LondonMetric Structurally supported sectors and assets driving strong income backed returns

LondonMetric (LON:LMP) today announced its half yearly results for the six months ended 30 September 2018.

1 Including share of Joint Ventures. Further details on Alternative Performance Measures and the presentation of financial information can be found in the Financial Review and definitions can be found in the Glossary.

2 Including deferred consideration payable and receivable on transactions that have exchanged in the period.

Continued income growth increases earnings and dividends

· Net rental income up 5.8% to £47.1m1

· Reported profit was £79.3m and EPRA earnings up 7.3% to £30.9m, 6.6% on a per share basis

· Dividend increased 2.7% to 3.8p, 117% covered, including a second quarterly interim dividend declared of 1.9p

Sector alignment and asset selection delivers further valuation gains, contributing to total returns

· EPRA NAV per share up 4.1% to 172.1p (March 2018: 165.2p)

· Driven by a revaluation surplus of £51.0m1, reflecting a 2.7% uplift, with urban logistics increasing by 4.5%

· Equivalent yield compression on portfolio of 9bps and ERV growth of 0.9%

· Total Accounting Return of 6.7% and Total Property Return of 5.4%, outperforming IPD All Property by 210bps

Investment activity increases distribution weighting to 72% and further improves portfolio quality

· £139.0m of acquisitions increase urban logistics portfolio to 54 assets, representing 25% of total portfolio

o 14 years’ WAULT on acquisitions, with nearly 60% of income subject to contractual uplifts

· £92.5m of disposals including shorter let distribution, convenience, retail parks and residential

o 10 years’ WAULT on disposals, with retail assets sold at book, reflecting their strong income characteristics

· £39.4m of disposals post period end reduce retail parks to 5% and residential to 1% of the portfolio

o includes £17.4m of distribution disposals at book value with a WAULT of under 2 years

31 asset management initiatives

· £1.2m pa income uplift from lettings, signed with a WAULT of 12 years

· £1.1m pa income uplift from rent reviews, 12% uplift above passing on a five yearly equivalent basis

· Offsets loss of income from Poundworld vacancy, where we are in active discussions on re-letting

Short cycle developments creating future long income at attractive yields

· Recently completed distribution developments are 68% let

· 0.9m sq ft in construction or pipeline at 6.5% yield on cost

· At Bedford, construction of three warehouses totalling 180,000 sq ft will complete in Q2 2019 with terms agreed on over half the space. Discussions ongoing on the remaining 500,000 sq ft and construction is subject to pre-lets

Portfolio metrics reflect our focus on long income, contractual uplifts and low operational requirements

· WAULT of 12 years with only 6% of income expiring within three years

· 54% of income subject to contractual uplifts

· 98.3% gross to net income ratio

Conservative financing continues to enhance income

· Average cost of debt at 2.9% and debt maturity of 4.5 years following new £75m facility with Wells Fargo

Andrew Jones, Chief Executive of LondonMetric, commented:

“Our alignment towards logistics and convenience assets together with the portfolio’s sustainable and growing income has delivered another strong performance.

“As the real estate markets polarise further, we continue to refine the portfolio to ensure that it remains fit for purpose and outperforms. Our exposure to structurally supported sectors has grown further as we enthusiastically embrace the logistics market buoyed by the ongoing shift from bricks to clicks, constrained supply and rising occupier demand. In a yield tranquil environment, asset selection as well as sector calls are increasingly paramount to providing income certainty, income growth and capital enhancement.

“Looking ahead, the strength of our assets allows us to take a longer term investment horizon where we can collect, compound and grow our income and be a little less obsessed about predicting exact market movements or timing of cycles. This long term approach, combined with our beliefs in the merits of behaving as a ‘true REIT’ and our full shareholder alignment, will ensure that we continue to make rational decisions, grow our income and progress the dividend. After all, it is the consistency of compounding that produces a good performance and satisfied shareholders.”