LondonMetric Property H2 2026 Earnings Report

LondonMetric Property EPS Results

• Actual EPS: GBX 16.21
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

LondonMetric Property Revenue Results

• Actual Revenue: $464.60 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

LondonMetric Property Announcement Details

• Quarter: H2 2026
• Date: 5/21/2026
• Time: Before Market Opens
• Conference Call Date: Thursday, May 21, 2026
• Conference Call Time: 3:30AM 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 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: LondonMetric reported a strong year of growth, with EPRA earnings up 14% to £305.3 million and net rental income up 16.6% to a record £455.3 million, driven by acquisitions and like-for-like income growth.
• Positive Sentiment: The company increased its total dividend by 3.8% to £0.1245 per share, marking the 11th consecutive year of dividend growth and maintaining full cash cover and 108% dividend cover.
• Positive Sentiment: Portfolio value rose to £7.6 billion, helped by the Urban Logistics and Highcroft acquisitions, while total property return reached 7.1% and EPRA NTA increased to £200.6p per share.
• Neutral Sentiment: The balance sheet was strengthened through £1.2 billion of new debt facilities and £1.1 billion of repayments, lowering the average debt margin and leaving the company with no material refinancing risk until FY2030.
• Positive Sentiment: Operational performance remained strong, with 99.7% rent collection, low income leakage, and a contracted rent roll expected to grow further to more than £480 million as reversion and vacant space are let.

Presentation

[Andrew Jones, CEO at LondonMetric]

Good morning, ladies and gentlemen, welcome to LondonMetric's full year results. It's quite a long table just for Martin and me. Actually, I'm going to open up with congratulating Steve and all the other Arsenal supporters in the room for what has been an incredibly long wait. Well done, Steve. All right? I quite often take the Mickey out of you, but today, I'm going to congratulate you. I'll stop tomorrow. Okay, quick overview on the last 12 months. The company has continued its triple net income compounding model. We've grown the portfolio, up 23%, courtesy of obviously some external growth as well as internal growth. Continue to invest in the right sectors, mission-critical assets. We added GBP 1.5 billion to our portfolio value, GBP 1.2 billion of which came from the acquisition of Urban Logistics and Highcroft.

[Andrew Jones, CEO at LondonMetric]

Come on to talk about that in a little bit more detail later on how that's going. Our income continues to flow and grow. Net rental income is up 17% in the year. Again, as you would expect from a budding dividend aristocrat, we have again increased our dividend for the 11th year in a row. It's up 3.8% in the year. It's actually up 78% since the creation of LondonMetric back in 2013 when I probably stood up in a room similar to this, taking questions on whether or not we were going to cut our dividend because we were over-distributing, like so many others in our sector. That obviously has been reversed. We added, across the portfolio, GBP 16.6 million of additional income, 4.2% like-for-like growth. I'll come on and talk about that.

[Andrew Jones, CEO at LondonMetric]

That's effectively a combination of rent reviews, lease renewals, asset management, lease re-gears and what have you. I'll break that down in a bit more detail later. As a result, our average uplift on rent reviews, lease renewals was 19%. Open market rent reviews delivered 33%. The standout performer was, again, our open market rent reviews on our urban logistics portfolio, which was up 38%. Then, as you can see, we still have more rent to collect over the next two years, GBP 38 million. All in all, that delivered a total property return of 7.1%, which is effectively, again, relatively flat cap rates. We all know we're living in a very volatile world at the moment, so to be able to accurately predict cap rates, I think for values at this moment in time is particularly difficult.

[Andrew Jones, CEO at LondonMetric]

I don't think it's easy in any markets to predict what assets will trade at. It's particularly difficult today when you've seen in the last 12 weeks, a 100 basis movement in the five-year swap. It is very difficult. Even the valuations that companies are reporting at this moment, for end of March, what do they look like at the end of May or the end of June? This is a fast-moving world. The great thing is why we focus on income is because it's real. As we say, valuations can be vanity, but income is sanity. The scale continues to give us some competitive advantages. Martin, Ritesh, and the finance team have refinanced GBP 2.7 billion of debt in the period, and we've been doing that at opportune times, and we've got a graph to show that later. The volatility of the five-year swap is amazing.

[Andrew Jones, CEO at LondonMetric]

Absolutely amazing. What you need to be is fleet of foot, and we need to be quick. You'll see the timing of our financings has meant that we try to take advantage of the swap rates when they're closer to 3.5% than when they're closer to 4.5%. Our scale is giving us other opportunities to think about as we look to deploy capital, whether or not it's development fundings. We announced a small GBP 40 million trade today with a developer across some food stores, M&A, which you'll know about. Sale and leasebacks, which is a sector that we continue to operate in. Obviously, portfolios, as we see a shakeup in the wider pension fund sector. The most important number on this slide is actually the bottom right.

[Andrew Jones, CEO at LondonMetric]

It actually shows that we paid out dividends last year to our shareholders that were nine times higher than our overheads. Okay. That's against a sector average of about four times. There are a few companies where actually I think that their overheads are higher than their dividends, we probably leave those for when we're not on the mic. That is a very powerful number, we hope to improve on it over the year as we leverage our platform further. Turning to some numbers. I better do this briefly, otherwise Martin will be limited in what he can say. EPRA earnings are up 14% to GBP 305.3 million, driven really by that increase in our net rental income, which is now at a record GBP 455 million. That is a lot of money to arrive in our bank account every day.

[Andrew Jones, CEO at LondonMetric]

As I said to somebody this morning, the great thing about this model is we're collecting rent when we sleep. All right? It's a phenomenally comforting strategy. Our earnings per share is up at GBP 0.1345 per share, which has allowed us, as I say, to announce a final dividend of GBP 0.033 today to bring our total dividend for the year at GBP 0.1245. That's up 3.8% on the previous period. We're also announcing this morning a Q1 dividend for the financial year 2027 of GBP 0.0315, which is up 3.3% on the Q1 last year. As you see on the right-hand side, 11 years of dividend progression. Just another 14 to go to get aristocracy. Portfolio value, I've just touched on already. EPRA NTA is at GBP 2.006. That's helped drive a total accounting return of 6.9%.

[Andrew Jones, CEO at LondonMetric]

Excluding M&A costs and refinancing costs, whatever, that would obviously been a bit higher at GBP 7.7. There's been a drag there which we don't expect to be recurring. As I've already indicated, the activity in the debt markets has allowed us to maintain an average cost of debt for the period of 4%, and that's courtesy of the GBP 2.7 billion of the refinancing that Martin and Ritesh did over the year. On that note, I'll let Martin do a deeper dive into those numbers, and I'll come back to talk about the portfolio in a bit more detail. Thank you.

[Martin McGann, CFO at LondonMetric]

There you go. Steve, I'm glad you took the heat. Otherwise, it would've been me.

[Andrew Jones, CEO at LondonMetric]

It's all okay.

[Martin McGann, CFO at LondonMetric]

He dealt with the timing of the refi. That was my best point. I thought he probably would.

[Andrew Jones, CEO at LondonMetric]

It's actually a good slide as well.

[Martin McGann, CFO at LondonMetric]

Our focus this year has been on income and portfolio growth through significant further M&A activity and asset recycling. We've delivered a strong set of results, increasing our EPRA earnings, growing our dividend, and strengthening our balance sheet through significant financing activity, as Andrew says. I'm pleased to report that our net rental income is GBP 455.3 million, an increase of 16.6% over last year. We've included GBP 60 million of additional rent from the acquisition of Urban Logistics and Highcroft. That reflects nine months of trading. We'll benefit from the full effect of the Urban Logistics and Highcroft acquisitions next year or in the year we're currently in. We've included GBP 13 million of additional rent from other acquisitions, these increases in rent have more than offset the rent loss through non-core disposals of GBP 23 million. Rent collection remains exceptionally strong.

[Martin McGann, CFO at LondonMetric]

We've collected 99.7% of rents during the year. Our gross to net income leakage remains very low at 1.4%. Our administrative overhead for the year is GBP 30.2 million. That does reflect an increase from the scale of the business. The increase in overheads in the year primarily includes headcount and remuneration costs. Our headcount is now 54, up from 48 last year, which includes a small number of former Urban Logistics employees and new recruits, to ensure that we continue to have the right level of resource and the right skills for the enlarged business. Despite these increases, our EPRA cost ratio continues to be sector leading at 7.7%, a little better even than last year. Our net finance costs have increased to GBP 124 million, compared to GBP 97 million last year. We've held higher debt balances in the enlarged group in the year.

[Martin McGann, CFO at LondonMetric]

We acquired an additional GBP 464 million of debt through our corporate acquisitions, we funded the cash consideration for the Urban Logistics acquisition of GBP 205 million. Our average drawn debt balance in the year has been GBP 500 million higher than it was last year. Despite the increase in financing costs, our tight cost controls on top of our rental income growth has driven our EPRA earnings to GBP 305.3 million, an increase of 13.9%, or GBP 0.1345 per share, an increase of 2.4% over last year. This supports the increase to our dividend for the year to GBP 0.1245 per share, providing a very strong 108% dividend cover and full cash cover. The trading performance has been strong, with the portfolio valuations increasing by GBP 68 million in the year, allowing us to report IFRS profits of GBP 295.7 million.

[Martin McGann, CFO at LondonMetric]

This is after deducting exceptional acquisition costs of GBP 16.3 million, debt and hedging early repayment costs of GBP 16.9 million, and a goodwill impairment write-off of GBP 9.6 million. These were incurred in the previous year. We would not expect them to recur going forward. Turning to the balance sheet, the value of the portfolio is now GBP 7.6 billion, including GBP 1.23 billion of property assets acquired through the acquisitions of Urban Logistics and Highcroft.

[Martin McGann, CFO at LondonMetric]

Whilst much of our focus continues to be on the disposal of non-core assets, the combination of other acquisitions, development expenditure, and accretive capital expenditure has exceeded disposals by almost GBP 160 million. This, together with our valuation uplift of GBP 68 million, has contributed to the increased portfolio value. Gross debt is now almost GBP 3 billion, compared with just over GBP 2 billion last year, and the cash balance is GBP 143 million.

[Martin McGann, CFO at LondonMetric]

Other net liabilities for the period end is GBP 113.6 million. The major component of that is rents paid in advance of GBP 63 million. In summary, our EPRA net tangible assets for the year were GBP 4.7 billion, an increase of 15.4% on last year or 200.6p per share, comprising surplus earnings and revaluation uplifts, providing a 6.9% total accounting return or 7.7% if you exclude the exceptional items. This year, we've taken proactive measures to strengthen and diversify our financial position. Our objective has been to improve the balance of our debt stack between bond debt and bank borrowings. We've raised new debt facilities of GBP 1.2 billion, supported by our scale and our Fitch credit rating. New debt includes our inaugural GBP 500 million public bond, rated A- with a weighted average maturity of 5.5 years and a coupon of 4.69%.

[Martin McGann, CFO at LondonMetric]

If we're doing that today, I think that coupon would be more like 6%. The GBP 150 million pounds U.S. private placement at the tightest credit spread of any REIT globally over the last three years. These new facilities allowed us to repay GBP 1.1 billion of existing debt, GBP 744 million of which was more expensive former Urban Logistics and LXi secured facilities. We have repaid Aviva debt at 6.2%, Canada Life debt at 5.8%, and AIG debt at 5.3%, all materially ahead of our cost of debt. The refinancing of GBP 1.5 billion of unsecured revolving credit facilities and term loans in March reduced the average margin by 49 basis points to 105%, and average commitment fees by 19 basis points. Further diversifying our lender base and removing any material refinancing risk until FY 2030.

[Martin McGann, CFO at LondonMetric]

The right-hand side of this graph is a little busy, but it does show that our various refinancings through the year, marked by the red diamonds, have been well-timed when the swap curve was near its lowest point and ahead of spikes in rates in May, August of 2025, and January of 2026. We do not expect our finance costs to increase materially over the next two years, as reduced fees attaching to repaid revolving credit facilities will offset the risk of increases to bank rates. Our debt metrics remain robust, with debt maturity at 4.4 years or 5.2 years if I include the plus one options. With only GBP 200 million of debt expiring over the next two years. Undrawn debt facilities amount to GBP 500 million, which, taken together with our disposals program, provide significant headroom and flexibility to meet debt maturities over the next three years.

[Martin McGann, CFO at LondonMetric]

Our loan-to-value stands at 36.7%, and our net debt to EBITDA stands at 7.5 times, comfortably within our upper target of 8.5 times. We would expect both these numbers to reduce as we continue to divest non-core assets. Our interest cover ratio stands at 3.8 times, ahead of our covenant limit at 1.25 times, and our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. Our drawn debt is now 99.8% hedged at the year-end, and we expect floating rate debt to remain substantially hedged until its maturity. Our contracted rent roll at the year-end now stands at GBP 432.1 million, which includes GBP 75.1 million of the annualized benefit of the Urban Logistics and Highcroft acquisitions and other net investments in the year, and GBP 16.6 million of additional rent driven by our active asset management.

[Martin McGann, CFO at LondonMetric]

Looking further forward, we expect to add GBP 38.3 million of short-term reversion by 2028, which together with GBP 11 million of additional rent from the letting of vacant assets, will increase the rent roll to in excess of GBP 480 million. This significant earnings growth supports our confidence that we will continue to be able to grow our dividend. As Andrew said, we've announced our intention to increase our quarterly dividend payment for Q1 2027 to GBP 0.0315 per share, an increase of 3% on Q1 FY 2026. Finally, a brief look back, which puts the increase in the rent roll into context and clearly demonstrates that in the last 12 years, we've been able to increase earnings per share by 3.13 times, and we are in the 12th year of dividend progression, as I think Andrew might have mentioned, with excellent dividend cover.

[Martin McGann, CFO at LondonMetric]

Our total property return is strong with a 12-year CAGR of 10%, and our total shareholder return, driven both by share price appreciation and significantly, most recently by dividends, equates to a compound annual growth rate also in excess of 10%. On that note, I'll hand back to Andrew.

[Andrew Jones, CEO at LondonMetric]

Great. Okay. As I already mentioned, I'm going to dive a bit further into the portfolio and also our thoughts about the market and the periods ahead. We continue to operate a true triple net income compounding model, a disciplined approach, as you can see there, to delivering uninterrupted, predictable and growing rental streams. We have a relentless focus on our cash return, the quality, the quantity, and its timing, and obsessed around how much leakage comes out of a portfolio. Martin's already touched on our gross to net ratios, which were incredibly high. For this model to work, you need to limit income leakage from maintenance CapEx, operations, insurance, taxes. You also have to avoid vacancy, right? Vacancy is the dementor of the real estate sector, okay.

[Andrew Jones, CEO at LondonMetric]

The joy of holding a building gets sucked out of you when it comes vacant because of the loss of income and the costs and the taxes that you inherit as the owner. Therefore, when we look to allocate capital, not only do we focus on those qualities and the timings and the quantity of income, but also we want to make sure that the future growth trajectory is positive. In order to then, that's the income side of it, our operations, scaling up of our efficient platform is we have to leverage that. That is not only about making sure that we operate a very efficient platform at LondonMetric, but also to minimize the cost of debt that is available to us through different sources, which Martin has already taken you through. Income, see their gross to net income ratio of 98.6%.

[Andrew Jones, CEO at LondonMetric]

There's still room for improvement. It's a wonderful number, we could still do a little bit better. We do want to let out the vacant space that Martin touched on his previous slides. Turning to the portfolio. We continue to align them to the structurally supported sectors. Those of you who followed this business for the last 12, 13 years will have seen us pivot in and out of old sectors into new sectors. Logistics, as you can see there, still dominates our capital allocation, a portfolio there of GBP 4 billion. The reason for that is we think it's due to deliver the highest forecast rental growth. I touched on what our open market urban rent reviews were over the period. As you can see there, we're forecasting rental growth over the next few years of just over 5% per annum.

[Andrew Jones, CEO at LondonMetric]

We've continued to invest in our entertainment and leisure assets. We acquired 17 new Premier Inn hotels in the period, let off 30-year leases, with guaranteed inflation-linked rent reviews between 1% and 4%. Also, we've continued, as we made a small announcement this morning, about further investment into the convenience grocery sector, and that is a market that we continue to look to allocate further capital into, given the evolving consumer behavior for convenience groceries. Time is a more valuable commodity today for the population than it was maybe 20 or 30 years ago.

[Andrew Jones, CEO at LondonMetric]

As you can see at the bottom there, the numbers, it's a GBP 7.6 billion portfolio, a weighted average lease length of just under 17 years and a topped up net initial yield of 5.3% heading to over 6.5% that is due to deliver us an average forecast rental growth over the next couple of years of 4.3% per annum, which is slightly ahead of the like-for-like number, marginally ahead of the like-for-like number. Obviously, we will do our utmost to try and beat those forecasts. The acquisition activity in the period is focused on four key areas. This hasn't changed for a number of years now. We separate this out into, there's the M&A and the listed markets where we've obviously been relatively active over the last few years, four deals in the last three years.

[Andrew Jones, CEO at LondonMetric]

Sale and leasebacks, I've already referenced the Whitbread deal, but there are others in the wings too. The shake-up in the pension fund market, which is going to happen. It's happening a bit slower than maybe we would like, and therefore haven't allocated as much money to those opportunities this year as we might have expected. That pension fund, that big shift from defined benefit to defined contribution is taking place. There's a lot of money coming out of this. I think that pension fund, that sector owns as much commercial real estate as the entire listed sector. That is an area of focus for us in the current year. I've touched on development fundings already, and it tends to be either in the logistics or the grocery market, where we're seeing the most success.

[Andrew Jones, CEO at LondonMetric]

That is with existing customers who we have already enjoy strong relationships with. That will be a focus of attention for us excuse me, over the next 12 months. Disposal activity, this is probably my favorite slide. Without a doubt, interest rates are affecting liquidity in the market. Whilst we have elevated swap rates, that becomes difficult for people who are seeking liquidity and monetization of their assets, particularly for assets above GBP 20 million. You can see on the chart on the bottom left, we made 57 disposals in the year, totaling GBP 318 million. We've actually made another 12 post period end, totaling GBP 49 million. That means we're selling one building every four and a half working days. All right? We're in the market. All of the tension is at the smaller end.

[Andrew Jones, CEO at LondonMetric]

Out of the 57 sales, 50 of them were assets of less than GBP 10 million. Right? It just shows you where the demand supply tension is. We're dealing with every sector. You can see it there. Food stores, retail parks, discount stores, car parks, offices, garden centers, motor dealerships, children's nurseries, hotels, pub, you name it, we'll have sold something in those sectors, I tell you. It's a machine. What is really, really interesting is the type of buyer. 44% of our sales went to high net worth individuals and owner occupiers. Those buyers are not available when you're trying to sell an asset for more than GBP 20 million. They don't exist. They can't afford it. They don't have that sort of money. Fortunately, because we've got small average lot sizes, we're finding great liquidity.

[Andrew Jones, CEO at LondonMetric]

We've sold GBP 467 million of non-core assets that we've inherited through our various M&A transactions. We are proving liquidity. That actually takes place in an environment where you're seeing less activity from U.K. institutions or indeed, U.S. private equity operators. Asset management activity. This is again, a terrific slide, partly because the numbers make it easy for me. As I said before, just under GBP 17 million of rent add in the year, delivering a 4.2% like for like income growth. GBP 38 million of reversion to collect over the next two years. Rent reviews on average, as I said, 19% up. Open market urban at 38% up. 69 lettings and re-gears. We don't actually have the opportunity to do lots of lettings because we don't have any vacancy.

[Andrew Jones, CEO at LondonMetric]

Actually, most of that activity will have been re-gears that Mark and his team will have executed, on average 23% higher than previous passing rents. We have vacancy of about 1.2 million sq ft. We're working hard on that. We obsess about it. We have weekly meetings, I join them all. A lot of that has come from the assets we will have acquired from Urban Logistics, and we're just working through it. We are chopping down a lot of wood here. As all good portfolio managers, we always keep an eye on our income and our income granularity. As you can see, through asset management activity, portfolio management activity, also growing the asset base, we've seen our exposure to our top three customers fall over the period.

[Andrew Jones, CEO at LondonMetric]

I say, Travelodges would have fallen quite a lot courtesy of the amount of sales that we've made out of the budget hotel sector. A lot of that money has been reinvested, as you can see, into, I talked about the sale and leaseback deal with Whitbread for Premier Inns, but also activity with Tesco and Booker, and also Marks & Spencer increasing materially. That income granularity is something that we think about a lot, and it's something that we will continue to improve. Even over the last 12 months, which is quite a short period of time, our top three occupiers now are down from 27% of our rent roll to 22%. There are a number of you in this room would've remembered when Primark was our biggest tenant. Okay? I think at one time they accounted for 11% of our rent roll. All right?

[Andrew Jones, CEO at LondonMetric]

Today it's 1.4%. All right? We know how to actively manage income granularity. If I look at the outlook, I've touched on a number of these themes already. Macro events continue to impact investor sentiment. Interest rates are the yardstick by which all investments should be assessed. Gilt rates, swap rates, they are influencing the market, pricing, and liquidity. Political uncertainty is not helpful. However, I still believe U.K. consumer remains resilient. Good employment, high savings ratios, wage growth, still outpacing inflation. Even better if you're in the public sector. It's still above. It's 4.1%. It's 4.9% if you're in the public sector. It's not that at our place. Our triple net income model is unbelievably resilient. It's helped us build an all-weather portfolio that is driving reliable, predictable, and growing income. Consumer behavior continues to affect the sectors that we want to allocate money into.

[Andrew Jones, CEO at LondonMetric]

For those of you who've known me a long time, I started my career in shopping malls. Doesn't work for me anymore. We'd rather be in sheds and beds. In those sectors, you want to own the best assets. It allows you to be a price setter, not a price taker. We want to avoid sectors and buildings that incur maintenance CapEx, OPEX, letting incentives. They all dilute returns. Everybody can talk about big headline numbers on ERV. This beat ERV. "I did a letting at 6% above ERV." Why did your valuation only move 2% then? "Oh, well, I gave away 12 months rent-free for every five-year term certain." Some sectors, they're addicted to concessions. Even in the very hot office market, which apparently there is in about four streets in London. Undoubtedly, market uncertainty creates opportunities for us.

[Andrew Jones, CEO at LondonMetric]

We think that there's consolidation out there in the listed space. I'm not allowed to talk about that. We also think, I touched on earlier, the structural shift in the institutional pension fund market. Scale will continue to provide access to these deals, but also to cheaper and more diverse pools of debt. In summary, our income model is driving earnings and dividend. Our rent is flowing and growing to historic levels. Our discipline in capital allocation has created this all-weather portfolio. We continue to run our winners, and we'll sell our losers. Long-term compounding is what creates value. It is the essence of value creation. We will collect, compound, and see our yields compress. Our ownership culture ensures full alignment of interest, but also ensures it stops us doing stupid stuff. Right? We're not growing this for just to grow our AUM.

[Andrew Jones, CEO at LondonMetric]

There's so many companies out there that have made mistakes in the past by wanting to grow AUM just so that they can increase their management fees. Okay? A full alignment of interest stops you doing that. All right? We're shareholders first. We're employees second. Thank you for that. Now I think we're going to open up. Actually, there's a large part of the audience who actually can't ask questions because they're so offside. I would like to say they've given me them in advance, but they haven't. Any questions in the room before I go to the screen? I said they were All right. Oh, God. Thank God. Hannah. Oh. Andrew.

[Andrew Saunders, Analyst at Shore Capital]

Oh, is that me?

[Andrew Jones, CEO at LondonMetric]

Yeah.

[Andrew Saunders, Analyst at Shore Capital]

Yeah. It's Andrew Saunders from Shore Capital. I wonder if you could just talk about your tenant retention rates. Obviously very impressive numbers on your rental uplifts on lease reviews in logistics. I just wonder, is there a risk that things could get unaffordable if you keep putting through these sort of rent increases? Thanks.

[Andrew Jones, CEO at LondonMetric]

Yeah. It varies around the U.K. We think London's weaker than many other areas. It's hard to basically paint the whole U.K. with the same color. There are regional differences, and that comes back down to demand and supply. London is tougher because of the massive rental increases that you've seen in London. The rest of the U.K., I couldn't give you a correlated pattern. We've just agreed, for example, we've got a warehouse up in Motherwell.

[Andrew Jones, CEO at LondonMetric]

Which is somewhere in Scotland. We've just retained a tenant, XPO, for another five years. We might have thought that might be a risk, but they're probably not building too many sheds in Motherwell these days. It varies around the country. London would be our soft. It would be our biggest area of concern. We don't have a lot of money in London anyway, but that would be the one area where people can maybe move out from zone 2 and just move out a bit further past the M25, and they can halve their rent. You also remember in logistics, rent's just not a big proportion of their overhead. It's transport and wages are dominant. It's very different in retail, for example, where your total occupational costs can hit sometimes 20%. We don't really talk about it.

[Andrew Jones, CEO at LondonMetric]

You'd see it through the vacancy if it was a big issue. The amount of people, we have imminent break clauses coming up. Is so and so going to issue a break clause? We think they might, and then they don't. We had a situation down in Weybridge recently with Tesla. We expected them to issue the break clause. They didn't. There'll be somewhere else in the portfolio where we didn't think they'd issue the break clause, but they did. You'll see it through the vacancy, and we're not really seeing that just yet. Hemant. This is going to be a technical one, Mart, so it's definitely coming to you.

[Analyst]

It's high level. I think it's high level. Congratulations on the good results. Maybe a question on there's obviously a lot of best practices that you can see in LondonMetric, and that's obviously contributed to the success of the growth. In relation to the balance sheet, very strong. Really good financing. Just a question on net debt to EBITDA. If you look at the best practice in the U.S., it's about 5, maybe 6. Just any thoughts on that? Obviously, the U.K. market and European market's different, and I appreciate that.

[Martin McGann, CFO at LondonMetric]

I think it is different. Last year, I think we had net debt to EBITDA at Ritesh at 6.8, and it's gone up to 7.5, as our LTV has also gone up. Look, the truth is, I would prefer it to have a 6 in front of it. I think as we continue the disposal program, I'd hope that some of that will reduce that level of gearing. I don't have a problem with it. Look, LTV's not going to 40, net debt to EBITDA is not going into the 8s. If it had a 6 in front of it, I'd be more comfortable.

[Analyst]

Okay, great. Maybe just a bigger picture question on, you obviously have grown a lot and of some size now. How much more difficult does it get to do some of these acquisitions and effectively move the dial?

[Andrew Jones, CEO at LondonMetric]

Yeah. Look, there's two questions there. Some M&A acquisitions can be relatively straightforward, and some of them can come with some, that will depend a lot on management and the advisors. In terms of moving the dial, I think we take the same approach as we do to our property portfolio. It's all about compounding. I remember Valentine would've stood up here a few years back and said, "Somebody will say, 'Oh, you're doing small deals.'" If you knock out singles instead of waiting for the 4 or the 6, by the time the 4 or 6 arrives, you might have 10 on the scoreboard. A lot of these companies we've acquired, you would've said, "Oh, but why did you bother? Why did you bother?" When you add them all up, you get to a big number.

[Andrew Jones, CEO at LondonMetric]

We don't really think about it moving the dial. Say, "Oh, I can't be bothered to do that," or whatever. Sometimes the smaller deals are harder than the bigger deals. Yeah, we don't think about it. It's really, is there value in there that we'll be able to extract for our shareholders from an earnings and a value basis? Of course, moving the earnings dial is more difficult. The value, every little helps. Arguably, I look back, even things like the Highcroft, which was a GBP 80 million deal. It's been good. We've been surprised on it. We'll keep doing that. The opportunities aren't just in the listed sector. The listed sector needed shaking out, and largely, there's a few others that need dealing with. There's other opportunities.

[Andrew Jones, CEO at LondonMetric]

As I said, in the pension fund market, that is a market that is going to pop, and you just want to be ready.

[Martin McGann, CFO at LondonMetric]

That net contracted rent slide that I put up, I think is quite interesting because that includes everything that I think is within our control. I used to say it doesn't include any double somersaults. There's no sort of addition to that that comes out as an opportunity that we may not know about today, but it's opportunistic and we take advantage of it. I remember a time when we'd be celebrating taking that number over 100. We're now pretty close to 500. There will be things that happen that aren't in that slide that will grow it further.

[Martin McGann, CFO at LondonMetric]

Sounds good.

[Analyst]

One more, if I may. You mentioned the importance of occupancy and keeping portfolios full, and you've certainly got a lot of long let assets in your portfolio. On the logistics side and the urban logistics side, it is shorter. How do you think about that, and especially in the context of the dividend aspect?

[Andrew Jones, CEO at LondonMetric]

Yeah, no, it's a good question. It was interesting, a couple of years ago, I would've been standing up when we were just announcing or completing the takeover of LXi, and LXi was predominantly a long income REIT, and their number one focus was long leases.

[Andrew Jones, CEO at LondonMetric]

We applaud that. Actually, it's not the only consideration. You have to think about the desirability of the underlying real estate. I'm just as happy to have a five-year lease or sometimes actually a three-year lease on a wonderful building where you've got the opportunity of resetting the rent to what we consider to be the new market levels. Well, we have a number of buildings in our portfolio where we've got indexation on the leases, and we wish we didn't. We wish we had the opportunity to be able to market those. If something happened at expiry or before that, then that would be for us an opportunity. I think you have to think about the underlying. It's what I say, you run your winners and you sell your losers.

[Andrew Jones, CEO at LondonMetric]

It's unfair because I've never been to Motherwell, but it's not somewhere we want to allocate money. I'm just not sure I'm going to get a lot of demand tension in the event that my tenant was to leave. I want to be in places where if the tenant leaves, I still feel like I'm a price setter, not a price taker.

[Jonny Coubrough, Analyst at Deutsche Bank]

Thanks. Jonny Coubrough from Deutsche Bank. I'd just be interested to hear why view convenience is attractive. It looks like lower forecast rental growth there, and also much lower index-linked, and fixed reviews. What is it about that market?

[Andrew Jones, CEO at LondonMetric]

Well, if you think about consumer behavior. I've been in the grocery sector for about 30 years, real estate grocery sector for 30 years. In the old days, you used to buy your groceries out of four shops. It was Tesco, Sainsbury's, Asda, Morrisons. Today, as time's become a more valuable commodity for the population, they want to be quick. You want convenience. As M&S say, "If you can't do your grocery shop in 35 minutes, then you're inefficient." We think that this is a sector where rents are low. The average rent in our grocery assets is going to be around about maybe even just slightly less than GBP 20, maybe just slightly more, around about GBP 20. In the big box foods market, it's up at GBP 30. We think it looks cheap.

[Andrew Jones, CEO at LondonMetric]

We're buying these assets certainly under the funding arrangements at north of 6%. If you're getting CPI of say 3%, you feel pretty good that you're on track. Maybe you only get 2.5% because of the way inflation moderates. You're still getting an ungeared 8.5%. You're doing it on long leases, brand-new buildings, fit for purpose, but also with wonderful credits. Marks & Spencer is a terrific business, incredibly well run. Therefore, it feels like a sector where if we're coming in at 6%. We sold a grocery store recently in Weymouth for 5.2%. We think there's an arbitrage there. Matt.

[Matt Norris, Analyst at Gravis]

Thanks. Matt Norris from Gravis. On slide 14, where you have the acquisition activity, you've got four buckets there. Can you sort of flesh it out in terms of the returns we should expect across the four different buckets, please?

[Andrew Jones, CEO at LondonMetric]

The M&A is harder to work out, because we don't know how greedy some shareholders are going to be, do we, Matt? I just want to make it clear, I'm not on LinkedIn.

[Matt Norris, Analyst at Gravis]

Everybody should be.

[Andrew Jones, CEO at LondonMetric]

Some people try to negotiate on LinkedIn. I am not going to play. What was the question? I've had four coffees, Will. Let's take sale and lease backs. On average there, depending on quality, lease length, credit, you're probably in and around about a 5.5. Again, actually in reference to my earlier question, you're probably looking to add about close to 3 on it. You're somewhere between 8 and 9, probably near 8.5. Rockstar credit, 30-year leases. The sort of assets that if I had grandchildren, even they couldn't mess it up. You have to think about the credit. I've got another pack that Will's looking at at the moment in the discount retail space where the credit isn't as good. The lease lengths will be good.

[Andrew Jones, CEO at LondonMetric]

The geographies and the quality of the buildings, we wouldn't need a 10 on that. We'd need a 7 starting, wouldn't we? That would probably then 3 on top. That's going to give you a 10. I'm not even sure we're going to play on it. We'll see. I won't name who it is. Pension funds, it's difficult because we just haven't seen enough coming out of it. The assets that we bought there, the UPS, the hotels at Manchester Airport, the Bookers. Look, they're wonderful. Unbelievably long leases. I think that the UPS lease is 55 years. It was longer than that. I think the Clayton Hotel is actually 200 year leases now, something 199 years. You set the lower return on that.

[Andrew Jones, CEO at LondonMetric]

Development fundings, it's very interesting because there you are brand-new buildings, good customers, otherwise you wouldn't do it. Long leases, 15, 20, 25s. There you're looking for a margin of between 50 and 75 basis points between the development yield that you get, the funding yield and the completed investment yield. They are wonderful. Truly wonderful. Grocery assets. Doing one at the moment for Marks & Spencer. We're in at 6.2%. We think it's worth 5.5%. We might get lucky and get 5.25%. That's your underwrite. We'd just like to do more of them.

[Matt Norris, Analyst at Gravis]

What's the limiting factor?

[Andrew Jones, CEO at LondonMetric]

Opportunity.

[Matt Norris, Analyst at Gravis]

Thank you.

[Andrew Jones, CEO at LondonMetric]

Sorry, Tom.

[Tom Musson, Analyst at Berenberg]

Thanks. Good morning. Tom Musson from Berenberg. You made good progress reducing your debt cost margin in the year. What is the average credit margin you're paying on your debt in total, if you know it? Now with more scale, what's the debt cost saving opportunity for that credit margin to fall further as you move through refinancing more pieces of debt. Appreciate the total cost will move around.

[Martin McGann, CFO at LondonMetric]

The one and a half billion refinancing we did in March, we took the margin down from 155 to 105. I think that was terrific, and a number of the very generous bankers are in the room who did that for us. I think if you then look at the balance of the debt stack, if you average it across, we're probably about one and a quarter, in terms of credit spread. Look, as we stand today, I don't think we're in the market for more debt particularly, but without doubt, and the banks would say this, credit spreads at the moment are, they're not historic lows, but they are very tight. I've sat in rooms with bankers and say, who are not here actually, but I'll say this.

[Martin McGann, CFO at LondonMetric]

They say, "You've got to do this because the credit spread is unbelievably tight." I'd say, "Yeah, but the underlying cost of money isn't." You've got to look at the all-in cost of the debt, not just the credit spread.

[Tom Musson, Analyst at Berenberg]

That's clear. Thank you.

[Andrew Jones, CEO at LondonMetric]

I've got a question here on the screen from Paul at Thames River, talking about what was our debt saving. I think our annualized debt saving is about GBP 10 million per annum, and we incurred arrangement breakage fees on the existing facilities in the period of.

[Martin McGann, CFO at LondonMetric]

Five.

[Andrew Jones, CEO at LondonMetric]

Okay, five.

[Martin McGann, CFO at LondonMetric]

A very interesting one. When we did the LXi transaction, we took on some Canada Life debt that was incredibly long. It went out to 2039. It was expensive. It was 575 all in. We thought about breaking it at the time. The break cost would've been GBP 20 million. The movement in the yield curve between then and whenever we did it in September, meant that the break cost actually fell below GBP 1 million. You just do it. We've been watching the yield curve waiting for an opportunity. Then you say, "That's great." Between agreeing, deciding to do it and doing it, we were worried that the yield curve would move out again. We put a hedge in, that meant that when we actually did the transaction, we did it for less than GBP 1 million.

[Martin McGann, CFO at LondonMetric]

It would've cost us GBP 5 million if we hadn't put that hedge in. The yield curve is incredibly volatile and you just have to wait. Opportunities will present themselves, and you just have to be ready to go when the opportunity does present itself.

[Andrew Jones, CEO at LondonMetric]

I've got another good question here on the screen actually from Elliot, which is, what is causing the difference between the like for like income growth at 4.2% versus the EPS growth at 2.4%? It's a very good question to which I'd normally just go, "Oh, it's all in the timing." I think probably, and we'll come back maybe with a breakdown of this, but I think it's predominantly because your like for like is more of a contracted figure and obviously your earnings is a cash flow figure. It's the timing. Obviously some of the timing of the M&A when it came in, when it didn't, might affect those numbers as well. We'll do a big detailed deep dive into it, but it's going to be like for like might be higher because you settle a rent review halfway through the year, but you only got half the cash.

[Andrew Jones, CEO at LondonMetric]

Phew. That was quite difficult, that one.

[Martin McGann, CFO at LondonMetric]

It's really challenging.

[Andrew Jones, CEO at LondonMetric]

I think I'm right. I got pass. Might not get an A star, but I got a pass. Are there any other questions? I've only got, I think, unless Paul's, I didn't answer his question correctly. He'll no doubt reach out if I didn't. No more in the room? Well, thank you so much. We actually weren't predicting, given so many people are off-site at the moment, we weren't predicting quite such a strong turnout, but that's great. Thank you so much for your support and your time. Thank you.

Participants

Analysts

• Andrew Jones, CEO at LondonMetric
• Andrew Saunders, Analyst at Shore Capital
• Jonny Coubrough, Analyst at Deutsche Bank
• Martin McGann, CFO at LondonMetric
• Matt Norris, Analyst at Gravis
• Tom Musson, Analyst at Berenberg
• Analyst