LondonMetric Property H2 2025 Earnings Report

LondonMetric Property EPS Results

• Actual EPS: GBX 15.73
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

LondonMetric Property Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

LondonMetric Property Announcement Details

• Quarter: H2 2025
• Date: 5/20/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 20, 2025
• Conference Call Time: 4:00AM ET

LondonMetric is a FTSE 100 REIT that owns and manages desirable real estate that meets occupiers demands and delivers reliable, repetitive and growing income-led returns and outperforms over the long term. As a real estate owner, we look to help occupiers, communities and stakeholders grow, thrive and revitalise in an evolving and complex world.

LondonMetric Property H2 2025 Earnings Call Transcript

Key Takeaways

• Net rental income rose to £390m (+123% year-on-year), driving EPS up 21% to 13.1p and enabling an 18% dividend increase to 12p for FY2025.
• Asset management initiatives delivered £15m of new income with like-for-like growth of 4.2% and a 3.1% ERV increase, and the company targets a further £27m of rental uplifts.
• Executed £685m of disposals and acquisitions across 104 assets, expanding the portfolio to just under £6.2bn of triple net income properties.
• Achieved a sector-leading EPRA cost ratio of 7.8% and secured a BBB+ credit rating, supporting diverse debt facilities, a 4% debt cost and a conservative 32.7% LTV.
• Recommended offer for Urban Logistics REIT values it at £700m (22% premium), would boost market cap to ~£4.5bn and raise logistics exposure from 46% to 55%.

Presentation

[Andrew Jones, CEO at LondonMetric]

Morning, ladies and gentlemen, and welcome to LondonMetric's full-year results for the period ending the 31st of March 2025. Use your usual arrangement this morning. I'm going to start with an overview of the year gone, go through some of the highlights of the financials. I'll get all the good numbers out of the way. I'll pass over to Martin, and he can take you through the detail and hopefully keep you interested. I will come back with the exciting...

[Andrew Jones, CEO at LondonMetric]

It's going to take longer.

[Andrew Jones, CEO at LondonMetric]

Then I'll come back and talk about the market and the activity that we've executed before finishing up with our thoughts for the period ahead, both at a sector level, but also at a, obviously, at a portfolio level. We'll then open up for Q&A, both in the room and on the phones. If we start with an overview of the last 12 months, the company's continued to build a leading portfolio of triple-net income assets. The portfolio's up at just under GBP 6.2 billion and continues to demonstrate exceptional income characteristics. Some strong numbers with an earnings per share up 21%. This allowed us to progress our dividend for the 10th year in succession, which is now up 18%. We continued to capture the cost synergies that we said we would this time last year as we were closing the LXi takeover.

[Andrew Jones, CEO at LondonMetric]

That has allowed us a sector-leading EPRA cost ratio of 7.8%. Martin will come on to talk about that in a little bit more detail and our ambitions to reduce that even further. Our portfolio continues to be aligned to the strongest thematics: logistics, convenience, groceries, healthcare, and entertainment. I will go on to talk about those four key sectors later on in the presentation. Over the year, we have continued to add new income through rent reviews, lease renewals, asset management initiatives. GBP 15 million of new income in the year, like-for-like income growth of 4.2%, and an increase in our ERV of 3.1%. The portfolio continues to be reversionary, and we remain confident that we will capture at least GBP 27 million of further rental uplifts through those three various initiatives over the next couple of years. Our scale is continuing to drive economies of opportunities.

[Andrew Jones, CEO at LondonMetric]

We said at the time of the LXi takeover that actually getting bigger was not only going to deliver cost economies, it was also going to deliver opportunities too. We are unlocking those external opportunities with further M&A activity. I'll come on to talk about that in limited detail later on because I can't actually talk about anything else that isn't already public. We have, as you can see, over the last 12 months, executed on GBP 685 million of investment activity across 104 assets. That's been equally balanced between sales and acquisitions. I'll come on to talk about that further. Our recently assigned BBB+ credit rating is giving us greater capital market optionality. That, again, is something that Martin will come to talk about later on in the presentation as we talk about our refinancing options in the years ahead.

[Andrew Jones, CEO at LondonMetric]

Turning to the financial numbers or the highlights, these are all the good ones. Net rental income at GBP 390 million is up from GBP 175 million 12 months ago. That's driven our earnings up to GBP 268 million. That's an increase of 120%. It's just driven our earnings per share up, as I said, 21% to GBP 13.10 and has allowed us to declare this morning a final dividend of GBP 3.30, which brings GBP 0.12 for the year, an increase of 17.6%. We've also announced this morning an intention to pay a Q1 dividend of GBP 0.03 a share, which is an increase of just over 5% on our Q1 last year. I've already referenced the portfolio value, which is up 2.5%. That's helped drive an NTA increase of 3.9%-199.2%.

[Andrew Jones, CEO at LondonMetric]

Our activity, both in terms of both M&A and also investment activity, both sales and purchases, has meant that we've retained an extremely conservative LTV at just under 33% at 32.7%. What can I tell you about our recommended offer for Urban Logistics REIT? This is all in the public domain, so I'm maybe not telling you anything that you haven't already read. It's an offer that values the company at GBP 700 million. It's a mixture of shares and cash, and it represents a 22% premium to their undisturbed share price. We think that this is an excellent transaction for both shareholders, and it will consolidate our position as the U.K.'s leading triple-net REIT and increases our market capitalization to circa $4.5 billion.

[Andrew Jones, CEO at LondonMetric]

The combined portfolio of GBP 7.3 billion will continue to be aligned to what we call structurally supported sectors, and it increases our logistics exposure from 46%-55%. Absent sales, obviously, but that will be the spot headline number. It offers us potential for cost and operating synergies through increased economies of scale. As I've already intimated, we actually think that there's more to shoot for in reducing our EPRA cost ratio with a target of 7.5% or lower. We also believe that our more active asset management approach will capture embedded reversions, as it has done within our own portfolio, and we expect to be able to use those skill sets across a wider portfolio in the coming periods. The offer has been structured to ensure that we retain our conservative balance sheet with the LTV at 35% and an all-in cost of debt at 4%.

[Andrew Jones, CEO at LondonMetric]

Looking at how the portfolio will evolve, pie chart, which I'll come on to talk about, the left-hand one in a little bit more detail later on in the presentation, but that's our current portfolio today. You can see the Urban Logistics pie chart in the middle, and then this is what the pro forma would look like: $7.3 billion of gross assets. As I said, logistics at 55%. Urban Logistics would be actually at 40%, and that is, as you know, our strongest conviction call. As well as that, the portfolio will increase not only our income, but also the asset and geographical granularity of our portfolio, which is also important to us. Average lot size, as you can see if you do the sums on the right-hand column, is only GBP 11 million, which actually is quite important. I'll come on to talk about it later.

[Andrew Jones, CEO at LondonMetric]

It's quite important in today's investment market where actually we're seeing more liquidity for smaller lot sizes than we are for bigger lot sizes. That is all a factor of the debt markets, despite bankers' efforts to give us the tightest possible margins that they were able to. Thank you. I really appreciate it. The swap rate is more elevated than it has been for a while, albeit it is off its peak, which is great news, but it's not as low as I'd like it to be. Smaller average lot sizes is a distinct positive. I can't say any more. Before I get into trouble, I will forward hand over to Martin.

[Martin McGann, CFO at LondonMetric]

Morning. Thank you, Andrew. I think when I stood here last year and I made a little mental note to myself, "Don't do an M&A transaction three weeks before the year end." My little mental note to myself this year is, "Don't do two M&A transactions around the year end." Our focus this year has been on integration following last year's very transformational corporate acquisitions. These results reflect the full benefit of that activity. We've delivered very significant earnings growth and dividend progression. I'm pleased to report that our net rental income is GBP 390.6 million, an increase of 123% over last year. In addition to GBP 207.5 million of additional rent from LXi, we've included just under GBP 6 million of additional rent from CTPT and rent from our other acquisitions of GBP 9.5 million. Our rent collection remains exceptionally strong. We've collected 99.5% of rents during the year.

[Martin McGann, CFO at LondonMetric]

Our gross to net income leakage remains very low at 1.2%, and our administrative overhead for the year is GBP 27.1 million. Our EPRA cost ratio continues to be sector-leading at 7.8%, a little better than I forecast this time last year as we have taken significant economies out of LXi and the CTPT business that we acquired. The increase in overheads in the year reflects increased headcount and remuneration costs. Our headcount is now 48, up from 35 prior to the LXi acquisition. That is a combination of employees coming to us from LXi, but also new recruits to ensure that we have the right level of resource and the right skills for managing the enlarged group. Our net finance costs have increased to GBP 97.1 million compared to GBP 37.4 million last year.

[Martin McGann, CFO at LondonMetric]

We acquired an additional $1.2 billion of debt from LXi at an average rate of 5.2% compared to LMP's cost of debt at that time of 3.3%. This, together with costs attributed to the income strip liability, are the main contributory factors to the increase in finance costs. Despite this increase in finance costs, the tighter cost control and our focus on rental income growth has driven that EPRA earnings to GBP 268 million or GBP 13.10 per share, an increase of 20.7% over last year. That supports the increase to the dividend for the year to GBP 0.12 a share, providing very strong 109% dividend cover and full cash cover for the dividend. The trading performance has been strong, with portfolio valuations increasing by GBP 106 million in the year, allowing us to report IFRS profits of GBP 348 million compared to GBP 119 million last year.

[Martin McGann, CFO at LondonMetric]

Whilst the income statement this year demonstrates the significant impact of last year's acquisitions, the balance sheet already reflected that increased scale of the enlarged group, the LXi deal having happened on the 5th of March. The value of the portfolio is now GBP 6.2 billion. Whilst much of our focus this year has been on the disposal of non-core assets, the combination of acquisitions, development expenditure, and accretive CapEx has actually exceeded our disposals by GBP 50 million. That, together with the revaluation uplift to GBP 106 million, has contributed to that increase in the portfolio value. Gross debt, which I'll come on to in a moment, is GBP 2.07 billion, and the cash balance is GBP 81 million. The other net liability position at the period at year end is GBP 93 million. Rents in advance of GBP 63 million are the main component of that number.

[Martin McGann, CFO at LondonMetric]

In summary, our EPRA net tangible assets at the year end were GBP 4.07 billion or GBP 199.20 per share, an increase of 3.9% on last year, comprising surplus earnings and revaluation uplifts, providing a 9.7% total accounting return. As I said a moment ago, our gross debt balance is now GBP 2.07 billion. The GBP 1.2 billion of debt added to our balance sheet through the LXi acquisition was both shorter dated and more expensive than the existing LMP debt. The GBP 700 million refinancing undertaken at the point of acquisition was on more favorable terms of longer maturity and cheaper. Since that time, our increased scale has helped us secure an investment-grade credit rating with Fitch of BBB+. Our financial position has been further strengthened and diversified in the year.

[Martin McGann, CFO at LondonMetric]

We have entered into a new GBP 175 million revolving credit facility with SMBC, a new lender to us on terms ahead of our existing arrangements in terms of maturity and price. We have extended the maturity by one year on GBP 975 million of our revolving credit facilities. Consequently, and despite the passing of one year, our debt maturity now stands at 4.7 years compared with 5.4 years last year. Our average cost of debt, as Andrew said, is 4% compared to 3.9% last year. Our interest cover ratio is 4.2x, and our net debt to EBITDA stands at 6.4x, comfortably within the Fitch upper target of 8.5x. Our policy continues to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements.

[Martin McGann, CFO at LondonMetric]

We retained all of LXi's hedging on acquisition and have required GBP 339 million of current and forward starting derivatives in the year and extended protection on a further GBP 150 million of debt at an average rate of 2.9%. Our drawn debt, therefore, is fully hedged at the year end and through until April 2027. We expect floating rate debt to remain substantially covered until its maturity. Our LTV, as Andrew said, is slightly better than last year at 32.7% compared to 33.2%. Looking forward, we will continue to manage our debt arrangements to ensure that refinancing risk is mitigated and that we are able to take advantage of that increased scale to diversify our funding sources. Since the year end, we have entered into two further facilities for GBP 150 million with JPMorgan and GBP 200 million with Lloyds.

[Martin McGann, CFO at LondonMetric]

These facilities mirror the SMBC facilities in terms of price and duration that I mentioned earlier. We have GBP 350 million of former LXi debt, which matures this autumn, and we have ample resources to cover its repayment. We have prioritized the sale of weaker and non-core assets acquired through our corporate acquisitions and have successfully substituted approximately GBP 600 million of assets held in secure facilities to facilitate that disposal program. Further to that, our successful credit rating now allows us to plan for possible future debt capital market activity in the form of a public bond issue and further private placement activity as we plan for debt maturities coming at us in finance year 2027 and finance year 2028.

[Martin McGann, CFO at LondonMetric]

Continuing to look forward, our contracted rent roll at the year end stands at GBP 340.4 million, which will grow with the inclusion of rent on the Highcroft acquisition and reversion within the existing LMP portfolio to GBP 373.5 million. Looking further forward, the Urban Logistics acquisition is expected to add GBP 63 million of contracted rent and short-term reversion within that portfolio of GBP 14.4 million. The rent roll will increase as a result of that to over GBP 450 million. This will generate significant earnings growth, which supports our confidence that we will continue to be able to grow our dividend. As Andrew mentioned earlier, we've announced our intention to increase our Q1 dividend for FY26 to GBP 0.03 per share, which is an increase of 5.3% on the same period last year.

[Martin McGann, CFO at LondonMetric]

Finally, a look back, which puts the increase in the rent roll into context, clearly demonstrates that in the last 11 years now, we've been able to increase earnings per share more than threefold, and we're in the 10th year of dividend progression with excellent dividend cover. In particular, this year has marked a material step up both in earnings and in dividend. Our total property return is strong with an 11-year CAGR at 9%, and a shareholder return driven both by share price appreciation, but most significantly by dividends, equates to a compound annual growth rate in excess of 10%. On that note, I'll hand back to Andrew.

[Andrew Jones, CEO at LondonMetric]

Thanks, Martin. Just a brief comment upon the investment strategy, just to remind you of the four key subsectors that we are invested in. The portfolio continues to be aligned to the strongest thematics and owning mission-critical assets within those led to strong occupiers. Logistics remains our strongest conviction core, particularly urban logistics, with incredible rent reviews capturing the reversions, which I will come on to talk about later. Our entertainment and leisure investments continue to benefit from the shift from material to experience. Convenience, retail, and grocery builds on the thematic that time is an increasingly more valuable commodity. Our healthcare investments continue to enjoy a strong demographic tailwind.

[Andrew Jones, CEO at LondonMetric]

Diving down into the numbers in a bit more detail, you can see there are total assets of GBP 6.155 billion, a net initial yield of 5.1%, capital value appreciation of 2.5% helped deliver a total property return across the portfolio of 8.3%. Strong performances across all four key sectors. Logistics, 7.1%, driven by a 7.6% total property return across the urban logistics investments. Strong returns both from entertainment and convenience, which enjoy slightly higher starting yields than our logistics investments. Our healthcare delivered a 9.9% return, where we have seen some small yield compression allied to guaranteed rental growth. I have touched on our investment activity. If we start with disposals first, as I have already referenced, the investment markets continue to be influenced by the five-year swap and the overall cost of debt. There is, however, healthy activity across the winning sectors.

[Andrew Jones, CEO at LondonMetric]

As I mentioned earlier, we are seeing the greatest liquidity for the slightly smaller lot sizes, with owner-occupiers, private businesses, family offices all active across the investment market. In the year, we sold GBP 342 million, 72 assets. That works out an average lot size of about GBP 4.75 million. As the pie chart shows you at the bottom, we have been active in disposing of assets and exiting sectors. Whether or not it's assisted living, hotels, car dealerships, offices, training centers, large-format food stores, etc., I mean, Will and the team have been incredibly active in getting out of what we consider to be non-core sectors or non-core assets. In the year, as well as selling GBP 342 million, that included GBP 202 million worth of LXi assets across 54 individual properties. That is roughly about 7.5% of the total portfolio that we acquired a year earlier.

[Andrew Jones, CEO at LondonMetric]

As you can see there, bang in line with the prevailing book values. Looking at acquisition activity, again, as I've already intimated, we remain a thematic investor, allocating our capital to the structurally supported sectors, with 32 assets acquired for a total of GBP 343 million in the year, 87% of which were invested in the logistics sector. We're continuing to see five pockets of opportunities, as highlighted here on the pie chart, whether or not it's pension funds increasingly looking to exit direct ownership of real estate. Sale and leasebacks, with some of our key operators, is a great source of opportunity for us, as indeed are forward fundings from developers who are finding it difficult to get development finance from lending banks. We've also benefited from open-ended funds receiving redemptions and the need to monetize assets quickly.

[Andrew Jones, CEO at LondonMetric]

Obviously, our activity in the M&A arena has allowed us access to around GBP 1.2 billion worth of properties, which we remain hopeful of securing. You can see then the average acquisition yields of 6% net initial with a reversion yield of just under 7%, 6.8% to be precise. Asset management, this is probably one of my favorite slides. Our activity reinforces one of the best asset management teams in the industry with 340 initiatives. That is effectively one a day and certainly demonstrates the effectiveness of being in the office five days a week, at least five days a week. Like-for-like income growth, 4.2% portfolio occupancy, post-period end is up at 99%. We have already referenced the reversion that we expect to capture over the next couple of years of GBP 27 million. We have continued to improve our properties, which we always do.

[Andrew Jones, CEO at LondonMetric]

I mean, I always find it quite amusing when people say, "Worry about what are you going to do about your EPC ratings." I mean, the best money we allocate is to our own properties. And that's evidenced by not only our investment activity, but also the fact the CapEx program that we commit to some of our older assets to improve their letting and rental potential, but also their EPC ratings. A to C are up to 92%. Our A to Bs are up to 58%. The GBP 15 million additional income that we secured, GBP 9.4 million from rent reviews, that's an average uplift over a five-year period of 17%, with open market reviews being settled on an average uplift of 40%.

[Andrew Jones, CEO at LondonMetric]

have highlighted the performance of the urban portfolio with an average uplift across that portfolio of 24% and open market reviews settled on average at 48% above previous passing rents. That is why it is our strongest conviction core. Our asset management has continued to look at lease rig years and lettings, adding amenities, 68 lettings, GBP 5.9 million, on an average uplift on previous passing rents of 25% and a very impressive WALT of 19 years. Last two slides. First of all, the outlook. We have assembled a GBP 6 billion portfolio that is well let, is all weather, and enjoys triple net income characteristics. As I have already touched on, macro events will continue to influence investor sentiment across the real estate sector, with gilt and swap rates having a massive impact on investment markets.

[Andrew Jones, CEO at LondonMetric]

However, we are optimistic that continued interest rate cuts, decelerating inflation, and wage growth will continue to bring more confidence. The U.K. consumer remains incredibly resilient with full employment and real wage growth. In the real estate sector, we think polarization will continue and that the sectors with the strongest fundamentals will continue to win out. To take a phrase from Mike, it's all about beds, sheds, and breads. Disruptive sectors are seeing CapEx, OpEx, and letting incentives continuing to dilute returns. We remain convinced that there are opportunities for external growth, both at an asset level, a portfolio level, a funding level, and obviously future M&A. The market dynamic is continuing to create further opportunities. There will be more consolidation in the listed markets. There are also ongoing structural shifts in how pension funds and institutions hold their direct real estate that will create opportunities for us.

[Andrew Jones, CEO at LondonMetric]

Scale provides, as Martin's already touched on, better access to cheaper and more diverse debt. Finally, our focus for 2026 as we look at the current financial year and 12 months ahead. Full occupancy, exceptional income with longevity and certainty of income growth underpins our triple net portfolio. We continue to invest in the winning sectors. We will look to own mission-critical, high-quality assets that fit with our triple net strategy. We enjoy exceptional income and growth and will continue to capture the embedded reversion and the value enhancement opportunities through our active asset management program. We will look to improve our efficient and scalable platform with a wider range of opportunities that will continue to propel our earnings and grow our dividend for the foreseeable future. Thank you very much. That is the end of the formal presentation. Thank you for listening. Thank you for attending.

[Andrew Jones, CEO at LondonMetric]

I'm very, very happy to open up to Q&A. If we start in the room and then maybe we can go to the screens later, assuming there is anybody on the screen. Any questions? Max? Just finished his sandwiches.

[Max Nimmo, Equity Analyst at Deutsche Bank]

Thank you very much for the sandwiches.

[Max Nimmo, Equity Analyst at Deutsche Bank]

Max Nimmo at Deutsche Bank. I've got a couple of questions if I can. You talked obviously about the urban logistics strategy, but can you maybe talk a little bit about regional and the mega box strategy and kind of where that sits in your thinking and as part of this kind of enlarged portfolio? Second question, if I can, is on swap rates. You mentioned just in the past that they're not quite where you'd want them to be. I think in the past you've kind of said around 3.5% was where you'd like things to be. Do you, I guess the question is, do values need to, sorry, does the property market need to kind of adjust its assumptions on where that should be and do values need to adjust further on that front?

[Max Nimmo, Equity Analyst at Deutsche Bank]

Final question, if I may.

[Andrew Jones, CEO at LondonMetric]

Stop, stop, stop, because I'm going to forget all the questions.

[Max Nimmo, Equity Analyst at Deutsche Bank]

Yeah, no, okay.

[Andrew Jones, CEO at LondonMetric]

You're kidding me. I'm a real estate guy, yeah? What was the first one?

[Max Nimmo, Equity Analyst at Deutsche Bank]

Yeah. I don't even remember myself now. Regional box.

[Andrew Jones, CEO at LondonMetric]

Oh, okay. Okay. Look, we like them. We think that regional and mega have a place in our portfolio. They do not enjoy the same organic rental growth dynamics that you get in urban, generally because a lot of the lease structures are indexed as opposed to open market. Therefore, it is difficult to capture the real pizazz that we are seeing in the urban logistics space. We are very, very happy to own them. I mean, in the period, we announced a GBP 74 million funding of a 400,000 sq ft box in Avonmouth that is lent to Marks & Spencer, which actually has the best rent review you can ever have, which is the higher of open market or indexation sort of thing. We quite like those. That is fine. It is just the fact we like to get greater exposure to organic rental growth as opposed to the contractual.

[Andrew Jones, CEO at LondonMetric]

I mean, I think contractual rents in the portfolio today are around about mid 70%. Obviously, with the Urban transaction, that will fall and that would be one of the attractions. It's not that we don't like them, it's just that we want to get greater access to the market dynamics. The second question was swap rates, wasn't it?

[Max Nimmo, Equity Analyst at Deutsche Bank]

Yeah, just do property values need to correct more?

[Andrew Jones, CEO at LondonMetric]

Oh, no, I think, look, I think that property values have to reflect interest rates because I think interest rates are the yardstick by which all investments should be assessed. Now, I think that if you're invested in a great sector, if you've got a great asset where you've got organic income growth, then I think that the yields look pretty well set. I mean, we've talked about buying off an initial yield of 6 with a reversion to 6.8 and maybe with further growth we get to 7. You compare that against our current, what would be our marginal cost of debt today, if you take the swap rate, say at 380, you add a margin of 130 in, you're at 510, you add in a few undeserved fees.

[Martin McGann, CFO at LondonMetric]

Did you get that, guys? 130.

[Andrew Jones, CEO at LondonMetric]

You're in at 52. I actually can't believe I didn't go lower, but anyway, I'll keep the audience. You're in it just over five. You're buying an asset at six, I think that's fine. I think my views on some of the ex-growth legacy sectors are pretty well known where there is no growth and actually your values are just going to melt away. I think that there's nothing wrong. By the way, I've lived in a period where we've had property yields way below the cost of debt, but then we've had unbelievable confidence in growth that will break through that. I think for the wider sector is what I talk about. I think that for the wider sector, I think you will see more liquidity when swap rates get to three and a half and preferably below.

[Andrew Jones, CEO at LondonMetric]

When you say my preference is for three and a half, my preference is for two and a half.

[Max Nimmo, Equity Analyst at Deutsche Bank]

Great. Thank you.

[Andrew Jones, CEO at LondonMetric]

What's the third question? Oh, yeah, the third.

[Max Nimmo, Equity Analyst at Deutsche Bank]

No, no, you've answered it.

[Andrew Jones, CEO at LondonMetric]

Oh, have I? Oh, great.

[Max Nimmo, Equity Analyst at Deutsche Bank]

Thank you.

[Andrew Jones, CEO at LondonMetric]

Clever. Rob?

[Rob Jones, Operations Oversight Analyst at BNP Paribas Exane]

Great. It's Rob James, BNP Paribas. Just following on from Max's question. Martin, obviously you've got a credit rating now, Triple B Plus. Any kind of color you can give in terms of plans to utilize that going forward?

[Martin McGann, CFO at LondonMetric]

Look, Rob, his requirement of my team is optionality. When you look at that debt maturity in the autumn, we were always concerned. Sitting here last year, if rates had fallen by now, we would have probably refinanced it. Today, we probably would not refinance it. The new facilities we have put in since the year-end have given us the ability, we have got the money to do that. We are also preparing the paperwork for a public bond issue and for a private placement because I think we need to be in a position that when rates do come in and it is good to go, we want to be able to go. We do not want to say, "Look, give us two weeks while we sort the paperwork out." It is in play.

[Martin McGann, CFO at LondonMetric]

Public bond pricing is not quite where Andrew was talking about, but it's not so far off now. Private placement is still more expensive.

[Rob Jones, Operations Oversight Analyst at BNP Paribas Exane]

Okay, understood. Andrew, if you put on a kind of small Buffett hat momentarily, one of your comments that you made earlier today was talking about time is an increasingly valuable commodity. Obviously that plays in nicely to some of the subsectors that you want to grow, like convenience, for example. If I think about the value of time, I think about it in two ways. One, I could think that it would increase broadly in line with wage growth because it affects value of time when you're not having to work at roughly similar kind of value per hour, but also the availability of time, right? If we go back 50, 100 years, the availability of time previously was very, very low because people did not have things like washing machines, whatever it might be.

[Rob Jones, Operations Oversight Analyst at BNP Paribas Exane]

Roll forward to today, the driver of increased availability of time is things like AI or productivity benefiting measures, whatever it might be. When you say time is an increasingly valuable commodity, I don't disagree with the value point, but I wonder if there's a debate around the availability of it and then how that links into your strategy going forward.

[Andrew Jones, CEO at LondonMetric]

I referenced it with our investments in groceries and a view that 20 years ago, to your point, you might have spent an hour and a half or something going around your 130,000 sq ft. Well, yours would not have been a NASLA superstore, but mine was. That would take you an hour and a half, and that is time you are not going to get back. The chances of my children spending more than 30 minutes doing a grocery shop is pretty low. Therefore, there is an increasing view that it is convenience, therefore trumps experience in a grocery shop. That is why we are not big format food stores, why we are convenience food stores. That also goes to why we actually would rather invest in out-of-town retail parks than we would in the wider shopping center market.

[Andrew Jones, CEO at LondonMetric]

You don't want me to get onto offices and the fact that people are demanding more optionality about where they want to work and whether or not they need to actually arrive in their office. Fortunately, we're five. What's our strap line? Five together to wherever. That will have an impact on offices as well, probably. The offices doesn't fit the triple net strategy anyway, so we don't have to get into that. I don't want to offend any more people than I already have.

[Rob Jones, Operations Oversight Analyst at BNP Paribas Exane]

Thank you very much. Sorry.

[Sam Knott, Analyst at Company Representative]

Hi, Sam Knott from Colitics . Thanks for the presentation. First one, maybe a simple one. You talk about reducing your EPRA cost ratio. Is the plan there to reduce absolute costs or sort of purely naturally by scaling up the size of the company, the rent roll?

[Andrew Jones, CEO at LondonMetric]

Hopefully both. Let's deal with the first bit. I mean, we will benefit from a full year of the savings that we've already printed or we've already executed from, for example, the LXi integration. You do not make savings. They do not all come through immediately. We will be able to see the annualized impact of that in the current financial year. Obviously, as the rent roll gets bigger, then obviously we are able to push that through. EPRA cost ratio is an important metric for our business strategy. I know some people do not think it is that important, but we do. That is why we only have actually 47.4 people, not 48, in our business. That is because somebody works two days a week, so I have downparroted it.

[Sam Knott, Analyst at Company Representative]

Thanks. On the point around you've been very clear on the sort of growth embedded in the portfolio over the next couple of years. When we're looking at more long-term growth rates, do you see, and maybe between your sectors, it's different, where do you see those long-term growth rates? Are they sort of inflation plus a bit, or do you think they're more in line?

[Andrew Jones, CEO at LondonMetric]

Look, we have a portfolio that is exposed to both inflation and to the wider market. I think the organic rental growth in the wider real estate market is actually hard to identify. I think it is around bedsheds and breads, to again quote Mike, and that we think will give us better than inflation. We are very happy to have an inflation floor too. As I indicated in my answer to Max, we would be quite happy to have a little bit more of the market exposure in certain subsectors. I do not think organic rental growth is universal across the wider real estate market.

[Sam Knott, Analyst at Company Representative]

Thank you.

[Andrew Jones, CEO at LondonMetric]

We're probably limited on questions because so many of the team are actually offside with so many advisors involved in the M&A transactions. That's probably why we're not allowed anymore, is it? Matthew, you must have a question.

[Andrew Jones, CEO at LondonMetric]

[audio distortion]

[Matt Norris, Managing Director at Gravis]

Matt Norris from Gravis. Just looking to the future and drawing on from this question about rental growth and cost of debt. As you look to the future, as you look to 2027, 2028, and the repricing of debt, what gives you confidence that you can grow rents faster than your cost of debt increases and that we continue to see future dividend growth?

[Andrew Jones, CEO at LondonMetric]

Yeah, look, I mean, rental growth or income growth is a factor of two things. It's obviously organic rental growth. There's inflation, obviously heavily linked. The big bit for us is actually going to be asset management, how we can add value, we can create new opportunities. I mean, actually, when you look at our activity, where's my slide gone? If I go to slide 20, you look at the rent reviews have delivered GBP 9 million of rental growth, which is what you would all maybe could have predicted that. Actually, extending leases, adding amenities, carrying out at least three years has actually added 25% uplifts. Okay? That's the bit that's very difficult to identify here today as to what that looks like. What I do know is we have an incredible team and they just do it year in, year out.

[Andrew Jones, CEO at LondonMetric]

I have deep confidence that of the GBP 15 million, GBP 6 million actually came from initiatives that we did not even know about maybe a year or two ago. It is great when you are in a winning sector. You get incredible tailwinds. If you are in great buildings, your tenants want to stay with you. Tenants want to stay with you, guess what happens? They invest more money in your buildings. They invest more money in your buildings, they want to stay longer. They want to stay longer, they over time will come around to the idea of paying you more rent. Okay? That is what is great. There is nothing so wonderful as being a winning sector and owning the great buildings with wonderful occupiers.

[Matt Norris, Managing Director at Gravis]

Thanks very much.

[Andrew Jones, CEO at LondonMetric]

Oh, sorry.

[Edoardo Gili, Senior Analyst,Research at Green Street]

Good morning, Edoardo Gili from Green Street. A conceptual question around sort of your net lease positioning. You’re mentioning you want to reduce your contractual rent exposure and reduce WALT potentially as well. Isn’t that antithetic with being a net lease REIT today? How do you think about your cost of capital between being a net lease REIT and being an industrial exposed company as well? Because obviously you’re trading a stronger cost of capital than a lot of other industrial REITs in the market today. I’m just curious to know how you square that.

[Andrew Jones, CEO at LondonMetric]

Let's go with the first one first. Look, I mean, reducing your WALT allows you to capture the reversions a little bit quicker. There's actually not a lot I can do about that. I mean, actually, it's a first world problem in some ways. It just means we know we're going to get rich. We've just got to be a bit more patient. Again, that's sort of, like I said, it's a first world dilemma. Some of the, in an ideal world, reducing our percentage of exposure to inflation for more open market is fine, but it has to be open market in the right sectors with the right buildings. That's what we're doing with our M&A. Again, the ideal scenario is that you have rent review clauses that is the higher of an inflation or an open market. Unfortunately, they are very, very rare.

[Andrew Jones, CEO at LondonMetric]

It doesn't stop us trying to find more of them. I mean, in terms of your second question around, look, we are a triple net. It's a triple net thematic. We want to be aligned to the winning sectors. That might be a logistics transaction, but it equally might be a sale and lease back with a grocery occupier as well. It might be if we could find some more theme parks, we might do that too. We can only play what's on the pitch. It's not about, "Oh, I've got to get my logistics now from 55-65 because I've already gone to 50." It'll happen. Equally, I'm very happy if we were able to execute a sale and lease back on a grocery portfolio in the next few weeks. That would be wonderful too, as long as the pricing's right too.

[Andrew Jones, CEO at LondonMetric]

The net lease bid is important because costs can have an incredible impact on your returns. Again, to put my Munga hat or Buffett hat on, compounding is just an incredible calculation. Those who earn it understand it. Those who do not will pay it. That is why our EPRA cost ratio, despite some people thinking it is not that important, and maybe if I had an EPRA cost ratio in the 20s, I would probably think it was not that important. That is why it is important. It has an incredible dilutive impact on your returns.

[Edoardo Gili, Senior Analyst,Research at Green Street]

Thank you.

[Andrew Jones, CEO at LondonMetric]

I actually can't find any questions on the screen. I probably messed this up a bit. Are there any? Do you want to ask it? Sorry.

[Andrew Jones, CEO at LondonMetric]

Yeah, there's one coming from Charles Vaughan at Waverton about income concentration from the top occupiers and whether this will be reduced through the course of FY26.

[Andrew Jones, CEO at LondonMetric]

It is definitionally going to be reduced simply because actually, as I said, some of the M&A transactions that we are going through at the moment will have that and will improve the income granularity. It will come down on that. If you look at our top customer, Ramsay's, that portfolio is actually in a relatively solid state at the moment because it has some debt financing on it that prevents us doing anything with it until October this year.

[Martin McGann, CFO at LondonMetric]

Yeah. The GBP 350 million that matures in autumn, the hospital is secured against it. It would be too expensive to break that debt today. It will give us optionality in the autumn if we wanted to change the tenant mix.

[Andrew Jones, CEO at LondonMetric]

The Travelodge, I think, which is our third highest customer, that exposure is now down, will be down at circa 5% going forward. We've got a little bit of trimming to do, but not a huge amount. We've done a huge amount of heavy lifting on that portfolio and feel very, very comfortable with where we are. I think 18 months ago, we would have had effectively 146 Travelodges. I think we're down to about 64-65 today, and with a few more in the departure lounge. No more questions on the line. No more questions in the room. Thank you ever so much for your time and your interest. Have a great day.

Participants

Analysts

• Max Nimmo, Equity Analyst at Deutsche Bank
• Rob Jones, Operations Oversight Analyst at BNP Paribas Exane
• Andrew Jones, CEO at LondonMetric
• Matt Norris, Managing Director at Gravis
• Edoardo Gili, Senior Analyst,Research at Green Street
• Sam Knott, Analyst at Company Representative
• unknow speaker
• Martin McGann, CFO at LondonMetric