% (2012
6.6%) outperforming IPD by 5.0%. Our
income return was 5.6% and capital
return 2.4%. By investing in high quality,
well located assets with strong tenant
covenants we are in a strong position
to continue the trend of outperforming
the market and our competitors.
This measures the contracted rental
income of the commercial portfolio
space currently let as a percentage
of the total portfolio. It is a key measure
of performance as it has a direct impact
on profitability and dividend cover.
A small amount of vacant space is
considered necessary to obtain the
optimal tenant mix and maximise
future income.
This measures the level of recurring profit
available for distribution to shareholders
and is the key support for the Group’s
dividend payments. Underlying profit in
the year including our share of joint
ventures and associates was £21.3 million,
a decrease of 12%.
07
Annual report and accounts 2013 LondonMetric Property Plc Our business today
The combined portfolio provides a broader and complimentary asset base with
greater opportunities to leverage existing relationships and skills particularly in the retail
and distribution sectors.
A broader portfolio
Portfolio split
5
Regional split
1. Retail
29% £349m
4
2. Distribution
20% £244m
3. Office
20% £242m
4. Residential
21% £259m
5. Developments 10% £123m
Portfolio value:
£1,217m 1
3
2
1. London
18% £11.1m
2. South East
42% £26.3m
3. Midlands
24% £15.1m
3. North
5. Rest of UK
5% £3.1m
11% £6.9m
5
4
3
1
Total rent roll:
£62.5m(1)
2
(1) Includes a deduction of £1.5 million for residential running costs
Investment strategy
Income
Asset
management
Short-cycle
development
Retail
Retailer
led
Distribution
Strong
cashflow
London
Opportunity
driven
08
Leicester
Coventry
Bishop Auckland
In solicitor’s
hands
Primark Distribution Centre, Thrapston
Tesco, Harlow
Unilever HQ, Leatherhead
Clerkenwell Quarter, London
Carter Lane, City of London
OverviewLondonMetric Property Plc Annual report and accounts 2013
Our strategy and business model
We employ an occupier led approach to property investments across our acquisitions,
asset management initiatives and short-cycle developments. This improves our ability
to generate a superior return, and provide us with an attractive margin of safety that
compensates us for risk.
Our strategic priorities
1. Continued focus on income, asset
management and developments:
– Out of town retail
– Retailer distribution
3. Continue to leverage strong joint
venture relationships
4. Emphasis on growing income and
underlying profits to cover the dividend
2. Divestment of low yielding assets:
5. Exploit enlarged group synergies, both
– Wholly-owned residential investments
– City offices
value creation and costs
Our approach to creating value
Occupier-led
strategy
+
Income
+
Asset
management
Short-cycle
development
=
Desirable
real estate
Occupier
contentment
Shareholder
value
Income
growth
Capital
growth
09
Annual report and accounts 2013 LondonMetric Property Plc Chief Executive’s review
Andrew Jones
Chief Executive
The merger has led to transformational change both in respect
of the newly integrated LondonMetric and in reshaping the
portfolio to meet our new strategic priorities.
Bringing together capital and complementary
skill sets
One of the key objectives of the merger was to capitalise
on the combined skill sets across both organisations to allow
LondonMetric to execute on opportunities that neither
predecessor could have achieved on its own.
Retail and retailer distribution… a multi-channel
approach to asset allocation
Shortly after completing the merger we acquired a portfolio
of six retail parks, the “Saturn” portfolio, for £92.4 million, at a net
initial yield of 7.8%.
We are expanding our presence in the retailer-led distribution
market where we believe there are considerable opportunities
for growth as retailers look to satisfy consumers’ insatiable
demand for multi-channel shopping. We acquired Primark’s
main distribution centre in Thrapston for £60.5 million in March,
at a net initial yield of 6.4% and expect to make further
investments in this sector over the next few months.
10
We are more
focused yet remain
opportunistic,
operating in areas
where we have a high
level of expertise, that
help create key points
of difference
Significant capital recycling and reducing
our exposure to lower yielding, shorter lease
length income
We have a divestment programme across selected assets
which allows us to release relatively low yielding capital and
recycle the proceeds into higher yielding, stronger covenant
assets where we have an exciting pipeline of retail and retailer-
led distribution opportunities. This is evidenced by the spread
between our disposals and acquisitions where we have
generated a positive yield spread of 150bps, improved the
portfolio’s average lease length by 6.1 years and occupancy
by 7 percentage points.
Across our residential portfolio, terms have been agreed for the
sale of 116 units for £59.6 million, releasing c. £48 million of equity.
We have recently begun formal marketing of One Fleet Place,
EC4 at an asking yield of 5.25% and are pleased by the strong
interest from overseas buyers.
Positive momentum on residential lettings
and unit sales
Our prime central London residential portfolio comprises
520 units with a capital value of £374 million (LondonMetric
share: £259 million) and generates net rents of £4.9 million.
Seward Street (rebranded the Clerkenwell Quarter), our 107
unit development in Islington, was acquired in December 2012
for £45.7 million. We have recently launched a successful
marketing programme in both Asia and London and to date
have agreed 57 sales for £32.1 million at a premium over book
value of 2.7%. We remain on target to release over £60 million
of equity from this investment over the next six months.
OverviewLondonMetric Property Plc Annual report and accounts 2013 Deals since merger
£171m(1)
Like-for-like rental growth
+3.5%
Our residential investment portfolio is 98% let having agreed
141 new lettings for £3 million, at rents 1.1% ahead of previous
passing and concluding 147 lease renewals, 4.3% ahead
of previous passing rents securing £2.8 million. We have
commenced a divestment programme of individual unit sales
within this wholly-owned residential portfolio and expect to
have largely monetised this investment over the next year.
To date we have agreed 59 sales generating £27.5 million.
In July 2012 we acquired Moore House, Chelsea for £147.1 million
(LondonMetric share: £58.9 million) on behalf of our joint
venture with Green Park Investments and the Public Sector
Pension Investment Board. We continue our letting programme
and have let 81 units over the period, increasing occupancy
to 54%.
Valuation surplus +1.7% or £20.3 million
The portfolio was valued at £1,217 million delivering a valuation
surplus (net of acquisition costs) for the year of £20.3 million,
up from the £3.0 million surplus delivered last year. Asset
management actions made a considerable valuation
contribution of +2.0% which was partly offset by an outward
movement in market yields of 6bps, or –0.3%. By sector, the
largest contributor to the valuation movement was residential,
in particular Moore House.
Total return of 8.0% = 500bps outperformance
We outperformed the IPD All Property Quarterly Index
by 500bps, delivering a property level total return of 8.0%
compared with IPD at 3.0%. We generated a capital return
of 2.4% against the IPD index which witnessed capital declines
of 2.8% overall. On a total return basis we are pleased to have
outperformed at each sector level, with retail generating the
largest outperformance of 500bps followed by residential
at 490bps.
Robust portfolio metrics
Our occupancy at the end of the period was 95% (2) rising to 98%
post period end. The average unexpired lease term is 11.6 years
(10.8 years to first break). There are no temporary lettings and
19% of portfolio income benefits from fixed rental uplifts.
Like-for-like rental growth of 3.5% (2)
We are a total return business and, as a REIT, income forms
an important component. In a year of tremendous activity
we have continued to focus on income growth and delivered
like-for-like rental growth of 3.5%. The retail portfolio delivered
like-for-like rental growth of 5.7% with the office and industrial
portfolio delivering 1.7% and the residential portfolio 2.6%.
(1) London Metric share £166 million
(2) For the commercial investment portfolio excluding properties under development
(3) Includes a deduction of £1.5 million for residential running costs
Our contracted rent roll as at 31 March 2013 was £62.5 million (3)
with the investment portfolio contributing £55.5 million
in annualised rents and the development and residential
portfolio the remaining £7 million. Net rental income for the
year is £29.2 million, which includes two months of Metric’s
contribution. Proforma net income for the full year is
£39.4 million when combining both businesses for the full
12 months. Looking forward our financial position next year
will reflect the full-year’s contribution for acquisitions in the
last two months of this year.
EPRA EPS of 3.9p includes two months of Metric’s contribution
and is down 11.4% year-on-year.
Stable dividend of 7.0p
We have announced a final dividend of 3.5p per share to
be paid on 12 July 2013, bringing total dividends for the year
to 7.0p, flat over the previous year. The Board have agreed
to pursue a stable dividend policy which will be reviewed
once the dividend is sufficiently covered.
Path to achieving dividend cover
We aim to achieve an attractive spread between the lower
yields on disposal and higher reinvestment yields to grow
income. We will also generate additional income from new
lettings and the letting up of our developments. We expect
each to contribute meaningfully to our cumulative income
to ensure that our recurring profits cover the dividend.
£100 million tender offer taken up
The share capital has changed substantially as a result
of the merger, adding 178.6 million shares to the register
on 28 January, representing the 190 million Metric shares
at the agreed exchange ratio of 0.94. As part of the merger
in February, we offered shareholders a £100 million tender
offer which was taken up in full and reduced the register
by 88.6 million shares, resulting in a position at the year end
of 628.0 million shares. The full take-up of the tender offer
allowed us to right-size our balance sheet and start
LondonMetric in a more financially efficient position.
EPRA NAV of 109p, NAV adjusted for exceptional
items of 116p
ERPA NAV per share of 109p is 10p or –8.4% lower than last
year’s 119p. The EPRA NAV is reduced by dividends paid, the
merger costs and exceptional items of which the impairment
recognised on the sale of Meadowhall Shopping Centre was
the largest.
11
Annual report and accounts 2013 LondonMetric Property Plc Chief Executive’s review
continued
Tender offer
£100m
Annualised rent roll
£62.5m
Excluding the exceptional items, the NAV would have been
116p compared to the previous year’s NAV per share.
The EPRA NAV movement is driven by positive movements
in valuation surplus of 3.7p, underlying profits of 3.8p offset
by dividends paid of –7.0p, the impairment recognised
on the sale of Meadowhall Shopping Centre of –4.1p and
other exceptional items of –4.7p and other items of –0.9p.
LTV of 43% with undrawn facilities of £54 million
As at 31 March 2013, the LTV ratio was 43% with committed
undrawn facilities of £53.6 million. Our average cost of debt
over the year was 3.62%. Going forward, assuming the facilities
were fully drawn, our all-in cost of debt today based on current
LIBOR swap rates would be 3.58%.
Market outlook
Over the last few months we have seen a noticeable increase
in both the number of parties and quantum of money looking
across all sectors of the real estate market.
Rising investor appetite
The outward yield shift that we witnessed in the first half of our
financial year was not repeated in the second half and the
depth and breadth of investor interest today is now beginning
to put downward pressure on yields across the various sectors.
This is partly owing to an increased appetite for risk across most
sectors with more investors moving up the risk curve in search
of higher income returns. As a result, the divergence between
prime and good secondary assets is widely expected to
contract, although conversely the yield gap to poorer
secondary assets will continue to widen.
We continue to believe that assets with long and strong
income offer good value relative to the low cost of borrowing;
especially where there is high occupier contentment,
limited asset obsolescence, sustainable rental levels and
no income “leakage”.
These disciplines continue to drive our approach to new
opportunities, as we focus our capital on higher yielding,
sustainable income opportunities and new short-cycle
redevelopments which offer us a margin of safety. This will
ensure that we will only invest in assets that we are happy
to own, even if the market were to shut down for many years.
Retailers are reassessing the extent of their store
portfolios and distribution warehouse requirements
Retailers’ real estate portfolios are coming under ever
increasing focus as the retail market continues to evolve with
polarisation of shopping habits and a drive towards a multi-
channel strategy. The impact is not only on retailers’ shop
networks but also significantly affects their distribution
requirements which will play an increasing role within their
supply chains. This evolution will continue over the next few
years as many occupational leases expire, allowing retailers
to reduce the number of existing shops.
We expect retail vacancies to increase putting downward
pressure on rental values, particularly in-town, as impending
lease expiries allow retailers to vacate poorly performing shop
units. A number of the weaker retailers have already failed,
so we anticipate the rate of failures will start to decline and
the retailers who have survived will continue to benefit from
the reduced capacity and grow their market share. We believe
that lease expiries rather than administrations are now the chief
risk to rental income.
Retailers have a clear vision of the right size and shape of their
store portfolios, however, distribution strategies are continuing
to evolve. These will be increasingly driven by the needs of
e-tailing as retailers reconfigure supply chains to cater for
multi-channel retailing.
Understanding these occupier trends is critical to succeeding
in the real estate sector today. The dynamic nature of the
retail market is such that increased occupier mobility will
undoubtedly create opportunities for those able to build and
deliver modern space that is fit for purpose in today’s market.
We continue to try to position ourselves as the preferred real
estate provider of choice and will continue to stay close
to our customers across these asset classes.
Andrew Jones
Chief Executive
31 May 2013
12
OverviewLondonMetric Property Plc Annual report and accounts 2013 We are a customer-
focused business and
aim to be the partner
of choice across the retail
and distribution sector.
We have a bottom up approach
to selecting our investments. We build
first-class relationships and leverage
this knowledge to ensure our properties
have enduring occupier appeal.
Annual report and accounts 2013 LondonMetric Property Plc
1313
Annual report and accounts 2013 LondonMetric Property Plc What makes us different
Capitalising
on strong retail
relationships
Our deep long-standing relationship with
Next, not previously represented in Bishop
Auckland, allowed us to partner with them
at our development scheme Bishop Auckland
Shopping Park and secure a corner-stone
pre-letting and assist us in securing
an Open A1 retail planning consent.
14
Developed by Metric Property
Opened for trade January 2013
Bishop Auckland Shopping Park
Location: Bishop Auckland
LondonMetric Property Plc Annual report and accounts 2013Overview 15
Annual report and accounts 2013 LondonMetric Property Plc Congleton Retail Park
Congleton
Dunelm Unit Alban Park
St Albans
French Connection Distribution Unit
Dolphin Park, Thurrock
Kuehne & Nagel Distribution Unit
Greenford
High Street
Berkhamsted
Dunstable Retail Park
Luton
Next Distribution Unit
Eastman Way, Hemel Hempstead
Alban Retail Park
Bedford
16
LondonMetric Property Plc Annual report and accounts 2013 Overview
Our core strengths
Rebalance
towards retail
and retailer
distribution
Our portfolio is broadly split between distribution, office
and residential with retail making up an increasingly larger
proportion and developments generally comprising
about 10% of the mix. We aim a rebalance with an
increased focus on retail and retailer distribution, whilst
remaining opportunistic.
A disciplined approach of
focusing on assets that are well let
with high occupier contentment
Portfolio value: £1,217 million
We are extending our breadth of
experience and deep occupier
relationships into retailer-led distribution,
which is benefiting from strong occupier
interest as retailers’ multi-channel
strategies continue to evolve.
17
Annual report and accounts 2013 LondonMetric Property Plc Our core strengths
Crystallising
our residential
investments
We have commenced a divestment
programme of our wholly-owned
residential investments, in London
comprising our income-producing
portfolio at Battersea, Stockwell and
Highbury and recent acquisition
at Clerkenwell Quarter, Islington.
We expect to monetise our holdings
over the next year.
18
Buying wholesale and selling retail
Wholly-owned London residential
portfolio value £182 million
We have agreed the sale of 116 units
for £59.6 million
LondonMetric Property Plc Annual report and accounts 2013Overview Bridges Wharf
Battersea
Clerkenwell Quarter
Islington
Clapham Road
Stockwell
North Stand at Highbury
Islington
19
Annual report and accounts 2013 LondonMetric Property Plc Before...
and after...
20
LondonMetric Property Plc Annual report and accounts 2013 Overview
Our core strengths
Creating
occupier
appeal
Longwell Green, Bristol was acquired within
our MIPP joint venture and provided an exciting
partnership opportunity with the existing tenant,
Carpetright, to refurbish and extend its unit
and create a new DFS store. We agreed new
15 and 20-year leases, respectively. The new
design facilitated the construction of two pod
units let to Costa and Subway, which in turn has
increased footfall.
Partnering with our customers
means we can enter a deal
that is profitable to both parties
and maximises the value
of the scheme
Developed by Metric Property
Opened for trade March 2013
Longwell Green Retail Park
Location: Bristol
21
Annual report and accounts 2013 LondonMetric Property Plc Nine assets acquired since completion
of the merger
To date we have made 20 acquisitions (19 during the period)
across the retail, distribution, residential and office sectors for
£532 million (LondonMetric share: £408 million) at average
yields of 7.4%. We were also actively recycling capital divesting
18 assets which generated total sales proceeds of £1,028 million
(LondonMetric share: £489 million) at average disposal yields of
5.9%. The table summarises our activity over the year, including
post-period end transactions.
We have consciously worked towards improving the portfolio
metrics by divesting across selected assets that allow us to
release relatively low yielding capital and recycle the proceeds
into higher yielding, stronger covenant schemes. The 150bps
positive yield spread between our disposals and acquisitions,
improved lease length of 6.1 years and improved occupancy
spread of 7 percentage points are all evidence that we are
creating a stronger platform to grow income.
Since the merger we have spent £170.6 million (LondonMetric
share: £165.7 million) acquiring nine properties in the retail and
retailer distribution sectors at average yields of 7.2% with
unexpired lease terms of 13.9 years and occupancy of 98%.
Shortly after completing the merger we acquired a portfolio
of six retail parks, the Saturn portfolio, for £92.4 million, at a net
initial yield of 7.8%. Five of the parks are fully occupied with
Luton at 89% occupancy. The purchase offers secure, well-let
income with additional asset management opportunities and
the ability to add value.
Investment
Valentine Beresford
Investment Director
Reshaping the
portfolio and
monetising selected
assets will generate
a strong platform to
grow the portfolio and
its income potential
22
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Average acquisition yield
Average disposal yield
7.4%
5.9%
Investment activity
Acquisitions
Ipswich – post year end
Thrapston
Saturn portfolio
Clerkenwell Quarter
Marlow International
MIPP JV
Leatherhead
Retail parks
Moore House
Subtotal
Disposals
Meadowhall Shopping Centre
Triangle portfolio
Subtotal
Saturn portfolio
1.
2.
3.
4.
5.
6.
Christchurch
Leicester
Luton
Milton Keynes
Southampton
Tonbridge
Sector
Retail
Distribution
Retail
No. of
assets
1
1
6
Date
May 2013
Mar 2013
Feb 2013
Residential
107 units
Dec 2012
Office
Retail
Office
Retail
1
6
1
2
Residential
149 units
Sector
Retail
Distribution
20
No. of
assets
1
17
18
Jul 2012
Various
Jun 2012
Various
Jul 2012
Date
Oct 2012
Apr 2012
Cost
£m
10.4
60.5
92.4
45.7
50.2
54.5
61.2
10.3
147.1
532.3
Proceeds
£m
762.5 (1)
265.0
1,027.5
NIY
7.1%
7.2%
8.5%
8.4%
9.4%
7.3%
Occupancy
100%
100%
89%
100%
100%
100%
WAULT
years
7.9
14.4
9.2
9.4
8.8
10.1
Area
101,700 sq ft
77,300 sq ft
47,100 sq ft
57,400 sq ft
52,300 sq ft
57,400 sq ft
6
1
Cost:
£92.4m
2
5
4
3
(1) Represents 50% of the gross sales proceeds of £1.525 billion; LondonMetric 15.7% Share £239.4 million
NIY
%
6.5
6.4
7.8
–
8.9
7.1
6.9
7.4
–
7.4
NIY
%
5.1
6.6
5.9
23
Annual report and accounts 2013 LondonMetric Property Plc Investment
continued
Extending our occupier relationships
The occupier is at the centre of our business model impacting
every investment decision we make. As such, we are extending
our breadth of experience and deep occupier relationships
into retailer-led distribution, which is benefiting from strong
occupier interest as retailers’ multi-channel strategies continue
to evolve. Our investment activity since completion of the
merger illustrates our desire to grow both the retail and retailer-
led distribution segments of the portfolio, where we have an
attractive pipeline of opportunities.
We are primarily targeting retailer-led distribution where we
have a competitive advantage as a result of our strong retailer
relationships. Our acquisition of the Primark Distribution Centre,
Thrapston, which we accquired for £60.5 million at a net initial
yield of 6.4%, illustrates the attractive lease terms afforded by
retailers. The lease term is just under 20 years with annual fixed
uplifts of 1.5% and upward only open market rent reviews every
five years.
We have recently begun formal marketing of One Fleet Place,
EC4 and are pleased by the strong interest from overseas
buyers. The property comprises 170,000 sq ft and is primarily
let to the law firm SNR Denton LLP with 12.3 years unexpired.
We acquired the asset in January 2009 for £74 million and are
marketing at a disposal yield of 5.25% reflecting a price of
£109.3 million. The investment market appears to be receptive
to this prime offering and we aim to conclude the sale in
the summer.
Positive momentum on residential unit sales
Our prime Central London residential portfolio comprises
520 units with a capital value of £374 million (LondonMetric
share: £259 million) and generates net rents of £6.3 million
(LondonMetric share: £4.9 million). We have commenced
a divestment programme with terms agreed for the sale of
116 units for £59.6 million, at 1% over book values. We expect
to monetise our residential investments over the next year.
24
Residential portfolio
1. Moore House,
149 units
30%
2. Clerkenwell Quarter,
23%
107 units
3.
Bridges Wharf,
56 units
4. Clapham Road,
74 units
12%
11%
5
Value:
4
£259m(1)
1
5. Highbury Stadium
24%
3
Square, 134 units
2
(1) LondonMetric net share
Our residential investment portfolio comprising Bridges Wharf,
Battersea, Highbury Stadium Square, Islington and Clapham
Road, Stockwell is 98% let having agreed 141 new lettings
for £3 million, at rents 1.1% ahead of previous passing and
concluding 147 lease renewals, 4.3% ahead of previous passing
rents securing £2.8 million. We commenced a programme of
individual unit sales in February 2013 and to date have agreed
59 sales generating £27.5 million.
In July 2012 we acquired Moore House, Chelsea for £147.1 million
(LondonMetric’s 40% share: £58.9 million) on behalf of the joint
venture with Green Park Investments and Public Sector Pension
Investment Board. We continue our letting programme and
have let 81 units over the period, increasing occupancy to 54%.
In December 2012 we acquired the Clerkenwell Quarter
development in Islington for £45.7 million. We launched a
successful marketing programme in April in both Asia and
London and to date have agreed 57 sales for £32.1 million
at a premium over book value of 2.6%. We remain on target
to release over £60 million of equity from this investment over
the next six months.
Deep pipeline of opportunities
Our acquisitions have predominantly been off market and
we continue to find this a good source of product, particularly
for retailer partnering deals in both the retail and distribution
sectors. We are seeing a strong pipeline of opportunities
primarily from institutions and bank “motivated” vendors.
We have a good pipeline of product for both our wholly
owned and joint venture portfolios and are in a position
to quickly reinvest the proceeds from the residential sales.
We are already undertaking due diligence on a pipeline
of c. £100 million at average yields in excess of 7%.
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Asset management and development
Mark Stirling
Asset Director
The commercial investment portfolio generates a rent roll of
£55.5 million, has a capital value of £834.7 million and benefits
from unexpired lease terms of 11.6 years (10.8 years to first
break) and occupancy of 95%.
A significant level of activity has been generated across all
asset management fronts, having completed 14 new lettings
across 526,000 sq ft securing £1.7 million, 4.8% ahead of
anticipated levels. We concluded new lettings on average
lease terms of 11.8 years (10 years to first break). We have also
completed 12 rent reviews and re-gears over the same time
period across 236,300 sq ft securing £2.7 million, 7.5% ahead
of previous passing rents.
Post-period end an additional seven deals were contracted
across 670,000 sq ft securing £3.9 million of rental income on
average lease lengths of 10.0 years (7.8 years to first break).
At Carter Lane we have agreed pre-lets on 58% of the building
by income. Encouragingly, all rents agreed to date have been
at levels in excess of £60 psf.
Valuation uplift of £20.3 million
The portfolio was valued at £1,217 million at 31 March 2013,
reflecting a valuation uplift of 1.7% over the 12 month period.
Our weighted capital return for the period was 2.4% which
compares to –2.8% for the IPD All Property Quarterly Index.
Asset management actions made a considerable valuation
contribution of +2.0% which was only partly offset by an
outward movement in market yields of 6bps, or –0.3%. Asset
management actions include occupier transactions (new
lettings, re-gears and lease renewals), development of new
space and improving the quality of the lease, by extending
the lease length, enhancing the terms of the lease or improving
the lease covenant. Asset management yield shift, or improving
the quality of the lease, generated 15bps of inward yield shift.
By sector, the largest contributor to the valuation movement
was residential, in particular Moore House. The largest valuation
declines came from our legacy portfolio, primarily of land, and
our distribution joint venture.
25
Creating desirable
real estate is
fundamental to
our business model
and drives our
leasing, planning and
development strategies
Occupancy – Investment portfolio (%)
95
99
100
98
86
Investment
portfolio
Retail
Office
Distibution
Residential
Annual report and accounts 2013 LondonMetric Property Plc Asset management and development
continued
Retail
Distribution
No. of assets: 32
Occupancy: 99%
No. of assets: 15
Occupancy: 86%
Capital value: £409.6m
(LondonMetric share: £348.4m)
WAULT: 11.1 years
(10.3 years to first break)
Capital value: £362.6m
(LondonMetric share: £243.8m)
WAULT: 12.9 years
(12.8 years to first break)
The distribution portfolio comprises 15 warehouses with a retail
focus, 11 of which are owned in joint venture with Green Park
Investments. Tenants include Tesco (Harlow), Hillary’s Blinds
(Nottingham), Primark (Thrapston) and Co-op
(Wellingborough). We expect to execute on an attractive
pipeline of opportunities to grow this sector over the near term.
The portfolio continues to perform well with an intense level
of activity. There are a number of future opportunities
on the existing portfolio and the newly added six retail
warehouses acquired towards the end of the financial year
in the Saturn portfolio.
• 23 occupier transactions (12 lettings and 11 rent reviews)
securing £3.4 million of rental income, at terms 8.3% ahead
of existing rental levels on average WAULT of 13.7 years
(11.2 years to first break)
• Additional three lettings currently in solicitors’ hands securing
a further £0.6 million of rental income
• 11 rent reviews agreed at terms 9.1% ahead of previous passing
• 26% of income subject to fixed uplift
• Like-for-like rental income growth of 5.7%
• Planning gains of 161,500 sq ft with a further
205,000 sq ft of retail planning consents submitted
Valuation contributors
Offices
Contributors
Occupational deals
New space
Asset management yield shift
Market yield shift
Valuation surplus
Valuation
change
£m
% contribution
to valuation
uplift
10.7
4.2
9.4
–4.0
20.3
52.6
20.7
46.3
–19.6
100.0
No. of assets: 4
Occupancy: 100%
Capital value: £242.4m
WAULT: 11.1 years
(9.9 years to first break)
• At One Fleet Place, EC4 we are targeting a yield on disposal
of 5.25% and have received early positive interest from mainly
overseas buyers.
• At Leatherhead, Unilever have received a planning consent
for a decked car park providing an additional 136 car
parking spaces. We have now agreed to contribute to
developing the car park in exchange for a re-geared lease
and a rental increase. This initiative delivers a return on
marginal capex of almost 15%.
26
Performance reviewLondonMetric Property Plc Annual report and accounts 2013
Total return outperformance against IPD (1)
Valuation surplus
£20.3m
500 bps
(1) IPD All Property Quarterly Universe
Residential
No. of assets: 5
Occupancy: 82%
No. of assets: 5
Developments
Level of pre-lets on retail assets
under development: 78%
Capital value: £374m
(LondonMetric share: £258.8m)
Number of units: 520
Capital value: £112.2m
Occupancy across the residential investment portfolio
(Highbury, Clapham Road and Battersea) remains robust
at 98% and reflects a period of intense activity.
• At Clerkenwell Quarter, post-period end we have launched
The development portfolio comprises of five schemes
(Berkhamsted, Bristol – Channons Hill, Bishop Auckland Phases
II and III, Leeds and One Carter Lane, EC3). Achievements over
the period include:
the sales of individual units both in London and Asia.
We have now agreed sales on 57 units for £32.1 million
at 2.6% over book value
• Completed developments at Sheffield, Bristol (Longwell
Green), Bishop Auckland Phase I and Cannock, delivering
a return on capital expenditure of 16%
• Sales agreed for £27.5 million on 59 units, in line with book
• Onsite retail development portfolio (comprising Berkhamsted
value
and Bristol) is now 78% pre-let securing £1.0 million of rent
• Concluded 147 lease renewals securing £2.8 million of rental
• Invested £14.5 million across seven retail assets in
income at 4.3% ahead of previous passing rents
• Agreed 141 new lettings, securing rental income
of £3.0 million, 1.1% ahead of previous passing rents
Moore House, held in a joint venture, represents an
opportunistic hold as we believe further capital appreciation
is to come owing to its prime location and proximity to the
Chelsea Barracks, where we expect a future luxury residential
development to be valued significantly higher. We have let
81 of the available flats bringing occupancy to 54% and
generating a net rent of £2.4 million (LondonMetric share:
£1.0 million).
development and asset management capital expenditure
delivering a return of 15.7%
• At One Carter Lane, EC3 the building remains vacant and is
undergoing a substantial refurbishment and leasing exercise.
58% of the space has now been agreed at rents in excess of
£60 psf and on average lease lengths of 15 years
• Planned capital expenditure pipeline of £36.8 million across
four assets (Berkhamsted, Bristol – Channon Hill, Leatherhead
and One Carter Lane)
• Conditional capital expenditure pipeline across three
schemes (Bishop Auckland Phases II and III, Leeds and
St Austell) for £57.2 million
• Planning gains achieved over 161,500 sq ft with a further
205,000 sq ft of planning applications submitted
27
Annual report and accounts 2013 LondonMetric Property Plc Asset management and development
continued
Legacy
Lease expiry profile (% of contracted rental income)
1.
2.
3.
4.
0–5 years
5–10 years
10–15 years
15 years +
4
31
52
13
4
1
3
2
Tenant exposure (% of contracted rental income)
Tenant
SNR Denton
Unilever UK
Primark
B&Q
DSG
Allergan
Somerfield
DFS
Next
Dun & Bradstreet
Total top ten tenants
Other
Total income
Rent
£m
5.9
4.4
3.9
3.8
3.2
2.4
1.8
1.8
1.7
1.6
30.4
32.1
62.5
%
9.4
7.1
6.2
6.0
5.1
3.8
2.9
2.8
2.7
2.5
48.5
51.5
100.0
No. of assets: 5
Income producing: 2
Capital value: £10.95m
Plots of land: 3
The legacy portfolio comprises of a retail park in Newcastle,
a distribution warehouse in Stoke on Trent and parcels of land
in Gillingham, Nottingham and Yeovil. We will look to monetise
the value of this portfolio over the near term.
• Post-year-end we have conditionally exchanged to sell
Gillingham for £3.4 million, reflecting March 2013 book value
• At Newcastle, we let the former Cannons Fitness unit
(previously vacant for four years) on a new 15 year lease
to xercise4less, at a rental of £175,000 per annum
• At Stoke on Trent we have let the former Michelin Factory
to WRS Ltd on a two year lease at a rental of £297,000 to
generate income whilst we pursue planning
Diverse tenant mix and robust portfolio metrics
The merger has dramatically improved the level of tenant
diversity across the portfolio; with our top ten tenants
accounting for only 49% of total contracted rent and 19%
of rental income is subject to fixed rental uplifts. Our lease
expiry profile is well staggered with only 4% of rental income
due to expire over the next five years.
Sector exposure (% of contracted rental income)
1.
Professional Services
19
2. DIY
3. Residential
4.
3PL
5. Government
6. General Merchandise
7.
8.
Furniture
Food
9. Consumer Goods
10. Electrical
11. Other Retailers
9
8
5
2
15
12
11
9
6
4
11
10
9
Retail
tenants
57
6
8
7
1
3
2
4
5
28
Performance reviewLondonMetric Property Plc Annual report and accounts 2013
Sustainability report
Andrew Jones
Chief Executive
Bringing together
London & Stamford
and Metric Property has
given us the opportunity to
rebase our environmental
and social policies and
draw out best practices
from both organisations
We are committed to establishing best practice targets and
improving our performance measurements, including setting
out sustainability KPIs. We will aim to implement clear and
transparent targets for the benefit and accountability to all our
stakeholders – our investors, customers, employees, suppliers
and communities we operate in.
Committed to sustainable business practices
as key elements of our operations and
performance measurements
The formation of LondonMetric brings together a range
of property types, challenges and opportunities from an
environmental and sustainability perspective. As part of our
commitment to improving our processes and enhancing the
reporting for the Group, WSP Environmental were appointed
to undertake an environmental appraisal.
Business case for sustainability
There are strong alignments between sustainable business
practices and our aim to deliver attractive returns to our
shareholders. Committing to responsible business practices,
both socially and which respect the environments of the
communities we operate in, allows us to work in partnership
with all stakeholders. Aligning our principles to those of our
occupiers, employees, partners and local communities
enhance the occupier appeal of our properties, and in turn
our economic success, by contributing to both the income
and capital growth returns across our portfolio and creating
sustainable shareholder value.
Addressing the key issues
Key issues include health and safety; a commitment
to people – be it our occupiers, employees, partners
or the communities we serve; land contamination
and climate change.
29
Annual report and accounts 2013 LondonMetric Property Plc Sustainability report
continued
Health and safety
We recognise the importance of health and safety and look
to promote a level of awareness allowing health and safety
matters to be addressed through all our business activities,
from design and construction, ongoing management
of our properties and at our head office.
Our partners
Our joint venture partners have strong sustainability credentials.
Both Universities Superannuation Scheme (USS) and Public
Sector Pension (PSP) Investments are members and signatories
in various leading institutional organisations focused on
sustainability and good governance.
Our occupiers
Our occupier-led approach is at the centre of our strategy
and meeting their needs so that they choose to lease, stay
and recommend us to others is paramount. This places us
in a stronger position to improve the rental values across our
portfolio and improve occupancy levels, all maximising rental
income and improving property values. We continue to be
committed to addressing issues identified by our occupiers.
Our staff
Employing staff who are engaged, motivated and add value
across the business underpins our success. We employ the best
candidates available in every position, regardless of gender,
ethnic group or background. Training is provided to all
employees to help them develop their skills and reach
their potential.
Strong supplier relationships are paramount to our ability to
deliver our business model as we have a small corporate head
office and outsource a significant portion of our property
management. We manage our relationships with our suppliers
in a fair, consistent and transparent manner. We manage our
property portfolio through managing agents. This is both
cost-efficient and effective, enabling us to adapt the level
of management provided, as appropriate, to respond quickly
to the purchase and sale of properties. We work closely with
our managing agents to deliver consistently high performance.
Our portfolio is managed by Savills Advisory Services Limited,
Osborne King CBRE Limited and Montagu Evans.
Our communities
We have sponsored the Kirkstall Festival at our development
in Leeds and the Mayor of Milford Haven Christmas charity fund
in support of the community around our investment at Havens
Head Retail Park in Milford Haven. Our charitable donations
include the Wheelpower Charity, Animal Lifeline and the
Jewish Care Business breakfast.
Land contamination
Environmental audits are carried out prior to the acquisition
of new properties to identify any potential contamination and
if present, agree any measures required to control or reduce.
30
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Addressing climate change
We believe a significant impact can be made to address
climate change by working towards improving the energy
efficiency of existing buildings as the annual replacement rates
across the UK are very low. We have made the improvement of
existing building energy efficiency and sustainability alongside
the short-term redevelopment of brownfield sites a priority in
our portfolio. Better use of existing building stock rather than
replacement provides greater reduction in construction waste
and use of natural resources and we aim to engage down this
route where possible.
Integrating sustainable decision-making into
our redevelopment programme
Sustainable decision-making is core to the regeneration and
refurbishment of existing building stock whereby we identify
outmoded and well located older properties and refurbish
where appropriate or redevelop brownfield sites, see case
study on Bishop Auckland Shopping Park on pages 32 and 33.
We have adopted industry-recognised assessment methods
(such as BREEAM) to evaluate and promote environmental
awareness across our delivery teams, occupiers and end users
where appropriate. We will continue to work closely with all our
stakeholders to take a proactive approach and promote
environmental awareness on an ongoing basis, including
waste and recycling initiatives and encouraging and
promoting the use of public transport.
Meeting our commitment for enhanced disclosure
We are already engaged in undertaking an environmental
audit across the former London & Stamford and Metric
portfolios to harmonise the environmental reporting procedures
in order to comply with all relevant local, national and
international legislation and regulation and where possible
seek to implement environmental best practices and achieve
enhanced environmental reporting.
Whilst it is early days and we recognise it will take time to
achieve our ambitions, we aim to establish systems for real time
data collection for reporting and benchmarking the entire
portfolio. We will evaluate the use of an “energy use
dashboard” split into sub-sectors to properly understand
and be able to report on the Group’s position.
We are committed to completing the annual Global Real
Estate Sustainability Benchmark (GRESB) Survey and intend
to identify a corporate environmental policy and set
benchmarking and performance targets once we have
completed our audit and harmonised portfolio reporting.
Andrew Jones, Chief Executive, is the Board Director
responsible for sustainability. The Board reviews the
sustainability policy annually as part of its continuing
corporate governance procedures.
31
Annual report and accounts 2013 LondonMetric Property Plc Sustainability report
continued
Environmental and social successes
Case study: Bishop Auckland Phase I
Before...
and after...
32
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Environmental and social successes
Case study: Bishop Auckland Phase I
Highlights
• BREEAM Very Good rating
• Requirement for a minimum 10% reduction in carbon (CO2)
emissions or provide onsite renewable energy sources
to a minimum 10% of the total energy demand from
the development
– 14% reduction in CO2 emissions achieved from low
or zero carbon (LZC) energy technology
– 5% reduction in CO2 emissions achieved from installation
of most up to date M&E systems
• EPC rating of A exceeding rating of C for equivalent stock
• 7,500 sq m of re-used existing building materials
• Highly efficient external light fittings controlled by
daylight sensors
• All timber sourced from recognised sustainable suppliers
• Inclusion of sustainable travel planning
• Improved amenities for local residents
• Added 120 local jobs
Bishop Auckland Shopping Park is located to the south-west of
Bishop Auckland town centre, County Durham. LondonMetric
conditionally acquired the brownfield site in June 2011 which
originally was a single, large retail warehouse built in the 1970s
and formerly occupied by Focus DIY but stood vacant and
became unsightly and a problem for the local community,
having been vandalised numerous times.
On successfully achieving a revised planning consent for
Open A1 retail use in December 2011, LondonMetric acquired
the site in March 2012 when construction commenced for
a five-unit retail terrace of 49,225 sq ft and associated car
parking for Phase I.
Improving sustainability and social aspects were key
considerations in the design and development of the property,
which included:
• Targets for energy, water and environmental materials,
achieving a score of 57.11% against BREEAM Retail 2008 Issue
4.0 SD 5056, achieving a BREEAM rating of Very Good
• All timber was from suppliers certified to Forest Stewardship
Council (FSC) and Programme for the Endorsement of
Forest Certification (PEFC) standards
• The sub base (layer of aggregate material used for load
bearing) for external hard landscaping was made up of
at least 80% recycled materials generated from the existing
buildings and hard landscaping which was crushed and
re-used onsite
• The use of highly efficient sensor-controlled light fittings
reduces operation during daylight hours and significantly
reduces both replacement and maintenance costs
• Pulsed-output water meters were installed in all tenanted
areas, common areas and service areas and connected
to the Building Management System to encourage
reductions in water consumption
• Contractor signatory to Considerate Contractors Scheme
complying with best practice in construction and site
management including Waste & Resource Action
Programme (WRAP) Good Practice
• Tenants are obliged to comply with the requirements of
Green Building User Guide through the terms of their lease,
with the guide providing recommendations on how to
minimise the environmental impacts of the building’s use
and how the tenant should fit out its unit
• The development is pedestrian and cycle friendly through
the provision of amenities including cycle lanes, safe crossing
points, direct routes and cycle storage has been provided for
at least 10% of staff; the shopping park is in good proximity
to public transport networks and local amenities
• Wider economic benefits include the creation of 120 full-time
equivalent jobs, increased economic expenditure and
enhanced retail choice for the catchment area
33
Annual report and accounts 2013 LondonMetric Property Plc Finance report
Martin McGann
Finance Director
The Group’s total
adjusted profit before
tax and exceptional
items in 2013 was
£39.9 million (2012:
£19.5 million)
representing a 105%
increase in the year
The results for the year ended 31 March 2013 reflect ten months of London & Stamford and two months of the enlarged Group.
Income statement
Net income
Corporate costs
Net finance costs
Underlying profit
Revaluation surplus
Derivative movement
Profit on sales
Adjusted profit before tax
Group
£m
39.6
(11.0)
(11.7)
16.9
8.4
(1.7)
1.1
24.7
Share of JV
£m
14.4
(2.1)
(7.9)
4.4
11.9
(1.1)
–
15.2
2013
Total
£m
54.0
(13.1)
(19.6)
21.3
20.3
(2.8)
1.1
39.9
Group
£m
Share of JV
£m
41.9(1)
(9.5)
(13.4)
19.0
3.2
(5.2)
1.1
18.1
19.2
(2.8)
(11.1)
5.3
(0.2)
(3.7)
–
1.4
2012
Total
£m
61.1
(12.3)
(24.5)
24.3
3.0
(8.9)
1.1
19.5
(1) Excludes profit on sale of trading properties of £0.3 million
34
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Adjusted profit before tax
£39.9m
Portfolio value
£1,217m
The Group’s total adjusted profit before tax and exceptional
items in 2013 was £39.9 million (2012: £19.5 million), representing
a 105% increase in the year. A key component of this increase
was the valuation surplus of £20.3 million (2012: £3.0 million),
which included £11.9 million (2012: deficit of £0.2 million) from
our share of joint ventures and associates. Of most significance
was the Group’s share of the uplift at Moore House, London
of £13.9 million. In addition, the movement in the fair value
of derivatives decreased by £6 million compared with
the previous year as new borrowings were increasingly
hedged by way of interest rate caps replacing expensive
interest rate swaps.
Underlying profit, being an important focus for management
to support the Group’s dividend payment, was £21.3 million,
a fall of £3.0 million or 12% compared to 2012. The underlying
profit is identified as the sustainable net income after net
finance costs and overheads. It excludes, in particular, the
accounting impact of the internalisation of the management
of London & Stamford in 2010, goodwill and costs associated
with the merger with Metric, the impairment of Meadowhall
and property and derivative valuations. Underlying profit has
fallen primarily as a result of the sale of the Triangle portfolio
of 17 distribution warehouses in April 2012 and associated loss
of net income after interest of c. £13 million pa, which was
replaced in July 2012 with c. £6.8 million of net income after
interest following the acquisition of the office portfolio at
Leatherhead and Marlow. Like-for-like rental income reported
on a statutory basis increased by £1.76 million or 8% due to
a full year of income at Carter Lane and Clapham Road.
The acquisitions of the Saturn portfolio of six retail warehouses
in February 2013 and the Primark Distribution Unit at Thrapston
in March 2013 have added a further £11.4 million to the Group’s
contracted rent roll, which at 31 March 2013 was £62.5 million.
Dividend cover, expressed as a percentage of underlying profit,
was 52% compared with 64% in the previous year.
Management fee income has increased by £2.1 million or 33%
to £8.5 million in 2013 with the establishment of the residential
joint venture with Green Park and The Public Sector Pension
Investment Board and following the sale of the Group’s interest
in the Meadowhall Shopping Centre in October 2012 which
generated performance fees.
Corporate overheads have increased to £11 million from
£9.5 million in the previous year, reflecting the two months
of increased post-merger overhead.
Careful consideration is given to the management of our interest
exposure across the various debt arrangements we have.
Currently our hedging arrangements are a combination
of interest rate swaps, caps and fixed interest borrowings.
In managing our interest rate risk, we take independent advice
from J C Rathbone Associates, details of which are regularly
discussed at Board meetings.
Exceptional one-off costs in the year were £49.5 million
(2012: £14.5 million) categorised as follows:
Merger with Metric
Internalisation of management
in 2010
Impairment of Meadowhall
Goodwill on other acquisitions
Total exceptional items
2013
£m
11.9
14.4
23.2
–
49.5
2012
£m
–
17.4
–
(2.9)
14.5
The merger with Metric has resulted in £11.9 million of costs in
the year that are not expected to recur and comprise goodwill
written off of £6.3 million, as the fair value of the assets acquired
was less than the fair value of the consideration paid, and
professional fees of £5.7 million. The merger was implemented
by way of a Scheme of Arrangement under Part 26 of the
Companies Act 2006 whereby each Metric shareholder
received 0.94 ordinary shares in the Company in exchange
for every share held in Metric.
The goodwill arising was fully impaired and charged to the
profit and loss account in the year as it was due in large part
to the £4.1 million of professional fees incurred by Metric and
which did not form part of the pricing negotiations, which
was based on a share exchange ratio and was subject to
movements in the Company’s share price between the date
of announcement of the merger to its effective date of
25 January 2013.
The costs of the internalisation of management in 2010 reflect
a share-based payment charge of £10.5 million and the
amortisation of the Property Advisory Agreement acquired
of £4.0 million.
In October 2012 the Group disposed of its 15.7% investment
in the Meadowhall Shopping Centre held in joint venture with
Green Park Investments. The carrying value of the Group’s
investment was impaired at the half year by £23.2 million
as a result of a debt mark to market adjustment that was
recognised on sale. The asset was sold at a gross price
of £1,525 million (LondonMetric share: £239.4 million) which
represented its market value at the half year and generated
a return on equity of 129%.
35
Annual report and accounts 2013 LondonMetric Property Plc Finance report
continued
Balance sheet
Investment property (1)
Gross debt
Cash
Net gearing
Cost of debt
Undrawn facilities
Group
£m
990.6
464.6
37.6
43%
3.59%
37.0
Share of JV
£m
226.1
108.5
8.3
44%
3.75%
16.7
2013
Total
£m
1,216.7
573.1
45.9
43%
3.62%
53.7
Group
£m
663.9
322.8
136.9
28%
4.12%
22.3
Share of JV
£m
358.5
176.3
8.5
47%
4.63%
–
2012
Total
£m
1,022.4
499.1
145.4
35%
4.28%
22.3
The Group’s portfolio was valued at 31 March 2013 at
£1,217 million including its share of joint ventures and associates
and assets held for sale (2012: £1,022 million). This included
a restatement to decrease the 2012 valuation of Clerkenwell
Quarter by £2.7 million. The Group spent £575 million on
acquisitions including the Metric portfolio of assets valued on
acquisition at £255.5 million and reduced its holding in joint
ventures by £132 million as a result of the disposal of its interest
in Meadowhall offset in part by the acquisition of a 40% interest
in apartments at Moore House, London.
The net asset value per share at 31 March 2013 was 108p
(2012: 116p). The movement in net assets in the year can be
summarised as follows:
Net asset value
At 1 April 2012
Loss for the year
Share issue on merger with Metric
Tender offer share awards
Clawback and share awards
Dividends paid
At 31 March 2013
£m
630.9
(13.5)
202.7
(100.7)
(4.7)
(38.0)
676.7
(1) Includes assets held for sale and trading property
36
Debt
Our on balance sheet debt amounts to £464.5 million including
£76.7 million acquired on merger. Net of cash of £37.6 million,
the LTV is 43%. On a look-through basis, taking account of our
joint venture banking arrangements, gross debt is £573.0 million
and the LTV is 43%. We have been successful in raising new
debt finance in the year as follows:
• £61.8 million with Dekabank and Deutsche Postback AG
in July 2012 to finance the acquisition of our offices at
Leatherhead and Marlow.
• £65 million (LondonMetric share £26 million) in August 2012
with the Royal Bank of Scotland to finance the acquisition
of Moore House through our residential joint venture.
• £130 million amendment of our revolving credit facility with
Bank of Scotland of which £122.3 million was drawn to
finance the acquisitions of the Saturn portfolio and the
Primark Distribution Unit at Thrapston.
The average interest rate payable by the Group was 3.59%
(2012: 4.12%) and including its share of joint ventures was 3.62%
(2012: 4.28%).
The Group has hedged 80% (2012: 84%) of its exposure to
interest rate fluctuations and has complied throughout the year
with its loan covenants.
Liquidity and cash management
During the year we obtained third party advice on the
management of our cash resources in terms of liquidity, returns
and counterparty risk which is taken into consideration at each
meeting of the Board.
Deposits are placed with a diverse mix of institutions subject
to credit rating, rates of return and overall exposure.
The year-end cash position is £37.6 million. Following the
planned disposals of our residential assets our ungeared
firepower is expected to be c. £160 million.
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Risk management
Board
Overall responsibility for risk management
and internal controls
Audit Committee
Reviews and evaluates risk register and internal
financial controls. Reports findings to the Board
Executive Committee and
senior management team
Prepares risk register and Internal Control
Evaluation Questionnaire
Risk management is an integral part of our financial,
operational and governance activities. The Board
acknowledges the importance of identifying and managing
risks in reducing the likelihood of financial loss and in optimising
shareholder returns. By close Executive Director involvement
in all significant business decisions, this is effectively
communicated throughout the management team.
Whilst overall responsibility for identifying and managing risk
rests with the Board, it has delegated responsibility to the Audit
Committee for reviewing and monitoring the risk management
and internal control framework designed, implemented and
maintained by the Executive management team.
A key part of this process is the Group’s risk register, prepared by
the Executive Committee and the senior management team.
This identified each category of risk faced by the business and
assesses the severity of each risk, the likelihood of it occurring,
the controls and strategy in place to mitigate it and the
responsibility thereof. The register was updated in March 2013
and will be reviewed and updated on an annual basis.
The principal risks and uncertainties facing the Group and
the controls in place to mitigate them are set out overleaf.
37
Annual report and accounts 2013 LondonMetric Property Plc Risk management
continued
Strategic risks
Risk and uncertainty
Controls and mitigation
The Group’s strategy is unclear or
unrealistic given the economic climate
and market within which it operates,
leading to suboptimal returns for
shareholders and poor investment
decisions. Property markets, particularly
Retail and Distribution, and economic
conditions are outside the
Board’s control.
Operating only in the UK minimises exposure to financial uncertainty and instability
in the Eurozone.
Commission of research into the economic and occupation markets highlights
modifications required to strategy to minimise risk.
Financial forecasts are prepared and presented to the Board quarterly aligning
current strategy and the achievement of shareholder returns.
Close involvement of the Executive Directors in transactions and day to day
management includes the regular review and update of financial forecasts in light
of strategy changes.
Transactional risks
Risk and uncertainty
Investment opportunities are missed
and acquisitions underperform
financial objectives.
Controls and mitigation
Extensive experience and network of connections of the Directors and Executive
Committee provide a privileged insight into the property market and opportunities
within, evidenced by the recent investment activity undertaken (Saturn portfolio
and Primark distribution acquisitions) to deploy the Group’s cash.
Acquisitions are thoroughly evaluated by undertaking a detailed financial, legal
and operational appraisal process prior to Board approval.
Property valuations are snapshots in time
with no certainty that they will be realised
given uncertain market conditions.
The property portfolio performance is regularly reviewed and benchmarked on an
individual basis and assets that have achieved target returns are identified for sale.
Focus on secure income, let to high quality tenants, from well-located assets with
increasing weighted average lease lengths reduces the risk of negative movements.
Development projects fail to deliver
expected returns due to increased costs,
planning or construction delays or
adverse letting conditions.
Exposure to developments and phasing of projects is considered as part of the
quarterly financial forecasting process for the Board.
Standardised appraisals and cost budgets are prepared for all developments with
regular monitoring of actual expenditure against budget to highlight potential
overruns at an early stage.
The procurement process includes tendering and the use of highly regarded firms
to minimise uncertainty over costs.
Developments are only undertaken in areas of high occupier demand and
significant pre-lets are secured where possible before development work
commences to de-risk projects.
38
Performance reviewLondonMetric Property Plc Annual report and accounts 2013 Financial risks
Risk and uncertainty
Controls and mitigation
Adverse interest rate movements can
significantly increase interest charged on
bank borrowings and reduce profitability.
A high proportion of debt is hedged with fixed or capped interest rates through
derivative products. At 31 March 2013 the Group had £370 million of hedges in place
and its debt was 80% fixed.
Inability to raise finance could prohibit
the Group’s investment strategy or
significantly increase borrowing costs.
Failure to comply with financial loan
covenants could result from a substantial
decline in property values or a material
loss of rental income or increased
borrowing costs.
The Group has undrawn bank loan facilities of £37 million at 31 March 2013 and
significant equity investment commitment from joint venture partners. Cash flow
requirements are reviewed by the Executive Board on a weekly basis and excellent
relationships have been built with a diversified range of key lending banks.
Loan covenants are actively monitored and are carefully considered and stress
tested before entering into new arrangements.
Compliance is considered as part of the Group’s financial forecasting to enable
the detection of potential problems at an early stage and allow corrective action
to be taken.
The Group has a modest level of gearing and has complied comfortably during 2013
with its financial loan covenants.
Operational risks
Risk and uncertainty
Tenant defaults and failure to let vacant
units leads to a loss of recurring net
income and dividend cover.
A key risk to a small management team
is the ability to attract, motivate and
retain talented staff with the appropriate
skillsets to execute the Company’s
strategic plans.
Executive succession planning is vital
to ensure the long-term success of
the business.
Controls and mitigation
Tenant covenant strength and concentration is assessed for all acquisitions and
leasing transactions.
The Group’s dedicated and experienced property management teamwork
closely with tenants and consider appropriate action for slow payers.
Rent collection is closely monitored and reported to the property management
team to quickly identify slow payers.
The merger with Metric Property Investments plc brought together two very
experienced and complementary management teams. Succession planning
was a key focus of the Nomination Committee and their recommendation for
the composition of the new Board.
The remuneration structure for all staff has been reviewed and is being aligned
to the long-term key performance targets of the business by the introduction
of new long-term share based incentive arrangements.
The Executive Directors have a substantial equity investment in the Company.
Annual staff appraisals are undertaken to identify training requirements and
assess performance.
39
Annual report and accounts 2013 LondonMetric Property Plc Board of Directors
1.
2.
3.
4.
5.
6.
1. Patrick Vaughan (1)
Executive Chairman
Patrick has been involved in the UK property
market since 1970. He was a co-founder and
CEO of Arlington, formed in 1976; of Pillar,
formed in 1991; and of London & Stamford,
formed in 2005, leading all three of the
companies to successful flotations on the FTSE
main market. Upon completion of London &
Stamford’s merger with Metric in January 2013,
he was appointed Executive Chairman.
Patrick also served as an Executive Director of
The British Land Company plc between 2005
to 2006, following its acquisition of Pillar.
3. Martin McGann
Finance Director
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. Martin is a qualified chartered
accountant having trained and qualified
with Deloitte.
2. Andrew Jones
Chief Executive
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 and served on the main board with
responsibilities for shopping centres, retail
park investment and asset management.
Andrew is a Non-Executive Director of
The Unite Group Plc.
4. Mark Burton (2)
Non-Executive Director
Mark joined the board of London &
Stamford in July 2010. He currently holds a
range of real estate focused non-executive
directorships and advisory roles following
his retirement in June 2010 as the chief
investment officer for real estate for the
Abu Dhabi Investment Council. A chartered
surveyor and banker during his career,
Mark started working at London-based
Cluttons in 1967 and has worked at a variety of
leading institutions including the United Bank
of Kuwait, AXA Investment Managers, and
AIG Global Real Estate Investment (Europe).
Mark is stepping down from the Board
at the AGM.
40
5. Charles Cayzer (1,2,3)
Senior Independent Director,
Chairman of Nomination
Committee
Charles joined the board of London &
Stamford in July 2010. He has considerable
experience of merchant banking,
commercial banking and corporate and
project finance from his career at Baring
Brothers, Cayzer Irvine and Cayzer Limited
and was appointed a Director of Caledonia
Investments in 1985. Charles is also Chairman
of The Cayzer Trust Company Ltd and
The Sloane Club, and a Non-Executive
Director of Eredene Capital and Quintain
Estates & Development Plc.
6. James Dean
Non-Executive Director, Chairman
of the Remuneration Committee
James was appointed to the board of
London & Stamford in July 2010. He is a
chartered surveyor and has worked for
Savills plc since 1973, serving as a main Board
Director from 1988 to 1999. He is Chairman of
Pearlcrown Ltd, London & Lincoln Properties Ltd
and Patrick Dean Ltd and also a Non-
Executive Director of Branston Holdings Ltd.
LondonMetric Property Plc Annual report and accounts 2013Governance 7.
8.
7. Andrew Huntley
Non-Executive Director
Andrew joined the board of Metric as
Chairman at the company’s inception in
March 2010. He is a former Chairman of CBRE
and a former Non-Executive Director of Pillar.
He is currently a Non-Executive Director of
Capital Shopping Centres plc and Capital &
Counties plc, a Non-Executive Director of
Miller Group, and a Non-Executive Director
of AIM-listed Real Office Group plc. Andrew
is one of the UK’s most experienced property
advisers, serving as Chairman and as a
Director on a variety of boards including
New Sadlers Well Development and Beckwith
Property Fund Management. Andrew is
stepping down from the Board at the AGM.
8. Alec Pelmore (1,2)
Non-Executive Director
Alec joined the board of Metric at the
company’s inception in March 2010. He has
been a member of the supervisory board of
Unibail-Rodamco SE, one of Europe’s largest
property companies, since 2008 and is
currently a member of its Audit Committee.
Alec held positions as an equity investment
analyst specialising in property companies
from 1981 to 2007. The majority of his career as
an investment analyst was spent at Dresdner
Kleinwort Benson and Merrill Lynch, where his
teams were voted number one for property in
Europe by the Institutional Investor European
Property Research Survey for 12 out of 13 years
from 1995 to 2007.
9.
11.
10.
9. Humphrey Price
Non-Executive Director, Chairman
of the Audit Committee
Humphrey was Finance Director of Arlington
from 1982 to 1992, he then became a Director
of Pillar from its formation and Finance Director
from 1993 to 2004, resigning from the board in
2005 upon its sale to The British Land Company
plc. He was a Non-Executive Director of
London & Stamford Property Limited from
incorporation until April 2009 and was
appointed to the Board of London & Stamford
Property Plc in July 2010. He was appointed
as a Non-Executive Director of Hansteen
Holdings Plc in October 2010. He is a qualified
chartered accountant.
10. Andrew Varley (2,3)
Non-Executive Director
Andrew joined the board of Metric at the
company’s inception in March 2010. He is
Group Property Director and an Executive
Director of NEXT Plc, with the responsibility for
property, franchise, corporate responsibility
and code of practice related issues.
Andrew joined NEXT in 1985 and was
appointed to its board in 1990. His previous
experience includes 12 years in retail and
commercial property. From 1999 to 2007,
Andrew was a non-executive member of the
British Heart Foundation’s shops committee.
11. Philip Watson (1,3)
Non-Executive Director
Philip joined the board of Metric at the
company’s inception in March 2010. He is
group chief investment officer of Mirabaud
Asset Management. Philip joined Hill Samuel
in 1971 and then Robert Fleming in 1972, where
he worked as an investment analyst and fund
manager. He left Robert Fleming in 1982 to
found TWH Management Limited, in which
he and his partners sold a controlling interest
to Mirabaud Pereire Holdings Limited in 1991.
(1) Member of the Nomination Committee
(2) Member of the Audit Committee
(3) Member of the Remuneration Committee
41
Annual report and accounts 2013 LondonMetric Property Plc Report of the Directors
The Directors present their report together with the audited
financial statements for the year ended 31 March 2013.
Principal activities and business review
The principal activity of the Group continues to be property
investment and development, both directly and through unit
trusts and joint venture arrangements.
A detailed review of the Group’s business during the year,
position at year-end, future prospects, key performance
indicators, sustainability and risk management is contained in
the Overview and Performance Review sections of the Report
and Accounts on pages 02 to 39 and should be read as part
of this report.
The purpose of the Annual Report is to provide information
to the members of the Company. 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 uncertainty since future
events and circumstances can cause results and developments
to differ from those anticipated. The forward-looking statements
reflect knowledge and information available at the date of
preparation of this Annual Report. Nothing in this Annual Report
should be construed as a profit forecast.
Results and dividends
The Group reported losses for the year of £13.5 million (2012:
profits of £2.7 million) as shown on page 57. An interim dividend
for 2013 of 3.5p per share was paid on 7 December 2012 and
the Directors propose a final dividend of 3.5p per share, resulting
in a total dividend of 7.0p per share for the year to 31 March 2013
(2012: 7.0p per share). The final dividend will be paid following
approval at the Annual General Meeting on 10 July 2013 to
ordinary shareholders on the register at the close of business
on 14 June 2013.
As disclosed in note 8, 1.5p of the final dividend payment will
comprise a Property Income Distribution (PID) which is paid,
as required by REIT legislation, after deduction of withholding
tax at the basic rate of income tax.
Investment properties
A valuation of the Group’s investment properties at 31 March
2013 was undertaken by CBRE Limited and Savills Advisory
Services Limited on the basis of fair value which amounted
to £928 million as reflected in note 10 to these accounts.
Share capital
On 31 March 2013 there were 628,043,905 ordinary shares of
10p in issue, each carrying one vote and all fully paid. 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.
42
There were no persons with significant direct or indirect
holdings in the Company other than those listed as substantial
shareholders below.
There have been no changes to the issued share capital since
the year-end.
The London & Stamford Property Plc Employee Benefit Trust
was terminated in the year following the merger with Metric
Property Investments plc (“Metric”). A total of 178,716 shares
were awarded to staff and the remaining 763,533 shares held
by the Trust were sold.
The rules governing appointments, replacement and powers
of Directors are contained in the Company’s Articles of
Association. These include powers to authorise the issue
and buy back of shares by the Company.
Purchase of own shares
The Company was granted authority at the Annual General
Meeting in 2012 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 Annual General Meeting and
a resolution will be proposed for its renewal.
On 25 January 2013, the Company issued 178,599,912 new
ordinary shares in exchange for the entire issued share capital
of Metric pursuant to the merger of the two organisations.
In addition, 4,777,268 ordinary shares were acquired by the
Company from the former LSI Management LLP members (the
former property advisor to the Group) and were subsequently
cancelled. The Company acquired 88,573,910 ordinary shares
on 18 February 2013 from shareholders following a tender offer
as set out in a circular published on 31 January 2013. The tender
offer was taken up in full at a price of 112.9p per ordinary share.
Directors
The present membership of the Board and biographical details
of Directors are set out on pages 40 to 41.
The interests of the Directors and their families in the shares
of the Company are set out in the Remuneration report.
The Company’s Articles of Association require each Director to
retire from office and be subject to re-election at the first Annual
General Meeting after appointment and thereafter at no more
than three-yearly intervals. Accordingly, Andrew Jones, Andrew
Varley, Alec Pelmore and Philip Watson retire by rotation and offer
themselves for re-election at the forthcoming Annual General
Meeting. Andrew Huntley has informed the Board that he does
not intend to stand for re-election at the forthcoming AGM and
Mark Burton has decided to retire. The Company has not
followed the provisions of the UK Corporate Governance Code
which requires all Directors to retire and offer themselves for
re-election, as the Board believes this provision to be potentially
LondonMetric Property Plc Annual report and accounts 2013Governance detrimental to the effective and ongoing management of
the Company.
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.
Corporate governance statement
A statement on Corporate governance is set out on pages 45
to 49.
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:
Number of shares
Caledonia Investments Plc
Rothschild Wealth Management
Rathbone Investment Management
33,497,094
31,834,086
28,399,043
Blackrock Investment Management Ltd
27,746,932
Electra Partners Europe Ltd
26,292,000
Cohen & Steers Capital Management Inc 25,253,471
Legal & General Investment
Management Ltd
APG Investments (NL)
20,068,741
19,956,454
%
5.33
5.07
4.52
4.42
4.19
4.02
3.20
3.18
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 2013 was 22 days (2012: 19 days).
Provisions on change of control
Under the Group’s credit facilities, the lending banks may require
repayment of the outstanding amounts on any change of control.
Essential contracts
The Company has no contractual or other arrangements
which are considered essential to the business.
Details of the financial instruments used by the Group
and financial risk management policies can be found
in notes 1 and 16 and in the review of Risk Management
on pages 37 to 39.
Post-balance sheet events
On 14 May 2013 the Company completed the acquisition
of Martlesham Heath Retail Park, Ipswich for £10.35 million.
Charitable and political contributions
During the year the Group made charitable donations of
£40,900 (2012: £69,000). No political donations were made
during the year (2012: £nil).
Going concern
The Directors have reviewed the current and projected
financial position of the Group, making reasonable
assumptions about future trading performance. As part of the
review, the Group has considered its cash balances, its debt
maturity profile, including undrawn facilities, and the long-term
nature of tenant leases.
On the basis of this review, and after making due enquiries,
the Directors have a reasonable expectation that the
Company and the Group have adequate resources to
continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis
in preparing the Annual Report and financial statements.
Disclosure of information to auditors
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 auditors are unaware and each
Director has taken all steps that he ought to have taken as
a Director to make himself aware of any relevant audit
information and to establish that the auditors are aware
of that information.
Auditors
A resolution to reappoint BDO LLP as auditors of the Company
will be proposed at the Annual General Meeting.
Annual General Meeting
The Annual General Meeting of the Company will be held
at the Connaught, Carlos Place, Mayfair, London, W1K 2AL
at 10 am on 10 July 2013.
The Notice of Meeting on pages 86 to 93 sets out the proposed
resolutions and voting details.
On behalf of the Board
Martin McGann
Finance Director
31 May 2013
43
Annual report and accounts 2013 LondonMetric Property Plc Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the Group financial statements in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and have elected
to prepare the Company financial statements in accordance
with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law).
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss for the Group for that period.
In preparing these 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 they have been prepared in accordance
with IFRSs as adopted by the European Union, 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; and
• prepare a Directors’ report and Directors’ remuneration
report which comply with the requirements of the
Companies Act 2006.
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 enable them to ensure that the financial statements
comply with the Companies Act 2006 and, as regards the
Group financial statements, Article 4 of the IAS Regulation.
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.
Website publication
The Directors are responsible for ensuring the annual report
and the financial statements are made available on a website.
Financial statements are published on the Company’s website
in accordance with legislation in the United Kingdom governing
the preparation and dissemination of financial statements,
which may vary from legislation in other jurisdictions. The
maintenance and integrity of the company’s website is the
responsibility of the Directors. The Directors’ responsibility also
extends to the ongoing integrity of the financial statements
contained therein.
Directors’ responsibilities pursuant to DTR4
The Directors confirm to the best of their knowledge:
• the Group financial statements have been prepared in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union and Article 4 of
the IAS Regulation and give a true and fair view of the assets,
liabilities, financial position and profit and loss of the Group;
and
• the Annual Report includes a fair review of the development
and performance of the business and the financial position
of the Group and the Parent Company, together with
a description or the principal risks and uncertainties that
they face.
Approved by the Board and signed on its behalf by
Martin McGann
Finance Director
31 May 2013
44
LondonMetric Property Plc Annual report and accounts 2013Governance Corporate governance
The Board is committed to maintaining high standards
of corporate governance which it considers underpins
the delivery of its strategic objectives and the successful
management of the business.
The Board has considered the Company’s compliance with
the main principles and provisions of the 2010 UK Corporate
Governance Code and the revisions made in 2012 and has
sought to put in place practices to enable full compliance.
The Board considers that the Company has complied with
the provisions of the UK Corporate Governance Code, except
for Provision B1.1 which addresses the independence of
Non-Executive Directors, Provision A.3.1 which addresses the
independence of the Chairman and Provision B.7.1 which
addresses re-election of Directors. These are discussed below.
The Company’s principal governance policies and practices
are set out below.
The Board of Directors
Composition
The Board comprises the Executive Chairman, two other
Executive Directors and eight Non-Executive Directors.
The biographies of all members of the Board are set out
on pages 40 to 41.
The composition of the Board changed on 25 January 2013
following the merger of the Company with Metric Property
Investments plc (“Metric”). Raymond Mould retired as
Chairman and Patrick Vaughan was appointed to undertake
the role in an executive capacity. Andrew Jones was
appointed as Chief Executive. Although this does not
comply with Provision A.3.1, which discourages a chief
executive becoming chairman of the same company,
the Board considers this appointment as an appropriate
exception to the rule and a critical element of the merger,
maintaining continuity of leadership for both companies and
in order to facilitate the combination of the two businesses
given his excellent prior working relationship with the Chief
Executive of Metric, Andrew Jones. His experience as a founder
of London & Stamford and his relationship with key joint venture
partners is considered to be crucial to maintaining their
continued support and to providing shareholders with a
balanced and effective Board. Leading shareholders of both
former companies were consulted and the reasons for his
appointment explained to them.
Patrick Vaughan will retain his executive capacity representing
a commitment given to the shareholders on the acquisition
of LSI Management LLP.
All four of Metric’s Non-Executive Directors were appointed
to the Non-Executive Board and Richard Crowder decided
to retire from his role. Andrew Huntley has informed the Board
that he does not intend to stand for re-election at the
forthcoming Annual General Meeting of the Company and
Mark Burton has decided to retire.
There are clearly-defined roles for the Executive Chairman
and Chief Executive which have been approved by the Board.
The Chairman is responsible for leading the Board and
monitoring its effectiveness and the Chief Executive is
responsible for the day to day management of the Group
and delivery of its strategic objectives.
Attendance at Board meetings
The Board has a regular schedule of meetings together with
further ad hoc meetings as required to deal with transactional
matters. Non-Executive Directors are encouraged to
communicate directly with the Executive Directors and senior
management between scheduled Board meetings, as part of
each Director’s contribution to the delivery of the Company’s
strategy and the delivery of enhanced shareholder returns. The
following table shows Directors’ attendance at Board meetings
they were eligible to attend during the period:
Board
Audit
Committee
Remuneration
Committee
Nominations
Committee
Number of meetings
Raymond Mould (1)
Patrick Vaughan
Andrew Jones (2)
Martin McGann
Charles Cayzer
James Dean (4)
Humphrey Price
Mark Burton (3)
Richard Crowder (1)
Andrew Huntley (2, 5)
Andrew Varley (2, 6)
Alec Pelmore (2)
Philip Watson (2)
8
3/4
8/8
4/4
8/8
8/8
7/8
7/8
8/8
3/4
3/4
4/4
3/4
4/4
3
n/a
n/a
n/a
n/a
3/3
n/a
3/3
3/3
1/2
n/a
1/1
1/1
n/a
3
n/a
n/a
n/a
n/a
3/3
3/3
n/a
3/3
2/3
n/a
n/a
n/a
n/a
(1) Stepped down from the Board on 25 January 2013. Any non-attendance was the result
of ill-health
(2) Appointed to the Board and relevant committees on 25 January 2013
(3) Stepped down from Remuneration and Nomination Committees on 25 January 2013
(4) Stepped down from Nomination Committee on 25 January 2013
(5) Stepped down from Remuneration Committee on 3 May 2013
(6) Appointed to Remuneration Committee on 30 May 2013
1
n/a
1/1
n/a
n/a
1/1
0/1
n/a
1/1
n/a
n/a
n/a
n/a
n/a
45
Annual report and accounts 2013 LondonMetric Property Plc Corporate governance
continued
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. Where Directors are unable to attend
meetings, their comments are provided to the Board prior
to the meeting.
Board activities
The Board is collectively responsible to the shareholders
for the strategy, control and effective leadership of the
Group. The Executive Directors are responsible for the
business operations and transactions. The Non-Executive
Directors are responsible for ensuring strategies proposed
by the Executive Board are fully considered and for bringing
independent judgement and scrutiny to decisions taken.
There is a formal schedule of matters reserved for the
Board’s approval, including:
• approval of interim and annual financial statements
and dividends;
• setting and monitoring of overall strategy;
• ensuring there are adequate resources to meet objectives;
• reviewing property valuations;
• acquisitions and disposals;
• approval of major capital expenditure projects;
• treasury and financing arrangements; and
• internal control, risk management and Board evaluation.
This schedule of matters is reviewed and agreed by the
Board on an annual basis. The Board delegates authority
to its committees to assist in meeting its business objectives
and to maintain a sound system of internal control and
risk management.
The day to day running of the Group is delegated by the
Board to the Executive Committee, comprising the Executive
Directors and Valentine Beresford (Head of Investments) and
Mark Stirling (Head of Asset Management), former Executive
Directors of Metric.
The Executive Committee meets monthly to discuss property
investment, development and asset management activities
and the operational management of the Group. The Executive
Committee supports the Chief Executive in the delivery of
strategy, the achievement of financial and operating targets
and the assessment and management of business risks.
The minutes of these meetings are made available to the
Board. There are informal meetings between the Executive
Directors at other times and they are heavily involved in
significant business discussions and decisions due to the size
of the organisation.
46
The Board receives comprehensive reports and briefing papers
one week prior to Board and Committee meetings to enable
them to fulfil their responsibilities.
Presentations on current and prospective property portfolios
are made regularly to the Board by senior management and
property visits are regularly arranged.
All Directors 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 applicable rules and
governance regulations are complied with.
The Directors may, in the furtherance of their duties,
take independent professional advice at the expense
of the Company.
The commitments of each Director outside of the Company
are kept under review by the Board to ensure that sufficient
time is available to enable them to discharge their
responsibilities effectively.
Taking all factors into account, the Directors believe that
the Board has an appropriate balance of skills, experience,
knowledge and independence to satisfy the requirements
of good corporate governance.
Re-election of Directors
In accordance with the Company’s Articles of Association,
all Directors are required to submit themselves for election
at the first opportunity following their appointment by the
Board and thereafter for re-election at least every three years.
Accordingly, Andrew Jones, Andrew Varley, Alec Pelmore
and Philip Watson are proposed for re-election at the
forthcoming Annual General Meeting. Andrew Huntley has
informed the Board that he does not intend to stand for
re-election at the AGM and Mark Burton has decided to retire.
The Board considers this departure from the requirements
of the UK Corporate Governance Code that all Directors are
submitted for re-election annually is necessary to ensure the
effective and ongoing management of the business. Continuity
of Board leadership is considered to be essential to the survival
and success of the business and this provision would allow the
whole Board to be discharged simultaneously, leaving the
company in a most vulnerable position with potentially no
continuity of the required knowledge, skills and understanding
to lead the Company.
LondonMetric Property Plc Annual report and accounts 2013Governance Board performance and evaluation
At the end of the previous year, in March 2012, the Board
undertook its first formal evaluation of its own performance
and that of its Committees and individual Directors. As the
composition and leadership of the Board and its Committees
changed significantly following the merger with Metric
in January 2013, it was considered more appropriate to
give the new Board and Chairman sufficient time to settle
into their new roles before a subsequent self-evaluation
took place. It is the Board’s intention to carry out a further
evaluation later in the year. The process will be led by the
Nomination Committee.
The process will require each Director to complete a
questionnaire based on the components of good governance
focusing on the objectives, strategy and remit for the Board,
performance measurement, relationships with shareholders,
effectiveness of risk management and corporate reporting
and the effectiveness of the Board, individual Directors and
Committees. In addition, it will consider the balance of skills,
independence, knowledge and diversity of the Board and
how it works together as a unit.
Consideration will be given to the external facilitation of this
process every three years.
Board Committees
The Board has three Committees, the Audit, Remuneration
and Nomination Committees, each having written terms of
reference which are reviewed annually by the Board and
which are available on written request and on the Company’s
website: www.londonmetric.com.
The Audit and Remuneration Committees are composed
entirely of Non-Executive Directors. The Company Secretary
is secretary to each Committee. The Chairman of each
Committee reports the outcome of meetings to the Board.
Non-Executive Directors
The Board is a diverse group, the majority of whom are
independent. Humphrey Price and Charles Cayzer do not
qualify to be deemed independent using the criteria set out in
Provision B.1.1 of the Code. The Board has therefore specifically
considered their independence. Humphrey Price has a long
working relationship with the Executive Directors at Arlington
Securities, Pillar Property Plc and London & Stamford.
The Board nevertheless considers that the knowledge and
experience he brings, having been the Finance Director of
these very successful listed property companies, and his ability
to act independently, make him a most qualified and
appropriate Non-Executive Director and Chairman of the
Audit Committee.
Charles Cayzer is a Non-Executive Director of Caledonia
Investments Plc, a shareholder of the Company holding
a 5.33% interest as at 30 May 2013. Caledonia Investments
have put in place procedures to ensure that Charles Cayzer
does not participate in investment decision making procedures
relating to the Company to address this potential conflict
and Charles Cayzer himself is not a shareholder in the
Company. The Board does not believe Charles Cayzer’s
independence is compromised by his position and is satisfied
that he is able to carry out his function as Senior Independent
Director effectively. The Non-Executive Directors, chaired
by the Senior Independent Director, Charles Cayzer, have
met separately from the Board and will continue to meet as
necessary, but at least annually, without the Executive Directors
present to address any matters which they may wish to raise
and to appraise the performance of the Chairman. The
outcome of these discussions is conveyed to the Chairman
by the Senior Independent Director. The Senior Independent
Director acts as an intermediary to the Executive Directors for
the Non-Executive Directors and shareholders as required.
Positions held by the Non-Executive Directors are set out in their
biographies on pages 40 and 41. The Board is satisfied that
each of the Non-Executive Directors is able to devote sufficient
time to the Company’s business. On appointment they are
advised of the time required to fulfil the role and are asked
to confirm that they can make the required commitment.
On their appointment, Non-Executive Directors are provided
with a comprehensive Board pack and are briefed on the
Group’s assets, finances, risks and strategy.
47
Annual report and accounts 2013 LondonMetric Property Plc Corporate governance
continued
Nomination Committee
The Board established a Nomination Committee in November
2012. The Committee is chaired by Charles Cayzer and its
current membership is set out on pages 40 and 41. The
Committee is responsible for reviewing the size, structure and
composition of the Board, including diversity and the balance
of Executive and Non-Executive Directors. It also considers
succession planning for Directors and other senior executive
positions, and reviews the leadership needs of the Company
and is responsible for identifying and approving candidates to
fill Board vacancies. If appropriate, external search consultants
are used to assist the process. The Committee met once in
the year, to consider the appointment of Andrew Jones
as Chief Executive, Patrick Vaughan as Chairman and
Andrew Huntley, Andrew Varley, Alec Pelmore and Philip
Watson as Non-Executive Directors following the merger
with Metric. It met once post year end to consider changes
to the Remuneration Committee composition following the
notification of Andrew Huntley’s intention not to stand for
re-election at the forthcoming AGM and his resignation
from the Remuneration Committee. The Committee
considered the need to maintain the appropriate balance
of skills, experience and knowledge of both companies
regarding these appointments and will review the balance
of the Board on an annual basis. It did not believe it was
necessary to engage an external search agency in this process
and was mindful of ensuring successful integration of the two
businesses. Succession planning was a key consideration with
the appointment of Andrew Jones as Chief Executive and the
retirement of Raymond Mould as Chairman. However, at the
same time in order to maintain consistent and effective
leadership, the Committee felt it most appropriate to appoint
Patrick Vaughan as Chairman and in an Executive capacity,
given his wealth of experience, knowledge and understanding
of the property market.
The Nomination Committee is conscious of the increased focus
on Board diversity and acknowledges all aspects of diversity
including gender, ethnic origin, age, business skills and
experience throughout the Company. Within the Company
there is significant gender diversity with the male:female ratio
of staff excluding the Non-Executive Directors being 17:18.
Audit Committee
The Audit Committee is chaired by Humphrey Price and its
current membership is set out on pages 40 and 41.
BDO LLP 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.
The Audit Committee’s role is described further in its report
on page 50.
The Audit Committee met three times last year.
Remuneration Committee
The Remuneration Committee is chaired by James Dean
and its current membership is set out on pages 40 and 41.
Its responsibilities include recommending to the Board the
remuneration and other benefits of the Executive Directors
and other senior executives, and determining awards and
targets under share-based incentive schemes.
The Remuneration Committee’s role is described further
in the Remuneration report on pages 51 to 55.
The Remuneration Committee met three times last year.
Relations with shareholders
Communication with shareholders is given high priority and
the Company undertakes a regular dialogue with major
shareholders and fund managers. The Executive Directors are
the Group’s principal representatives with investors, analysts,
fund managers and other interested parties, assisted by the
Company’s brokers. The Senior Independent Director is available
for shareholders to contact if other channels of communication
with the Company are not available or appropriate and met
a number of significant shareholders during the year.
48
LondonMetric Property Plc Annual report and accounts 2013Governance Following the announcement of interim and year-end
results, the Executive Directors host a series of roadshows
and presentations with shareholders and investors. Meetings
are arranged as requested with at least the top twenty
shareholders of the Company. Ad hoc meetings are held
outside of the roadshow process at the request of shareholders
or on the advice of the Company’s brokers. During the last six
months alone more than fifty material shareholders of the
Group have been visited by two or more of the Executive
Directors. The Board receives reports of meetings with
institutional shareholders together with regular market
and brokers’ reports.
The Company’s website has been updated following the
merger to provide a more functional source of information
for shareholders and the presentations made to analysts
following the announcement of the Group’s results are made
available on the website.
Shareholders are kept informed of the Company’s progress
though results statements and other announcements
released through the London Stock Exchange. Company
announcements are made available on our website affording
all shareholders full access to material information.
Shareholders can raise questions directly with the Company
or at any time through a facility on the website.
The Executive Directors and Senior Independent Director are
available as a contact for shareholders and the whole Board
attends and is available to answer shareholder questions at
the Company’s Annual General Meeting, which provides a
forum for communication with both private and institutional
shareholders alike. Full interim and annual reports are sent
to all shareholders and details of the resolutions to be proposed
at the Annual General Meeting on 10 July 2013 can be found
in the Notice of Meeting on pages 86 to 93. Details of the
number of proxy votes for, against and withheld for each
resolution will be disclosed at the meeting and posted to
the Company’s website.
Internal controls
The Board is responsible for establishing and maintaining the
Group’s system of internal controls and risk management and
for reviewing its effectiveness at least annually.
The system is designed to manage rather than eliminate the risk
of failure to achieve the Group’s objectives. The system can
only provide reasonable but not absolute assurance against
material misstatement or loss.
The main elements of the internal control framework are:
• a defined schedule of matters reserved for the Board’s
attention;
• a comprehensive and documented system of financial
budgeting and forecasting;
• measurement of the Group’s quarterly financial
performance against budget and long-term financial plans;
• short-term cashflow forecasting that is updated, reviewed
and considered weekly in light of investment and
development opportunities;
• a formal whistle-blowing policy;
• a management structure with clearly defined roles
and responsibilities that enables effective and efficient
decision making;
• close involvement of the Executive Directors in day to day
operations;
• monthly meetings of the Executive Committee, which
assesses and monitors strategic and operational risk;
• the maintenance of a risk register and a financial reporting
procedures memorandum, both of which identify key
financial and other internal controls; and
• a documented appraisal and approval process for
all significant capital expenditure.
The Group’s internal control processes accord with the
Turnbull guidance.
Report and Accounts
The Board has considered the Group’s report and accounts
and, taking into account the recommendation of the Audit
Committee, is satisfied that, taken as a whole, it is fair, balanced
and understandable and provides the necessary information
for the shareholders to assess the Company’s performance,
business model and strategy.
Jadzia Duzniak
Company Secretary
31 May 2013
49
Annual report and accounts 2013 LondonMetric Property Plc Audit Committee report
Humphrey Price
Chairman of the Audit Committee
The Audit Committee’s focus has been to assist the Board
by reviewing financial information provided to shareholders
including interim and annual financial statements, reviewing
and assessing the effectiveness of the Company’s internal
controls and risk management systems and overseeing
the Company’s relationship with its external auditor.
Membership
Humphrey Price is Chairman of the Audit Committee and
together with Charles Cayzer and Mark Burton has served
as a member of the Committee throughout the year. Andrew
Varley and Alec Pelmore joined the Committee in January
2013 on their appointment to the Board. All members have
no day to day involvement with the Company. Humphrey
Price brings recent and relevant financial experience to
the Committee as a former Finance Director, chartered
accountant and Non-Executive Director and Chairman
of the Audit Committee of Hansteen Holdings Plc
Mark Burton has informed the Committee that he will be retiring
from the Board and Committee at the forthcoming AGM.
Meetings
The Committee met three times last year, with meetings
aligned to the Company’s financial reporting timetable.
Meetings are attended by the Group’s external auditor,
independent property valuers (CBRE Ltd and Savills Advisory
Services Limited), the Finance Director and senior management
when invited. Time is allocated for the Committee to meet the
external auditor without management present. In addition, the
Chairman has separate and ad hoc meetings with the audit
partner. There has been a focus on the valuation process for
the Group’s investment properties, as they are a significant part
of the Group’s reported performance. The Committee met
with the external valuers to assess the integrity of the valuation
process and to determine the key areas of judgement
surrounding the valuations themselves. The external auditor and
external valuer also meet as part of the year-end process and
have full access to one another and an open dialogue and
exchange of information that is independent of management.
Activities
During the year the work of the Committee undertaken
to discharge its responsibilities to the Board has included
the following:
• considered proposed accounting treatments for major
transactions and significant reporting judgements in advance
of interim and annual results at audit planning meetings.
• reviewed interim and annual financial statements including
consideration of key areas of judgement, compliance
with statutory obligations and accounting standards
and consistency throughout the report.
50
• met with the independent property valuers to discuss the
year-end portfolio valuation on a property by property basis.
• assessed the effectiveness of the external auditor which
included reviewing their independence, objectivity, terms
of engagement and the scope of their audit, as well as their
results. The Committee considered the length of tenure of
BDO LLP, being Group auditor for the last six years and the
fact that last year there was a rotation of audit partner to
further their independence.
• considered and reviewed the level of non-audit fees and the
nature of non-audit services provided before recommending
their reappointment. The Committee is satisfied that the level
of non-audit fees paid to the external auditors in the year
(£356,000) did not put their independence and objectivity
at risk. It took into account the fact that taxation services and
advice is provided separately by PricewaterhouseCoopers
and that a significant portion of the non-audit fees (£305,000)
were an exceptional cost of the merger with Metric and will
not recur.
The Company’s policy governing the provision of non-audit
services considers each appointment on a case by case
basis. Taxation, valuation and remuneration services are
provided by other professions but due diligence, VAT and
other advisory services can and have been undertaken by
the external auditor. The Executive Directors can authorise
an engagement up to a fee limit of £100,000, above which
the engagement is referred to the Audit Committee for
review and approval. BDO LLP 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.
• considered the need for an internal audit function and
concluded it was unnecessary at present given the size and
complexity of the business but agreed to keep the matter
under regular review.
• reviewed the Group’s internal controls and risk management
systems and whistle-blowing arrangements. A detailed
internal control evaluation questionnaire was completed
by management which was reviewed by the Committee
along with the risk register, which identified key risks and
the management and operational framework in place to
address, monitor and minimise the key risks. The Committee
received an annual update and review of the risk register
and control evaluation questionnaire and reported their
findings to the Board.
Humphrey Price
Chairman of the Audit Committee
31 May 2013
LondonMetric Property Plc Annual report and accounts 2013Governance Remuneration Committee report
James Dean
Chairman of the Remuneration Committee
The Remuneration Committee (the “Committee”) has
prepared this report in accordance with the requirements of
the UK Corporate Governance Code, the Companies Act 2006
and the listing rules of the Financial Conduct Authority.
A resolution will be proposed for its approval at the Annual
General Meeting of the Company on 10 July 2013.
The report deals with remuneration arrangements for the
periods pre and post the merger and with the Committee’s
proposals for remuneration going forward.
This report is the first report by the new Remuneration
Committee of LondonMetric. Immediately following the
merger, Andrew Huntley was appointed as Chairman of the
new Remuneration Committee. Richard Crowder, following his
retirement from the Board after completion of the merger, and
Mark Burton stepped down from Remuneration Committee.
However, following Andrew Huntley’s decision not to stand for
re-election to the Board at the AGM, he stepped down from
the Remuneration Committee with effect from 3 May 2013.
The Committee now comprises Charles Cayzer, Philip Watson
and Andrew Varley and is chaired by James Dean who
was appointed on 3 May 2013. All of the members of the
Committee are independent Non-Executive Directors of the
Company. Andrew Varley joined the Remuneration Committee
following the Board Meeting on 30 May 2013.
The Committee’s responsibilities are set out in its terms of
reference which have been reviewed following the merger
and which will be reviewed annually by the Board, and
which are available to shareholders on request and on the
Company’s website: www.londonmetric.com. The Committee
recommends to the Board the remuneration policy and
packages of the Executive Directors and other senior
Executives, and determines awards and targets under
management incentive schemes.
The Committee will meet at least twice a year. It will review its
own performance, constitution and terms of reference to ensure
it is operating at maximum effectiveness, as well as review and
approve remuneration awards. The Chairman of the Committee
reports to the Board on proceedings following each meeting.
During the year the Committee has met on three occasions.
Remuneration policy
The Committee’s overriding objective in determining the
Company’s remuneration policy is to ensure it continues to
attract, motivate and retain individuals of the highest calibre
who individually and collectively contribute to the long-term
success of the Group, and which is competitive in relation to
other comparable property companies. It seeks to provide
incentives to encourage and reward individual performance
and success as well as aligning interests with shareholders by
implementing rewards and incentives that are dependent on
the overall performance and growth of the Group.
The Committee considers annual performance bonuses
and long-term share-based incentive plans to be the most
effective means of achieving these aims.
No Executive Director is involved in the determination of his
own remuneration and fees for Non-Executive Directors are
determined and reviewed by the Board as a whole. In setting
the Executive Directors’ remuneration, the Committee takes
into account pay and employment conditions applicable
across the Group and most particularly remuneration
arrangements in other comparable property companies.
Revised remuneration proposals for the enlarged Group
In the circular issued to shareholders dated 27 November 2012,
it was confirmed that following completion of the merger and
the termination of incentive plans for the management of
Metric and the clawback of certain incentive shares for London
& Stamford management, it would be a priority for the new
Remuneration Committee to put in place revised salary and
bonus arrangements and new long-term arrangements for
senior Executives of the enlarged Group, in line with the market.
The objectives of the new arrangements will be:
• The motivation and retention of the existing team and the
attraction of the highest calibre new individuals as required.
• The provision of material rewards for optimising shareholder
returns and delivering the business strategy.
• Alignment with shareholders through continuing high levels
of share ownership.
It was confirmed in the circular that Patrick Vaughan and
Martin McGann would not participate in any revised bonus or
long-term incentive arrangements until 30 September 2013, in
accordance with lock-in arrangements in connection with the
Company’s acquisition of LSI Management LLP on October 2010.
Accordingly, the Remuneration Committee has met and
formulated a new arrangement for the Company going forward.
The Committee has taken advice from New Bridge Street and
has sought the views of the Company’s largest shareholders.
The remuneration packages for Executive Directors of the
Group consist of the following:
Basic salary and benefits
Basic salary and benefit arrangements which apply from
1 February 2013 are as follows;
Basic
salary
£
Pension
allowance
£
Car
allowance
£
Total
£
Patrick Vaughan
400,000
60,000
20,000
480,000
Andrew Jones
480,000
72,000
20,000
572,000
Martin McGann
315,000
47,250
20,000
382,250
51
Annual report and accounts 2013 LondonMetric Property Plc Remuneration Committee report
continued
The pension allowance is a 15% monthly contribution to
Executive Directors’ individual personal pension plans, with the
option to elect to receive the pension contributions as a cash
allowance. In addition, Executive Directors will be entitled
to a car allowance of £20,000 per annum, private medical
insurance and permanent health and life assurance.
There will be no payment in respect of TPR if TPR is negative.
Full payment in respect of TPR will be made only if TPR is at least
120% of the IPD composite index TPR. Standard clawback
provisions will be applied by the Remuneration Committee
to share-based elements of the bonus in respect of fraud,
material misstatement or gross misconduct.
Basic salaries will be reviewed annually by the Committee
at the same time and on the same basis as the review by the
Executive Directors of all other staff salaries. Salary increments
will be approximately linked to inflation, save for increases
justifiable on the basis of exceptional merit or material increase
in scope or scale of responsibilities. Their assessment will have
regard to individual and corporate performance, individual
roles and responsibilities and comparable salary levels in other
similar companies.
Benefits for all employees include and are restricted to medical
insurance and life assurance cover.
All staff will receive a monthly contribution to their individual
personal pension plans.
Annual discretionary bonus
The Committee will consider on an annual basis the award
of Executive Directors’ bonuses. These are non-pensionable
awards which are discretionary and dependent upon the
performance of the Group, as well as the individual
contribution made by each Director.
Any annual bonus will be subject to the following caps:
Patrick Vaughan*
Andrew Jones
Martin McGann*
100% of basic salary to be paid in cash
150% of basic salary
125% of basic salary
*With effect from 1 October 2013, 100% of basic salary until then
The bonuses for Andrew Jones and Martin McGann will be
paid 50% in cash and 50% in shares. Shares will vest in three
equal instalments over three years and will be subject to good/
bad leaver provisions.
The bonus payable will be based upon the following measures
and targets, agreed with the Remuneration Committee ahead
of the start of the financial year.
Patrick Vaughan
Andrew Jones
Martin McGann
EPRA
Earnings
per share
35%
35%
35%
Total Property
Return (TPR)
Portfolio
management
Management
objectives
35%
35%
35%
10%
15%
–
20%
15%
30%
The Committee will set challenging targets consistent with
the Group’s business strategy for the other components
of the bonus award.
Long-term incentives (LTIs)
The Company wishes to align the long-term interests of
Executive Directors and members of the Executive Committee
with those of shareholders and to reward and encourage
continued and sustained growth.
Except for Patrick Vaughan, who has a very significant interest
in the shares of the Company and a very direct alignment
with the interests of other shareholders, the Executive
Directors will be subject to a single, straightforward, long-term
incentive arrangement.
Grants made under the LTI plan will be made at the discretion
of the Remuneration Committee, within an overall limit of 200%
of basic salary.
Grants will be made up to the following caps:
Andrew Jones
175% of basic salary
Martin McGann 140% of basic salary
Awards may vest three years after grant on the basis of
performance over those three years against the following tests:
• 75% of any award will be subject to total shareholder return
(TSR) exceeding the index of FTSE 350 Real Estate
Companies TSR.
A full payout in respect of TSR would be made if TSR exceeds
the benchmark index by 0.5 times over three years. A 25%
payout would be made if TSR equals the benchmark index
over three years, with straight-line interpolation between
25% and 100%.
• 25% of any award will be on the basis of EPRA EPS (“EPS”)
growth versus RPI.
• Full vesting would occur if EPS equals RPI plus 8% over three
years. For 25% vesting, EPS would have to equal RPI plus 3%
over three years. There will be straight-line interpolation
between 25% and 100%.
For LTI grants to be made in 2013, the Committee will set a
base EPS materially higher than the EPS for the year ended
31 March 2013.
52
LondonMetric Property Plc Annual report and accounts 2013Governance
Approval to these proposals in respect of LTIs will be sought
at the AGM on 10 July 2013. A summary of the LTI plan is shown
in the Appendix to the Notice of AGM on pages 88 to 91.
Staff incentive plan
An LTI scheme is being established to align the interests of
staff who are not party to the arrangements noted on page 52,
thereby attracting and retaining high calibre individuals
throughout the organisation.
All current and future employees of the Group will be eligible
to participate in the plan at the Company’s discretion.
The scheme will operate on the same basis as the Executive
Directors’ scheme. Members of the Executive Committee will
be invited to participate in the Executive Directors’ scheme.
The intention is that awards will be made annually and will
be a function of basic salary.
Non-Executive Directors’ remuneration
The fees payable to the Non-Executive Directors are
determined and reviewed by the Board annually and reflect
the time commitment and responsibility taken by them.
Each Non-Executive Director is paid a basic fee of £50,000
per annum. In addition, Charles Cayzer, James Dean and
Humphrey Price receive a fee of £10,000 per annum to act
as Chairmen of the Nomination Committee, Remuneration
Committee and Audit Committee respectively. Non-Executive
Directors’ fees remain unchanged from last year.
Non-Executive Directors are not eligible for performance-
related bonuses, participation in the staff incentive plan,
pensions or any other benefits from the Company.
Service arrangements
Following the merger, the service contracts for Executive
Directors have been reviewed and revised contracts put in
place. Notice periods are terminable by either party with
notice of twelve months. Apart from salary and benefits in the
notice period, there are no other contractual terms which
would give rise to compensation payable for early termination.
The Non-Executive Directors have letters of appointment
effective from 1 October 2010 or their date of appointment,
if later, for an initial term of three years, which are subject
to a notice period of three months by either party.
Remuneration for the year ended 31 March 2013
Following the completion of the merger on 25 January 2013,
Raymond Mould retired from his position as Executive
Chairman and was replaced by Patrick Vaughan, formerly
the Chief Executive.
No payment was made to Raymond Mould as compensation
or in lieu of notice on his retirement.
Richard Crowder resigned as a Non-Executive Director and
Andrew Huntley, Philip Watson, Alec Pelmore and Andrew
Varley joined the Board as Non-Executive Directors.
The new Directors’ remuneration disclosed in this report is in
respect of the period from the merger until the year-end.
For those Directors who sat on the Board of London & Stamford
Property Plc before the merger, the remuneration disclosed
in this report is in respect of the whole of the year ended
31 March 2013.
All staff are entitled to receive a monthly contribution
of between 10% and 15% to their individual personal
pension plans.
Martin McGann has a salary sacrifice arrangement with the
Company whereby additional pension contributions are paid
in lieu of salary.
The Committee has approved cash bonuses of 100% of gross
salary for Patrick Vaughan and Martin McGann and a 50%
bonus for Raymond Mould for the year. A bonus of £90,000 has
been awarded to Andrew Jones for the post-merger period.
Consideration has been given to the considerable business
achievements in a challenging business environment in
determining such awards and to the relativity of remuneration
of the Executive Directors within the Real Estate sector.
The Executive Directors have significant interests in the shares
of the Company, the performance of which creates direct
alignment for the Executive Directors with other shareholders.
Under the terms of the merger, a certain number of the
shares held by Raymond Mould, Patrick Vaughan and
Martin McGann as consideration for the sale to the Company
of LSI Management LLP were clawed back. 76.5% of the
incentive shares (3,534,233 shares) were clawed back.
The staff incentive plan which was established in January 2011
was also terminated as part of the merger arrangements.
A total of 178,716 shares were awarded to employees who
had not previously been partners in LSI Management LLP.
53
Annual report and accounts 2013 LondonMetric Property Plc Remuneration Committee report
continued
None of the Executive Directors are subject to any long-term incentive arrangements for the period post the merger
until the year end.
Audited information
Directors’ emoluments
Executive
Raymond Mould
Patrick Vaughan
Martin McGann
Andrew Jones (1)
Non-Executive
Mark Burton
Charles Cayzer
Richard Crowder
James Dean
Humphrey Price
Andrew Huntley (1)
Alec Pelmore (1)
Andrew Varley (1)
Philip Watson (1)
Salary
and fees
£
Bonus
£
Total excluding
pension
contributions
2013
£
Total excluding
pension
contributions
2012
£
Benefits
in kind
£
Pension
2013
£
Pension
2012
£
262,833
334,585
257,683
58,541
50,000
54,167
41,667
58,333
60,000
11,154
9,295
9,295
9,295
162,250
324,500
270,500
90,000
16,287
8,435
5,777
5,009
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
441,370
667,520
533,960
153,550
50,000
54,167
41,667
58,333
60,000
11,154
9,295
9,295
9,295
629,962
629,305
514,444
–
50,000
50,000
75,000
60,000
60,000
–
–
–
–
–
35,568
50,000
11,708
–
–
–
–
–
–
–
–
–
–
34,800
48,125
–
–
–
–
–
–
–
–
–
–
(1) Represents cost for the two months post merger
Salary and fees paid to Raymond Mould relate to the period up until the merger, at which point he retired from the Board.
A bonus was paid in respect of his contribution to the Company until that point. As disclosed in the merger circular,
Raymond Mould has agreed to make himself available under a consultancy arrangement with the Company to
continue to contribute to its future success.
The consultancy arrangement is for £100,000 per annum payable on a monthly basis. It is terminable by either party
with six months’ notice.
54
LondonMetric Property Plc Annual report and accounts 2013Governance Interests of Directors in Company’s shares
The beneficial interests of the Directors and their families in the
shares of the Company are as follows:
Raymond Mould
Patrick Vaughan
Andrew Jones
Martin McGann
Mark Burton
Charles Cayzer
Richard Crowder
James Dean
Humphrey Price
Andrew Huntley
Alec Pelmore
Andrew Varley
Philip Watson
Ordinary shares
of 10p each
31 March 2013
Ordinary shares
of 10p each
31 March 2012
14,473,987
16,000,000
16,619,997
18,146,010
2,178,979
–
3,341,585
3,823,795
–
–
–
–
100,000
100,000
–
–
2,015,733
2,143,127
114,000
120,500
47,000
94,000
20,000
50,000
–
–
Movements in the shareholdings of Raymond Mould, Patrick
Vaughan and Martin McGann during the year are due
to the clawback of incentive shares relating to the sale
of LSI Management LLP.
There were no movements in Directors’ shareholdings between
31 March 2013 and the date of this report. No Director had any
interest in or contract with the Company or any subsidiary
undertaking during the year.
Total Shareholder Return
180
160
140
120
100
80
60
40
20
0
Nov
‘07
May
‘08
Nov
‘08
May
‘09
Nov
‘09
May
‘10
Nov
‘10
May
‘11
Nov
‘11
May
‘12
Nov
‘12
May
‘13
LMP
FTSE 100 (rebased)
FTSE 250 (rebased)
FTSE REITs Index (rebased)
FTSE Real Estate Index (rebased)
The graph above shows the Company’s total shareholder
return from November 2007 to May 2013, compared to a
composite measure of the FTSE All-Share Real Estate Investment
Trusts Index and the FTSE All-Share Real Estate Investment and
Services Index and also to the FTSE 250 and FTSE 100 Indexes.
These indices have been chosen by the Committee as they
are considered the most appropriate benchmarks against
which to assess the relative performance of the Company.
Total shareholder return measures price growth, with dividends
deemed to be reinvested on the ex-dividend date.
The period from 7 November 2007 to 30 September 2010
relates to the performance of the Group headed by
London & Stamford Property Limited. The period from
1 October 2010 to 25 January 2013 relates to the performance
of the Group headed by London & Stamford Property Plc,
and since that date relates to the performance of the
LondonMetric Property Plc.
James Dean
Chairman of the Remuneration Committee
31 May 2013
55
Annual report and accounts 2013 LondonMetric Property Plc Independent auditor’s report to the members
of LondonMetric Property Plc
We have audited the Group financial statements of
LondonMetric Property Plc for the year ended 31 March 2013
which comprise the Group Income Statement, the Group
Balance Sheet, the Group Statement of Changes in Equity,
the Group Cash Flow Statement and the related notes.
The financial reporting framework that has been applied
in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union.
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.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the
preparation of the Group financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the Group financial
statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the Group financial statements:
Opinion on other matter prescribed by the Companies
Act 2006
In our opinion the information given in the Directors’ report for
the financial year for which the Group financial statements are
prepared is consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report
to you if, in our opinion:
– certain disclosures of Directors’ remuneration specified
by law are not made; or
– we have not received all the information and explanations
we require for our audit.
Under the Listing Rules we are required to review:
– the Directors’ statement in relation to going concern;
– the part of the corporate governance statement relating to
the Company’s compliance with the nine provisions of the
UK Corporate Governance Code specified for our review;
and
– certain elements of the report to shareholders by the Board
on Directors’ remuneration.
Other matters
We have reported separately on the Parent Company
financial statements of LondonMetric Property Plc for the year
ended 31 March 2013 and on the information in the Directors’
remuneration report that is described as having been audited.
David Eagle
Senior Statutory Auditor
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
– give a true and fair view of the state of the Group’s affairs
as at 31 March 2013 and its loss for the year then ended;
31 May 2013
– have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
– have been prepared in accordance with the requirements
of the Companies Act 2006 and Article 4 of the
IAS Regulation.
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
56
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Independent auditor’s report to the members
of LondonMetric Property Plc
Group Income Statement
For the year ended 31 March
In our opinion the information given in the Directors’ report for
the financial year for which the Group financial statements are
prepared is consistent with the Group financial statements.
Matters on which we are required to report by exception
Gross rental income
Property operating expenses
Net rental income
Property advisory fee income
We have nothing to report in respect of the following:
Net proceeds from sales of trading properties
Other operating income
Net income
General corporate costs
Share-based payments
Write down of goodwill on acquisition of subsidiaries
Amortisation of intangible asset
Acquisition costs
Total administrative costs
Profit on revaluation of investment properties
(Loss)/profit on sale of investment properties
Profit on sale of subsidiaries
Impairment of investment in associate
Share of profits of associates and joint ventures
Operating profit
Finance income
Finance costs
Change in fair value of derivative financial instruments
(Loss)/profit before tax
Taxation
(Loss)/profit after tax
(Loss)/profit for the year and total comprehensive income attributable to:
Equity shareholders
Non-controlling interest
(Loss)/earnings per share
Basic and diluted
All amounts relate to continuing activities.
We have audited the Group financial statements of
Opinion on other matter prescribed by the Companies
LondonMetric Property Plc for the year ended 31 March 2013
Act 2006
which comprise the Group Income Statement, the Group
Balance Sheet, the Group Statement of Changes in Equity,
the Group Cash Flow Statement and the related notes.
The financial reporting framework that has been applied
in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the
European Union.
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
to you if, in our opinion:
Under the Companies Act 2006 we are required to report
Companies Act 2006. Our audit work has been undertaken so
– certain disclosures of Directors’ remuneration specified
that we might state to the Company’s members those matters
by law are not made; or
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.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’
Responsibilities, the Directors are responsible for the
preparation of the Group financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the Group financial
statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion the Group financial statements:
– we have not received all the information and explanations
we require for our audit.
Under the Listing Rules we are required to review:
– the Directors’ statement in relation to going concern;
– the part of the corporate governance statement relating to
the Company’s compliance with the nine provisions of the
UK Corporate Governance Code specified for our review;
– certain elements of the report to shareholders by the Board
on Directors’ remuneration.
and
Other matters
We have reported separately on the Parent Company
financial statements of LondonMetric Property Plc for the year
ended 31 March 2013 and on the information in the Directors’
remuneration report that is described as having been audited.
David Eagle
Senior Statutory Auditor
London
United Kingdom
For and on behalf of BDO LLP, statutory auditor
– give a true and fair view of the state of the Group’s affairs
31 May 2013
as at 31 March 2013 and its loss for the year then ended;
– have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
– have been prepared in accordance with the requirements
of the Companies Act 2006 and Article 4 of the
IAS Regulation.
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Note
2013
£000
As restated
2012
£000
3
32,752
38,526
(3,511)
(2,982)
29,241
35,544
8,466
6,360
3
–
1,913
333
–
39,620
42,237
(10,956)
(9,515)
4
(10,484)
(13,450)
17
(6,251)
–
(3,954)
(3,965)
17
(5,661)
–
(37,306)
(26,930)
10
8,394
3,260
(10)
1,086
(23,178)
56
646
–
15,969
4,346
4,575
23,615
730
684
(12,553)
(14,113)
(1,704)
(8,952)
(5,171)
5,015
11
11
4
6
6
6
7
(4,441)
(1,131)
(13,393)
3,884
(13,456)
63
(13,393)
2,689
1,195
3,884
9
(2.4)p
0.5p
The notes on pages 61 to 80 form part of these financial statements.
57
Annual report and accounts 2013 LondonMetric Property Plc
Group Balance Sheet
As at 31 March
Non current assets
Investment properties
Investment in equity accounted associates and joint ventures
Assets held for sale
Intangible assets
Other tangible assets
Deferred tax 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
Total liabilities
Net assets
Equity
Called up share capital
Capital redemption reserve
Other reserve
Retained earnings
Equity shareholders’ funds
Non-controlling interest
Total equity
Net asset value per share
Note
2013
£000
As restated
2012
£000
10 927,983
660,022
11 120,919
161,575
10
12
58,810
–
9,638
12,424
311
7
2,311
383
6,097
1,119,972
840,501
3,837
3,837
13
14
11,731
22,739
37,572
136,934
53,140
163,510
1,173,112 1,004,011
15
26,232
26,232
35,217
35,217
16 460,328
319,833
16
9,883
12,274
470,211
332,107
496,443
367,324
676,669
636,687
19
62,804
54,280
9,636
300
227,920
47,069
376,309
529,255
676,669
630,904
–
5,783
676,669
636,687
9
107.7p
116.2p
The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2013 and were signed
on its behalf by:
Martin McGann
Finance Director
The notes on pages 61 to 80 form part of these financial statements.
58
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Group Balance Sheet
As at 31 March
Group Statement of Changes in Equity
For the year ended 31 March
Investment in equity accounted associates and joint ventures
Non current assets
Investment properties
Assets held for sale
Intangible assets
Other tangible assets
Deferred tax 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
Total liabilities
Net assets
Equity
Called up share capital
Capital redemption reserve
Other reserve
Retained earnings
Equity shareholders’ funds
Non-controlling interest
Total equity
Net asset value per share
on its behalf by:
Martin McGann
Finance Director
Note
2013
£000
As restated
2012
£000
10 927,983
660,022
11 120,919
161,575
10
12
58,810
–
9,638
12,424
311
7
2,311
383
6,097
1,119,972
840,501
3,837
3,837
13
14
11,731
22,739
37,572
136,934
53,140
163,510
1,173,112 1,004,011
15
26,232
26,232
35,217
35,217
16 460,328
319,833
16
9,883
12,274
470,211
332,107
496,443
367,324
676,669
636,687
19
62,804
54,280
9,636
300
227,920
47,069
376,309
529,255
676,669
630,904
–
5,783
676,669
636,687
9
107.7p
116.2p
The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2013 and were signed
At 1 April 2012 (as previously reported)
Restatement
At 1 April 2012 (after restatement)
Profit for the year and total
comprehensive income
Share issue on merger with Metric
Clawback and cancellation of own shares
Purchase and cancellation of own shares
following Tender Offer
Share-based awards
Distribution paid to non-controlling interest
Dividends paid
At 31 March 2013
Note
10
8
Note
At 1 April 2011 (as previously reported)
Profit for the year and total
comprehensive income as restated
Purchase and cancellation of own shares
Purchase of shares held in trust
Share-based payments
Distribution paid to non-controlling interest
Dividends paid
8
Capital
redemption
reserve
£000
Other
reserve
£000
Retained
earnings
£000
Subtotal
£000
Non-
controlling
interest
£000
Total
£000
47,069
531,905 633,554
5,783
639,337
–
(2,650)
(2,650)
–
(2,650)
47,069
529,255 630,904
5,783
636,687
–
(13,456)
(13,456)
63
(13,393)
Share
capital
£000
54,280
–
54,280
–
17,860
(479)
300
–
300
–
–
184,851
– 202,711
479
(5,015)
(479)
(5,494)
(8,857)
8,857
–
(100,650) (100,650)
1,015
(365)
650
–
–
–
–
–
–
–
–
(37,996)
(37,996)
–
–
(5,846)
(5,846)
62,804
9,636
227,920
376,309 676,669
–
–
–
–
202,711
(5,494)
(100,650)
650
–
–
(37,996)
676,669
Share
capital
£000
54,580
–
(300)
–
–
–
–
Capital
redemption
reserve
£000
Other
reserve
£000
Retained
earnings
£000
Subtotal
£000
Non-
controlling
interest
£000
Total
£000
–
–
300
–
–
–
–
47,551
566,589 668,720
4,987
673,707
–
–
(482)
–
–
–
2,689
2,689
1,195
(3,157)
(3,157)
(482)
248
–
248
–
–
(399)
–
–
–
3,884
(3,157)
(482)
248
(399)
(37,114)
(37,114)
–
(37,114)
At 31 March 2012 (as restated)
54,280
300
47,069
529,255 630,904
5,783
636,687
The notes on pages 61 to 80 form part of these financial statements.
The notes on pages 61 to 80 form part of these financial statements.
59
Annual report and accounts 2013 LondonMetric Property Plc
Group Cash Flow Statement
For the year ended 31 March
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for non-cash items:
Profit on revaluation of investment properties
Loss/(profit) on sale of investment properties
Profit on sale of subsidiaries
Share of post tax profit of associates and joint ventures
Share-based payment
Impairment of investment
Write down of intangible asset
Write down of positive goodwill on acquisition of subsidiary
Net finance costs
Cash flows from operations before changes in working capital
Change in trade and other receivables
Movement in lease incentives
Change in trade and other payables
Disposal of trading properties
Cash flows from operations
Interest received
Interest paid
Tax received/(paid)
Financial arrangement fees and break costs
Cash flows from operating activities
Investing activities
Purchase of subsidiary undertakings net of cash acquired
Purchase of investment properties
Purchase of other tangible assets
Capital expenditure on investment properties
Sale of investment property
Sale of subsidiary undertakings net of cash disposed
Investments in associates and joint ventures
Distributions from associates and joint ventures
Cash flow from investing activities
Financing activities
Dividends paid
Purchase of shares held in trust
Sale of shares held in trust
Purchase of own shares
New borrowings
Repayment of loan facilities
Cash flows from financing activities
Net decrease in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 61 to 80 form part of these financial statements.
60
2013
£000
As restated
2012
£000
(8,952)
5,015
(8,394)
(3,260)
10
(1,086)
(56)
(646)
(15,969)
(4,346)
10,484
23,178
3,954
6,251
13,527
23,003
(2,774)
(604)
1,304
–
13,450
–
3,965
–
18,600
32,722
6,828
63
21,273
1,923
20,929
62,809
743
680
(9,775)
(12,687)
454
(10,489)
(2,682)
(2,359)
9,669
37,954
3,610
–
(319,224)
(115,732)
–
(136)
(712)
(3,034)
900
2,254
72,144
34,411
(44,297)
(9,341)
101,449
5,575
(186,130)
(86,003)
(37,996)
(37,513)
–
650
(482)
–
(100,650)
(3,157)
215,095
142,980
–
(73,630)
77,099
28,198
(99,362)
(19,851)
136,934
156,785
37,572
136,934
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Group Cash Flow Statement
For the year ended 31 March
Notes forming part of the Group financial statements
For the year ended 31 March
Share of post tax profit of associates and joint ventures
(15,969)
(4,346)
Cash flows from operating activities
(Loss)/profit before tax
Adjustments for non-cash items:
Profit on revaluation of investment properties
Loss/(profit) on sale of investment properties
Profit on sale of subsidiaries
Share-based payment
Impairment of investment
Write down of intangible asset
Write down of positive goodwill on acquisition of subsidiary
Net finance costs
Cash flows from operations before changes in working capital
Change in trade and other receivables
Movement in lease incentives
Change in trade and other payables
Disposal of trading properties
Cash flows from operations
Interest received
Interest paid
Tax received/(paid)
Financial arrangement fees and break costs
Cash flows from operating activities
Investing activities
Purchase of subsidiary undertakings net of cash acquired
Purchase of investment properties
Purchase of other tangible assets
Capital expenditure on investment properties
Sale of investment property
Sale of subsidiary undertakings net of cash disposed
Investments in associates and joint ventures
Distributions from associates and joint ventures
Cash flow from investing activities
Financing activities
Dividends paid
Purchase of shares held in trust
Sale of shares held in trust
Purchase of own shares
New borrowings
Repayment of loan facilities
Cash flows from financing activities
Net decrease in cash and cash equivalents
Opening cash and cash equivalents
Closing cash and cash equivalents
The notes on pages 61 to 80 form part of these financial statements.
2013
£000
As restated
2012
£000
(8,952)
5,015
(8,394)
(3,260)
10
(1,086)
10,484
23,178
3,954
6,251
13,527
23,003
(2,774)
(604)
1,304
–
(56)
(646)
13,450
3,965
–
–
18,600
32,722
6,828
63
21,273
1,923
20,929
62,809
743
680
(9,775)
(12,687)
454
(10,489)
(2,682)
(2,359)
9,669
37,954
3,610
–
(319,224)
(115,732)
–
(136)
(712)
(3,034)
900
2,254
72,144
34,411
(44,297)
(9,341)
101,449
5,575
(186,130)
(86,003)
(37,996)
(37,513)
–
650
(482)
–
(100,650)
(3,157)
215,095
142,980
–
(73,630)
77,099
28,198
(99,362)
(19,851)
136,934
156,785
37,572
136,934
1 Accounting policies
a) General information
On 25 January 2013 the merger between London & Stamford Property Plc and Metric Property Investments plc (“Metric”)
became effective by way of a Scheme of Arrangement under Part 26 of the Companies Act 2006. The Company issued
178,599,912 New Ordinary Shares in exchange for the entire issued share capital of Metric. The Company changed its name
to LondonMetric Property plc and the New Ordinary Shares were admitted to the premium segment of The Official List to trade
on the Main Market of the London Stock Exchange on 28 January 2013.
b) Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as adopted by the European Union.
c) Basis of preparation
At the request of the Financial Reporting Council, the Company has agreed to restate the valuation of its property at
Clerkenwell Quarter, Islington in the 31 March 2012 financial statements. As this relates to the year ended 31 March 2012,
there is no restatement required to any financial information for the year ended 31 March 2011 or earlier.
While the Directors consider that the valuation of investment property assets in the Group Balance Sheet was materially
accurate, they have acknowledged that because of the specific circumstances surrounding the property concerned, it had
not been valued in accordance with IFRS or valuation standards. The Directors have accordingly restated the figures previously
reported, including the profit on revaluation shown in the Group Income Statement.
The functional and presentational currency of the Company and all subsidiaries (“the Group”) is sterling. The financial
statements are prepared on the historical cost basis except that investment and development properties and derivative
financial instruments are stated at fair value.
The accounting policies have been applied consistently in all material respects.
i) Estimates and judgements
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Significant items subject to such assumptions and estimates include the fair value of investment properties, the recognition of
deferred tax assets and liabilities for potential corporation tax, amortisation of intangible assets and the fair value of derivative
financial instruments. The most critical accounting polices in determining the financial condition and results of the Group are
those requiring the greatest degree of subjective or complex judgements. These relate to property valuation, business
combinations and goodwill, intangible assets, investment in associates and joint ventures, derivative financial instruments and
taxation and these are discussed in the policies below. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
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.
ii) Adoption of new and revised standards
Standards and interpretations effective in the current period
No new standards or interpretations issued by the International Accounting Standards Board (“IASB”) or the International
Financial Reporting Interpretations Committee (“IFRIC”) have led to any material changes in the Group’s accounting policies
or disclosures during the year.
61
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
1 Accounting policies (continued)
Standards and interpretations in issue not yet adopted
The IASB and the International Financial Reporting Interpretations Committee have issued the following standards and
interpretations that are mandatory for later accounting periods and which have not been adopted early. These are:
Name
IAS 1
IFRS 7
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 27
IAS 28
IAS 32
Description
Amendments to IAS 1
Amendments to IFRS 7
Consolidated financial statements
Joint arrangements
Disclosure of interests in other entities
Fair value measurement
Amendments to IAS 27
Amendments to IAS 28
Amendments to IAS 32
Annual improvements to IFRSs (2009–2011 cycle)
IFRS 9
Financial instruments
Effective date
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2015
The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the
Group’s financial statements in the period of initial application, other than on presentation and disclosure.
d) Basis of consolidation
i) Subsidiaries
The consolidated financial statements include the accounts of the Company and its subsidiaries using the purchase method.
Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power to govern the
financial and operating policies of an entity to gain benefits from its activities. In the consolidated balance sheet, the acquiree’s
identifiable assets, liabilities and contingent liabilities are initially recognised at their fair value at the acquisition date. The results
of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that
control ceases.
Where properties are acquired through corporate acquisitions and there are no significant assets or liabilities other than
property, the acquisition is treated as an asset acquisition, in other cases the purchase method is used.
ii) Joint ventures and associates
Joint ventures are those entities over whose activities the Group has joint control. Associates are those entities over whose
activities the Group is in a position to exercise significant influence but does not have the power to jointly control.
Joint ventures and associates are accounted for under the equity method, whereby the consolidated balance sheet
incorporates the Group’s share of the net assets of its joint ventures and associates. The consolidated income statement
incorporates the Group’s share of joint venture and associate profits after tax.
The Group’s joint ventures and associates adopt the accounting policies of the Group for inclusion in the Group
financial statements.
iii) Intangible assets
Intangible assets, such as property advisory and management agreements acquired through business combinations,
are measured initially at fair value and are amortised on a straight-line basis over their estimated useful lives. Intangible
assets are subject to regular reviews for impairment.
iv) Goodwill
Any excess of the purchase price of business combinations over the fair value of the assets, liabilities and contingent liabilities
acquired and resulting deferred tax thereon is recognised as goodwill. This is recognised as an asset and is reviewed for
impairment at least annually. Any impairment is recognised immediately in profit or loss within administration expenses and
is not subsequently reversed.
Any excess of the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax thereon over the
purchase price of business combinations is recognised immediately in profit or loss.
62
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
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. These are:
continued
For the year ended 31 March
1 Accounting policies (continued)
Standards and interpretations in issue not yet adopted
Name
IAS 1
IFRS 7
IFRS 10
IFRS 11
IFRS 12
IFRS 13
IAS 27
IAS 28
IAS 32
Description
Amendments to IAS 1
Amendments to IFRS 7
Consolidated financial statements
Joint arrangements
Disclosure of interests in other entities
Fair value measurement
Amendments to IAS 27
Amendments to IAS 28
Amendments to IAS 32
Annual improvements to IFRSs (2009–2011 cycle)
IFRS 9
Financial instruments
d) Basis of consolidation
i) Subsidiaries
The consolidated financial statements include the accounts of the Company and its subsidiaries using the purchase method.
Subsidiaries are those entities controlled by the Group. Control is assumed when the Group has the power to govern the
financial and operating policies of an entity to gain benefits from its activities. 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.
ii) Joint ventures and associates
Joint ventures are those entities over whose activities the Group has joint control. Associates are those entities over whose
activities the Group is in a position to exercise significant influence but does not have the power to jointly control.
Joint ventures and associates are accounted for under the equity method, whereby the consolidated balance sheet
incorporates the Group’s share of the net assets of its joint ventures and associates. The consolidated income statement
incorporates the Group’s share of joint venture and associate profits after tax.
The Group’s joint ventures and associates adopt the accounting policies of the Group for inclusion in the Group
financial statements.
iii) Intangible assets
iv) Goodwill
Intangible assets, such as property advisory and management agreements acquired through business combinations,
are measured initially at fair value and are amortised on a straight-line basis over their estimated useful lives. Intangible
assets are subject to regular reviews for impairment.
Any excess of the purchase price of business combinations over the fair value of the assets, liabilities and contingent liabilities
acquired and resulting deferred tax thereon is recognised as goodwill. This is recognised as an asset and is reviewed for
impairment at least annually. Any impairment is recognised immediately in profit or loss within administration expenses and
is not subsequently reversed.
Any excess of the fair value of the assets, liabilities and contingent liabilities acquired and resulting deferred tax thereon over the
purchase price of business combinations is recognised immediately in profit or loss.
1 Accounting policies (continued)
e) Property portfolio
i) Investment properties
Effective date
1 July 2012
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2015
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. They are subsequently
carried at each published balance sheet date at fair value on an open market basis as determined by professionally qualified
independent external valuers. 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.
The determination of the fair value of each property requires, to the extent applicable, the use of estimates and assumptions
in relation to factors such as future rental income, current market rental yields, future development costs and the appropriate
discount rate. In addition, to the extent possible, the valuers make reference to market evidence of transaction prices for similar
properties. Gains or losses arising from changes in the fair value of investment properties are recognised in the income statement
in the period in which they arise.
In accordance with IAS 40 “Investment Property”, 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 Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the
Group’s financial statements in the period of initial application, other than on presentation and disclosure.
– there are no material conditions precedent which could prevent completion; and
– the cost of the investment property can be measured reliably.
Where properties are acquired through corporate acquisitions and there are no significant assets or liabilities other than
property, the acquisition is treated as an asset acquisition, in other cases the purchase method is used.
iii) Trading properties
All costs directly associated with the purchase of an investment 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 capitalised in the carrying value of the property.
ii) Assets held for sale
Non current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale
transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the
asset is available for sale in its present condition. Management expect the sale to complete with one year from the date of its
classification and are committed to the sale. Investment properties classified as held for sale are transferred from investment
properties and carried at fair value.
Trading properties are initially recognised at cost and subsequently at the lower of cost and net realisable value.
iv) Tenant leases
Management has exercised judgement in considering the potential transfer of the risks and rewards of ownership in
accordance with IAS 17 for all properties leased to tenants and has determined that such leases are operating leases.
v) Net rental income
Revenue comprises rental income.
Rental income from investment property leased out under an operating lease is recognised in the profit or loss on a straight-line
basis over the lease term.
Contingent rents, such as turnover rents, rent reviews and indexation, are recorded as income in the periods in which they are
earned. Rent reviews are recognised when such reviews have been agreed with tenants.
Where a rent free period is included in a lease, the rental income foregone is allocated evenly over the period from the date
of lease commencement to the lease termination date.
Lease incentives and costs associated with entering into tenant leases are amortised over the lease term.
Revenue from the sale of trading properties is recognised in the period within which there is an unconditional exchange
of contracts.
Property operating expenses are expensed as incurred and any property operating expenditure not recovered from tenants
through service charges is charged to profit or loss.
63
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
1 Accounting policies (continued)
vi) Surplus on sale of investment properties
Surpluses on sales of investment properties are calculated by reference to the carrying value at the previous valuation date,
adjusted for subsequent capital expenditure.
f) Financial assets and financial liabilities
Financial assets and financial liabilities are recognised in the balance sheet when the Group becomes a party to the
contractual terms of the instrument. Unless otherwise indicated, the carrying amounts of the financial assets and liabilities
are a reasonable approximation of their fair values.
i) Loans and receivables
These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and receivables comprise trade and other receivables, intra-group loans and cash and cash equivalents. Loans and
receivables are initially recognised at fair value, plus transaction costs that are directly attributable to their acquisition or issue,
and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. 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.
ii) Other financial assets
These comprise deposits held with banks where the original maturity was more than three months.
iii) Equity instruments
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
iv) Other financial liabilities
Other financial liabilities include interest bearing loans, trade payables (including rent deposits and retentions under construction
contracts) and other short-term monetary liabilities. Trade payables and other short-term monetary liabilities are initially
recognised at fair value and subsequently carried at amortised cost using the effective interest method. Interest bearing loans
are initially recorded at fair value net of direct issue costs, and subsequently carried at amortised cost using the effective interest
method. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for
on an accruals basis to the profit and loss account using the effective interest method and are added to the carrying amount
of the instrument to the extent that they are not settled in the period in which they arise.
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 profit or loss.
g) Finance costs
Net finance costs include interest payable on borrowings, net of interest capitalised and finance costs amortised.
h) Finance income
Finance income includes interest receivable on funds invested, measured at the effective rate of interest on the underlying
sum invested.
i) 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.
64
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
continued
For the year ended 31 March
1 Accounting policies (continued)
vi) Surplus on sale of investment properties
adjusted for subsequent capital expenditure.
f) Financial assets and financial liabilities
Surpluses on sales of investment properties are calculated by reference to the carrying value at the previous valuation date,
Financial assets and financial liabilities are recognised in the balance sheet when the Group becomes a party to the
contractual terms of the instrument. Unless otherwise indicated, the carrying amounts of the financial assets and liabilities
are a reasonable approximation of their fair values.
i) Loans and receivables
These are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and receivables comprise trade and other receivables, intra-group loans and cash and cash equivalents. Loans and
receivables are initially recognised at fair value, plus transaction costs that are directly attributable to their acquisition or issue,
and cash equivalents include cash in hand, deposits held at call with banks and other short-term highly liquid investments with
These comprise deposits held with banks where the original maturity was more than three months.
original maturities of three months or less.
ii) Other financial assets
iii) Equity instruments
iv) Other financial liabilities
Other financial liabilities include interest bearing loans, trade payables (including rent deposits and retentions under construction
contracts) and other short-term monetary liabilities. Trade payables and other short-term monetary liabilities are initially
recognised at fair value and subsequently carried at amortised cost using the effective interest method. Interest bearing loans
are initially recorded at fair value net of direct issue costs, and subsequently carried at amortised cost using the effective interest
method. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for
on an accruals basis to the profit and loss account using the effective interest method and are added to the carrying amount
of the instrument to the extent that they are not settled in the period in which they arise.
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 profit or loss.
Net finance costs include interest payable on borrowings, net of interest capitalised and finance costs amortised.
Finance income includes interest receivable on funds invested, measured at the effective rate of interest on the underlying
g) Finance costs
h) Finance income
sum invested.
i) Dividends
Dividends on equity shares are recognised when they become legally payable. In the case of interim dividends, this is when
paid. In the case of final dividends, this is when approved by the shareholders at the Annual General Meeting.
1 Accounting policies (continued)
j) 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 following differences are not provided for:
– the initial recognition of goodwill;
– goodwill for which amortisation is not tax deductible;
and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Cash
transaction affects neither accounting or taxable profit; and
– the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the
– investments in subsidiaries, associates and jointly controlled entities where the Group is able to control the timing of the reversal
of the difference and it is probable that the difference will not reverse in the foreseeable future.
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.
Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.
k) 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.
l) 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 per share.
m) Capital management policy
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and equity balance.
In managing its capital, the Group’s primary objective is to ensure its continued ability to provide a consistent return for its equity
shareholders through a combination of capital growth and distributions. In order to achieve this objective, the Group seeks to
maintain a gearing ratio that balances risks and returns at an acceptable level and also maintain a sufficient funding base to
enable the Group to meet its working capital and strategic investment needs. In making decisions to adjust its capital structure
to achieve these aims, either through altering its dividend policy, new share issues, or the reduction of debt, the Group considers
not only its short-term position but also its long-term operational and strategic objectives.
n) Operating lease commitments
Where substantially all of the risks and rewards incidental to ownership are not transferred to the Group, the total rentals payable
under the lease are charged to profit or loss on a straight-line basis over the lease term. The aggregate benefit of lease
incentives is recognised as a reduction of the rental expense over the lease term on a straight-line basis.
65
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
2 Segmental information
Property value
Retail
Distribution
Offices
Residential
Development
Other
100%
owned
£000
Assets
held for
sale
£000
Trading
property
£000
Share
of JV
£000
2013
Total
£000
As restated
2012
100%
owned
£000
Trading
property
£000
Share
of JV
£000
Total
£000
347,540
125,075
242,438
–
–
–
–
–
–
30,567
378,107
–
– 237,667
237,667
118,763
243,838
320,784
– 120,849
441,633
–
242,438
203,905
–
119,355
58,810
3,837
76,800
258,802
122,718
3,837
82,624
10,951
–
–
–
–
–
–
82,624
10,951
–
12,615
–
–
–
–
–
–
203,905
126,555
–
12,615
At 31 March valuation
927,983
58,810
3,837
226,130 1,216,760
660,022
3,837 358,516 1,022,375
Gross property income
Retail
Distribution
Offices
Residential
Development
Other
At 31 March
100%
owned
£000
3,476
3,668
20,310
5,180
–
118
32,752
Assets
held for
sale
£000
–
–
–
–
–
–
–
2013
Total
£000
9,595
100%
owned
£000
Share
of JV
£000
–
12,643
11,947
22,107
7,210
20,310
12,132
5,727
4,225
–
118
–
62
–
–
–
–
2012
Total
£000
12,643
29,317
12,132
4,225
–
62
Share
of JV
£000
6,119
8,279
–
547
–
–
14,945
47,697
38,526
19,853
58,379
An operating segment is a distinguishable component of the Group that engages in business activities, earns revenue and
incurs expenses, whose results are reviewed by the Group’s chief operating decision makers and for which discrete financial
information is available. The Group operates entirely in the United Kingdom and no geographical split is provided in information
reported to the Board.
3 Net income
Gross rental income
Property operating expenses
Proceeds from sales of trading properties
Cost of sales of trading properties
2013
£000
2012
£000
32,752
38,526
(3,511)
(2,982)
29,241
35,544
–
–
–
2,300
(1,967)
333
For the year ended 31 March 2013 19%, 19% and 10% (2012: 15% and 12%) of the Group’s gross rental income was receivable
from three tenants (2012: two tenants).
Property outgoings of £0.8 million (2012: £1.1 million) related to investment properties that did not generate rental income
in the year.
66
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
continued
For the year ended 31 March
2 Segmental information
Property value
Retail
Distribution
Offices
Residential
Development
Other
100%
owned
£000
Assets
held for
sale
£000
Trading
property
£000
Share
of JV
£000
100%
owned
£000
Trading
property
£000
Share
of JV
£000
Total
£000
30,567
378,107
–
– 237,667
237,667
118,763
243,838
320,784
– 120,849
441,633
347,540
125,075
242,438
82,624
10,951
–
–
–
–
–
–
–
–
–
–
119,355
58,810
3,837
76,800
258,802
122,718
3,837
242,438
203,905
82,624
10,951
–
12,615
–
–
–
At 31 March valuation
927,983
58,810
3,837
226,130 1,216,760
660,022
3,837 358,516 1,022,375
2013
Total
£000
Share
of JV
£000
6,119
8,279
–
–
–
Assets
held for
sale
£000
–
–
–
–
–
–
–
–
–
–
100%
owned
£000
3,476
3,668
20,310
5,180
–
118
32,752
2013
Total
£000
9,595
100%
owned
£000
Share
of JV
£000
–
12,643
11,947
22,107
7,210
20,310
12,132
547
5,727
4,225
–
118
–
62
An operating segment is a distinguishable component of the Group that engages in business activities, earns revenue and
incurs expenses, whose results are reviewed by the Group’s chief operating decision makers and for which discrete financial
information is available. The Group operates entirely in the United Kingdom and no geographical split is provided in information
14,945
47,697
38,526
19,853
58,379
As restated
2012
–
–
–
–
–
–
–
–
203,905
126,555
–
12,615
2012
Total
£000
12,643
29,317
12,132
4,225
–
62
2013
£000
2012
£000
32,752
38,526
(3,511)
(2,982)
29,241
35,544
–
–
–
2,300
(1,967)
333
Gross property income
Retail
Distribution
Offices
Residential
Development
Other
At 31 March
reported to the Board.
3 Net income
Gross rental income
Property operating expenses
Proceeds from sales of trading properties
Cost of sales of trading properties
from three tenants (2012: two tenants).
in the year.
For the year ended 31 March 2013 19%, 19% and 10% (2012: 15% and 12%) of the Group’s gross rental income was receivable
Property outgoings of £0.8 million (2012: £1.1 million) related to investment properties that did not generate rental income
4 Profit from operations
This has been arrived at after charging:
Share-based payments
Effect of cancellation of Consideration Shares
Operating lease expense
Auditors’ remuneration:
Audit of the Group and Company financial statements, pursuant to legislation
Fees payable to the Company’s auditors for other services to the Group:
– Statutory audit of subsidiary accounts, pursuant to legislation
– Corporate advisory services
– Other advisory services
2013
£000
2012
£000
14,759
(4,275)
10,484
674
13,450
–
13,450
664
189
32
326
30
155
32
–
–
A share-based payment prepayment was created for £39.5 million of the total purchase consideration payable under the
LSI Acquisition Agreement as reported in the 2011 financial statements. This was based on a total of 34,346,378 Consideration
Shares issued to the members of the former Property Advisor (LSI Management LLP) at the market price on the date of its
acquisition of 115p per share, of which 6,244,796 were subject to clawback provisions. In addition, bad leaver provisions and
lock in arrangements prohibiting the disposal of such Consideration Shares apply for the three years to September 2013.
On 25 January 2013 the Company acquired and then cancelled 4,777,268 of the Consideration Shares pursuant to the terms
of the Existing Management Incentive Termination Agreement. This has resulted in the reversal of share based payments
charged in previous periods of £4.3 million. The remaining 1,467,258 Consideration Shares were awarded to members.
Raymond Mould was deemed a good leaver on his resignation from the Company and retained 9,916,367 of the total Consideration
Shares. The remaining 19,652,743 Consideration Shares remain subject to bad leaver provisions and the reduced share-based payment
prepayment of £3.8 million is being charged evenly to the profit and loss account over the period to 30 September 2013.
In the year to 31 March 2013 £10.5 million (2012: £13.5 million) has been charged to the profit and loss and £5.5 million has been
charged to reserves, reducing the share-based payment prepayment to £3.8 million (2012: £19.8 million).
5 Employee costs
Employee costs, including those of Directors, comprise the following:
Wages and salaries
Social security costs
Other pension costs
Share-based payment
2013
£000
2012
£000
5,719
4,499
780
395
6,894
(365)
6,529
622
333
5,454
248
5,702
The emoluments and pension benefits of the Directors are set out in detail within the Directors’ remuneration report on pages 51 to 55.
The staff share incentive scheme that was in place throughout the current and previous years allowed eligible employees to
receive an award of shares, held in trust, dependent on performance conditions based on the net asset value of the Group
over a three-year 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.
The scheme was terminated following the merger with Metric and 178,716 shares were awarded to staff. The remaining 763,533
shares held by the Company’s Employee Benefit Trust were sold.
The average number of employees including Executive Directors during the year was:
Head office and property management
2013
Number
2012
Number
27
22
67
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
6 Finance income and costs
Finance income
Interest on short-term deposits
Finance costs
Interest payable on bank loans
Loan break costs and amortisation of loan issue costs
Fair value loss on derivative financial instruments
7 Taxation
The tax charge comprises:
Current tax
UK tax charge/(credit) on profit
Deferred tax
Change in deferred tax
2013
£000
730
730
2012
£000
684
684
11,261
12,800
1,292
1,313
12,553
14,113
1,704
5,171
14,257
19,284
2013
£000
As restated
2012
£000
32
(655)
4,409
4,441
1,786
1,131
The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:
(Loss)/profit before tax
(Loss)/profit at the standard rate of corporation tax in the UK of 24% (2012: 26%)
Effects of:
Expenses not deductible for tax purposes
Tax effect of income not subject to tax
Share of post-tax profit of associates and joint ventures
Temporary differences
Utilisation of tax losses
Prior year tax adjustments
UK tax charge on profit
Deferred tax asset
At 31 March 2012
Acquisition of subsidiary
Charged during the year
At 31 March 2013
2013
£000
(8,952)
(2,148)
10,790
(4,809)
(3,833)
1,978
2,431
32
4,441
Losses
£000
Intangible
assets
£000
1,808
4,289
623
–
2012
£000
5,015
1,304
4,842
(4,876)
(1,130)
1,786
–
(795)
1,131
Total
£000
6,097
623
(2,431)
(1,978)
(4,409)
–
2,311
2,311
As the Group is a UK-REIT there is no provision for deferred tax arising on the revaluation of properties. The Group has unprovided
deferred tax assets in respect of trading losses of £3.2 million (2012: £nil).
68
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
continued
For the year ended 31 March
6 Finance income and costs
Finance income
Interest on short-term deposits
Finance costs
Interest payable on bank loans
Loan break costs and amortisation of loan issue costs
Fair value loss on derivative financial instruments
7 Taxation
The tax charge comprises:
Current tax
UK tax charge/(credit) on profit
Deferred tax
Change in deferred tax
Temporary differences
Utilisation of tax losses
Prior year tax adjustments
UK tax charge on profit
Deferred tax asset
At 31 March 2012
Acquisition of subsidiary
Charged during the year
At 31 March 2013
The tax assessed for the year varies from the standard rate of corporation tax in the UK. The differences are explained below:
(Loss)/profit before tax
(Loss)/profit at the standard rate of corporation tax in the UK of 24% (2012: 26%)
Effects of:
Expenses not deductible for tax purposes
Tax effect of income not subject to tax
Share of post-tax profit of associates and joint ventures
As the Group is a UK-REIT there is no provision for deferred tax arising on the revaluation of properties. The Group has unprovided
deferred tax assets in respect of trading losses of £3.2 million (2012: £nil).
2013
£000
730
730
2012
£000
684
684
11,261
12,800
1,292
1,313
12,553
14,113
1,704
5,171
14,257
19,284
2013
£000
As restated
2012
£000
32
(655)
4,409
4,441
2013
£000
(8,952)
(2,148)
10,790
(4,809)
(3,833)
1,978
2,431
32
4,441
1,786
1,131
2012
£000
5,015
1,304
4,842
(4,876)
(1,130)
1,786
–
(795)
1,131
Total
£000
6,097
623
Losses
£000
Intangible
assets
£000
1,808
4,289
623
–
(2,431)
(1,978)
(4,409)
–
2,311
2,311
8 Dividends
For the year to 31 March
Ordinary dividends paid
2011 Final dividend: 3.3p per share
2012 Interim dividend: 3.5p per share
2012 Final dividend: 3.5p per share
2013 Interim dividend: 3.5p per share
Proposed for approval by shareholders at Annual General Meeting
Final dividend: 3.5p per share
2013
£000
2012
£000
–
–
18,011
19,103
18,998
18,998
37,996
–
–
37,114
21,982
18,998
The proposed final dividend was approved by the Board on 30 May 2013 and is subject to approval at the Annual General
Meeting on 10 July 2013. It has not been included as a liability or deducted from retained earnings as at 31 March 2013.
The proposed final dividend of 3.5p per share, of which 1.5p per share is a Property Income Distribution, is payable on 12 July
2013 to ordinary shareholders on the register at the close of business on 14 June 2013 and will be recognised as an appropriation
of retained earnings in 2014.
9 Earnings and net assets per share
The loss per share of 2.4p (2012: Earnings per share of 0.5p) is calculated on a weighted average of 561,508,387 (2012:
544,775,895) ordinary shares of 10p each and is based on losses attributable to ordinary shareholders of £13.5 million (2012: profit
of £2.7 million). There are no potentially dilutive or anti-dilutive share options in the year.
Net assets per share is based on equity shareholders’ funds at 31 March 2013 of £676.7 million (2012: £630.9 million) and
628,043,905 ordinary shares in issue at that date (2012: 542,795,171).
Adjusted earnings and adjusted net assets per share are calculated in accordance with the Best Practice Recommendations
of the European Public Real Estate Association (EPRA) as follows:
For the year to 31 March
Basic and adjusted earnings
Basic earnings attributable to ordinary shareholders
Revaluation of investment property(1)
Fair value of derivatives(1)
Goodwill on acquisitions(1)
Write down of intangible assets
Share-based payments
Acquisition costs
Deferred tax
Cost on closing out of derivatives
Profit on disposal of investment and trading property and subsidiaries
Impairment of investments held for sale
Minority interest in respect of the above
EPRA adjusted earnings
Cost on closing out of derivatives
Minority interest
Current tax credit(1)
Underlying profit
(1)
Including share of associates and joint ventures.
2013
£000
As restated
2012
£000
(13,456)
2,689
(20,320)
(3,038)
2,803
6,251
3,954
8,859
(2,876)
3,965
10,484
13,450
5,661
4,409
–
–
1,786
111
(1,076)
(1,035)
23,178
63
–
50
21,951
23,961
–
–
(679)
(111)
1,145
(704)
21,272
24,291
69
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
9 Earnings and net assets per share (continued)
As at 31 March
Number of shares
Opening ordinary share capital
Purchase and cancellation of own shares
Shares held in employee trust
Issue of 178,599,912 ordinary shares (28 January 2013)
Clawback and cancellation of 4,777,268 shares (28 January 2013)
Purchase and cancellation of tender offer shares (18 February 2013)
Weighted average number of ordinary shares
Basic (loss)/earnings per share
EPRA adjusted earnings per share
As at 31 March
Net assets per share
Equity shareholders’ funds
Fair value of derivatives
Cost of cap and swaption
Revaluation of trading properties
Fair value of associate and joint ventures’ derivatives
Deferred tax
EPRA adjusted net assets
Basic net assets per share
EPRA adjusted net assets per share
10 Investment properties
As at 31 March
Investment properties
Opening balance
Reclassifications
Acquisitions
Other capital expenditure
Disposals
Transfer to development properties
Transfer to assets held for sale
Revaluation movement
Movement in tenant incentives and rent free uplifts
At 31 March valuation
70
2013
Number of shares
2012
Number of shares
542,795,171
545,795,171
–
(863,424)
30,337,519
(811,481)
(9,949,398)
(501,370)
(517,906)
–
–
–
561,508,387
544,775,895
(2.4)p
3.9p
0.5p
4.4p
2013
£000
As restated
2012
£000
676,669
9,883
(336)
633
2,723
(2,311)
687,261
107.7p
109.4p
630,904
12,274
–
408
4,272
(4,289)
643,569
116.2p
118.6p
2013
As restated
2012
Freehold
£000
Long
leasehold
£000
Total
£000
Freehold
£000
Long
leasehold
£000
Total
£000
474,435
185,587
660,022 583,553 164,722
748,275
–
–
–
67,225
(67,225)
–
487,979
81,319
569,298
34,039
81,625
115,664
857
(168)
689
1,932
1,102
3,034
(242,151)
(6,198)
(248,349) (207,896)
(2,252) (210,148)
–
–
(77,000)
(77,000)
(58,810)
(58,810)
–
–
–
–
–
–
(1,606)
(8,650)
9,760
8,154
(4,393)
7,653
3,260
5
(8,645)
(25)
(38)
(63)
710,864
134,495
845,359 474,435 185,587
660,022
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
continued
For the year ended 31 March
As at 31 March
Number of shares
Opening ordinary share capital
Purchase and cancellation of own shares
Shares held in employee trust
Basic (loss)/earnings per share
EPRA adjusted earnings per share
As at 31 March
Net assets per share
Equity shareholders’ funds
Fair value of derivatives
Cost of cap and swaption
Deferred tax
EPRA adjusted net assets
Basic net assets per share
EPRA adjusted net assets per share
10 Investment properties
As at 31 March
Investment properties
Opening balance
Reclassifications
Acquisitions
Other capital expenditure
Disposals
Transfer to development properties
Transfer to assets held for sale
Revaluation movement
Revaluation of trading properties
Fair value of associate and joint ventures’ derivatives
Movement in tenant incentives and rent free uplifts
At 31 March valuation
2013
£000
As restated
2012
£000
–
(863,424)
30,337,519
(811,481)
(9,949,398)
(2.4)p
3.9p
676,669
9,883
(336)
633
2,723
(2,311)
687,261
107.7p
109.4p
(501,370)
(517,906)
–
–
–
0.5p
4.4p
630,904
12,274
–
408
4,272
(4,289)
643,569
116.2p
118.6p
As restated
2012
Freehold
leasehold
£000
Long
£000
Freehold
leasehold
£000
Long
£000
Total
£000
2013
Total
£000
–
–
–
474,435
185,587
660,022 583,553 164,722
748,275
–
–
67,225
(67,225)
487,979
81,319
569,298
34,039
81,625
115,664
857
(168)
689
1,932
1,102
3,034
(242,151)
(6,198)
(248,349) (207,896)
(2,252) (210,148)
(77,000)
(77,000)
(58,810)
(58,810)
–
–
–
–
(1,606)
(8,650)
9,760
8,154
(4,393)
7,653
3,260
5
(8,645)
(25)
(38)
(63)
710,864
134,495
845,359 474,435 185,587
660,022
–
–
–
9 Earnings and net assets per share (continued)
10 Investment properties (continued)
Issue of 178,599,912 ordinary shares (28 January 2013)
Clawback and cancellation of 4,777,268 shares (28 January 2013)
Purchase and cancellation of tender offer shares (18 February 2013)
Weighted average number of ordinary shares
561,508,387
544,775,895
2013
2012
Number of shares
Number of shares
542,795,171
545,795,171
As at 31 March
Investment properties under development
Opening balance
Acquisitions
Other capital expenditure
Transfer from investment properties
Revaluation movement
At 31 March valuation
Total investment properties
2013
As restated
2012
Freehold
£000
Long
leasehold
£000
Total
£000
Freehold
£000
Long
leasehold
£000
Total
£000
–
5,360
24
–
240
–
–
–
–
5,360
24
77,000
77,000
–
240
5,624
77,000
82,624
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
716,488
211,495
927,983 474,435 185,587
660,022
At 31 March 2013, the Group’s freehold and leasehold investment properties were externally valued by the Royal Institution
of Chartered Surveyors (RICS) Registered Valuers of CBRE Limited (“CBRE”) and Savills Advisory Services Limited (“Savills”), both
Chartered Surveyors, at £928.0 million. Apartments held at Clerkenwell Quarter, Islington were valued by RICS Registered Valuers
of Savills at £58.8 million and have been transferred at valuation as held for sale at the year-end as the property was being
actively marketed for sale.
Investment property in the course of construction at Clerkenwell Quarter, Islington in the previous year was valued by the
Directors at £10.4 million. At the request of the Financial Reporting Council, the Company has agreed to restate the valuation for
this property in the 31 March 2012 financial statements reducing its value by £2.65 million. While the Directors consider that the
valuation of investment property assets in the Group Balance Sheet was materially accurate, they have acknowledged that
because of the specific circumstances surrounding the property concerned, it had not been valued in accordance with IFRS
or valuation standards. The Directors have accordingly restated the figures previously reported including the profit on
revaluation shown in the Group Income Statement.
The valuations were undertaken in accordance with the RICS Valuation – Professional Standards 2012 on the basis of fair value
and were primarily derived using comparable recent market transactions on arm’s length terms. Fair value represents the price
that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at
the measurement date. The total fees earned by CBRE and Savills from the Company represent less than 5% of their total UK
revenues. CBRE and Savills have continuously been the signatory of valuations for the Company since October 2007 and
September 2010 respectively.
Included within the investment property valuation is £0.8 million (2012: £9.6 million) in respect of lease incentives and rent free
periods. The historical cost of all of the Group’s investment properties at 31 March 2013 was £885.3 million (2012: £599.5 million).
Capital commitments have been entered into amounting to £5.6 million (2012: £nil) which have not been provided for in the
financial statements.
11 Investment in associate and joint venture
As at 31 March
Opening balance
Additions at cost
Share of profit in the year
Disposals
Profit distributions received
At 31 March
2013
£000
2012
£000
161,575
115,345
68,002
15,969
(119,165)
47,459
4,346
–
(5,462)
(5,575)
120,919
161,575
In February 2009 the Group established the LSP Green Park Property Trust with Green Park Investments, a wholly-owned
subsidiary of a major Gulf institution, in which it held a 31.4% interest.
The Trust acquired a 50% interest in the Meadowhall Shopping Centre in February 2009, which was equity accounted for the
Group as an associate in the financial statements to 31 March 2012. The investment was transferred to current assets and
classified as an investment held for sale at 30 September 2012 in accordance with IFRS 5 at its fair value less costs of disposal,
of £95.8 million. An impairment loss of £23.2 million is reflected in the income statement. The disposal of the Group’s interest
in the Meadowhall Shopping Centre completed on 6 October 2012.
71
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
11 Investment in associate and joint venture (continued)
In May 2011 the Group disposed of a 50% interest in its distribution portfolio of ten prime assets acquired in November 2010
to Green Park. It retained a 50% interest in the joint venture company, LSP Green Park Distribution Holdings Limited.
In June 2012, the Group entered into a joint venture arrangement with Green Park Investments and the Public Sector Pension
Investment Board to invest in residential property. On 19 July 2012, the joint venture arrangement, LSP London Residential
Investments Limited, in which the Group has a 40% interest, acquired 149 apartments at Moore House, London, for £147.1 million.
As part of the merger with Metric, the Group acquired a one-third interest in Metric Income Plus Limited Partnership (MIPP).
The Universities Superannuation Scheme Limited holds the remaining two-third stake.
All Group interests are equity accounted for in these financial statements.
The Group’s share of the profit after tax and net assets of its associates and joint ventures is as follows:
Summarised income statement
Net rental income
Administration expenses
Movement in fair value of
net assets acquired over
consideration paid
Surplus/(deficit) on revaluation
of investment properties
Net interest payable
Movement in fair value
of derivatives
Tax
Profit after tax
Summarised balance sheet
Investment properties
Other current assets
Cash
Current liabilities
Bank debt
Unamortised finance costs
Derivative financial instruments
Other non current liabilities
Net assets
LSP
Green Park
Property Trust
(Meadowhall)
£000
LSP
Green Park
Distribution
Holdings
£000
LSP London
Residential
Investments
£000
Metric
Income Plus
£000
LSP
Green Park
Property Trust
(Meadowhall)
£000
LSP
Green Park
Distribution
Holdings
£000
2013
£000
2012
£000
5,628
(909)
8,257
(895)
152
(279)
359
(25)
14,396
(2,108)
11,980
(1,871)
7,189
(914)
19,169
(2,785)
–
–
–
–
(2,075)
13,948
–
53
(3,938)
(3,179)
(634)
(106)
–
2,876
–
2,876
11,926
(7,857)
(4,952)
4,730
(222)
(8,330)
(2,723)
(11,053)
(544)
226
463
(329)
485
(151)
–
2,264
13,036
(75)
–
206
(1,099)
(1,294)
(2,394)
(3,688)
711
15,969
49
–
(1,542)
5,888
49
4,346
–
–
–
–
–
–
–
–
–
118,763
76,800
30,567
226,130
237,667
120,849
358,516
358
4,209
(3,251)
310
1,970
(487)
–
2,085
(544)
668
8,264
491
4,116
298
4,430
789
8,546
(4,282)
(10,971)
(3,800)
(14,771)
(74,040)
(26,000)
(8,433)
(108,473)
(102,243)
(74,040)
(176,283)
621
(2,493)
–
399
(151)
–
315
(79)
–
1,335
(2,723)
–
848
848
(2,109)
(2,163)
(4,272)
–
(11,798)
–
(11,798)
44,167
52,841
23,911
120,919
115,153
46,422
161,575
At 31 March 2013, the freehold and leasehold investment properties were externally valued by Royal Institution of Chartered
Surveyors (RICS) Registered Valuers of CBRE Limited and Savills Advisory Services Limited.
72
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
continued
For the year ended 31 March
11 Investment in associate and joint venture (continued)
In May 2011 the Group disposed of a 50% interest in its distribution portfolio of ten prime assets acquired in November 2010
to Green Park. It retained a 50% interest in the joint venture company, LSP Green Park Distribution Holdings Limited.
In June 2012, the Group entered into a joint venture arrangement with Green Park Investments and the Public Sector Pension
Investment Board to invest in residential property. On 19 July 2012, the joint venture arrangement, LSP London Residential
Investments Limited, in which the Group has a 40% interest, acquired 149 apartments at Moore House, London, for £147.1 million.
As part of the merger with Metric, the Group acquired a one-third interest in Metric Income Plus Limited Partnership (MIPP).
The Universities Superannuation Scheme Limited holds the remaining two-third stake.
All Group interests are equity accounted for in these financial statements.
The Group’s share of the profit after tax and net assets of its associates and joint ventures is as follows:
LSP
Green Park
Property Trust
(Meadowhall)
£000
LSP
Green Park
Distribution
Holdings
£000
LSP London
Residential
Investments
£000
Metric
Income Plus
£000
LSP
Green Park
Property Trust
(Meadowhall)
£000
LSP
Green Park
Distribution
Holdings
£000
2013
£000
2012
£000
5,628
(909)
8,257
(895)
152
(279)
359
(25)
14,396
(2,108)
11,980
(1,871)
7,189
(914)
19,169
(2,785)
Summarised income statement
Net rental income
Administration expenses
Movement in fair value of
net assets acquired over
consideration paid
Surplus/(deficit) on revaluation
of investment properties
Net interest payable
Movement in fair value
of derivatives
Tax
Profit after tax
Summarised balance sheet
Investment properties
Other current assets
Cash
Current liabilities
Bank debt
Unamortised finance costs
Derivative financial instruments
Other non current liabilities
Net assets
–
53
(75)
–
206
–
2,085
(544)
315
(79)
–
(544)
226
463
(329)
485
(151)
–
2,264
13,036
(1,099)
(1,294)
(2,394)
(3,688)
711
15,969
49
–
(1,542)
5,888
49
4,346
118,763
76,800
30,567
226,130
237,667
120,849
358,516
(74,040)
(26,000)
(8,433)
(108,473)
(102,243)
(74,040)
(176,283)
358
4,209
(3,251)
621
(2,493)
–
310
1,970
(487)
399
(151)
–
668
8,264
491
4,116
298
4,430
789
8,546
(4,282)
(10,971)
(3,800)
(14,771)
1,335
(2,723)
–
848
848
(2,109)
(2,163)
(4,272)
–
(11,798)
–
(11,798)
–
–
–
–
–
–
–
–
–
–
–
12 Intangible assets
As at 31 March
Cost
Opening balance
Additions
At 31 March
Amortisation
Opening balance
Amortisation during the year
At 31 March
Net carrying amount
2013
£000
2012
£000
53,260
53,260
1,168
–
54,428
53,260
40,836
36,871
3,954
44,790
9,638
3,965
40,836
12,424
An intangible asset of £53.3 million was created on the acquisition by the Company of the LSP Green Park Property Trust Property
Advisory Agreement and is being amortised on a straight-line basis over the remaining period of the contract to May 2015.
As part of the merger with Metric the Group created a further intangible asset of £1.2 million, representing the fair valuation of
the Management Agreement with Metric Income Plus Limited Partnership. This is being amortised on a straight-line basis over the
remaining period of the contract to November 2016.
–
–
–
2,876
–
2,876
13 Trade and other receivables
(2,075)
13,948
(3,938)
(3,179)
(634)
(106)
11,926
(7,857)
(4,952)
4,730
(222)
(8,330)
(2,723)
(11,053)
As at 31 March
Trade receivables
Performance fees receivable
Amounts receivable from income guarantees
Share-based payment prepayment
Corporation tax debtor
Prepayments and accrued income
Other receivables
2013
£000
1,942
3,457
–
2012
£000
288
–
557
3,789
19,767
–
1,057
1,486
752
1,068
307
11,731
22,739
All amounts fall due for payment in less than one year.
Trade receivables comprise rental income which is due on contractual quarter days with no credit period. All trade receivables
are considered recoverable at the balance sheet date and as such no allowance for doubtful debts has been made. Since
the year end all trade receivables have been collected.
At 31 March 2013 there were no trade receivables which were overdue or impaired. There is no provision for impairment of
trade receivables as at 31 March 2013 as the risk of impairment of the amounts outstanding is not considered to be significant.
At 31 March 2013, the freehold and leasehold investment properties were externally valued by Royal Institution of Chartered
Surveyors (RICS) Registered Valuers of CBRE Limited and Savills Advisory Services Limited.
Cash and cash equivalents include £9.6 million (2012: £29.1 million) retained in rent and restricted accounts which are not
readily available to the Group for day to day commercial purposes.
44,167
52,841
23,911
120,919
115,153
46,422
161,575
14 Cash and cash equivalents
73
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
15 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
Deferred income
2013
£000
2,096
4,499
8,051
2,739
1,263
7,584
–
26,232
2012
£000
775
51
8,156
2,239
2,009
1,971
20,016
35,217
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
16 Borrowings and financial instruments
a) Non current financial liabilities
As at 31 March
Secured bank loans
Unamortised finance costs
2013
£000
2012
£000
464,564
322,769
(4,236)
(2,936)
460,328
319,833
The bank loans are secured by fixed charges over certain of the Group’s investment properties with a carrying value
of £884 million and are repayable within five years of the balance sheet date.
b) Financial risk management
Financial risk factors
The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the Group’s financial performance. The Group’s financial risk management objectives are to
minimise the effect of risks it is exposed to through its operations and the use of debt financing.
The principal financial risks to the Group and the policies it has in place to manage these risks are summarised below:
i) Credit risk
Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual
obligations.
The Group’s principal financial assets are cash balances and deposits and trade and other receivables. The Group’s credit risk
is primarily attributable to its cash deposits and trade receivables.
The Group mitigates financial loss from tenant defaults by dealing with only creditworthy tenants. The trade receivable amounts
presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where
there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the
receivables concerned. The balance is low relative to the scale of the balance sheet and therefore the credit risk of trade
receivables is considered to be low.
Cash is placed on deposit with a diverse mix of institutions with suitable credit ratings and rates of return and for varying periods
of time. At the year-end deposits were spread across eight different banks. The credit ratings of the banks are monitored by
J C Rathbone Associates Limited and reported to the Board at least quarterly in order to make necessary changes and
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.
74
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
2013
£000
2,096
4,499
8,051
2,739
1,263
7,584
–
26,232
2012
£000
775
51
8,156
2,239
2,009
1,971
20,016
35,217
2013
£000
2012
£000
464,564
322,769
(4,236)
(2,936)
460,328
319,833
continued
For the year ended 31 March
15 Trade and other payables
Amounts payable on property acquisitions and disposals
Rent received in advance
As at 31 March
Trade payables
Accrued interest
Other payables
Other accruals
Deferred income
16 Borrowings and financial instruments
a) Non current financial liabilities
As at 31 March
Secured bank loans
Unamortised finance costs
b) Financial risk management
Financial risk factors
The Group has financial risk management policies in place to ensure that all payables are paid within the credit timeframe.
The bank loans are secured by fixed charges over certain of the Group’s investment properties with a carrying value
of £884 million and are repayable within five years of the balance sheet date.
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
obligations.
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
The Group’s principal financial assets are cash balances and deposits and trade and other receivables. The Group’s credit risk
is primarily attributable to its cash deposits and trade receivables.
The Group mitigates financial loss from tenant defaults by dealing with only creditworthy tenants. The trade receivable amounts
presented in the balance sheet are net of allowances for doubtful receivables. An allowance for impairment is made where
there is objective evidence that the Group will not be able to collect amounts due according to the original terms of the
receivables concerned. The balance is low relative to the scale of the balance sheet and therefore the credit risk of trade
receivables is considered to be low.
Cash is placed on deposit with a diverse mix of institutions with suitable credit ratings and rates of return and for varying periods
of time. At the year-end deposits were spread across eight different banks. The credit ratings of the banks are monitored by
J C Rathbone Associates Limited and reported to the Board at least quarterly in order to make necessary changes and
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.
16 Borrowings and financial instruments (continued)
ii) Liquidity risk
Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due.
The Group actively maintains a mixture of long-term and short-term committed facilities that are designed to ensure that the
Group has sufficient available funds for operations and committed investments. The Group’s funding sources are diversified
across a range of banks. Quarterly cash flow forecasts are prepared for the Board in order to ensure sufficient resources of cash
and undrawn borrowing facilities are in place to meet liabilities as they fall due. The Group deposits surplus cash with a number
of banks and for varying periods of time to ensure diversification, liquidity of resources and so as to deliver appropriate returns.
The Group had cash reserves of £37.6 million (2012: £136.9 million) and available and undrawn bank loan facilities at 31 March
2013 of £37.0 million (2012: £22.3 million).
The following table shows the contractual maturity profile of the Group’s financial liabilities on an undiscounted cash flow basis
and assuming settlement on the earliest repayment date.
At 31 March 2013
Bank loans
Derivative financial instruments
At 31 March 2012
Bank loans
Derivative financial instruments
iii) Market risk – Interest rate risk
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Total
£000
41,622
41,243 420,708
503,573
4,507
3,750
2,792
11,049
46,129
44,993 423,500
514,622
Less than
one year
£000
One to two
years
£000
Two to five
years
£000
Total
£000
8,553
5,272
8,553 335,134
352,240
5,346
4,493
15,111
13,825
13,899 339,627
367,351
The Group is exposed to interest rate risk from the use of debt financing at a variable rate. It is the risk that future cash flows of
a financial instrument will fluctuate because of changes in interest rates. It is Group policy that a reasonable portion of external
borrowings are at a fixed interest rate in order to manage this risk.
The Group uses interest rate swaps and caps to manage its interest rate exposure and hedge future interest rate risk for the term
of the bank loan. Although the Board accepts that this policy neither protects the Group entirely from the risk of paying rates in
excess of current market rates nor eliminates fully the cash flow risk associated with interest payments, it considers that it
achieves an appropriate balance of exposure to these risks.
At 31 March 2013 the Group had £370 million (2012: £289 million) of hedges in place, and its debt was 80% (2012: 84%) fixed.
Consequently, based on year-end debt levels, a 1% change in interest rates would decrease or increase the Group’s annual
loss before tax by £1.9 million and £1.0 million respectively.
The average interest rate payable by the Group on all bank borrowings at 31 March 2013 excluding undrawn facility
commitment fees was 3.59% (31 March 2012: 4.12%).
75
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
16 Borrowings and financial instruments (continued)
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.
c) Financial instruments
i) Categories of financial instruments
As at 31 March
Current assets
Cash and cash equivalents
Trade receivables (note 13)
Amounts receivable from income guarantees (note 13)
Performance fees receivable (note 13)
Corporation tax receivable
Other receivables (note 13)
As at 31 March
Non current liabilities
Borrowings (note 16a)
Current liabilities
Trade payables (note 15)
Accrued interest (note 15)
Other accruals (note 15)
Deferred income (note 15)
Other payables (note 15)
Derivative financial instruments (see 16c(iii))
ii) Fair values
Loans and receivables
2013
£000
2012
£000
37,572
136,934
1,942
–
3,457
–
1,486
288
557
–
752
307
44,457
138,838
Measured at
amortised cost
Measured at fair value
2013
£000
2012
£000
2013
£000
2012
£000
460,328 319,833
2,096
2,739
7,584
775
2,239
1,971
–
20,016
1,263
2,009
–
–
474,010 346,843
–
–
–
–
–
–
–
–
–
–
–
–
9,883
9,883
12,274
12,274
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 2013.
76
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Group financial statements
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.
continued
For the year ended 31 March
16 Borrowings and financial instruments (continued)
iv) Capital risk management
c) Financial instruments
i) Categories of financial instruments
As at 31 March
Current assets
Cash and cash equivalents
Trade receivables (note 13)
Amounts receivable from income guarantees (note 13)
Performance fees receivable (note 13)
Corporation tax receivable
Other receivables (note 13)
As at 31 March
Non current liabilities
Borrowings (note 16a)
Current liabilities
Trade payables (note 15)
Accrued interest (note 15)
Other accruals (note 15)
Deferred income (note 15)
Other payables (note 15)
ii) Fair values
Derivative financial instruments (see 16c(iii))
Loans and receivables
2013
£000
2012
£000
37,572
136,934
1,942
–
–
3,457
1,486
288
557
–
752
307
44,457
138,838
Measured at
amortised cost
Measured at fair value
2013
£000
2012
£000
2013
£000
2012
£000
460,328 319,833
2,096
2,739
7,584
775
2,239
1,971
–
20,016
1,263
2,009
–
–
474,010 346,843
–
–
–
–
–
–
–
–
–
–
–
–
9,883
9,883
12,274
12,274
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 2013.
The Group’s objectives when maintaining capital are to safeguard the entity’s ability to continue as a going concern so that
Details of the fair value of the Group’s derivative financial instruments that were in place at 31 March 2013 are provided below:
16 Borrowings and financial instruments (continued)
iii) Derivative financial instruments
Protected
rate
%
Market
value
31 March
2012
£000
Acquired in
the period
£000
Expiry
3.68
1.88
2.35
4.00
2.69
3.77
2.03
1.31
1.07
4.00
4.00
1.19
2.00
2.00
1.48
2.03
1.56
1.19
1.20
3.34
3.00
October 2014
(5,689)
October 2012
(213)
March 2016
October 2014
January 2015
October 2014
July 2016
July 2016
July 2017
March 2016
July 2015
July 2015
June 2016
June 2016
October 2015
October 2016
October 2016
October 2016
October 2016
April 2016
April 2016
25
20
(1,796)
(3,840)
(767)
(14)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
172
9
–
47
108
(424)
(161)
(266)
(126)
(119)
(861)
27
Disposed
in the
period
£000
5,689
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Movement
recognised
in income
statement
£000
Market
value
31 March
2013
£000
–
213
(25)
(20)
309
975
(417)
(400)
(874)
(149)
(8)
(879)
(11)
(45)
(53)
(74)
(63)
(73)
(80)
(20)
(10)
–
–
–
–
(1,487)
(2,865)
(1,184)
(414)
(874)
23
1
(879)
36
63
(477)
(235)
(329)
(199)
(199)
(881)
17
(12,274)
(1,594)
5,689
(1,704)
(9,883)
£85 million swap(1)
£40.7 million swap(1)
£40.7 million swaption(1)
£26.5 million cap(2)
£38.1 million swap(3)
£55.3 million swap
£25.0 million fixed rate
£17.6 million fixed rate
£61.8 million swap
£100.0 million swaption(4)
£4.0 million cap
£40.7 million swap(5)
£17.7 million cap
£5.8 million cap
£20.0 million swap
£20.0 million swap
£10.0 million swap
£10.0 million swap
£10.0 million swap
£10.5 million fixed rate
£17.5 million cap
(1)
(2)
(3)
(4)
(5)
Derivatives disposed or lapsed in the period.
Increased from £17.5 million in October 2012.
Decreased from £48.1 million in October 2012.
Exercisable in July 2015.
Increases to £96 million in October 2014.
All derivative financial instruments are non current interest rate derivatives, and are carried at fair value following a valuation
as at 31 March 2013 by J C Rathbone Associates Limited.
The market values of hedging products change with interest rate fluctuations, but the exposure of the Group to movements
in interest rates is protected by way of the hedging products listed above. In accordance with accounting standards, fair value
is calculated on a replacement basis using mid-market rates. For all derivative financial instruments this equates to a Level 2 fair
value measurement as defined by IFRS 7 Financial Instruments: Disclosures. 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.
77
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
17 Acquisitions
On 25 January 2013 the Company issued 178,599,912 ordinary shares as consideration in exchange for the entire share capital
of Metric Property Investments plc (“Metric”). The merger was implemented by way of a Scheme of Arrangement under Part 26
of the Companies Act 2006. Each Metric shareholder received 0.94 ordinary shares in the Company for each ordinary share
held in Metric.
The fair value of the consideration payable by the Company was £202.7 million, being 178,599,912 ordinary shares at 113.5p,
the closing share price of the Company at 25 January 2013.
The fair value of assets acquired was £196.5 million and the goodwill arising of £6.3 million has been fully impaired and charged
to the profit and loss. Exceptional administration costs associated with the merger and integration of £5.7 million have been
charged to the profit and loss in the year.
The fair value of assets and liabilities acquired is set out in the table below:
Assets
Investment properties
Investment in joint ventures
Intangible asset
Tangible assets
Deferred tax
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Total liabilities
Net assets
Fair value of consideration paid
Goodwill on acquisition of subsidiaries
Book value of
net assets
acquired
£000
255,502
23,705
–
45
–
2,867
3,610
Intangible
asset
£000
Deferred tax
£000
–
–
1,168
–
–
–
–
–
–
–
–
623
–
–
Fair value of
net assets
acquired
£000
255,502
23,705
1,168
45
623
2,867
3,610
285,729
1,168
623
287,520
(13,501)
(75,629)
(1,930)
(91,060)
194,669
–
–
–
–
–
–
–
–
1,168
623
(13,501)
(75,629)
(1,930)
(91,060)
196,460
202,711
6,251
A detailed review of the existence of intangible assets other than goodwill was undertaken and an intangible asset was
recognised representing the fair value of the Metric Income Plus Partnership Management Agreement acquired by the Group.
The value attributed to the contract of £1.2 million will be amortised over the remaining period of the contract to November
2016. In addition, tax losses available to the Group of £2.7 million have given rise to a deferred tax asset of £0.6 million. The
properties acquired complement the existing portfolio and an adjustment was made to the carrying value of two investment
properties at Bishop Auckland and Cannock which had completed development and refurbishment work in the period prior
to acquisition, giving rise to a revaluation uplift of £1.5 million. It is anticipated that the Group will benefit from proposed asset
management, refurbishment and development enhancements within the acquired portfolio which has not been incorporated
into the fair value of the assets in accordance with IAS 36.
The acquisition has contributed £2.6 million to gross rental income and £0.1 million to profit before tax since acquisition. If the
acquisition had occurred on 1 April 2012, the contribution to gross rental income and profit before tax would have been
£13.2 million and £1.7 million respectively.
The goodwill arising on acquisition of £6.3 million has been fully impaired and charged to the profit and loss account in the year.
It primarily reflects exceptional costs associated with the merger of £4.1 million which were committed to and charged by
Metric in the pre-acquisition period and which did not form part of the pricing negotiations for the merger which was based
on a share exchange ratio and was subject to movements in the Company’s share price between the date of announcement
of the merger to its effective date of 25 January 2013.
78
LondonMetric Property Plc Annual report and accounts 2013Financial statements
continued
For the year ended 31 March
17 Acquisitions
held in Metric.
Assets
Investment properties
Investment in joint ventures
Intangible asset
Tangible assets
Deferred tax
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Total liabilities
Net assets
Trade and other payables
Derivative financial instruments
Fair value of consideration paid
Goodwill on acquisition of subsidiaries
Notes forming part of the Group financial statements
On 25 January 2013 the Company issued 178,599,912 ordinary shares as consideration in exchange for the entire share capital
of Metric Property Investments plc (“Metric”). The merger was implemented by way of a Scheme of Arrangement under Part 26
of the Companies Act 2006. Each Metric shareholder received 0.94 ordinary shares in the Company for each ordinary share
The fair value of the consideration payable by the Company was £202.7 million, being 178,599,912 ordinary shares at 113.5p,
the closing share price of the Company at 25 January 2013.
The fair value of assets acquired was £196.5 million and the goodwill arising of £6.3 million has been fully impaired and charged
to the profit and loss. Exceptional administration costs associated with the merger and integration of £5.7 million have been
charged to the profit and loss in the year.
The fair value of assets and liabilities acquired is set out in the table below:
Less than one year
Between one and five years
Between six and ten years
Between 11 and 15 years
Between 16 and 20 years
2013
£000
49,728
186,337
182,679
76,158
22,716
2012
£000
37,190
98,579
81,679
41,273
2,094
517,618
260,815
18 Commitments under operating leases
The Group’s minimum lease rentals receivable under non-cancellable operating leases, excluding associates and joint ventures,
are as follows:
Book value of
net assets
acquired
£000
255,502
23,705
45
–
–
2,867
3,610
(13,501)
(75,629)
(1,930)
(91,060)
194,669
1,168
–
–
–
–
–
–
–
–
–
–
623
–
–
–
–
–
–
–
–
–
–
Fair value of
net assets
acquired
£000
255,502
23,705
1,168
45
623
2,867
3,610
(13,501)
(75,629)
(1,930)
(91,060)
196,460
202,711
6,251
285,729
1,168
623
287,520
Intangible
asset
£000
Deferred tax
£000
The Group’s minimum lease payments under non-cancellable operating leases, excluding associates and joint ventures,
are as follows:
Less than one year
Between one and five years
After five years
19 Share capital
As at 31 March
Authorised
2013
£000
213
3,240
339
3,792
2012
£000
673
1,682
–
2,355
2012
£000
2013
Number
2013
£000
2012
Number
Ordinary shares of 10p each
Unlimited
Unlimited
Unlimited
Unlimited
1,168
623
As at 31 March
Issued, called up and fully paid
Ordinary shares of 10p each
2013
Number
2013
£000
2012
Number
2012
£000
628,043,905
62,804
542,795,171
54,280
A detailed review of the existence of intangible assets other than goodwill was undertaken and an intangible asset was
recognised representing the fair value of the Metric Income Plus Partnership Management Agreement acquired by the Group.
The value attributed to the contract of £1.2 million will be amortised over the remaining period of the contract to November
2016. In addition, tax losses available to the Group of £2.7 million have given rise to a deferred tax asset of £0.6 million. The
properties acquired complement the existing portfolio and an adjustment was made to the carrying value of two investment
properties at Bishop Auckland and Cannock which had completed development and refurbishment work in the period prior
to acquisition, giving rise to a revaluation uplift of £1.5 million. It is anticipated that the Group will benefit from proposed asset
management, refurbishment and development enhancements within the acquired portfolio which has not been incorporated
into the fair value of the assets in accordance with IAS 36.
The acquisition has contributed £2.6 million to gross rental income and £0.1 million to profit before tax since acquisition. If the
acquisition had occurred on 1 April 2012, the contribution to gross rental income and profit before tax would have been
£13.2 million and £1.7 million respectively.
The goodwill arising on acquisition of £6.3 million has been fully impaired and charged to the profit and loss account in the year.
It primarily reflects exceptional costs associated with the merger of £4.1 million which were committed to and charged by
Metric in the pre-acquisition period and which did not form part of the pricing negotiations for the merger which was based
on a share exchange ratio and was subject to movements in the Company’s share price between the date of announcement
of the merger to its effective date of 25 January 2013.
On 25 January 2013, the Company issued 178,599,912 New Ordinary Shares in exchange for the entire issued share capital
of Metric Property Investments plc pursuant to the merger of the two organisations. In addition 4,777,268 ordinary shares were
acquired by the Company from the former LSI Management LLP members (the former Property Advisor to the Group) and
subsequently cancelled. The Company acquired 88,573,910 ordinary shares on 18 February 2013 from shareholders following
a Tender Offer as set out in a Circular published on 31 January 2013. The Tender Offer was taken up in full at a price of 112.9p
per ordinary share.
20 Reserves
The Statement of Changes in Equity is shown on page 59.
The following describes the nature and purpose of each reserve within equity:
Share capital
The nominal value of shares issued.
Capital redemption
reserve
Other reserve
Amounts transferred from share capital on redemption of issued ordinary shares.
A reserve relating to the application of merger relief in the acquisition of LSI Management Limited
and Metric Property Investments plc by the Company, the cost of the Company’s shares held in
treasury and the cost of shares held in trust to provide for the Company’s future obligations under
share award schemes.
Retained earnings
The cumulative profits and losses after the payment of dividends.
79
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Group financial statements
continued
For the year ended 31 March
21 Related party transactions and balances
Details of Directors’ remuneration and interests are given in the Remuneration report on pages 51 to 55.
During the year the Group received property advisory fees of £6.6 million (2012: £5.5 million) from LSP Green Park Property
Trust, in which it has a 31.4% interest. It also received £1.4 million (2012: £1.1 million) from LSP Green Park Distribution Holdings
Limited, in which it has a 50% interest and £0.4 million (2012: £nil) from LSP London Residential Investments Limited, in which
it has a 40% interest.
In the post-merger period the Group received fees of £0.1 million form Metric Income Plus Partnership, in which it has
a one-third interest.
None of the fees were outstanding at 31 March 2013 (2012: £nil).
Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation.
22 Events after the balance sheet date
On 14 May 2013 the Group completed the acquisition of Martlesham Heath Retail Park, Ipswich for £10.35 million.
80
LondonMetric Property Plc Annual report and accounts 2013Financial statements
continued
For the year ended 31 March
21 Related party transactions and balances
Details of Directors’ remuneration and interests are given in the Remuneration report on pages 51 to 55.
During the year the Group received property advisory fees of £6.6 million (2012: £5.5 million) from LSP Green Park Property
Trust, in which it has a 31.4% interest. It also received £1.4 million (2012: £1.1 million) from LSP Green Park Distribution Holdings
Limited, in which it has a 50% interest and £0.4 million (2012: £nil) from LSP London Residential Investments Limited, in which
it has a 40% interest.
a one-third interest.
In the post-merger period the Group received fees of £0.1 million form Metric Income Plus Partnership, in which it has
None of the fees were outstanding at 31 March 2013 (2012: £nil).
Transactions between the Company and its subsidiaries which are related parties have been eliminated on consolidation.
22 Events after the balance sheet date
On 14 May 2013 the Group completed the acquisition of Martlesham Heath Retail Park, Ipswich for £10.35 million.
Notes forming part of the Group financial statements
Independent auditor’s report to the members
of LondonMetric Property Plc
We have audited the Parent Company financial statements of
LondonMetric Property Plc for the year ended 31 March 2013
which comprise the Parent Company Balance Sheet and the
related notes. The financial reporting framework that has been
applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
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.
Respective responsibilities of Directors and auditors
As explained more fully in the Statement of Directors’
responsibilities, the Directors are responsible for the preparation
of the Parent Company financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit and express an opinion on the Parent Company
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices
Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the Financial Reporting Council’s website at
www.frc.org.uk/auditscopeukprivate.
Opinion on other matters prescribed by the Companies
Act 2006
In our opinion:
– the part of the Directors’ remuneration report to be
audited has been properly prepared in accordance
with the Companies Act 2006; and
– the information given in the Directors’ report for the financial
period for which the financial statements are prepared is
consistent with the Parent Company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion;
– 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 and the part of
the Directors’ remuneration report to be audited are not
in agreement with the accounting records and returns; or
– certain disclosures of Directors’ remuneration specified
by law are not made; or
– we have not received all the information and explanations
we require for our audit.
Other matter
We have reported separately on the Group financial
statements of LondonMetric Property Plc for the year ended
31 March 2013.
Opinion on financial statements
In our opinion the Parent Company financial statements:
– give a true and fair view of the state of the Company’s
affairs as at 31 March 2013;
David Eagle
Senior Statutory Auditor
For and on behalf of BDO LLP, statutory auditor
London
United Kingdom
– have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
31 May 2013
– have been prepared in accordance with the requirements
of the Companies Act 2006.
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
81
Annual report and accounts 2013 LondonMetric Property Plc
Company Balance Sheet
As at 31 March
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Cash at bank
Current liabilities
Creditors: amounts falling due within one year
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Capital redemption reserve
Other reserve
Retained earnings
Shareholders’ funds
Note
2013
£000
2012
£000
iii 667,628
524,265
667,628
524,265
iv
669
35,880
15,555
91,431
16,224
127,311
v
3,683
2,623
12,541
124,688
680,169
648,953
680,169
648,953
vi
vi
62,804
54,280
9,636
300
vi 403,356
434,946
vi 204,373
159,427
680,169
648,953
The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2013 and were signed
on its behalf by:
Martin McGann
Finance Director
The notes on pages 83 to 85 form part of these financial statements.
82
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Company Balance Sheet
As at 31 March
Notes forming part of the Company financial statements
For the year ended 31 March 2013
Note
2013
£000
2012
£000
i Accounting policies
Accounting convention
The Company financial statements are prepared under UK GAAP and the historical cost convention. The Company has
prepared its financial statements on a going concern basis.
The accounting policies relevant to the Company are the same as those set out in the accounting policies for the Group,
except as noted below.
Subsidiary undertakings
Investments in subsidiary companies are stated at cost less any provision for impairment.
ii Profit attributable to members of the parent undertaking
As permitted by Section 408 Companies Act 2006, the income statement of the Company is not presented as part of these
financial statements. The loss dealt within the accounts of the Company was £33.5 million (2012: profit of £61.1 million).
Audit fees in relation to the Company only were £189,000 in the year (2012: £155,000).
iii Fixed asset investments
At 1 April 2012
Additions to cost
Impairment of investment
At 31 March 2013
Subsidiary
undertakings
£000
524,265
360,819
(217,456)
667,628
The Company is the ultimate holding company of the Group and has the following principal subsidiary undertakings:
Country of
incorporation or
registration
Proportion of voting rights
held (by way of share
capital or units held)
Creditors: amounts falling due within one year
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Cash at bank
Current liabilities
Net current assets
Total assets less current liabilities
Net assets
Capital and reserves
Called up share capital
Capital redemption reserve
Other reserve
Retained earnings
Shareholders’ funds
on its behalf by:
Martin McGann
Finance Director
iii 667,628
524,265
667,628
524,265
iv
669
35,880
15,555
91,431
16,224
127,311
v
3,683
2,623
12,541
124,688
680,169
648,953
680,169
648,953
vi
vi
62,804
54,280
9,636
300
vi 403,356
434,946
vi 204,373
159,427
680,169
648,953
The financial statements were approved and authorised for issue by the Board of Directors on 31 May 2013 and were signed
The notes on pages 83 to 85 form part of these financial statements.
London & Stamford Property Limited
LSI Management Limited
LSI (Investments) Limited
LondonMetric Saturn Limited
Metric Property Investments plc
MREF II PM Limited
London & Stamford Investments Limited*
LSI Developments Limited*
London & Stamford Property Subsidiary Limited*
London & Stamford Offices Trust*
L&S Business Space Limited*
L&S Highbury Limited*
L&S Business Space II Limited*
L&S Battersea Limited*
L&S Clapham Road Limited*
L&S Seward St. Limited*
London & Stamford Offices II Limited*
LSP Leatherhead Limited*
LSP Marlow Limited*
Guernsey
Guernsey
England
England
England
Jersey
England
England
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
Guernsey
100%
100%
100%
100%
100%
100%
100%
Nature of business
Intermediate holding company
Management company
Property investment
Property investment
Property investment
Property investment
Intermediate holding company
100% Property investment and development
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Intermediate holding company
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
83
Annual report and accounts 2013 LondonMetric Property Plc
Notes forming part of the Company financial statements
continued
For the year ended 31 March 2013
iii Fixed asset investments (continued)
Metric Property Newry Limited*
Metric Property Launceston Limited*
Metric Property Loughborough Limited*
Metric Property Coventry Limited*
Metric Property Mansfield Limited*
Metric Property Congleton Limited*
Wick Retail Limited*
Metric Property Bedford Limited*
Metric Property Milford Haven Limited*
Metric Property Bristol Limited*
Metric Property Hove Limited*
Metric Property Kirkstall Limited*
Metric Property Inverness Limited*
Metric Property Bishop Auckland Limited*
Metric Property Sheffield Limited*
Metric Property Kings Lynn Limited*
Metric Property Finance 1 Limited*
Metric Property Finance 2 Limited*
Metric Property Berkhamsted Limited*
* Undertakings held indirectly by the Company.
Country of
incorporation or
registration
Proportion of voting rights
held (by way of share
capital or units held)
England
England
England
England
England
England
Scotland
England
England
England
England
England
Scotland
England
England
England
England
England
England
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of business
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Intermediate holding company
Intermediate holding company
Property investment
All of the undertakings listed above operate in their country of incorporation except those who are tax resident in the United
Kingdom. All shares held are ordinary shares.
iv Debtors
As at 31 March
Trade debtors
Dividend receivable from subsidiary undertakings
Prepayments and accrued income
Other receivables
All amounts under receivables fall due for payment in less than one year.
v Creditors: amounts falling due within one year
As at 31 March
Trade payables
Other payables
Other accruals and deferred income
Amounts due to subsidiary undertakings
84
2013
£000
516
–
23
130
669
2012
£000
–
33,445
2,435
–
35,880
2013
£000
58
105
597
2,923
3,683
2012
£000
2,319
–
304
–
2,623
LondonMetric Property Plc Annual report and accounts 2013Financial statements
Notes forming part of the Company financial statements
continued
For the year ended 31 March 2013
iii Fixed asset investments (continued)
vi Reserves
Country of
Proportion of voting rights
incorporation or
registration
held (by way of share
capital or units held)
At 1 April 2012
Retained loss for the year
Share issue on merger with Metric
Clawback and cancellation of own shares
Share
capital
£000
Capital
redemption
reserve
£000
Other
reserve
£000
Retained
earnings
£000
54,280
300 434,946
159,427
–
–
–
(33,499)
17,860
(479)
– 184,851
479
–
–
(100,650)
–
–
Purchase and cancellation of own shares following Tender offer
(8,857)
8,857
Share-based awards
Reserve transfer of impairment in subsidiary
Dividends paid
At 31 March 2013
vii Related party transactions
–
–
–
–
1,015
(365)
– (217,456)
217,456
–
–
(37,996)
62,804
9,636 403,356
204,373
The Company has received short-term non-interest bearing loans from subsidiaries in the year and £2.9 million is outstanding as
at 31 March 2013. In the previous year a dividend of £33.4 million was due to the Company from subsidiaries. This was paid in full
in the year.
Other related party transactions for the Company are as noted for the Group in note 21 to the Group financial statements.
85
Metric Property Newry Limited*
Metric Property Launceston Limited*
Metric Property Loughborough Limited*
Metric Property Coventry Limited*
Metric Property Mansfield Limited*
Metric Property Congleton Limited*
Wick Retail Limited*
Metric Property Bedford Limited*
Metric Property Milford Haven Limited*
Metric Property Bristol Limited*
Metric Property Hove Limited*
Metric Property Kirkstall Limited*
Metric Property Inverness Limited*
Metric Property Bishop Auckland Limited*
Metric Property Sheffield Limited*
Metric Property Kings Lynn Limited*
Metric Property Finance 1 Limited*
Metric Property Finance 2 Limited*
Metric Property Berkhamsted Limited*
* Undertakings held indirectly by the Company.
England
England
England
England
England
England
Scotland
England
England
England
England
England
Scotland
England
England
England
England
England
England
iv Debtors
As at 31 March
Trade debtors
Dividend receivable from subsidiary undertakings
Prepayments and accrued income
Other receivables
All amounts under receivables fall due for payment in less than one year.
v Creditors: amounts falling due within one year
As at 31 March
Trade payables
Other payables
Other accruals and deferred income
Amounts due to subsidiary undertakings
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Nature of business
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Property investment
Intermediate holding company
Intermediate holding company
Property investment
2013
£000
516
–
23
130
669
2012
£000
33,445
2,435
–
–
35,880
2013
£000
58
105
597
2,923
3,683
2012
£000
2,319
304
–
–
2,623
All of the undertakings listed above operate in their country of incorporation except those who are tax resident in the United
Kingdom. All shares held are ordinary shares.
Annual report and accounts 2013 LondonMetric Property Plc
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the members of LondonMetric Property Plc (Registered number
7124797) will be held at The Connaught, Carlos Place, Mayfair, London W1K 2AL, on 10 July 2013 at 10 am.
Resolutions 1 to 12 will be proposed as ordinary resolutions and resolutions 13 to 15 will be proposed as special resolutions.
1. To consider and receive the Annual Report and Audited Financial Statements for the year to 31 March 2013.
2. To approve the Remuneration Committee report for the year ended 31 March 2013.
3. To approve the final dividend for the year to 31 March 2013 of 3.5p per share.
4. To reappoint BDO LLP as auditors of the Company, to hold office until the conclusion of the next general meeting at which
accounts are laid before the Company.
5. To authorise the Board to determine the remuneration of the auditors.
6. To consider the election of Mr Andrew Jones as a Director of the Company.
7. To consider the election of Mr Andrew Varley as a Director of the Company.
8. To consider the election of Mr Alec Pelmore as a Director of the Company.
9. To consider the election of Mr Philip Watson as a Director of the Company.
10. 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 £20,934,797; 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 an additional aggregate nominal amount of £20,934,797 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 dates as the
Directors may determine are proportionate (as nearly as may be) to the respective numbers of equity securities held or
deemed to be 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 10a and 10b 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 the Annual General
Meeting, except that the Company may before such expiry make an offer or agreement which would or might require
Relevant Securities or equity securities as the case may be to be allotted after such expiry and the Directors may allot
Relevant Securities or equity securities in pursuance of any such offer or agreement as if the authority in question had
not expired.
11. That the rules of the Company’s Long Term Incentive Plan (the principal terms of which are summarised in the attached
Appendix to this Notice on pages 88 to 91 and the draft rules for which will be produced at the meeting and initialled by the
Chairman for purposes of identification) be and are hereby approved (with such immaterial modifications (if any) as the
Directors consider necessary or desirable) and the Directors be and are hereby authorised to do all such acts and things
as they consider necessary or desirable for the purposes of implementing and carry the same into effect.
12. That the LondonMetric Property Employee Benefit Trust (the principal terms of which are summarised in the attached
Appendix to this Notice on pages 88 to 91 and the draft trust deed for which will be produced at the meeting and initialled
by the Chairman for the purpose of identification) be and it is hereby approved (with such immaterial modifications (if any)
as the Directors or the trustee consider necessary or desirable) and the Directors be and are hereby authorised to do all such
acts and things as they consider necessary or desirable for the purposes of implementing and carry the same into effect.
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Notice of Annual General Meeting
7124797) will be held at The Connaught, Carlos Place, Mayfair, London W1K 2AL, on 10 July 2013 at 10 am.
Resolutions 1 to 12 will be proposed as ordinary resolutions and resolutions 13 to 15 will be proposed as special resolutions.
1. To consider and receive the Annual Report and Audited Financial Statements for the year to 31 March 2013.
2. To approve the Remuneration Committee report for the year ended 31 March 2013.
3. To approve the final dividend for the year to 31 March 2013 of 3.5p per share.
4. To reappoint BDO LLP as auditors of the Company, to hold office until the conclusion of the next general meeting at which
accounts are laid before the Company.
5. To authorise the Board to determine the remuneration of the auditors.
6. To consider the election of Mr Andrew Jones as a Director of the Company.
7. To consider the election of Mr Andrew Varley as a Director of the Company.
8. To consider the election of Mr Alec Pelmore as a Director of the Company.
9. To consider the election of Mr Philip Watson as a Director of the Company.
10. 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 £20,934,797; 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 an additional aggregate nominal amount of £20,934,797 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 dates as the
Directors may determine are proportionate (as nearly as may be) to the respective numbers of equity securities held or
deemed to be 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 10a and 10b 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 the Annual General
Meeting, except that the Company may before such expiry make an offer or agreement which would or might require
Relevant Securities or equity securities as the case may be to be allotted after such expiry and the Directors may allot
Relevant Securities or equity securities in pursuance of any such offer or agreement as if the authority in question had
not expired.
11. That the rules of the Company’s Long Term Incentive Plan (the principal terms of which are summarised in the attached
Appendix to this Notice on pages 88 to 91 and the draft rules for which will be produced at the meeting and initialled by the
Chairman for purposes of identification) be and are hereby approved (with such immaterial modifications (if any) as the
Directors consider necessary or desirable) and the Directors be and are hereby authorised to do all such acts and things
as they consider necessary or desirable for the purposes of implementing and carry the same into effect.
12. That the LondonMetric Property Employee Benefit Trust (the principal terms of which are summarised in the attached
Appendix to this Notice on pages 88 to 91 and the draft trust deed for which will be produced at the meeting and initialled
by the Chairman for the purpose of identification) be and it is hereby approved (with such immaterial modifications (if any)
as the Directors or the trustee consider necessary or desirable) and the Directors be and are hereby authorised to do all such
acts and things as they consider necessary or desirable for the purposes of implementing and carry the same into effect.
Notice is hereby given that the Annual General Meeting of the members of LondonMetric Property Plc (Registered number
13. That the Directors be and are empowered, in accordance with Section 570 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 number 10 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, provided that this power
shall be limited to:
a. the allotment of equity securities in connection with a rights issue or other pro rata offer (but, in the case of the authority
granted conferred by paragraph 10b, by way of a rights issue only) 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 dates as the Directors may determine are proportionate (as nearly as may be) to the respective
numbers of equity securities held or deemed to be held by them or are otherwise allotted in accordance with the rights
attaching to such equity securities subject in each case 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;
b. and the allotment (otherwise than pursuant to paragraph 10a above) of equity securities up to an aggregate nominal
amount of £3,140,220.
and shall expire upon the expiry of the general authority conferred by Resolution 10 above, except that the Company may
make an offer or agreement before this power expires which would or might require equity securities to be allotted and/or
shares held by the Company in treasury to be sold or transferred after such expiry and the Directors may allot equity
securities and/or sell or transfer shares held by the Company in treasury in pursuance of such offer or agreement as if the
power conferred by this resolution had not expired.
14. 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 62,804,391;
b. the minimum price which may be paid for an ordinary share is 10p (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.
15. That the Company is authorised to call any general meeting of the Company other than the Annual General Meeting by
notice of at least 14 clear days during the period beginning on the date of the passing of this resolution and ending on the
conclusion of the next Annual General Meeting of the Company.
By order of the Board
Jadzia Duzniak
Company Secretary
31 May 2013
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Appendix
Long Term Incentive Plan
Resolution 11 seeks shareholder approval for the adoption of the Company’s Long Term Incentive Plan (“Plan”). The principal
purpose of the plan is to provide a long-term incentive to senior management which is aligned as closely possible to the interests
of shareholders.
Copies of the draft rules of the proposed Plan are available for inspection at the Company’s Registered Office during normal
business hours on any weekday up to and including 10 July 2013 and at the Annual General Meeting convened for that day
from at least 15 minutes prior to the appointed time for the meeting until the meeting is concluded or adjourned.
(a) Eligibility
All employees of the Company and its subsidiaries from time to time (the “Group”), including Executive Directors, are
eligible to participate in the Plan at the discretion of the Remuneration Committee. However, those Executive Directors
of the Company appointed prior to its merger with Metric Property Investments plc will not participate in the Plan until
1 October 2013.
(b) Grant of awards
The Plan provides for the grant of nil cost options (“Awards”) over ordinary shares in the capital of the Company (“Shares”).
Awards may also be structured as conditional rights to acquire Shares, or to receive a cash payment.
The price (if any) at which a participant may acquire shares on the exercise or vesting of an Award under the Plan will be
determined by the Remuneration Committee on the date of grant and may, if the Remuneration Committee sees fit, be nil
or equal to the nominal value of a Share.
Awards may be granted during the period of (i) 42 days following shareholder approval of the Plan or an amendment to the
Plan, (ii) 42 days following the announcement of the Company's final or interim results for any financial period, or (iii) within 42
days following the occurrence of an event which the Remuneration Committee considers to be exceptional. If any of the
above periods is a “close period” as a result of the application of the Listing Rules, then Awards may be granted within 42
days of the end of the close period.
No Awards may be granted more than ten years after the adoption of the Plan.
Awards may be granted over newly issued Shares, treasury shares or Shares purchased in the market.
Except to the extent required by foreign laws, Awards will not form part of a participant’s pensionable earnings. Awards are
not transferable (other than on death) without the consent of the Remuneration Committee. No payment will be required
for the grant of an Award.
(c) Vesting
The Remuneration Committee will determine at the date of grant when and how Awards will vest. Ordinarily, Awards will vest
on the third anniversary of grant subject to (i) the participant remaining an employee or director of a Group company, and
(ii) the satisfaction of performance targets measured over three consecutive financial years. The period from the date of
grant until the date of vesting shall be known as the “Vesting Period”.
It is proposed that the first tranche of Awards to be granted under the Plan will vest subject to the following performance
conditions:
1. Total shareholder return (“TSR”)
Rights to acquire three-quarters (75%) of the Shares subject to an Award will be subject to a TSR based condition. TSR, or
movement in the share price plus the dividend in the year, is an effective measure of the change in shareholder returns
during a Financial Year or performance period. The Company’s TSR will be benchmarked against the TSR of the FTSE 350
Real Estate index the (“Index”) over the performance period. Vesting of the TSR portion of an Award will be based on the
following table:
Company’s TSR performance measured against that
of the Index
Percentage of the TSR part of the Award vesting
Company performance is less than the Index
Company performance is equal to the Index
0%
25%
Company performance is 50% or greater than that of the Index 100%
Straight-line vesting will occur if the Company’s TSR relative percentage is between the 25% and 100% vesting levels.
In addition, the Company must have a positive TSR over the performance period for vesting to occur.
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Appendix
of shareholders.
(a) Eligibility
1 October 2013.
(b) Grant of awards
Resolution 11 seeks shareholder approval for the adoption of the Company’s Long Term Incentive Plan (“Plan”). The principal
purpose of the plan is to provide a long-term incentive to senior management which is aligned as closely possible to the interests
Copies of the draft rules of the proposed Plan are available for inspection at the Company’s Registered Office during normal
business hours on any weekday up to and including 10 July 2013 and at the Annual General Meeting convened for that day
from at least 15 minutes prior to the appointed time for the meeting until the meeting is concluded or adjourned.
All employees of the Company and its subsidiaries from time to time (the “Group”), including Executive Directors, are
eligible to participate in the Plan at the discretion of the Remuneration Committee. However, those Executive Directors
of the Company appointed prior to its merger with Metric Property Investments plc will not participate in the Plan until
The Plan provides for the grant of nil cost options (“Awards”) over ordinary shares in the capital of the Company (“Shares”).
Awards may also be structured as conditional rights to acquire Shares, or to receive a cash payment.
The price (if any) at which a participant may acquire shares on the exercise or vesting of an Award under the Plan will be
determined by the Remuneration Committee on the date of grant and may, if the Remuneration Committee sees fit, be nil
or equal to the nominal value of a Share.
Awards may be granted during the period of (i) 42 days following shareholder approval of the Plan or an amendment to the
Plan, (ii) 42 days following the announcement of the Company's final or interim results for any financial period, or (iii) within 42
days following the occurrence of an event which the Remuneration Committee considers to be exceptional. If any of the
above periods is a “close period” as a result of the application of the Listing Rules, then Awards may be granted within 42
No Awards may be granted more than ten years after the adoption of the Plan.
Awards may be granted over newly issued Shares, treasury shares or Shares purchased in the market.
Except to the extent required by foreign laws, Awards will not form part of a participant’s pensionable earnings. Awards are
not transferable (other than on death) without the consent of the Remuneration Committee. No payment will be required
for the grant of an Award.
(c) Vesting
The Remuneration Committee will determine at the date of grant when and how Awards will vest. Ordinarily, Awards will vest
on the third anniversary of grant subject to (i) the participant remaining an employee or director of a Group company, and
(ii) the satisfaction of performance targets measured over three consecutive financial years. The period from the date of
grant until the date of vesting shall be known as the “Vesting Period”.
It is proposed that the first tranche of Awards to be granted under the Plan will vest subject to the following performance
conditions:
1. Total shareholder return (“TSR”)
Rights to acquire three-quarters (75%) of the Shares subject to an Award will be subject to a TSR based condition. TSR, or
movement in the share price plus the dividend in the year, is an effective measure of the change in shareholder returns
during a Financial Year or performance period. The Company’s TSR will be benchmarked against the TSR of the FTSE 350
Real Estate index the (“Index”) over the performance period. Vesting of the TSR portion of an Award will be based on the
following table:
of the Index
Company’s TSR performance measured against that
Company performance is less than the Index
Company performance is equal to the Index
0%
25%
Company performance is 50% or greater than that of the Index 100%
Percentage of the TSR part of the Award vesting
Straight-line vesting will occur if the Company’s TSR relative percentage is between the 25% and 100% vesting levels.
In addition, the Company must have a positive TSR over the performance period for vesting to occur.
Long Term Incentive Plan
2. Earnings Per Share
Rights to acquire one-quarter (25%) of the Shares subject to an Award will be subject to an “Earnings Per Share” based
condition whereby the Company's Earnings (calculated on the European Public Real Estate Association Basis) Per Share
(“EPS”) performance over the performance period is measured against the Retail Prices Index (“RPI”) performance over
the same period. Vesting of this portion of an Award will be based on the following table:
Company’s EPS performance
Percentage of the EPS part of the Award vesting
EPS is less than RPI + 3%
EPS is equal to RPI + 3%
EPS is equal to RPI + 8%
0%
25%
100%
Straight-line vesting will occur if the Company’s EPS performance is between the 25% and 100% vesting levels.
Failure to meet these targets will result in the relevant part of the Award lapsing.
Subsequent Awards may be subject to different performance conditions, which will be determined at the time of their
grant at the Remuneration Committee's discretion. If events occur which cause the Remuneration Committee to
reasonably believe that the original performance conditions are no longer a fair measure of performance, then the
conditions may be amended or waived in such manner as may be fair and reasonable in the Remuneration
Committee's discretion.
(d) Dividends
If the Remuneration Committee so determines (in its absolute discretion) participants will be entitled to receive additional
Shares (or cash) representing the value of dividends declared during the Vesting Period on the number of Shares subject to
the participant's Award which have vested. Any Shares so awarded will not count towards the individual limits summarised
in paragraph (f) nor the company limits summarised in paragraph (g) below.
days of the end of the close period.
(e) Clawback
Awards will be granted subject to clawback conditions requiring any Shares acquired (or proceeds acquired thereon) in
connection with the Award to be forfeited for nil consideration in the event of gross misconduct or material misstatement
in the accounts.
(f) Individual limits
The aggregate market value of Shares subject to Awards granted to an eligible employee under the Plan in any financial
year will not exceed 200% of that person's gross annual salary (as at the date of grant). The Remuneration Committee has
discretion to determine the size of an Award granted to any individual under the Plan within this maximum limit.
In applying the above limit, no account will be taken of Shares which are issued and which represent the value of dividends
declared during the Vesting Period on the number of Shares which are subject to a participant's Award and which have
vested.
In order to calculate the size of an Award for the purposes of this limit, market value will be determined by reference to the
Company's share price averaged over five dealing days from (and including) the announcement of the Company's annual
results for the financial year ended 31 March 2013, in respect of initial grants under the Plan. Alternatively, the Remuneration
Committee has discretion to refer to the Company's share price averaged over five dealing days prior to (but not including)
the relevant date of grant, or such other basis as it (in its absolute discretion) sees fit.
(g) Scheme limits
The number of Shares in respect of which Awards to subscribe for Shares may be granted on any date shall be limited so
that the total number of Shares issued and issuable in respect of Awards granted under the Plan (and any other executive
(discretionary) share scheme operated by the Company) in any ten-year period is restricted to 5% of the Company’s issued
ordinary shares, calculated at the relevant time.
The number of Shares in respect of which Awards to subscribe for Shares may be granted on any date shall be limited so that
the total number of Shares issued and issuable in respect of Awards granted under the Plan (and any other share scheme
operated by the Company) in any ten-year period is restricted to 10% of the Company's issued ordinary shares, calculated
at the relevant time.
For the purposes of these limits, no account will be taken of options or awards which have lapsed, been surrendered or
otherwise become incapable of exercise or vesting. Treasury shares will be treated as newly issued Shares for the purposes
of this limit, but (for the avoidance of doubt) Shares acquired in the market will not.
In addition, no account will be taken of Shares which are issued and which represent the value of dividends declared during
the Vesting Period on the number of Shares subject to the participant's Award which have vested.
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Appendix
continued
(h) Manner of exercise/allotment
Within 30 days of vesting and/or the receipt of a notice of exercise (or “call”) of an Award, together with a payment (or
arrangements to pay) for the aggregate exercise price due (if any) and a payment (or arrangements to pay) for any
income tax and employee social security contributions (or similar liabilities) due, the Shares in respect of which the Award
has vested or been exercised must be issued by the Company or the Company must procure their transfer (which for the
purposes of the Plan includes the transfer of Shares out of treasury) to the participant and shall issue a definitive certificate in
respect of the Shares allotted or transferred. Shares issued or transferred by the Company on the exercise and/or vesting of
Awards will rank pari passu with existing Shares.
(i) Termination of employment
Unvested Awards granted under the Plan will normally lapse on cessation of employment. However, if a participant is a
“good leaver” i.e. if he or she dies or leaves employment through illness, injury or disability, retirement or because his or her
employing company or business in which he or she works is sold out of the Company's group or for any other reason approved
by the Remuneration Committee (in its absolute discretion), then the Remuneration Committee may permit that participant
(or his or her personal representatives as the case may be) to retain the unvested Award and permit vesting/exercise subject
to the satisfaction of the performance conditions and a pro-rata reduction for the time that has elapsed since the relevant
date of cessation. The Remuneration Committee also reserves the right to permit vesting/exercise subject to a lesser
reduction (or none at all) than that calculated by applying a pro-rata reduction.
Alternatively, the Remuneration Committee may, in its discretion, permit some or all of the unvested Awards held by a
“good leaver” to immediately vest and/or be exercised during a limited period following cessation, having regard to the
achievement of the performance conditions and the period of time that has passed since the relevant date of grant.
If a participant ceases employment in any circumstances other than the “good leaver” circumstances described above
then all his or her Awards (vested and unvested) will lapse on such cessation.
(j) Change of control
If a change of control event occurs, such as a takeover, or other capital event, the Remuneration Committee will determine
the extent to which subsisting unvested Awards will vest and, in the case of options, become exercisable, by reference to the
extent to which performance conditions have been satisfied (taking into account the reduced performance period) and
pro-rating Awards to take into account the period which has elapsed since the date of grant. The Remuneration Committee
may, if it sees fit, permit vesting on an alternative basis, including, but not limited to, full vesting.
(k) Variation of Share capital
In the event of a capitalisation issue or offer by way of rights (including an open offer), a special dividend or a demerger, or
upon any consolidation, subdivision or reduction or other variation of the Company's capital, the number of Shares subject
to an Award and/or the exercise price (if any) may be adjusted in such manner as the Remuneration Committee shall, in its
opinion, consider fair and reasonable.
(l) Amendments and general
The Plan may be amended by the Board in any way provided that:
(i) no amendment, addition or deletion may be made to the Plan which would materially prejudice the interests of
participants in relation to Awards already granted to them unless the sanction of at least 75% of the participants
(by value of subsisting Awards) has been obtained; and
(ii) all amendments to the advantage of participants to the provisions relating to the definition of eligible employee, limits on
the number of Shares subject to the Plan, the maximum entitlement for any one participant or the basis for determining
a participant's entitlement to and the terms of Shares to be provided and adjustment thereof, if any, in the event of a
capitalisation issue, rights issue, subdivision or consolidation of Shares or reduction of capital or any other variation of
capital will require the prior consent of the Company in general meeting unless they are minor amendments to benefit
the administration of the scheme or to obtain or maintain favourable tax, exchange control or regulatory treatment for
participants, the Company or a member of the Group.
The Board may amend the Plan by way of separate schedules to enable it to be operated overseas, provided that the
terms of the separate schedules are not overall more favourable than the terms of the Plan.
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Appendix
continued
Within 30 days of vesting and/or the receipt of a notice of exercise (or “call”) of an Award, together with a payment (or
arrangements to pay) for the aggregate exercise price due (if any) and a payment (or arrangements to pay) for any
income tax and employee social security contributions (or similar liabilities) due, the Shares in respect of which the Award
has vested or been exercised must be issued by the Company or the Company must procure their transfer (which for the
purposes of the Plan includes the transfer of Shares out of treasury) to the participant and shall issue a definitive certificate in
respect of the Shares allotted or transferred. Shares issued or transferred by the Company on the exercise and/or vesting of
Awards will rank pari passu with existing Shares.
(i) Termination of employment
Unvested Awards granted under the Plan will normally lapse on cessation of employment. However, if a participant is a
“good leaver” i.e. if he or she dies or leaves employment through illness, injury or disability, retirement or because his or her
employing company or business in which he or she works is sold out of the Company's group or for any other reason approved
by the Remuneration Committee (in its absolute discretion), then the Remuneration Committee may permit that participant
(or his or her personal representatives as the case may be) to retain the unvested Award and permit vesting/exercise subject
to the satisfaction of the performance conditions and a pro-rata reduction for the time that has elapsed since the relevant
date of cessation. The Remuneration Committee also reserves the right to permit vesting/exercise subject to a lesser
reduction (or none at all) than that calculated by applying a pro-rata reduction.
Alternatively, the Remuneration Committee may, in its discretion, permit some or all of the unvested Awards held by a
“good leaver” to immediately vest and/or be exercised during a limited period following cessation, having regard to the
achievement of the performance conditions and the period of time that has passed since the relevant date of grant.
If a participant ceases employment in any circumstances other than the “good leaver” circumstances described above
then all his or her Awards (vested and unvested) will lapse on such cessation.
(j) Change of control
If a change of control event occurs, such as a takeover, or other capital event, the Remuneration Committee will determine
the extent to which subsisting unvested Awards will vest and, in the case of options, become exercisable, by reference to the
extent to which performance conditions have been satisfied (taking into account the reduced performance period) and
pro-rating Awards to take into account the period which has elapsed since the date of grant. The Remuneration Committee
may, if it sees fit, permit vesting on an alternative basis, including, but not limited to, full vesting.
(k) Variation of Share capital
In the event of a capitalisation issue or offer by way of rights (including an open offer), a special dividend or a demerger, or
upon any consolidation, subdivision or reduction or other variation of the Company's capital, the number of Shares subject
to an Award and/or the exercise price (if any) may be adjusted in such manner as the Remuneration Committee shall, in its
opinion, consider fair and reasonable.
(l) Amendments and general
The Plan may be amended by the Board in any way provided that:
(i) no amendment, addition or deletion may be made to the Plan which would materially prejudice the interests of
participants in relation to Awards already granted to them unless the sanction of at least 75% of the participants
(by value of subsisting Awards) has been obtained; and
(ii) all amendments to the advantage of participants to the provisions relating to the definition of eligible employee, limits on
the number of Shares subject to the Plan, the maximum entitlement for any one participant or the basis for determining
a participant's entitlement to and the terms of Shares to be provided and adjustment thereof, if any, in the event of a
capitalisation issue, rights issue, subdivision or consolidation of Shares or reduction of capital or any other variation of
capital will require the prior consent of the Company in general meeting unless they are minor amendments to benefit
the administration of the scheme or to obtain or maintain favourable tax, exchange control or regulatory treatment for
participants, the Company or a member of the Group.
The Board may amend the Plan by way of separate schedules to enable it to be operated overseas, provided that the
terms of the separate schedules are not overall more favourable than the terms of the Plan.
(h) Manner of exercise/allotment
(m) Proposed Awards for the financial year ended 31 March 2013
Subject to shareholder approval of the Plan, it is proposed that Awards for the financial year ended 31 March 2013, will be
granted as soon as possible following such shareholder approval (the “2013 Awards”).
The 2013 Awards will be granted subject to the vesting criteria summarised at paragraph (c) above.
The size of the 2013 Awards for the purposes of the limits summarised at paragraphs (f) and (g) above, will be calculated by
reference to the Company's share price averaged over five dealing days from (and including) the announcement of the
Company's results for the year ended 31 March 2013.
Those Executive Directors of the Company appointed prior to its merger with Metric Property Investments plc will not be
eligible to participate in the Plan until 1 October 2013, at which point, it is proposed that they will be granted an Award equal
to 50% of what would otherwise have been their annual grant for 2013 (as determined by the Remuneration Committee in its
absolute discretion).
Employee Benefit Trust
Resolution 12 seeks shareholder approval for the adoption of an Employee Benefit Trust (“EBT”), details of which are set
out below.
The full draft trust deed for the proposed EBT is available for inspection at the Company’s Registered Office during normal
business hours on any weekday up to and including 10 July 2013 and at the Annual General Meeting itself from at least
15 minutes prior to the appointed time for the meeting until the meeting is concluded or adjourned.
(a) Constitution
The EBT will be a discretionary trust constituted by a trust deed between the Company and an independent off-shore
professional trustee company (the “Trustees”). The EBT will be constituted as an employees’ share scheme within the
meaning of Section 1166 of the Companies Act 2006, with the purpose which includes but is not limited to encouraging
and facilitating the holding of shares by bona fide employees of the Company (which, for these purposes includes Executive
Directors) and its subsidiaries, former employees and certain of their relatives or for their benefit.
(b) Power and funding
The Trustees will have full discretion with regard to the application of the trust fund.
The Trustees will have the power to acquire Shares and any Shares so acquired may be used for the purposes of the grant
of Awards under the Plan and/or any other employees' share scheme adopted by the Company.
The EBT may be funded by way of loan or gift to acquire Shares either by market purchase or by subscription.
(c) Limits to holdings and dividend waiver
Any shares issued to the EBT in order to satisfy Awards it has granted will be treated as counting towards the dilution limits
that apply to the Plan. For the avoidance of doubt, any shares acquired by the EBT in the market in order to satisfy Awards
will not count towards these limits. Unless directed otherwise, the Trustees will waive any dividends paid on the Shares settled
in the EBT.
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Annual report and accounts 2013 LondonMetric Property Plc
Notes to Annual General Meeting Notice
(i)
(ii)
Shareholders entitled to attend and vote at the meeting may appoint one or more proxies (who need not be shareholders) to attend and vote
on their behalf, provided that each proxy is appointed to exercise the rights attaching to different shares held by him or her.
Your proxy could be the Chairman, another Director of the Company or another person who has agreed to attend to represent you. Your proxy will
vote as you instruct and must attend the meeting for your vote to be counted. Details of how to appoint the Chairman or another person as your
proxy using the proxy form are set out in the notes to the proxy form.
(iii) Any person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 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 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 the 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.
(iv)
(v)
To have the right to attend and vote at the meeting you must hold ordinary shares in the Company and your name must be entered on the share
register of the Company in accordance with note (vi) below.
To be valid, Forms of Proxy (and the power of attorney or other authority, if any, under which it is signed or a notarially certified copy thereof) must be
received by Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible but, in any event, so as to arrive
no later than 10 am on 8 July 2013. A Form of Proxy accompanies this notice. Completion and return of a Form of Proxy will not preclude members
from attending and voting at the meeting should they wish to do so. Where you have appointed a proxy using the hard copy proxy form and would
like to change the instructions using another hard copy proxy form, please contact Capita Registrars, PXS, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU. The deadline for receipt of proxy appointments (see above) also applies in relation to amended instructions. Any attempt
to terminate or amend a proxy appointment received after the relevant deadline will be disregarded. Where two or more valid separate
appointments of proxy are received in respect of the same share in respect of the same meeting, the one which is last sent shall be treated
as replacing and revoking the other or others.
(vi)
The time by which a person must be entered on the register of members in order to have the right to attend or vote at the meeting is 6 pm on 8 July
2013. 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 6 pm on the day that is two days before the date fixed for the adjourned meeting. Changes to entries on the register of
members after such times shall be disregarded in determining the rights of any person to attend or vote at the meeting.
(vii) CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
(viii)
In order for a proxy appointment 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 am on 8 July 2013. 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 service providers are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
92
LondonMetric Property Plc Annual report and accounts 2013
Notes to Annual General Meeting Notice
(i)
Shareholders entitled to attend and vote at the meeting may appoint one or more proxies (who need not be shareholders) to attend and vote
(xi) Any corporation which is a member can appoint one or more corporate representatives who may exercise on its behalf all of its powers
on their behalf, provided that each proxy is appointed to exercise the rights attaching to different shares held by him or her.
as a member provided that they do not do so in relation to the same shares.
(ii)
Your proxy could be the Chairman, another Director of the Company or another person who has agreed to attend to represent you. Your proxy will
(xii) You may not use any electronic address provided either in this notice of Annual General Meeting or any related documents (including the form
vote as you instruct and must attend the meeting for your vote to be counted. Details of how to appoint the Chairman or another person as your
of proxy) to communicate with the Company for any purposes other than those expressly stated.
proxy using the proxy form are set out in the notes to the proxy form.
(xiii) As at 28 May 2013 (being the closest practical business day before the publication of this Notice), the Company’s issued share capital consisted
(iii) Any person to whom this notice is sent who is a person nominated under Section 146 of the Companies Act 2006 to enjoy information rights
of 628,043,905 ordinary shares carrying one vote each.
(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 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 the 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.
(xiv) Members satisfying the thresholds in Section 527 of the Companies Act 2006 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
(iv)
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
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 auditors no later than the time it makes its statement available on the website. The business which may be dealt with at
the meeting includes any statement that the Company has been required to publish on its website.
(xv) Any member attending the meeting has the right to ask questions. The Company must cause to be answered any such question relating to the
business being dealt with at the meeting but no such answer need be given if:
(a) to do so would interfere unduly with the preparation for the meeting or involve the disclosure of confidential information;
(b) the answer has already been given on a website in the form of an answer to a question; or
(c) it is undesirable in the interests of the Company or the good order of the meeting that the question be answered.
(xvi) A copy of this notice, and other information required by Section 311A of the Companies Act 2006, 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) 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.
register of the Company in accordance with note (vi) below.
(v)
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
received by Capita Registrars, PXS, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU as soon as possible but, in any event, so as to arrive
no later than 10 am on 8 July 2013. A Form of Proxy accompanies this notice. Completion and return of a Form of Proxy will not preclude members
from attending and voting at the meeting should they wish to do so. Where you have appointed a proxy using the hard copy proxy form and would
like to change the instructions using another hard copy proxy form, please contact Capita Registrars, PXS, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU. The deadline for receipt of proxy appointments (see above) also applies in relation to amended instructions. Any attempt
to terminate or amend a proxy appointment received after the relevant deadline will be disregarded. Where two or more valid separate
appointments of proxy are received in respect of the same share in respect of the same meeting, the one which is last sent shall be treated
as replacing and revoking the other or others.
(vi)
The time by which a person must be entered on the register of members in order to have the right to attend or vote at the meeting is 6 pm on 8 July
2013. 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 6 pm on the day that is two days before the date fixed for the adjourned meeting. Changes to entries on the register of
members after such times shall be disregarded in determining the rights of any person to attend or vote at the meeting.
(vii) CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so by utilising the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
(viii)
In order for a proxy appointment 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 am on 8 July 2013. 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 service providers are referred, in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and timings.
93
Annual report and accounts 2013 LondonMetric Property Plc
Financial calendar
Announcement of results
Financial dividend – Ex dividend date
– Record date
– Payable on
Annual General Meeting
Anticipated 2014 Interim dividend
31 May 2013
12 June 2013
14 June 2013
12 July 2013
10 July 2013
December 2013
94
LondonMetric Property Plc Annual report and accounts 2013Additional information
Financial calendar
Shareholder information
Announcement of results
Financial dividend – Ex dividend date
– Record date
– Payable on
Annual General Meeting
Anticipated 2014 Interim dividend
31 May 2013
12 June 2013
14 June 2013
12 July 2013
10 July 2013
December 2013
Registrar
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
Secretary and Registered Address
Jadzia Duzniak
One Curzon Street
London W1J 5HB
londonmetric.com
Advisors to the Company
Joint Financial Advisors and Brokers
Tax Advisors
Peel Hunt LLP
Moor House
120 London Wall
London EC2Y 5ET
JP Morgan Securities Limited
125 London Wall
London EC2Y 5AJ
Auditors
BDO LLP
55 Baker Street
London W1U 7EU
Property Valuers
CBRE Limited
St Martin’s Court
10 Paternoster Row
London EC4M 7HP
Savills Advisory Services Limited
20 Grosvenor Hill
London W1K 3HQ
REIT status and taxation
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Solicitors to the Company
Jones Day
21 Tudor Street
London EC4Y 0DJ
Nabarro LLP
Lacon House
84 Theobald’s Road
London WC1X 8RW
Travers Smith LLP
10 Snow Hill
London EC1A 2AL
Mourant Ozannes
PO Box 186
1 Le Marchant Street
St Peter Port
Guernsey
Channel Islands GY1 4HP
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 Capita Registrars.
Tax vouchers will continue to be sent to the shareholder’s registered address.
95
Annual report and accounts 2013 LondonMetric Property Plc
Notes
96
LondonMetric Property Plc Annual report and accounts 2013Additional information
Overview
Introduction to LondonMetric Property Plc
LondonMetric brings
together two outstanding
property companies
to become top 10 UK
REIT with a broader and
complementary asset base.
Front cover image
Moore House, London
Design and Production
Radley Yeldar – www.ry.com
Paper
The report is printed on Amadeus 50% Silk
which is FSC® certified and contains
50% recycled waste and 50% virgin fibre
Net income
Underlying profit (1)
Revaluation surplus (1)
Adjusted profit before tax (2)
Portfolio value (1)
Net assets
Net debt (1)
Loan to value (1)
EPRA earnings per share
Dividend per share
NAV per share
EPRA NAV per share
Adjusted NAV per share (2)
2013
£39.6m
£21.3m
£20.3m
£39.9m
As restated
2012
£42.2m
£24.3m
£3.0m
£19.5m
£1,216.8m £1,022.4m
£676.7m £630.9m
£527.2m £353.6m
35%
4.4p
7.0p
116p
119p
119p
43%
3.9p
7.0p
108p
109p
116p
(1) Includes share of joint ventures and associates (2) After adjusting for exceptional costs of the merger, 2010 mangement internalisation and impairment of investments
Annual report
and accounts
2013
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LondonMetric Property Plc
One Curzon Street
London
W1J 5HB
United Kingdom
Telephone: +44 (0) 20 7484 9000
Fax: +44 (0) 20 7484 9001
www.londonmetric.com