Half Yearly Report

RNS Number : 1306U
LondonMetric Property PLC
28 November 2013
 



28 November 2013

LONDONMETRIC PROPERTY PLC

("LondonMetric" or the "Group" or the "Company")

HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2013

PORTFOLIO REPOSITIONING BUILDING MOMENTUM WITH

£812 MILLION OF INCOME ENHANCING INVESTMENT ACTIVITY SINCE MERGER

LondonMetric today announces its half yearly results for the six months ended 30 September 2013.

HIGHLIGHTS:1

Six months ended
30 September 2013

Six months ended
30 September 2012

Twelve months ended 31 March 2013

Profit before exceptional items (£m)2

50.9

28.0

40.5

Revaluation surplus (£m)

35.6

16.9

20.3

EPRA earnings (£m)

11.7

13.4

22.0

EPRA NAV per share (p)

112

114

109

NAV per share (p)

111

112

108

EPRA EPS (p)

1.9

2.5

3.9

Dividend per share (p)

3.5

3.5

7.0

LTV (%)

30.3

28.5

43.3

1.        Unless otherwise stated, all figures include LondonMetric's net share of joint ventures

2.        IFRS profit after tax of £44.1 million and before exceptional items of £6.8 million

 

Financial:

·     Profit adjusted for exceptional items of £50.9 million (September 2012: £28.0 million)

·     Revaluation surplus of £35.6 million, a portfolio uplift of 3.5%

·     Interim dividend of 3.5p to be paid on 20 December 2013 (September 2012: 3.5p)

·     On target to cover dividend, on an annualised basis, for next financial year, 86% achieved at today's contracted rents

·     EPRA net asset value per share of 112p, an increase of 2.8% over March 2013

·     EPRA EPS of 1.9p (September 2012: 2.5p) driven by the repositioning of the portfolio

·     Net debt £322.8 million (March 2013: £527.2 million)

·     Loan to value ratio of 30% (March 2013: 43%)

·     Weighted average cost of debt 4.2% (March 2013: 3.6%)

·     On target to achieve merger cost synergies of £3 million (£2.5 million projected at merger).

 

Operational:

·     Focus on portfolio repositioning capitalising on 310bps of positive yield arbitrage between acquisitions and disposals:

-      Acquisitions totalling £160.4 million (£135.6 million LondonMetric share) at an average NIY of 7.2%, unexpired lease terms 11.4 years

-      Disposal proceeds of £456.7 million (£347.6 million LondonMetric share) at an average NIY  of 4.1%,  unexpired lease terms 9.7 years

·     Wholly-owned residential divestment programme on target releasing £109.4 million (81%) of equity to date, with a further £25.6 million expected to crystallise over the remaining half year

·     Post period end investment activity comprises £92.9 million of acquisitions and £80.6 million of disposals

 

·     7.8% rise in annualised rent roll to £67.4 million, post period (March 2013: £62.5 million) driven by acquisitions funded by residential sales proceeds and underpinned by 1.6% increase in like-for-like rental growth over the last six months

·     190bps outperformance of IPD All Property Quarterly Index. Total property returns for the six month period on the like-for-like portfolio of 6.5% (IPD: 4.6%)

-      Revaluation surplus of £35.6 million contributing to a capital return of 4.0% compared to  IPD All Property Quarterly Index of 1.7%

-      25bps inward yield shift driven primarily by offices and distribution from both market movements and asset management initiatives

·     Investment portfolio continues to exhibit long and strong income with high occupier contentment:

-      22 occupier transactions across 659,000 sq ft, securing an additional £4.8 million of rental income over previous passing rentals, at average lease lengths of 15.2 years (13.9 years to first break)

-      Long unexpired leases averaging 11.3 years (10.6 years to first break); post period end 12.5 years (11.8 years to first break)

·     MIPP joint venture grown to £133.9 million of assets under management at period end following net acquisitions of £37.0 million (£12.2 million at share) during the period and a further £9.6 million (£3.2 million at share) of acquisitions made post period end

Patrick Vaughan, Chairman of LondonMetric, commented:

 "The LondonMetric team has worked diligently in their first half year together.  Their principal focus has been on evolving the portfolio to focus on areas where we believe we can deliver strong long term returns as well as securing an income run rate that exceeds the dividend.  Their efforts to date have achieved excellent operational results, which puts a solid foundation in place for an exciting second half to the year.

"Since the merger we have released £205.7 of equity from our office, legacy distribution and residential portfolio which has been redeployed on acquisitions in our preferred sectors of out of town and retail distribution.  We have secured 310bps higher yields on the equity used for our purchases than was contributed by the assets we sold.  This has given rise to an increase in our annual rent roll of 7.8% to £67.4 million, whilst also materially improving the lease lengths. We still have significant resources available to deploy which will add to our rental income. 

"One of our objectives of covering the current dividend of 7p per annum with sustainable annualised income by the year-end has already been 86% achieved at today's contracted rents.  We expect to continue our current pace of strategic acquisitions to further improve the portfolio and capitalise on our strong occupier and financial relationships.

"I should like to extend my thanks on your behalf to our occupiers, advisers, financiers and the home team for all that they have contributed to the half year."

For further information, please contact:

LONDONMetric Property plc                                               +44 (0)20 7484 9000

Andrew Jones (Chief Executive)

Martin McGann (Finance Director)

Juliana Weiss Dalton (Investor Relations)                                           

FTI Consulting                                                                                   +44 (0)20 7831 3113

Stephanie Highett

Dido Laurimore

Nina Legge        

Meeting and conference call for investors and analysts

A meeting for investors and analysts will be held at 9.00am today at:

FTI Consulting

Holborn Gate

26 Southampton Buildings

London WC2A 1PB

In addition, a simultaneous conference call will also be available and the presentation will be available to download from the Company's website www.londonmetric.com

To participate in the call, please dial:

Dial in number: +44 (0)20 3427 1919

Conference ID: 9716682

Event title: LondonMetric Property Half Year Results

Notes to editors:

LondonMetric (ticker: LMP) is a UK REIT admitted on the Official List and to trading on the Main Market of the London Stock Exchange on 28 January 2013 as a result of the merger between London & Stamford Property Plc (LSP) and Metric Property Investments plc (METP).

LondonMetric aims to deliver attractive returns for shareholders through a strategy of increasing income and improving capital values. It invests across the UK in Retail and predominantly retailer led Distribution properties.  It employs an occupier-led approach to property investments through opportunistic acquisitions, joint ventures, active asset management and short cycle developments. The asset focus is on properties with enduring occupier appeal providing opportunities to improve both rental values and the security and longevity of income; and limited risk redevelopments with the aim of enhancing shareholder returns.

Further information on LondonMetric is available at www.londonmetric.com.

Neither the content of LondonMetric's website nor any other website accessible by hyperlinks from LondonMetric's website are incorporated in, or form, part of this announcement nor, unless previously published by means of a recognised information service, should any such content be relied upon in reaching a decision as to whether or not acquire, continue to hold, or dispose of, shares in LondonMetric.

Forward looking statements: This announcement may contain certain forward-looking statements with respect to LondonMetric's expectations and plans, strategy, management objectives, future developments and performance, costs, revenues and other trend information. These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future. There are a number of factors which could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. Certain statements have been made with reference to forecast price changes, economic conditions and the current regulatory environment. Any forward-looking statements made by or on behalf of LondonMetric speak only as of the date they are made. LondonMetric does not undertake to update forward-looking statements to reflect any changes in LondonMetric's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. Nothing in this announcement should be construed as a profit forecast. Past share price performance cannot be relied on as a guide to future performance.

 

Business review

Overview of results

Significant progress has been made in reshaping the portfolio since year-end. A clear strategy is in place and we are on track to double our exposure to the retail distribution sector, whilst reducing our London investments and recycling some of our out of town retail.

Robust portfolio metrics

Our investment portfolio metrics remain robust with occupancy up to 99% and our unexpired lease length increased to 11.3 years (10.6 years to first break), rising post period end to 12.5 years unexpired (11.8 years to first break).  Only 3.4% of rental income expires over the next three years and 24.9% of our rental income is now subject to fixed uplifts, rising to 31.0% post period end.

yield arbitrage of 310 bps between purchases and sales

We continue to focus on capital recycling out of low yielding mature stock that has successfully delivered capital growth and into our preferred sectors of retail distribution and out of town. This strategy has allowed us to profit from a yield arbitrage of 310 bps between the £135.6 million of purchases at average yields of 7.2% and £347.6 million of sales at average yields of 4.1%.

full year dividend of 7 pence 86% covered AT TODAY'S CONTRACTED RENTS

Contracted annual rental income has risen £4.9 million over the period - an increase of 7.8%.  As a result we are now firmly on target to cover the dividend payment by the year-end, on an annualised basis, with sustainable recurring profits.

Profit before exceptional items was £50.9 million, including the revaluation surplus of £35.6 million. EPRA profit was £11.7 million or 1.9 pence per share, (September 2012: £13.4 million or 2.5 pence per share). 

valuation surplus of £35.6 million growing EPRA Nav by 2.8% to 112 pence

The portfolio was valued at £1,064.6 million across 68 properties delivering a valuation surplus of £35.6 million or 3.5% since year-end. The like-for-like portfolio has delivered a total ungeared property return of 6.5% outperforming the IPD All Property Quarterly Index of 4.6% by 190bps. 

The revaluation surplus along with our retained profits more than offset dividends paid in the period to contribute to growing the EPRA NAV to 112p, an increase of 3 pence per share or 2.8% compared to March 2013. The final amortisation charge in respect of the internalisation of management in 2010 reduced NAV by 0.6p per share; there will be no further share based payment charges going forward. The LTV ratio stood at 30% at period end, rising to 40% post period end.  This compares favourably to an LTV of 43% at year end.

£617 million of investment activity

We acquired 14 properties for £160.4 million (£135.6 million at share) on average yields of 7.2% and disposed of 13 commercial assets for £363.4 million (£254.2 million at share) on average yields of 5.3%. We are on track with the disposal of our wholly-owned residential assets which have been yielding us just 1.0%. During the period we sold £93.3 million across 182 units with a further £37.2 million agreed across 75 units. To date we have monetised 81% of our equity, realising £109.4 million, with a further £25.6 million to go.

Post period end we acquired a portfolio of ten Odeon multiplex cinemas for £80.6 million, reflecting a net initial yield of 7.2%. The acquisition fits well with our out of town strategy of long income and asset management opportunities where each cinema adjoins or is in close proximity to a retail park or shopping centre. Odeon becomes an important partner for us as our largest tenant paying £5.9 million per annum towards our total rent roll. We have also acquired the Travis Perkins Distribution Centre in Brackmills for £9.0 million at a net initial yield of 8.8% and are in active discussions to extend Travis Perkins' occupation. We have today sold two retail parks in Mansfield and Sheffield for £19.2 million reflecting a net initial yield of 6.8%, which compares to our yield on cost of 8.8%.  These disposals endorse the validity of our business model by demonstrating the potential value that can be created through institutionalising good quality secondary stock. The transaction allows us to crystallise attractive profits and recycle our equity following completion of asset management initiatives.

The MIPP joint venture with USS acquired Dartford Heath retail park in Dartford for £9.6 million (£3.2 million at share), reflecting a net initial yield of 6.5% and sold the Wickes unit in Oxford for £12.4 million (£4.1 million at share), reflecting a net initial yield of 5.3%. Including two assets, which are currently under offer, the fund has met its target investment of £150 million.

CARTER LANE ON TRACK FOR MARCH 2014

Our refurbishment work at Carter Lane totalling 127,400 sq ft is running on budget and on time to complete in March 2014. We have exchanged on 58% of projected rental income, equating to 67,400 sq ft on average lease lengths of 15 years term certain. We are in detailed negotiations on a further 11% and in active discussions on the remainder.  We are confident that our remaining lettings will be ahead of appraisals and expect to be fully let by practical completion.

Investment and occupier outlook

As key indicators point towards economic recovery and a faster pace of growth, some commentators are lifting their economic growth forecasts. The property market is showing signs of buoyancy across all sectors as capital allocators are assigning a higher weighting to this asset class. This is benefiting our portfolio where we are seeing increasing interest in our assets from UK Institutions as we have successfully lengthened and strengthened the income profiles in line with our asset management programmes. We expect yields for long let, rack rented real estate to compress further over the next six months, supported by the off market approaches that we are receiving for many assets within our portfolio.

consumer spending iS on the rise

Consumer confidence, while not yet positive, is recovering quickly and this is showing through improved retail sales volumes, with expectations for much improved trading and margin performance over the Christmas period. The increasingly rosy picture has some commentators expecting 2014 to show the largest increase in consumer spending since 2007. Whilst there are increasing pockets of growth the market remains challenging with significant disparity between regions and product and some areas of the UK remain in decline. We continue to believe that lease expiries, not administrations remain the chief risk to property valuations, demonstrated by the fact that in the first half of 2013 18 town centre shops closed each day.

shopping habits transforming multichannel retail…

Online sales growth remains robust, averaging about 11% over the last 12 months, compared to anaemic retail sales growth at 1.1% and footfall declines at -4.0%. Against this backdrop, online sales are benefitting from explosive growth of consumers shopping via their mobile devices, which has doubled over the last year, driven by increasing use of tablets. Sales growth to 2017 is forecast at 10.3% per annum. Physical stores are evolving to meet retailers' requirements towards larger formats and out of town destinations and consumer shopping patterns remain firmly polarised towards large format destinations and convenience shopping. 

…and supply chains to the benefit of the distribution sector

Retailers' supply chains are progressively moving from B2B to B2C as click-and-collect and home delivery are becoming the norm, driving the positive momentum for the distribution and logistics sectors. The B2C online market is witnessing explosive growth globally and in particular in the UK where online penetration is the highest in the world. We expect click-and-collect to have increasing appeal to both retailers and consumers as the lower cost option to home delivery and the convenient option for consumers. The retail distribution market is going through transformational change to align itself to the structural shift in consumer shopping patterns and our strategy to double the size of our distribution portfolio capitalises on this.

strong STRUCTURAL demand across distribution

Occupational demand across distribution continues to be robust (13.1 million sq ft let year-to-date) with take-up for 2013 anticipated to beat the five year average of almost 21 million sq ft.  Grade A space coming to the market is letting up quickly and as such a growing number of occupiers are opting for design & build solutions and good quality secondary stock. Demand continues to be dominated by retailers, accounting for almost 50% of Grade A take-up; led by value and internet retailers and large supermarkets redefining their supply chains. With new development availability three-quarters lower than its pre-recession levels the demand-supply tension is now sufficiently strong that for the first time since the downturn confidence has returned for speculative development.

Strong investment demand across the board has compressed yields between 25 - 100bps, with greatest movement shown by short income investments of c. five years where there is growing confidence in the ability to regear, relet or redevelop. The investor demand for long-dated income of greater than 15 years is increasing, with premium prices paid for index-linked leases, which is reflected in the distribution sector being the top performing IPD subsector to date during 2013. We expect the appetite from UK institutions and overseas investors to continue to fuel demand and in the absence of prime stock availability, push down yields for good quality secondary stock further. Forty-four per cent of the rental income of our distribution portfolio is index-linked and should benefit from this premium.

office market benefiting from strong investment and occupational demand

In Central London, activity across both occupational and investment markets continues to accelerate. Year-to-date take up to Q3 of 8.3 million sq ft has already surpassed all of 2012 at 7.2 million sq ft. Upward pressure on rents in the City is evident and our pre-letting activity at One Carter Lane is benefiting from increased demand for grade A space. Investment volumes have spiked in Q3 with UK investors doubling their presence and joining a market traditionally dominated by overseas investors. Our disposal of One Fleet Place and refurbishment at One Carter Lane capitalises on this strong demand which continues to push yields lower.

Investments

Our acquisitions have concentrated on securing higher quality properties in our preferred sectors of retail and retail distribution. The investment landscape is increasingly more competitive as institutional and overseas investors are bidding prices higher. However, our focus on occupier contentment and strong retailer relationships has delivered a robust pipeline of predominantly off-market deals.

During the period we made 14 new acquisitions totalling £160.4 million (£135.6 million at share) at an average yield on cost of 7.2% and a weighted unexpired lease length of 11.4 years (10.6 years to first break). Post period end we made 12 further acquisitions for £99.3 million (£92.9 million at share) with an average yield on cost of 7.3% and average unexpired lease term of 21.5 years.

Our disposal programme has been significant allowing us to free up capital locked into lower yielding assets where we have crystallised value to reinvest into higher yielding stock benefiting from a yield arbitrage of 310 bps; contributing to our annual rent roll rising more than 7.8% from £62.5 million at the end of March to £67.4 million, post period end.

FIVE distribution acquisitions for £93.9 million, NIY 7.3%

Across our distribution portfolio we completed on the disposal of 11 distribution centres in July to a joint venture between ProLogis and Norges for £247.6 million (£138.4 million at share), NIY: 5.6%.  During the period we completed the acquisitions of four distribution centres and one post period end.  These were predominantly let to national retailers. In July we exchanged unconditionally on the purchase of the Argos Distribution Centre in Bedford for £51.7 million, NIY: 7.2%, in August we completed on the WH Smith Distribution Centre in Birmingham for £10.1 million, NIY: 7.5 % followed in September by the purchase of the Boden Distribution Centre in Leicester for £5.2 million, NIY: 8.3% and the Norbert Dentressengle Distribution Centre in Northamptonshire for £17.9 million, NIY: 7.0%. Post period end in November we acquired the Travis Perkins Distribution Centre in Brackmills for £9.0 million, NIY: 8.8%.

OUT OF TOWN RETAIL INVESTMENT ACquisitions OF £82.8 MILLION, NIY 7.4%

In the retail sector, including our MIPP joint venture with USS, we acquired nine properties during the period and one post period end. LondonMetric completed the acquisition of Martlesham Heath, Ipswich in May for £10.4 million, NIY: 6.5% and in August we completed on a portfolio of two retail parks, Westcroft Retail Park in Milton Keynes and Seagar Retail Park in Cardiff for £25.8 million, NIY: 8.0%. Post period end in November, we sold two retail parks: Nottingham Road Retail Park in Mansfield and St Mary's Road in Sheffield to clients of Henderson Global Investors for £19.2 million, reflecting a net initial yield of 6.8%. This compares favourably to our yield on cost of 8.8% and provides further indication of the pent up institutional demand for well-let, long dated income.

MIPP joint venture reaches full investment

At 30 September, assets under management in MIPP totalled £133.9 million and included the purchases of Eastbourne in August for £9.0 million (£3.0 million at share), NIY: 7.2% and the portfolio of five Wickes units for £28.0 million (£9.3 million at share), NIY: 7.2%. In October MIPP acquired Dartford Heath Retail Park for £9.6 million (£3.2 million at share), NIY: 6.5%. In addition MIPP sold Wickes, Oxford, which formed part of the Wickes portfolio. The sale price was £12.4 million (£4.1 million at share), reflecting a disposal yield of 5.3%. MIPP retains the four remaining Wickes units. The fund now has 16 properties in total which produce a running yield of 6.8% with 28% of the portfolio benefiting from RPI linked income, and an unexpired lease term of 15.6 years.  We have also agreed to acquire two further assets totalling £19.92 million (£6.64 million LondonMetric share) which will achieve the fund's target investment of £150 million.

Acquired portfolio of ten Odeon multiplex cinemas for £80.6 million

In November we purchased a portfolio of ten Odeon multiplex cinemas for £80.6 million, NIY: 7.2%. The leases have an unexpired lease term of 24.9 years term certain and the rents rise annually in line with RPI between at 1% to 5%. In addition to a double-digit cash-on-cash return the portfolio also provides value enhancing asset management opportunities. Each cinema either adjoins or is in close proximity to a retail park or shopping centre providing an excellent fit with our out of town strategy where leisure forms a growing component of the retail experience.

 

Crystallising value across the office portfolio

Across the office portfolio we completed on the sale of One Fleet Place in September for £112.5 million, NIY: 5.1% and are currently marketing the sale of Unilever House in Leatherhead in response to increasing demand for quality assets outside of London from institutional, overseas and high-net worth investors. 

Our remaining office portfolio includes Unilever House in Leatherhead, Marlow International in Marlow and Forest House and Elm Park Court in Crawley, with a book value of £147 million. Our development portfolio includes our office at Carter Lane, where the let-up of remaining space is continuing.  The property does not have any debt against it. At Marlow, we are undertaking asset management initiatives to extend the occupation of the major tenants on longer leases, which we expect to conclude shortly.

Residential sales to date of £150.7 million across 297 units

Our residential sales programme is on track with 257 units sold or under offer in the period generating £130.5 million of gross sales receipts. Post period end we transacted on a further 40 units for £20.2 million, 1.7% ahead of valuation, realising equity of £11.5 million. To date the sales programme has generated £150.7 million of gross sales across 297 units in total.

We have completed the sale of our residential portfolio at Clerkenwell Quarter and generated a return on cost of 27.7% since acquisition. We acquired the asset for £47.8 million and sold the 107 units for £61.1 million in gross sales, releasing equity of £59.4 million. The remaining wholly-owned residential investment portfolio of Battersea, Highbury and Stockwell is trading well.

At 30 September 2013

 

Sales (units)

 

Gross sales (£m)

 

Total equity


Location


Completed


sold


Agreed

 


Completed


sold


Agreed


Total

 

released
(£m)

Clerkenwell Quarter

89

18

 

50.2

10.9

61.1

 

59.3

Highbury

47

20

 

22.4

9.7

32.1

 

17.1

Battersea

23

11

 

12.2

6.1

18.3

 

11.0

Stockwell

23

26

 

8.5

10.5

19.0

 

10.5

Total

182

75

 

93.3

37.2

130.5

 

97.9

 

The table summarises the units sold and equity released over the period to 30 September 2013. Within the wholly-owned portfolio we have a further £25.6 million of equity to be released over the remaining 69 units which we anticipate monetising by Spring 2014.

Our remaining residential asset at Moore House is held in a joint venture with Green Park and PSP, where our 40% share has a book value of £76.9 million. We have £50.9 million of equity to release and have recently commenced a targeted sales campaign on a number of units. We expect this to be a 'patient exit' of this property over the next few years.

Asset management

Occupier transactions

During the period we executed on 22 occupier transactions, including five lease re-gears, two rent reviews and 15 new lettings as set out below.

Re-gears were undertaken across 471,000 sq ft achieving average lease terms of 13.8 years, securing an additional £457,000 of rental income per annum. Rent reviews across 24,600 sq ft secured an additional £15,000 per annum of rental income, an increase of 5.3%.

Letting Summary - re-gears

Scheme name

Asset management initiatives

Wickes,
Barnsley (MIPP)

·  Re-geared existing lease from 6 years to 17 years to expiry

Wickes,
Chatham (MIPP)

·  Re-geared existing lease from 5 years to 20 years to expiry

Wickes,
Oxford (MIPP)

·  Re-geared existing lease from 10 years to 25 years to expiry

WH Smith DC,
Birmingham

·  Re-geared existing lease from 10 years to 21 years to expiry

·  Increased rent from £4.00 psf to £4.75 psf +18.8%

Unilever House,
Leatherhead

·  Re-geared existing lease from 9 years to 10 years to expiry

·  Increased rent by 7.5% to £26.55 psf

Letting Summary - rent reviews

Scheme name

Asset management initiatives

Congleton Retail Park, Congleton

·  Achieved rental uplift of 11.9% to £15.65 psf

Airport Retail Park, Coventry

·  Achieved rental uplift of 3.7% to £11.25 psf

Fifteen new lettings were transacted across 163,700 sq ft on average lease terms of 16.9 years (14.0 years to first break), securing £4.3 million per annum of new rental income on newly constructed or previously vacant space. These lettings have further improved our occupancy rate across the investment portfolio to 99%. We have only seven vacant units, totalling 36,000 sq ft across the entire investment portfolio.

Letting Summary - new lettings

Scheme name

Asset management initiatives

Carter Lane, EC4

·  New letting to MFS for 24,500 sq ft

·  New letting to SEB for 36,000 sq ft

·  PC expected March 2014

Watling Street,
Cannock

·  New letting to Porcelanosa  on last remaining unit of 3,600 sq ft

·  Park is now fully let

·  Trading commenced November 2013

Pierpoint Retail Park,
King's Lynn

·  New letting to Greggs on former HSBC unit

·  1 remaining unit to let; trading commenced October 2013

Launceston Retail Park,
Launceston

·  New letting to Brantano on former 5,000 sq ft Shoe Zone unit

·  49% ahead previous passing, subject to vacant possession

Mountbatten Retail Park, Southampton

·  New letting to Pure Gym on former Oak Furnitureland unit,
5.8% ahead of previous passing rent

·  Trading commenced November 2013

Tindale Crescent,
Bishop Auckland

·  New letting to Card Factory on  unit of 1,400 sq ft

·  Last unit under offer; Trading commenced October 2013

Christchurch Retail Park, Christchurch

·  New letting to Home Bargains on former Comet unit

·  Trading to commence February 2014

Martlesham Heath, Ipswich

·  New letting to Brantano on vacant 5,000 sq ft unit

·  Park is fully let

·  Trading commenced October 2013

Damolly Retail Park, Newry

·  New letting to Home Bargains  on former Carpetright unit

·  Trading to commence January 2014

Channons Hill Retail Park, Bristol

·  New letting to Poundworld on 6,000 sq ft

·  Trading commenced September 2013

Phase 2,
Bishop Auckland

·  New letting to Home Bargains on 11,100 sq ft

·  Trading due to commence April 2014

Kirkstall Bridge,
Leeds

·  New letting to Pure Gym on 12,000 sq ft

·  Construction to commence May 2014

St Austell

·  New letting to M&S for a 25,500 sq ft general merchandise store

·  Awaiting planning consent

Cambridge Road, Haverhill (MIPP)

·  New letting to Pets at Home for 6,000 sq ft

·  Planning consent due January 2014

Development

Our aim is to deliver a pipeline of short cycle redevelopments where there is strong occupier demand and a favourable planning outlook.

We are on track to complete our developments at Berkhamsted (22,500 sq ft), Bishop Auckland Phase 2 (27,300 sq ft) and at Carter Lane (127,400 sq ft) by March 2014.

At Berkhamsted we are 76% pre-let having let 18,000 sq ft to M&S for a Simply Food format.  We have agreed terms with two national operators on the remaining two units totalling 4,500 sq ft.

At Bishop Auckland Phase 2 we are 39% pre-let having exchanged agreements with Home Bargains over 11,100 sq ft and agreed terms with TK Maxx on a 10,000 sq ft unit, taking pre-lets to 77%.  One remaining unit of 6,200 sq ft is to be let.

At Carter Lane we are 58% pre-let having let floors two to five. This leaves 60,000 sq ft remaining and we are in detailed negotiations over 16,300 sq ft, which would take pre-letting to 70%.

Our 105,000 sq ft shopping park development at Kirkstall, Leeds, will commence construction in May 2014. It is now 62% pre-let including deals in solicitor's hands.

Development summary:

Scheme name

Description

Progress

Phase 2,
Bishop Auckland

27,300 sq ft Open A1 new retail
park development

·  Planning consent received

·  39% pre-let to Home Bargains

·  38% in solicitor's hands

·  Practical completion expected in March 2014

Kirkstall Bridge,
Leeds

105,000 sq ft Open A1 shopping
park development

·  Planning consent received

·  Pre-let to M&S, BHS, Outfit, Costa and others

·  62% pre-let/ in solicitor's hands

M&S, Berkhamsted

22,500 sq ft food store
development

·  Planning consent received

·  76% pre-let to M&S Simply Food

·  Practical completion expected in March 2014

St Austell

103,000 sq ft Open A1 shopping
park development

·  Planning application submitted

·  22% pre-let to M&S, pre-sale to Sainsbury's

Carter Lane

127,400 sq ft office refurbishment

·  58% pre-let to MFS & SEB

·  Practical completion expected in March 2014

 

 

Continued planning gains on existing investments

In the six months to September 2013 we received nine planning consents on 84,300 sq ft (including 7,000 sq ft relating to PODS). Three of these were for small pod units and the remaining six were for specific retailer units as set out below.

Planning gains achieved

Scheme name

Planning success

Channons Hill,
Bristol

·  22,600 sq ft Open A1 consent for three units

·  14,500 sq ft  exchanged to Xercise 4 Less

·  Remaining two units to let

Christchurch Retail Park,
Christchurch

·  10,100 sq ft Open A1 consent for Home Bargains as part of re-letting of former Comet unit

·  Exchanged with trading to commence February 2014

Airport Retail Park,
Coventry

·  15,000 sq ft bulky consent for Smyths Toys

·  Exchanged with trading to commence July 2014

Pierpoint Retail Park,
King's Lynn

·  9,000 sq ft Open A1 consent for Paul Simon unit

·  In solicitors' hands

Damolly Retail Park,
Newry

·  9,800 sq ft part food/part bulky consent for Home Bargains in the former Carpetright

·  Exchanged

Mountbatten Retail Park,
Southampton

·  10,800 sq ft leisure consent for Pure Gym

·  Exchanged

 

Going forward we await a decision at St Austell where we submitted a detailed application to develop a new 103,000 sq ft Open A1 shopping park. We expect a decision in the early part of 2014.

 

Property portfolio

Valuation uplift of £35.6 million

The portfolio valuation as at 30 September 2013 was £1,064.6 million, reflecting a valuation uplift of 3.5% or £35.6 million over the six month period. Our weighted capital return over the period was 4.0% which compares to IPD All Property Quarterly Index at 1.7%, an outperformance of 230bps.  

The portfolio benefited from an inward yield shift of 25bps, from a combination of asset management initiatives and market yield movements.  

Valuation contributors

Valuation uplift (%)

New lettings and rent reviews

14

New space

20

Asset management yield shift

14

Market yield shift

52

Total

100

 

Valuation contributors by sector

Valuation uplift (%)

Office

11.3

Distribution

3.4

Residential

2.9

Retail

1.0

Total valuation uplift

3.5

 

Only 5.8% of our income is due to expire in the next five years. The significant investment and disposal activity post period end has contributed positively to this profile. Our weighted average unexpired lease term is 11.3 years (10.6 years to first break).

Lease expiry profile - % of contracted rental income

At 30 September

Today1

0-5 years

5.8

6.4

5-10 years

36.0

32.2

10-15 years

42.0

37.6

15 years +

16.2

23.8

Total

100.0

100.0

1. As at 27 November 2013 including post period end acquisitions and disposals

fixed uplifts comprise 25% of rental income rising to 31% post period end

Fixed uplifts form an increasing part of the makeup of our rental income. It provides us with security of growth and it is increasingly sought-after by institutions, which generates a premium yield.

At period end 24.9% of the investment portfolio's income was subject to fixed rental uplifts with the split between sectors set out below. Across retail the split between LondonMetric and MIPP is LondonMetric: 86.7%, MIPP: 13.3%. The table also shows the rise in fixed uplifts to 31.0% post period end owing to acquisitions and disposals.

Fixed uplifts - % of contracted rental income

At 30 September

Today1

Out of town



Retail

12.2

9.6

Leisure

-

10.0

Distribution

11.4

10.3

Office

1.3

1.1

Residential

-

-

Total portfolio

24.9

31.0

1. As at 27 November 2013 including post period end acquisitions and disposals

Tenant diversity and covenant strength

One of our strategic priorities has been to rebalance the portfolio towards retail and retail distribution and the table below shows the significant progress we have made recycling capital out of offices and residential into these sectors.

Sector exposure (%)

At merger

At 30 September

Today1

Out of town




Retail

24

39

37

Leisure

-

-

7

Distribution

19

19

20

Office

24

14

14

Residential

21

16

10

Development

12

12

12

Total

100

100

100

1. As at 27 November 2013 including post period end acquisitions and disposals

Our tenant sector exposure shows that we remain well diversified across many sectors. We would expect our exposure to retailers to continue to rise as we aim to double the size of our retail distribution portfolio. The proportion of rental income generated by retail occupiers has increased from 56% at merger to 71% today.

 

Tenant sector exposure1


(% of contracted rental income)

DIY

16.2

General merchandise

16.5

Professional services

14.3

Furniture

11.0

Food

9.1

Leisure

10.0

Consumer goods

7.0

Electrical

4.0

Residential

5.2

Other retailers

4.3

3PL

2.4

Total

100.0

1. As at 27 November 2013

The tenant exposure set out below provides a snapshot post period end to include our significant acquisition of the Odeon portfolio, now being our largest tenant by rental income.  Our top ten customers currently account for 49% of the total contracted rent.

Tenant exposure (weighted by contracted rental income)1

Trading name

Rent p.a.
 £m

% of total rent

1.   Odeon Cinema Ltd

5.9

8.7

2.   Unilever UK Ltd

4.8

7.1

3.   Argos

4.0

5.9

4.   Primark

3.9

5.8

5.   B&Q

3.7

5.6

6.   Dixons

2.4

3.6

7.   Allergan

2.4

3.5

8.   SEB

2.2

3.3

9.   Somerfield

1.8

2.7

10. Travis Perkins/Wickes

1.7

2.5

Total top ten customers

32.8

48.7

Other

34.6

51.3

Total income

67.4

100.0

1. As at 27 November 2013

 

 

Financial review

Income statement

The results for the six months to 30 September 2013 are the first full set of results for the newly merged LondonMetric Group.  The results for the comparative period to 30 September 2012 are pre-merger and for London & Stamford alone, as statutorily required and as reported in the income statement.

The Company has appointed Deloitte LLP as auditor to the Group following a formal tender process that took place in September 2013.  The Board would like to thank BDO LLP, the former auditor to the Group, for their hard work and dedication over the last seven years.

To enable a better understanding of the evolution of the business, the table below includes the Group's key financial metrics of EPRA earnings and profit before exceptional items for the current and comparative period and also for the previous six month period to 31 March 2013, which is considered a more appropriate period of comparison for the newly merged Group. The results for the six months to 31 March 2013 reflect four months of London & Stamford and two months of the enlarged Group.

Proportionately consolidated income statement



 


Six months to

30 September

 2013

Six months to

31 March

 2013

Six months to

30 September

 2012


Group
£m

Share of JV

£m

Total

£m

Total

£m

Total

£m

Net income

25.0

4.2

29.2

23.6

22.0

Management fees

0.1

(0.4)

(0.3)

(0.1)

7.2

Administrative costs

(6.1)

(0.3)

(6.4)

(6.6)

(5.1)

Net finance costs (1)

(9.1)

(1.7)

(10.8)

(8.5)

(11.1)

Other

0.1

(0.1)

-

0.1

0.4

EPRA earnings

10.0

1.7

11.7

8.5

13.4

Revaluation surplus

34.8

0.8

35.6

3.4

16.9

Derivative movements

6.5

2.7

9.2

0.6

(3.4)

Profit on sales (2)

0.2

0.3

0.5

-

1.1

Finance break costs

(4.0)

(2.1)

(6.1)

-

-

Other

(0.1)

0.1

-

-

-

Profit before exceptional items

47.4

3.5

50.9

12.5

28.0

Exceptional items(3)

(6.8)

-

(6.8)

(21.0)

(32.8)

Profit after tax

40.6

3.5

44.1

(8.5)

(1)      Excludes finance break costs associated with sales not included in EPRA earnings (see note 4)

(2)      Comprises loss on sale of investment property of £0.2 million and profit on sale of trading property of £0.4 million

(3)      Comprises share based payments, amortisation of intangible assets and deferred tax relating to the internalisation of management in 2010

 

Profit before tax and exceptional items was £50.9 million compared with £12.5 million for the six months to 31 March 2013 representing a 307% increase.  This excludes the accounting impact of the internalisation of management in 2010 of £6.8 million (six months to 31 March 2013: £17.7 million) which continues to unwind through the Income Statement as the intangible asset is amortised, although the share based payment is now fully amortised.

The growth in EPRA earnings and the achievement of full dividend cover continues to be a strategic priority.  EPRA earnings in the period were £11.7 million compared with £8.5 million for the last six months of 2013, a 38% increase and a dividend cover of 53%.  On an annualised basis, as at today's date, the dividend cover is 86%.

The Group has benefited from favourable valuation yield movements and value enhancing asset management initiatives which give rise to a £35.6 million valuation surplus, including its share of joint ventures, in the half year.

Net income was £29.2 million compared with £23.6 million for the second half of 2013.  Income has increased by £11.1 million due to the acquisition of the Saturn Portfolio of six retail parks and the Primark Distribution Unit in Thrapston late in 2013, and the additional four months' contribution from the Metric portfolio.  Offset against this was the loss of rent at Carter Lane of £3.0 million as the refurbishment and redevelopment work commenced and due to a one-off receipt in the previous period.

Management fees have fallen following the sales of joint venture investments in Meadowhall and in Distribution assets.

Administrative expenses have decreased by £0.2 million compared to the second half of last year as a result of cost synergies associated with the merger.  The combined administrative expense of the pre merged companies for the year to 31 March 2013 was £15.6 million.  At the time of the merger, we anticipated cost synergies of £2.5 million.  We now expect that number to exceed £3 million.

EPRA earnings from joint venture operations was £1.7 million, £0.3m less than in the previous six months due to the corporate sale of 10 distribution assets in July 2013 offset in part by a full six months' contribution from the MIPP joint venture acquired on merger with Metric.

Net finance costs, excluding the costs associated with repaying debt and terminating derivative arrangements on sales or refinancings, was £10.8 million, an increase of £2.3 million over the second half of last year.  This increase reflects interest on debt drawn to finance acquisitions in the latter part of 2013.

Careful consideration is given to the management of our interest rate exposure and hedging entered into in the period consisted of a combination of fixed rate swaps and caps.  We take independent advice from J C Rathbone Associates before entering into derivative arrangements. The average cost of debt at 30 September 2013 is 4.2%.

We have unutilised revolving credit facilities with Lloyds Bank and RBS of £127.1 million.  If these facilities were fully drawn, our average cost of debt would fall to 3.8%.

The favourable derivative movement of £9.2 million comprises £7.5 million of instruments which were terminated as a result of sales and £1.7 million due to movement in future swap rates.

It has been a busy first half year with 14 property acquisitions totalling £135.6 million including our share of joint ventures and 13 commercial and 182 residential asset disposals, all of which are discussed in the Business Review.  Profit on sale of investment and trading properties and before deducting associated finance break costs was £0.5 million.

Balance sheet

At 30 September 2013, the Group's portfolio was valued at £1,064.6 million including its share of joint ventures and trading properties (March 2013: £1,216.8 million).  The movement is explained in the investment property table below. The Group spent £135.6 million on property acquisitions (excluding costs) and £7.1 million on capital expenditure relating to the redevelopment and refurbishment of property, principally at Carter Lane, London.  The disposal of 182 residential flats, offices at Fleet Place London, 11 distribution units and development land at Gillingham reduced the carrying value of investment property by £340.9 million.

Proportionately consolidated balance sheet

30 September 2013


31 March 2013


Group

£m

Share of JV

£m

Total

£m


Group
£m

Share of JV

£m

Total

£m

Investment property (1)

930.4

134.2

1,064.6


990.6

226.2

1,216.8

Gross debt

349.8

49.9

399.7


464.6

108.5

573.1

Cash

73.6

3.2

76.8


37.6

8.3

45.9

Net gearing

30%

35%

30%


43%

44%

43%

Cost of debt

4.3%

3.8%

4.2%


3.6%

3.8%

3.6%

Undrawn facilities

221.7

8.6

230.3


37.0

16.7

53.7

(1)      Includes trading properties

 

Investment property

Group

£m

Share of JV

£m

Total

£m

Investment and trading property at 31 March 2013

990.6

226.2

1,216.8





Property acquisitions

123.3

12.3

135.6

Acquisition costs

4.9

0.7

5.6

Capital expenditure

6.9

0.2

7.1

Disposals

(234.8)

(106.1)

(340.9)

Revaluation

34.8

0.8

35.6

Lease incentive movement

4.7

0.1

4.8

Investment and trading property at 30 September 2013

930.4

134.2

1,064.6

 

 

 

EPRA net asset value per share at 30 September 2013 was 112p compared with 109p at 31 March 2013.  The movement can be summarised as follows:

EPRA net asset value

£m

pence per share

At 1 April 2013

687.3

109.4

EPRA earnings

11.7

1.9

Property revaluation(1)

35.1

5.6

Profit on disposals

0.5

0.1

Finance break costs (2)

(6.1)

(1.0)

Dividends paid

(22.0)

(3.5)

Exceptional items and tax(3)

(4.4)

(0.7)

Shares held in trust

(2.1)

-

At 30 September 2013

700.0

111.8

(1)      Including revaluation deficit on trading properties of £0.5 million

(2)      Excludes favourable derivative movement of £7.5 million

(3)      Exceptional items of £6.8 million net of prior year deferred tax on intangible assets of £2.4 million

 

Financing

Group debt at 30 September 2013 was £349.8 million and net of cash deposits of £73.6 million.  Group gearing was 30%.  On a look through basis, after taking account of joint venture funding arrangements, gross debt was £399.7 million and gearing remains at 30%.  The Group (including its share of joint ventures) has hedged 90% (31 March 2013: 80%) of its exposure to interest rate fluctuations and has complied throughout the period with its loan covenants.  Its undrawn facilities amounted to £230.3 million at 30 September 2013, falling to £127.1 million following the acquisition of 10 Odeon cinemas in November 2013 which was financed in part through a term loan with Lloyds, and as assets recently acquired have been charged.

Since 31 March 2013 the Group has agreed new five year debt facilities with Helaba and RBS totalling £252.5 million at a blended margin of 2.4%.

The £112.5 million facility with Helaba has now been fully utilised to finance seven assets, three of which were acquired in the period under review.

Our new five year £140 million term facility with RBS has been utilised to refinance certain of the former Metric portfolio of assets acquired on merger and the Saturn portfolio of retail units acquired in the last financial year.  The £80 million revolving credit facility with RBS has become fully available to finance our acquisition pipeline.

The £130 million debt drawn under our revolving facility with Lloyds was repaid as part of the refinancing and following the post period end acquisition of 10 Odeon cinemas £56.5 million is available to redraw.

Following the sale of One Fleet Place in September 2013, the entire £96 million facility used to finance both our City assets was repaid in full.

Following the disposal of 11 distribution assets in July 2013, debt of £133.3 million (Group share £66.6 million) was assigned as part of the corporate transaction undertaken by our joint venture with Green Park Investments and £4.6 million was repaid.

Debt of £4.4 million was repaid following residential sales in the period and a further £15 million was repaid post period end.

Further debt of £24.0 million (Group share £8.0 million) was drawn in the period and £11.5 million (Group share £3.8 million) post period end by our MIPP joint venture following its acquisitions, increasing total debt drawn to £60.8 million (Group share £20.3 million).

The new debt arrangements increase our debt maturity to 4.1 years from 3.0 years in March 2013.

The average interest rate payable by the Group and its share of joint ventures was 4.2% (31 March 2013: 3.6%).

 

Liquidity and Cash

The Group had cash resources of £73.6 million at 30 September 2013.  Following the post period end transactions, our anticipated geared firepower is expected to be £198 million, calculated as follows:

Firepower

Group

£m

Cash at bank at 30 September

73.6

Post period end transactions;


Acquisitions and disposals(1)

(41.4)

Debt financing(2)

94.3

Capital commitments

(37.3)

Anticipated cash balance

89.2

Potential debt funding at assumed gearing of 55%

109.0

Anticipated firepower

198.2

(1)      Committed acquisitions and disposals and sales of the remaining wholly owned residential portfolio

(2)      Committed debt financing and anticipated development funding

 

 

 

Key risks and uncertainties

Strategic risks

Property Markets

Financial markets have become more stable and property markets have started to show signs of an upturn.  However both remain subject to economic conditions and are outside of the Board's control.  As the Company operates only in the UK its exposure to financial uncertainty and instability in the Eurozone is minimised.  In addition, the portfolio is let to high quality tenants, the covenant of which is thoroughly reviewed before entering into lease agreements, thus reducing the risk of tenant failure in challenging economic conditions.

Property Valuations

Being a snapshot in time, there is no certainty property valuations will be ultimately realised given uncertain and changing market conditions.  The Group's net asset value may fluctuate as property valuations are the most significant component of net asset value with a resulting negative impact on gearing.  To alleviate this risk the Group has invested in a diversified property portfolio of assets spread geographically and which are let to a large number of tenants.  Gearing is low at 30% and loan covenants are met comfortably.

Investment Opportunities

The identification of high yielding investment opportunities continues to be a key focus.   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 to deploy the Group's cash.

Operational Risks

Letting risk and tenant default

Tenant defaults and failure to let vacant units would lead to a loss of recurring net income and dividend cover.  To control this risk, tenant covenant strength and concentration is assessed for all acquisitions and leasing transactions.

The Group's dedicated and experienced property management team work 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 those tenants that may have difficulty paying rent.

Developments

With a growing development pipeline there is a risk that returns are compromised due to increased costs, planning or construction delays or adverse letting conditions.

The Group's 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

Financial Risks


Interest rate movements

Adverse interest rate movements can significantly increase interest charged on bank borrowings and reduce profitability.

To manage and mitigate this risk, a high proportion of debt is hedged with fixed or capped interest rates through derivative products.  At 30 September 2013 the Group had hedged 90% of its drawn debt.

Liquidity

The inability to raise finance could prohibit the Group's investment strategy or significantly increase borrowing costs.

The Group has undrawn bank loan facilities of £189 million at 30 September 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.

 

Group income statement

Six months ended 30 September 2013





Note

Unaudited
Six months to
30 September 2013
£000

Unaudited
Six months to

30 September 2012
£000

Audited
Year to
31 March 2013
£000

Gross rental income


26,850

13,774

32,752

Property operating expenses


(1,765)

(1,500)

(3,511)

Net rental income

3

25,085

12,274

29,241

Property advisory fee income


58

8,236

8,466

Net proceeds from sales of trading properties

3

386

-

-

Other operating income


-

-

1,913

Net income


25,529

20,510

39,620

Administrative costs


(6,138)

(4,546)

(10,956)

Share-based payments


(3,961)

(6,769)

(10,484)

Amortisation of intangible asset

10

(2,120)

(1,983)

(3,954)

Write down of goodwill on acquisition of subsidiaries


-

-

(6,251)

Acquisition costs


-

-

(5,661)



(12,219)

(13,298)

(37,306)

Profit on revaluation of investment properties

8

34,774

4,968

8,394

Loss on sale of investment properties


(199)

-

(10)

Profit on sale of subsidiaries


-

1,086

1,086

Impairment of investment in associate


-

(23,178)

(23,178)

Share of profits of associates and joint ventures

9

3,512

13,845

15,969

Operating profit


51,397

3,933

4,575

Finance income

4

63

344

730

Finance costs

4

(13,207)

(5,870)

(12,553)

Change in fair value of derivative financial instruments

14

6,491

(2,106)

(1,704)

Profit/(loss) before tax


44,744

(3,699)

(8,952)

Taxation

5

(630)

(1,138)

(4,441)

Profit/(loss)  after tax


44,114

(4,837)

(13,393)






Profit/(loss) for the period and total comprehensive income attributable to:





Equity shareholders


44,114

(4,900)

(13,456)

Non-controlling interest


-

63

63



44,114

(4,837)

(13,393)

Earnings per share





Basic and diluted

7

7.0p

(0.9)p

(2.4)p

EPRA earnings per share

7

1.9p

2.5p

3.9p

 

All amounts relate to continuing activities.

Group balance sheet

As at 30 September 2013





Note

 

Unaudited

30 September
2013
£000

As restated

Unaudited

30 September 2012
£000

 

Audited

31 March
2013
£000

Non current assets





Investment properties

8

929,472

525,029

986,793

Investment in equity accounted associates and joint ventures

9

84,474

97,534

120,919

Intangible asset

10

7,518

10,441

9,638

Other tangible assets


516

294

311

Deferred tax assets

5

1,568

4,991

2,311



1,023,548

638,289

1,119,972

Current assets





Trading properties


905

3,837

3,837

Investments held for sale


-

95,832

-

Trade and other receivables

11

21,580

22,811

11,731

Cash and cash equivalents

12

73,634

98,874

37,572



96,119

221,354

53,140

Total assets


1,119,667

859,643

1,173,112

Current liabilities





Trade and other payables

13

73,641

11,193

26,232

Taxation payable


1,133

989

-



74,774

12,182

26,232

Non current liabilities





Borrowings

14

344,784

231,596

460,328

Derivative financial instruments

14

3,392

8,691

9,883



348,176

240,287

470,211

Total liabilities


422,950

252,469

496,443

Net assets


696,717

607,174

676,669

Equity





Called up share capital

15

62,804

54,280

62,804

Capital redemption reserve


9,636

300

9,636

Other reserve


225,665

47,069

227,920

Retained earnings


398,612

505,525

376,309

Equity shareholders' funds


696,717

607,174

676,669

Net asset value per share

7

111.3p

111.9p

107.7p

EPRA net asset value per share

7

111.8p

113.5p

109.4p

 

 

Group statement of changes in equity

Six months ended 30 September 2013 (Unaudited)




Note


Share
capital
£000

Capital redemption reserve
£000

 

Other
reserve
£000

 

Retained earnings £000



Total

 £000

At 1 April 2013


62,804

9,636

227,920

376,309

676,669

Profit for the period and total comprehensive income


-

-

-

44,114

44,114

Purchase of shares held in trust


-

-

(2,255)

-

(2,255)

Share-based awards


-

-

-

171

171

Dividends paid

6

-

-

-

(21,982)

(21,982)

At 30 September 2013


62,804

9,636

225,665

398,612

696,717

 

 

Year ended 31 March 2013 (Audited)





Note



Share
capital
£000

Capital redem-ption reserve
£000

 

Other
reserve
£000

 

Retained earnings £000

 

Subtotal £000

Non-controll-ing interest
£000

 

Total
£000

At 1 April 2012 (as previously reported)


54,280

300

47,069

531,905

633,554

5,783

639,337

Restatement

8

-

-

-

(2,650)

(2,650)

-

(2,650)

At 1 April 2012 (after restatement)


54,280

300

47,069

529,255

630,904

5,783

636,687

(Loss)/profit for the period and total comprehensive income


-

-

-

(13,456)

(13,456)

63

(13,393)

Share issue on merger with Metric


17,860

-

184,851

-

202,711

-

202,711

Clawback and cancellation of own shares


(479)

479

(5,015)

(479)

(5,494)

-

(5,494)

Purchase and cancellation of own shares following Tender Offer


(8,857)

8,857

-

(100,650)

(100,650)

-

(100,650)

Share-based awards


-

-

1,015

(365)

650

-

650

Distribution paid to non-controlling interest


-

-

-

-

-

(5,846)

(5,846)

Dividends paid

6

-

-

-

(37,996)

(37,996)

-

(37,996)

At 31 March 2013


62,804

9,636

227,920

376,309

676,669

-

676,669

 

 

Six months ended 30 September 2012 (Unaudited)




Note


Share
capital
£000

Capital redemp-tion reserve
£000


Other
reserve
£000


Retained earnings £000



Subtotal £000

Non-controll-ing interest
£000



Total
£000

At 1 April 2012 (as previously reported)


54,280

300

47,069

531,905

633,554

5,783

639,337

Restatement


-

-

-

(2,650)

(2,650)

-

(2,650)

At 1 April 2012 (after restatement)


54,280

300

47,069

529,255

630,904

5,783

636,687

(Loss)/profit for the period and total comprehensive income


-

-

-

(4,900)

(4,900)

63

(4,837)

Share-based awards


-

-

-

168

168

-

168

Distribution paid to non-controlling interest


-

-

-

-

-

(5,846)

(5,846)

Dividends paid

6

-

-

-

(18,998)

(18,998)

-

(18,998)

At 30 September 2012


54,280

300

47,069

505,525

607,174

-

607,174

 

 

Group cash flow statement

Six months ended 30 September 2013

 

Unaudited

Six months to
30 September
2013
£000

Unaudited

Six months to
30 September 2012
£000

Audited

Year to
31 March
2013
£000

Cash flows from operating activities




Profit/(loss) before tax

44,744

(3,699)

(8,952)

Adjustments for non-cash items:




Profit on revaluation of investment properties

(34,774)

(4,968)

(8,394)

Loss on sale of investment properties

199

-

10

Profit on sale of subsidiaries

-

(1,086)

(1,086)

Share of post-tax profit of associates and joint ventures

(3,512)

(13,845)

(15,969)

Share-based payment

3,961

6,769

10,484

Impairment of investment

-

23,178

23,178

Amortisation of intangible asset

2,120

1,983

3,954

Write down of positive goodwill on acquisition of subsidiary

-

-

6,251

Finance income

(6,554)

(344)

(730)

Finance costs

13,207

7,976

14,257

Cash flows from operations before changes in working capital

19,391

15,964

23,003

Change in trade and other receivables

(5,086)

(7,272)

(2,774)

Movement in lease incentives

(4,725)

19

(604)

Change in trade and other payables

457

343

1,304

Disposal of trading properties

2,859

-

-

Cash flows from operations

12,896

9,054

20,929

Interest received

63

357

743

Interest paid

(7,906)

(4,146)

(9,775)

Tax received

-

338

454

Cash flows from operating activities

5,053

5,603

12,351

Investing activities




Purchase of subsidiary undertakings net of cash acquired

-

-

3,610

Purchase of investment properties

(81,382)

(115,789)

(319,224)

Purchase of other tangible assets

(225)

-

-

Capital expenditure on investment properties

(6,878)

(1,459)

(712)

Sale of investment properties

223,666

435

900

Sale of subsidiary undertakings net of cash disposed

-

72,144

72,144

Investments in associates and joint ventures

(926)

(43,559)

(44,297)

Distributions from associates and joint ventures

40,883

2,435

101,449

Cash flow from investing activities

175,138

(85,793)

(186,130)

Financing activities




Dividends paid

(20,738)

(18,009)

(37,996)

Financial arrangement fees and break costs

(6,351)

(1,636)

(2,682)

Purchase of shares held in trust

(2,255)

-

-

Sale of shares held in trust

-

-

650

Purchase of own shares

-

-

(100,650)

New borrowings

120,190

61,775

215,095

Repayment of loan facilities

(234,975)

-

-

Cash flows from financing activities

(144,129)

42,130

74,417

Net increase/(decrease) in cash and cash equivalents

36,062

(38,060)

(99,362)

Opening cash and cash equivalents

37,572

136,934

136,934

Closing cash and cash equivalents

73,634

98,874

37,572

 

Notes to the financial statements

1. Basis of preparation and general information

 

Basis of preparation

The condensed consolidated financial information included in this half yearly report has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 "Interim Financial Reporting", as adopted by the European Union.  The current period information presented in this document is reviewed but unaudited and does not constitute statutory accounts within the meaning of S435 of the Companies Act 2006.

The financial information for the year to 31 March 2013 does not constitute statutory accounts as defined in section 434 of the Companies Act 2006.  A copy of the statutory accounts for that period has been delivered to the Registrar of Companies. The auditor's report on those accounts was not qualified, did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report, and did not contain statements under section 498(2) or (3) of the Companies Act 2006.

The accounting policies adopted are consistent with those as reported in the Group's annual financial statements for the year to 31 March 2013 and in accordance with those the Group expects to be applicable at 31 March 2014.

These condensed financial statements were approved by the Board of Directors on 27 November 2013.

Going concern

The Group's business activities, together with the factors affecting its performance, position and future development are set out in the Business Review.  The finances of the Group, its liquidity position and borrowing facilities are set out in the Financial Review.

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 Directors have considered the Group's cash balances, debt maturity profile of its 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 Group has adequate resources to continue in operational existence for the foreseeable future.  Accordingly, they continue to adopt the going concern basis in preparing the Half Year Report.

 

2.  Segmental information

 

Property value

 

 

100% owned  £000

Trading property

£000

Share of JV
 £000

Unaudited

30 September 2013

£000

Unaudited

30 September 2012
£000

Audited

31 March 2013
£000

Retail

387,890

-

44,620

432,510

-

378,107

Distribution

191,030

-

12,725

203,755

182,492

243,838

Offices

146,950

-

-

146,950

321,618

242,438

Residential

91,992

905

76,884

169,781

207,744

258,802

Development

103,685

-

-

103,685

-

82,624

Other

7,925

-

-

7,925

12,456

10,951


929,472

905

134,229

1,064,606

724,310

1,216,760

 

Gross Rental Income

100% owned  £000

Share of

 JV
 £000

Unaudited

Six months to 

30 September 2013
£000

Unaudited

Six months to

30 September 2012
£000

Audited

Year to

31 March 2013
£000

Retail

12,963

1,131

14,094

6,164

9,595

Distribution

3,493

2,456

5,949

6,541

11,947

Offices

8,178

-

8,178

8,714

20,310

Residential

1,883

896

2,779

2,649

5,727

Development

87

-

87

-

-

Other

246

-

246

32

118


26,850

4,483

31,333

24,100

47,697

 

Net Rental Income

100% owned  £000

Share of

 JV
 £000

Unaudited

Six months to 

30 September 2013
£000

Unaudited

Six months to

30 September 2012
£000

Audited

Year to

31 March 2013
£000

Retail

12,645

1,129

13,774

5,628

9,437

Distribution

3,034

2,448

5,482

6,271

11,179

Offices

8,126

-

8,126

8,424

19,681

Residential

1,083

608

1,691

1,711

3,525

Development

78

-

78

-

-

Other

119

-

119

(88)

(185)


25,085

4,185

29,270

21,946

43,637

 

 

An operating segment is a distinguishable component of the Group that engages in business activities, earns revenue and incurs expenses, whose results are reviewed by the Group's chief operating decision makers and for which discrete financial information is available.  Gross rental income represents the Group's revenues from its tenants and the net rental income is the principal profit measure used to determine the performance of each sector.  Total assets are not monitored by segment.  However, property assets are reviewed on an on-going basis. The Group operates entirely in the United Kingdom and no geographical split is provided in information reported to the Board.

3. Net income

Unaudited

Six months to

30 September 2013
£000

Unaudited

Six months to
 30 September 2012
£000

Audited

Year to

31 March
2013
£000

Gross rental income

26,850

13,774

32,752

Property operating expenses

(1,765)

(1,500)

(3,511)


25,085

12,274

29,241

Proceeds from sales of trading properties

3,386

-

-

Cost of sales of trading properties

(3,000)

-

-


386

-

-

For the six months to 30 September 2013 21% (30 September 2012: 43%, 31 March 2013: 48%) of the Group's gross rental income was receivable from two tenants (31 March 2013: three tenants).

4. Finance income and costs

Unaudited

Six months to

30 September 2013
£000

Unaudited

Six months to
30 September 2012
£000

Audited

Year to

31 March
2013
£000

Finance income




Interest receivable and short-term deposits

63

344

730


63

344

730

Finance costs




Interest payable on bank loans

7,615

5,071

11,261

Loan break costs and amortisation of loan issue costs

5,592

799

1,292


13,207

5,870

12,553

Borrowing costs of £1.0 million have been capitalised in the period at an average rate of 5.2% (30 September 2012 and 31 March 2013: nil). Loan and hedging break costs on sale of property in the period were £4.0 million (30 September 2012 and 31 March 2013: nil). These costs are not included in EPRA earnings.

 

5. Taxation

Unaudited

Six months to

30 September 2013
£000

Unaudited

Six months to
30 September 2012
£000

Audited

Year to

31 March
2013
£000

The tax (credit)/charge comprises:




Current tax




UK tax (credit)/charge on profit

(113)

32

32

Deferred tax




Change in deferred  tax

743

1,106

4,409


630

1,138

4,441

Deferred tax asset






Intangible assets
£000

Total
£000

At March 2013 (audited)


2,311

2,311

Charged during the year


(743)

(743)

At 30 September 2013 (unaudited)


1,568

1,568

As the Group is a UK-REIT there is no provision for deferred tax arising on the revaluation of properties or other temporary differences. 

6. Dividends

Unaudited

Six months to

30 September 2013
£000

Unaudited

Six months to
30 September 2012
£000

Audited

Year to

31 March
2013
£000

Ordinary dividends paid




2012 Final dividend: 3.5p per share

-

18,998

18,998

2013 Interim dividend: 3.5p per share

-

-

18,998

2013 Final dividend: 3.5p per share

21,982

-

-


21,982

18,998

37,996

Proposed dividend




2014 Interim dividend: 3.5p per share

21,982



The proposed dividend was approved by the Board on 27 November 2013 and has not been included as a liability or deducted from retained earnings as at 30 September 2013. The proposed dividend of 3.5p per share, of which 1.5p per share is a Property Income Distribution, is payable on 20 December 2013 to ordinary shareholders on the register at the close of business on 6 December 2013 and will be recognised as an appropriation of retained earnings in the six months to 31 March 2014.

7. Earnings and net assets per share

Earnings per share of 7.0p (30 September 2012: (0.9)p, 31 March 2013: (2.4)p) is calculated on a weighted average of 627,828,427 (30 September 2012: 541,931,747, 31 March 2013: 561,508,387) ordinary shares of 10p each and is based on profits attributable to ordinary shareholders of £44.1 million (30 September 2012: loss of £4.9 million, 31 March 2013: loss of £13.5 million). There are no potentially dilutive or anti-dilutive share options in the period.

Net assets per share is based on equity shareholders' funds at 30 September 2013 of £696.7 million (30 September 2012: £607.2 million, 31 March 2013: £676.7 million) and 626,014,561 ordinary shares in issue excluding those held in the Employee Benefit Trust at that date (30 September 2012: 542,795,171; 31 March 2013: 628,043,905).

Adjusted earnings and adjusted net assets per share are calculated in accordance with guidance issued by the European Public Real Estate Association (EPRA) as follows:

Basic and adjusted earnings






Basic earnings attributable to ordinary shareholders

40,602

3,512

44,114

(4,900)

(13,456)

Revaluation of investment property

(34,774)

(830)

(35,604)

(16,934)

(20,320)

Fair value of derivatives

(6,491)

(2,733)

(9,224)

3,369

2,803

Cost on closing out of derivatives

4,009

2,121

6,130

-

-

Profit on disposal (1)

(187)

(327)

(514)

(1,088)

(1,076)

Amortisation of intangible assets

2,120

-

2,120

1,983

3,954

Share-based payments(2)

3,961

-

3,961

6,769

10,484

Deferred tax

743

-

743

1,106

4,409

Goodwill on acquisitions

-

-

-

-

6,251

Acquisition costs

-

-

-

-

5,661

Impairment of investment held for sale

-

-

-

23,178

23,178

Minority interest in respect of the above

-

-

-

(68)

63

EPRA earnings

9,983

1,743

11,726

13,415

21,951

(1) Profit on disposal of investment and trading property and subsidiaries

(2) Amortisation of share based payments created on the internalisation of management in 2010

 

 

 

Unaudited

Six months to

30 September 2013

Unaudited

Six months to 30 September 2012

Audited

Year to

31 March

2013

Number of shares




Opening ordinary share capital

628,043,905

542,795,171

542,795,171

Shares held in employee trust

(215,478)

(863,424)

(863,424)

Issue of 178,599,912 ordinary shares (28 January 2013)

-

-

30,337,519

Clawback and cancellation of 4,777,268 shares
(28 January 2013)

-

-

(811,481)

Purchase and cancellation of tender offer shares
(18 February 2013)

-

-

(9,949,398)

Weighted average number of ordinary shares

627,828,427

541,931,747

561,508,387





Basic and diluted earnings per share

7.0p

(0.9)p

(2.4)p

EPRA earnings per share

1.9p

2.5p

3.9p






Unaudited

30 September 2013
£000

As restated

Unaudited

30 September 2012
£000

Audited

31 March

 2013
£000

Net assets per share




Equity shareholders' funds

696,717

607,174

676,669

Fair value of derivatives

3,392

8,691

9,883

Cost of cap and swaption

(155)

-

(336)

Revaluation of trading properties

105

588

633

Fair value of associate and joint ventures' derivatives

(10)

2,882

2,723

Deferred tax

-

(3,183)

(2,311)

EPRA adjusted net assets

700,049

616,152

687,261





Basic net assets per share

111.3p

111.9p

107.7p

EPRA net assets per share

111.8p

113.5p

109.4p

 

8. Investment properties

Unaudited 30 September 2013

Audited 31 March 2013


Freehold
£000

Long
leasehold
£000

Total
£000

Freehold
£000

Long
leasehold
£000

Total
£000

Investment properties







Opening balance

710,864

193,305

904,169

474,435

185,587

660,022

Acquisitions

125,734

138

125,872

487,979

81,319

569,298

Other capital expenditure

601

614

1,215

857

(168)

689

Disposals

(150,827)

(81,054)

(231,881)

(242,151)

(6,198)

(248,349)

Transfer of development properties

(2,565)

-

(2,565)

-

(77,000)

(77,000)

Revaluation movement

21,605

2,648

24,253

(1,606)

9,760

8,154

Movement in tenant incentives and rent free uplifts

4,828

(103)

4,725

(8,650)

5

(8,645)

Closing balance

710,240

115,548

825,788

710,864

193,305

904,169





Unaudited 30 September 2013

Audited 31 March 2013


Freehold
£000

Long
leasehold
£000

Total
£000

Freehold
£000

Long
leasehold
£000

Total
£000

Investment properties under development





Opening balance

5,624

77,000

82,624

-

-

-

Acquisitions

2,311

-

2,311

5,360

-

5,360

Other capital expenditure

1,913

3,750

5,663

24

-

24

Transfer from investment properties

2,565

-

2,565

-

77,000

77,000

Revaluation movement

1,521

9,000

10,521

240

-

240

Closing balance

13,934

89,750

103,684

5,624

77,000

82,624

Total investment properties

724,174

205,298

929,472

716,488

270,305

986,793

At 30 September 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 £929.5 million. The valuation of property held for sale at 30 September 2013 was £110.3 million (31 March 2013: £58.8 million).

Investment property in the course of construction at Clerkenwell Quarter, Islington in the previous period to 30 September 2012 was valued by the Directors at £13.1 million. At the request of the Financial Reporting Council, the Company agreed to restate the valuation for this property at 31 March 2012 in the 2013 financial statements reducing its value by £2.65 million.  This reduction has been reflected in the 30 September 2012 financial statements which have been restated accordingly.

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 £6.0 million (30 September 2012: £0.4 million, 31 March 2013: £1.3 million) in respect of lease incentives and rent free periods.

The historical cost of all of the Group's investment properties at 30 September 2013 was £884.6 million (30 September 2012: £475.9 million, 31 March 2013: £885.3 million).

Capital commitments have been entered into amounting to £37.3 million (30 September 2012: nil, 31 March 2013: £5.6 million) which have not been provided for in the financial statements.

9. Investment in associates and joint venture

Unaudited

Six months to

30 September 2013
£000

Unaudited

Six months to 30 September 2012
£000

Audited

Year to

31 March 2013
£000

Opening balance

120,919

161,575

161,575

Additions at cost

926

43,559

68,002

Share of profit in the period

3,512

13,845

15,969

Disposals

-

(119,010)

(119,165)

Profit distributions received

(40,883)

(2,435)

(5,462)

Closing balance

84,474

97,534

120,919

In July 2013 LSP Green Park Distribution Holdings Limited, in which the Group has a 50% interest,  disposed of ten out of its eleven assets by way of a corporate disposal of 3 companies.

The Group's one-third interest in Metric Income Plus Limited Partnership (MIPP) acquired 6 properties for £13.1 million (including purchase costs) in the period and its 40% interest in LSP London Residential Investments Limited acquired 149 apartments at Moore House, London in the previous year.


 

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 Distribution Holdings
£000


LSP London Residential Investments
£000



Metric Income Plus
£000


Unaudited
30 September 2013
£000


Unaudited
30 September 2012
£000

Audited
31 March 2013
£00

Summarised income statement

 

Net rental income


2,448

608

1,129

4,185

9,672

14,396

Administration expenses


(105)

(217)

(13)

(335)

(567)

(723)

Management fees


(246)

(97)

(64)

(407)

(1,060)

(1,385)

(Deficit)/surplus on revaluation of investment properties


-

(77)

907

830

11,966

11,926

Net interest payable


(2,961)

(543)

(317)

(3,821)

(5,614)

(7,857)

Movement in fair value of derivatives


2,397

197

139

2,733

(1,263)

(1,099)

Profit or loss on sale


327

-

-

327

-

-

Taxation


-

-

-

-

711

711

Profit after tax


1,860

(129)

1,781

3,512

13,845

15,969

 

 

LSP Green Park Distribution Holdings
£000


LSP London Residential Investments
£000



Metric Income Plus
£000


Unaudited
30 September 2013
£000


Unaudited
30 September 2012
£000


Audited
31 March 2013
£000

Summarised balance sheet

Investment properties

12,725

76,884

44,620

134,229

195,444

226,130

Other current assets

164

76

330

570

2,212

668

Cash

685

2,080

420

3,185

6,024

8,264

Current liabilities

(305)

(714)

(3,400)

(4,419)

(4,335)

(4,282)

Bank debt

(7,445)

(26,000)

(16,433)

(49,878)

(100,070)

(108,473)

Unamortised finance costs

85

341

351

777

1,141

1,335

Derivative financial
instruments

(96)

46

60

10

(2,882)

(2,723)

Net assets

5,813

52,713

25,948

84,474

97,534

120,919

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 Ltd.

 

10. Intangible assets

Unaudited

30 September 2013
£000

Unaudited

30 September 2012
£000

Audited

31 March

2013
£000

Cost




Opening balance

54,428

53,260

53,260

Additions

-

-

1,168

Closing balance

54,428

53,260

54,428

Amortisation




Opening balance

44,790

40,836

40,836

Amortisation during the period

2,120

1,983

3,954

Closing balance

46,910

42,819

44,790

Net carrying amount

7,518

10,441

9,638

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.

11. Trade and other receivables

Unaudited

30 September 2013
£000

Unaudited

30 September 2012
£000

Audited

31 March

2013
£000

Trade receivables

5,365

4,343

1,942

Performance fees receivable

2,712

4,229

3,457

Amounts receivable from property sales

8,533

-

-

Amounts receivable from income guarantees

-

240

-

Share-based payment prepayment

-

13,166

3,789

Corporation tax debtor

-

100

-

Prepayments and accrued income

4,648

594

1,057

Other receivables

322

139

1,486

At end of period

21,580

22,811

11,731

All amounts fall due for payment in less than one year.

Trade receivables comprise rental income which is due on contractual payment dates with no credit period.

A provision for doubtful debts is made based on estimated irrecoverable amounts determined by past experience and knowledge of the tenants' circumstances.  The amount charged to the income statement in respect of doubtful debts was £188,000 (30 September 2012 and 31 March 2013: nil).

12. Cash and cash equivalents

Cash and cash equivalents include £21.8 million (30 September 2012: £4.0 million, 31 March 2013: £9.6 million) retained in rent and restricted accounts which are not readily available to the Group for day to day commercial purposes.

13. Trade and other payables

Unaudited

30 September 2013
£000

Unaudited

30 September 2012
£000

Audited

31 March

2013
£000

Trade payables

3,078

879

2,096

Amounts payable on property acquisitions and disposals

52,536

393

4,499

Rent received in advance

8,744

5,686

8,051

Accrued interest

2,448

2,074

2,739

Other payables

1,719

643

1,263

Other accruals

5,116

1,518

7,584

At end of period

73,641

11,193

26,232

The Group has financial risk management policies in place to ensure that all payables are paid within the credit time frame.

14. Borrowings

Unaudited

30 September 2013
£000

Unaudited

30 September 2012
£000

Audited

31 March

2013
£000

Secured bank loans

349,779

234,544

464,564

Unamortised finance costs

(4,995)

(2,948)

(4,236)

At end of period

344,784

231,596

460,328

The bank loans are secured by fixed charges over certain of the Group's investment properties with a carrying value of £680.2 million and are repayable within two to five years of the balance sheet date.

 

Details of the fair value of the Group's derivative financial instruments that were in place at 30 September 2013 are provided below:

 

Protected rate

 %

Expiry

Audited

Market value

31 March 2013

£000

Movement recognised in income statement  £000

Unaudited

Market value

30 September 2013

£000

£38.1 million swap

2.69

January 2015

(1,487)

1,487

-

£55.3 million swap

3.77

October 2014

(2,865)

2,865

-

£25.0 million fixed rate

2.03

July 2016

(1,184)

443

(741)

£17.6 million fixed rate

1.31

July 2016

(414)

247

(167)

£61.8 million swap

1.07

July 2017

(874)

1,361

487

£100.0 million swap

4.00

March 2016

23

(23)

-

£4.0 million cap

4.00

July 2015

1

(1)

-

£40.7 million swap

1.19

July 2015

(879)

879

-

£17.7 million cap

2.00

June 2016

36

40

76

£5.8 million cap

2.00

June 2016

63

74

137

£20.0 million swap

1.48

October 2015

(477)

477

-

£20.0 million swap

2.03

October 2016

(235)

235

-

£10.0 million swap

1.56

October 2016

(329)

329

-

£10.0 million swap

1.19

October 2016

(199)

199

-

£10.0 million swap

1.20

October 2016

(199)

199

-

£10.5 million fixed rate

3.34

April 2016

(881)

232

(649)

£17.5 million cap

3.00

April 2016

17

17

34

£40.7 million swap(1)

2.07

July 2018

      -

(1,492)

(1,492)

£30.0 million cap

2.00

July 2018

-

719

719

£50.0 million swap

3.05

August 2018

-

(3,501)

 (3,501)

£70.0 million cap

2.00

August 2018

-

1,705

1,705

Total all derivative financial instruments

(9,883)

6,491

(3,392)

(1)Increases to £63.72 million on 30 October 2013

All derivative financial instruments are non-current interest rate derivatives, and are carried at fair value following a valuation as at 30 September 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.


15. Share capital

Unaudited

30 September 2013
Number

Unaudited

30 September 2013
£000

Audited

31March

2013
Number

(Audited)

31March

2013
£000

Authorised





Ordinary shares of 10p each

Unlimited

Unlimited

Unlimited

Unlimited

Issued, called up and fully paid





Ordinary shares of 10p each

628,043,905

62,804

628,043,905

62,804

In August 2013 the Company granted options over 2,029,344 ordinary shares under its Long Term Incentive Plan and acquired the same number of shares through its Employee Benefit Trust, at a cost of £2.3 million.

16. Reserves

The following describes the nature and purpose of each reserve within equity:

Share capital

The nominal value of shares issued.

Capital redemption reserve

Amounts transferred from share capital on redemption of issued ordinary shares.

Other reserve

A reserve relating to the application of merger relief in the acquisition of 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.

17. Related party transactions and balances

The interests of the current and former Directors and their families in the shares of the Company are as follows:

Ordinary shares of 10p each
30 September 2013

Ordinary shares of 10p each

30 September 2012

Ordinary shares of 10p each

31 March 2013

Patrick Vaughan

16,619,997

18,383,510

16,619,997

Andrew Jones

2,243,479

-

2,178,979

Martin McGann

3,341,585

3,823,795

3,341,585

Charles Cayzer

-

-

-

James Dean

20,000

-

-

Alec Pelmore

120,500

-

120,500

Humphrey Price

2,015,733

-

2,015,733

Andrew Varley

47,000

-

47,000

Philip Watson

94,000

-

94,000

 

There has been no change in the beneficial and non-beneficial shareholdings of the Directors between 30 September 2013 and the date of this report.

 

Management fees receivable from the Group's joint venture arrangements in which it has an equity interest were as follows;

Related Party

 

 

 

Group
Interest

Six months to

30 September 2013

£000

Six months to

30 September 2012

£000

Year to

31 March 2013

£000

LSP Green Park Property Trust

31.4%

-

7,400

6,600

LSP Green Park Distribution Holdings

50.0%

492

700

1,400

LSP London Residential Investments

40.0%

242

100

400

Metric Income Plus Partnership

33.3%

193

-

-

In addition performance fees receivable were reduced by £0.8 million in the six months to 30 September 2013.

18. Post balance sheet events

On 15 October 2013 the Group completed the acquisition of the Dartford Heath Retail Park for £9.6 million (Group share £3.2 million) and on 31 October the sale of Botley Road, Oxford for £12.4 million (Group share £4.1 million), both through its investment in the Metric Income Plus Partnership (MIPP).  Further debt of £11.5 million (Group share £3.8 million) was drawn by MIPP.

On 13 November 2013 additional funding of £41.7 million was received from Helaba to refinance property acquisitions at Bedford and Crick.

On 18 November 2013 the Group completed the acquisition of 10 Odeon cinemas for £80.6 million, which was funded in part by a new facility arrangement with Lloyds Bank.

On 21 November 2013 the Group completed the acquisition of the Travis Perkins Distribution Unit in Northampton for £9.0 million.

On 27 November 2013 the Group completed the sale of two retail parks in Mansfield and Sheffield for £19.2 million.

On 30 September 2013 the three year lock-in period for certain employees created on the internalisation of the management company in 2010 came to an end.  Following this, on 27 November 2013, the Company approved a nil-cost option award for Martin McGann over 167,885 ordinary shares under the terms of the Company's Long Term Incentive Plan.

 

Directors' responsibility statement

The Directors are responsible for preparing the condensed set of financial statements, in accordance with applicable law and regulations. The Directors confirm that, to the best of their knowledge:

 

·     This condensed set of financial statements has been prepared in accordance with IAS 34 "Interim Financial Reporting", as adopted by the European Union, and

·     This condensed set of financial statements includes a fair review of the information required by Sections DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

 

By order of the Board

 

Andrew Jones

Chief Executive

 

 

MARTIN MCGANN

Finance Director

 

28 November 2013



Independent review report to LondonMetric Property Plc

We have been engaged by the company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2013 which comprises the Group income statement, the Group balance sheet, the Group statement of changes in equity, the Group cash flow statement and related notes 1 to 18.  We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board.  Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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, for our review work, for this report, or for the conclusions we have formed.

Directors' responsibilities

The half yearly financial report is the responsibility of, and has been approved by, the Directors.  The Directors are responsible for preparing the half yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the company are prepared in accordance with IFRSs as adopted by the European Union.  The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting," as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six months ended 30 September 2013 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Deloitte LLP

Chartered Accountants and Statutory Auditors

London, United Kingdom

28 November 2013


This information is provided by RNS
The company news service from the London Stock Exchange
 
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