Annual Report and
Accounts 2023
Real
estate for
reliable
inc ome
Strategic report
01
An overview, purpose and strategy
Our purpose 1
Performance highlights 10
Chair’s statement 11
At a glance 12
Our strategic priorities 14
Chief Executive’s review 15
The world around us 22
Creating value
Our markets 24
Business model 28
Key performance indicators 30
A review of our performance
Property review 32
Financial review 46
Our sustainability performance
Responsible Business
and ESG review 54
TCFD Recommendation
and Alignment 77
A review of our risk
Risk management
and internal controls 82
Risk management update 86
A review of our principal risks 88
Going concern and viability 100
Governance
102
Governance overview 102
At a glance 104
Board leadership and
Company purpose
Chair’s introduction 106
Board of Directors 108
Management team 110
Our cultural framework 112
The Board in action 115
Section 172 Statement 118
Board meetings
and attendance 120
Division of responsibilities
Leadership framework 121
Leadership roles
and responsibilities 122
Nomination
Committee report 124
Audit Committee report 132
Remuneration
Committee report 139
Report of the Directors 171
Directors’ Responsibilities
Statement 174
Financial statements
175
Independent Auditor’s report 176
Group financial statements 182
Notes forming part of the
Group financial statements 186
Company financial statements 208
Notes forming part of the
Company financial statements 210
Supplementary information 215
Glossary 222
Notice of Annual
General Meeting 224
Financial calendar 232
Shareholder information 232
LondonMetric
is a FTSE 250 business that owns one of
the UK’s leading listed logistics platforms
alongside a grocery-led long income portfolio.
We own £3bn of assets across 16.5m sq ft and
generated £147m net rental income in the year.
Governance
Own Manage Collaborate Generate
Our purpose
Own desirable real
estate that meets
occupiers’ needs.
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive.
Maximise our expertise
and relationships to
build on our position
as partner of choice.
Generate reliable,
repetitive and
growing income-led
total returns.
10.33p
EPRA Earnings per share
-£506.3m
IFRS reported loss
9.5p
Dividend for the year, with cover of 109%
£2.0bn
IFRS net assets
£147m
Net rental income
198.9p
EPRA Net Tangible Assets per share
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LondonMetric Property Plc Annual Report and Accounts 2023
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Strategic report
Portfolio aligned
to macro trends
& structural
tail winds
Disciplined investment
strategy to ensure
portfolio remains fit
for purpose
We are continually
upscaling the quality
of the portfolio to
ensure it remains
fit for purpose and
can deliver strong
income growth.
Valentine Beresford
Investment Director
Own desirable real estate.
Our investment strategy is
focused on owning quality
assets in the winning sectors
that are underpinned by
strong and growing income.
Our focus on distribution and long income
Own
£3.0bn
portfolio of assets, 73% of which is
invested in logistics assets, primarily
focused on urban logistics
Desirable
assets
43.1%
30.0%
23.8%
Urban logistics
Regional & mega logistics
Long income
An overview, purpose and strategy
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LondonMetric Property Plc Annual Report and Accounts 2023
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Own the right
assets in the right
locations with high
residual values
Create enduring
occupier appeal
What we're doing
• Aligning portfolio to urban areas
• Selling mature/non core assets
where strong income and/or
income growth is less certain
• Reacting to bids for our assets
where the price offered exceeds
our own expectations
• Positioning the Company to
be ready to take advantage
of future opportunities
43%
Urban logistics exposure
as a proportion of our portfolio
£273m
Disposals in year
£120m
Acquisitions in the year
Ensuring our assets are fit
for purpose and will deliver
income growth
View all of our properties
on our interactive map
londonmetric.com/portfolio
Why it's important to us
Our focus on the macro trends and how they
define the winners and losers in real estate has
served us well over the years and continues to
influence where we invest our capital.
We continue to prioritise asset selection, patience and strong
conviction in the structural tailwinds of our preferred sectors.
When you choose real estate for its quality and location,
you are more likely to be a price setter than a price taker
as occupiers will need you more, you can attract quality
companies at higher rental levels and be more confident
of future rental growth.
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Manage and enhance
responsibly. Securing and
enhancing our strong income
metrics as well as improving
the quality and sustainability
of our assets.
Manage
1.1m sq ft
of lettings and regears
signed during the year
Improving
and upgrading
10 years
WAULT on lettings and regears
in the year
167
Occupier initiatives undertaken
in the year delivering 5.0% like
for like income growth
An overview, purpose and strategy
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LondonMetric Property Plc Annual Report and Accounts 2023
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+£7.8m
Additional income from
lettings and rent reviews in year
+0.7m
Sq ft of BREEAM Very Good
developments completed in the year
Why it's important to us
The period of very low interest rates is over.
Therefore, investors will be more focused on delivering
growth opportunities from both the macro and structural
shifts but also asset management initiatives that can deliver
higher levels of income as well as improve the quality of
buildings to generate higher occupier contentment.
Learn more on page 24
What we’re doing
• Strengthening our income through
extending lease lengths and signing
new leases with long WAULTs
• Upgrading the quality and
sustainability of assets through
development, refurbishment and
environmental improvements,
often in conjunction with occupiers
• Capturing rental growth embedded
in the portfolio
Learn more on page 34
Our buildings need to
meet increasingly higher
occupier expectations
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We are proud of our
employees who we
recognise are vital to
the continued success
of the Company.
Andrew Livingston
Designated workforce
Non Executive Director
Collaborate
Collaborative
relationships
Maximise our expertise and relationships.
We have a highly talented, motivated and aligned
team who collaborate with all stakeholders to build
strong relationships and trust.
8.7/10
Average score in occupier survey
for whether our occupiers would
recommend LondonMetric
94%
of staff feel proud to work for the
Company
An overview, purpose and strategy
6
LondonMetric Property Plc Annual Report and Accounts 2023
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99.1%
Portfolio occupancy
£675m
of debt financing either through
lengthening of maturity or new
facilities agreed
Why it's important to us
Leveraging our highly talented, motivated and
aligned team to make the right decisions will
help to deliver long term outperformance.
By working with a wide range of stakeholders, we gather
a greater depth of understanding to deliver a culture of
excellence. This allows us to rely on strong shareholder
support, the best property intelligence, reliable contractors
and access to attractive and diverse debt financing.
Learn more on pages 66 to 69
What we’re doing
• Empowering our talented
employees with a combination
of strong market insight, deep
fundamental analysis and market
leading relationships
• Adopting a ‘partner of choice’
approach, collaborating with
all stakeholders
• Considerate of local communities
and how we approach society as
a whole
Learn more on pages 20 to 21
Find out more about our partners
londonmetric.com/partners
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An overview, purpose and strategy
Reliable,
repetitive and
growing returns
Generate reliable, repetitive
and growing income-led
total returns.
We believe that income
growth is fundamental to
successful investing and to
pay a progressive dividend.
Generate
10%
Growth in net rental income in the year
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Why it's
important for us
Bringing all our actions together to deliver
strong, durable cash flows underpinning highly
attractive total returns.
We expect that our ‘all weather’ portfolio will allow us to
absorb increased interest rate costs, continue to grow
our earnings and progress our covered dividend over the
longer term.
Learn more on page 24
£147m
Net rental income
8%
Growth in EPRA Earnings
3%
Growth in dividend per share
21%
Growth in urban
logistics rent reviews
11.7%
EPRA cost ratio
What we’re doing
• Maintaining our very strong
portfolio metrics with occupancy
at 99%, a WAULT of 12 years and a
gross to net income ratio of 99%
• Allocate capital to assets that can
deliver rental growth either through
contractual rental uplifts or where
we can achieve strong open market
reviews
• Minimise debt costs
• Maintain a low cost base and EPRA
cost ratio
Learn more on page 15
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-506.3
734.5
257.3
-5.7
IFRS reported loss
-£
506.3m
169%
2
023
2
022
2
021
2
020
9.5
9.25
8.65
8.3
Dividend per share
9.5
p
2.7%
20 23
20 22
20 21
20 20
1,995.2
2,569.8
1,731.7
1,438.9
IFRS net assets
£1,995.2
m
22.4%
20 23
20 22
20 21
20 20
-12.0
28.2
13.4
5.1
Total property return
-12.0
%
2023
20 22
20 21
20 20
3.4
2.6
2.5
2.9
Cost of debt
3.4
%
20 23
20 22
20 21
2020
80bps
6.0
6.5
4.2
4.7
Average debt maturity
6.0
yrs
20 23
20 22
20 21
2020
0.5 years
11.9
11.9
11.4
11.2
WAULT
11.9
yrs
20 23
20 22
20 21
2020
Alternative performance measures
The Group financial statements are prepared in accordance
with IFRS. Management reviews the performance of the
business principally on a proportionately consolidated
basis which includes the Group’s share of joint ventures and
excludes any non-controlling interest.
Alternative performance measures are financial measures
not specified under IFRS but are used by management as
they highlight the underlying performance of the Group’s
property rental business and are based on the EPRA Best
Practice Recommendations ('BPR') reporting framework.
Therefore, unless specifically stated, the performance
metrics and financial results reflected in the Strategic report
and on this page, reflect the proportionately consolidated
results of the Group and the EPRA BPR reporting framework.
Further details can be found on page 47 of the Financial review
and definitions are set out in the Glossary on page 222.
198.9
261.1
190.3
170.3
EPRA net tangible assets per share
198.9
p
20 23
20 22
20 21
20 20
23.8%
10.33
10.04
9.52
9.26
EPRA EPS
10.33
p
2.9%
20 23
20 22
20 21
20 20
An overview, purpose and strategy
Performance highlights
32.8
28.8
32.3
35.9
Loan to value ratio
32.8
%
20 23
20 22
20 21
2020
400bps
11.7
12.5
13.6
14.2
EPRA cost ratio
11.7
%
20 23
20 22
20 21
2020
80bps
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+2.7%
Dividend increase
per share
It has been a highly volatile and difficult year
for most asset classes, particularly those that
are sensitive to changes in interest rates.
The material and sudden upward movement in
central bank rates has had a profound impact
on the UK real estate sector, with property
yields expanding by nearly 100bps on average
and share prices falling on average by 34% over
our reporting period.
The logistics sector, particularly larger boxes,
was hit hard as yields moved out rapidly from
the record low levels set in the prior year as
investors quickly recalibrated to the higher rate
environment. Despite the effect this has had
on values, it has not impacted our excellent
portfolio metrics and occupancy levels or
our strong earnings position, which is at an all
time high.
With our logistics weighting of over 70%, and
after our exceptional performance in 2022
which saw us deliver a total accounting return of
42% and a total property return of 28%, it was
disappointing to see the Company return -20%
and -12% respectively over this year. This was
owing to our EPRA NAV decline of 24%.
You will appreciate that we do not run the
Company over a 12 month cycle, we look over
the longer term. So, despite a disappointing
year, we must remember that the Company has
still delivered a total accounting return of 32.5%
over the last three years. This strong longer term
performance reflects the team’s successful and
continual reshaping of the portfolio that has
seen us transact on £3 billion of property over
the last five years, equivalent to the current
portfolio value. This has allowed continued
earnings and dividend growth.
The majority of these transactions reflect our
decision to rotate out of large distribution
warehousing into urban logistics. For a number
of years, we had been nervous about both the
low yields and supply potential for mega box
warehousing and have consciously reduced
our weighting to this sub-sector from 27%
to 10% over the last five years. Conversely,
demonstrating our conviction that urban
logistics would deliver superior rental growth
and offer greater rewards, we have increased
the portfolio’s urban logistics exposure from
20% to 43%.
Our transactional activity over the last year has
focused on disposals, with sales of £273 million.
These were primarily urban and regional
logistics assets where, despite the difficult
market conditions, our team delivered some
excellent sales. These sales were in popular
sectors, so were transacted at a premium to
the prevailing book value and crucially have
allowed us to retain a lower LTV and reduce our
exposure to higher interest rate debt.
Despite these sales and higher financing costs,
and reflecting the highly resilient occupation
dynamics across our sectors, our focus on
income growth has again seen our EPRA
earnings per share increase by 2.9%, which has
given us confidence to increase our dividend
per share for the eighth year in a row, up by
2.7% over the year, 109% covered by EPRA
earnings. Furthermore, we have indicated that
our first quarterly dividend for the next financial
year will be 4.3% higher.
Despite the recent market challenges, we
maintain that well managed real estate in
structurally supported sectors can continue to
deliver reliable and growing dividends over the
long term. We feel that the Company is well
positioned with its carefully selected portfolio,
ongoing discipline, inflation protection through
rental growth and index linked leases.
We also have managed to retain attractive
financing rates following material refinancing
activity in the year.
We have a well aligned and high grade
executive team with strong occupier and
property relationships. I would again like
to warmly thank the Board and all of our
employees for their hard work in this difficult
year. We have also strengthened our Board with
the appointment of Suzy Neubert, who I would
like to welcome on your behalf. Suzy brings an
outstanding depth of experience to our team
and she also joins the Audit Committee with
effect from today.
The time has now come after 40 years in the
listed property sector for me to retire as Chair
and member of the Board. I am handing over
to Alistair Elliott, who I am confident will prove
an outstanding successor. I wish him well as
your new Chair. I would also like to take this
opportunity to thank Rosalyn Wilton for her
valuable contribution to the Company of the
last nine years as she retires from the Board with
effect from today. She has provided excellent
leadership as Chair of the Audit Committee and
is succeeded in that position by Kitty Patmore.
I am pleased to be leaving the Company in
a strong position, with a very good portfolio,
outstanding management and a strong Board.
I am confident they will continue to be excellent
stewards of our continued investment. Finally I
wish to thank the team who it has been my
pleasure to work with for many years.
I am also pleased that we have agreed a
£198.6 million recommended offer to acquire
CT Property Trust Limited. The all-share offer
has compelling strategic and portfolio rationale,
providing us with the opportunity to acquire a
high quality portfolio in a cost efficient way.
Patrick Vaughan
Chair
24 May 2023
+32.5%
Total accounting return
over three years
An overview, purpose and strategy
Chair’s statement
Once again, it is time to write to you
as shareholders of LondonMetric with
my thoughts on the past year and our
immediate future. Sadly, it is also the
last time I will have that privilege.
Patrick Vaughan
Chair
11
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LondonMetric Property Plc Annual Report and Accounts 2023
Our portfolio is located in
the UK and has grown from
£1.2 billion in 2013 to £3.0
billion today. It has shifted
significantly away from
multi-let retail parks, offices
and residential into logistics
and grocery-led long
income assets.
Our portfolio
Our focus on logistics and long income
1
Our property portfolio continues to
deliver long and strong income with
high rental growth.
Learn more on page 34
Property value
£3.0bn
3.0bn
3.6bn
2.6bn
20 23
20 22
20 21
WAULT
11.9 yrs
11.9 yrs
11.9 yrs
11.4 yrs
2023
2022
2021
London & South East
weighting
48.2%
48.2%
47.1%
43.0%
20 23
20 22
20 21
1 Urban logistics
43%
3 Long Income
24%
2 Mega & Regional logistics
30%
4 Retail Parks & Offices
3%
1
2
3
4
1 Includes development
An overview, purpose and strategy
At a glance
Mark Stirling
Asset Director
12
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LondonMetric Property Plc Annual Report and Accounts 2023
Urban Logistics
Smaller logistics units strategically
located in or close to dense areas
of population to meet increasing
consumer demands for next and
same day delivery.
Our exposure to this sector has
increased substantially and is our
main conviction call.
Mega & Regional Logistics
Mega Distribution
Large scale modern distribution units,
typically greater than 500,000
sq ft and located close to major
arterial routes.
Regional Distribution
Mid size units typically between
100,000 sq ft and 500,000 sq ft
serving as regional hubs and creating
the link in any modern supply chain.
Long Income
Grocery and Roadside
Consists of grocery, wholesale
and roadside assets.
NNN Retail
Primarily discount, essential,
electrical and home stores.
Trade, DIY & Other
Principally building, trade and DIY stores
as well as car servicing centres.
Leisure
Five out of town cinemas let to Odeon,
two hotels, three F&B sites and one
development site.
1 Including developments
16 assets
6.5m sq ft
Property value
1
£898m
WAULT
15.8 yrs
Read more about mega & regional
distribution on page 37
125 assets
6.8m sq ft
Property value
1
£1,288m
WAULT
8.7 yrs
Read more about urban logistics on page 37
128 assets
2.8m sq ft
Property value
1
£713m
WAULT
13.1 yrs
Read more about long income on page 42
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An overview, purpose and strategy
Our strategic priorities
Strategic priorities
1
Align portfolio to real estate
benefiting from macro trends
that are structurally supported
2
Focus on long-let property
in good locations with strong
occupier contentment,
intrinsic value and rental
growth prospects
Long term strategy
Employing a range of investment
strategies to ensure we own the
right asset in the right location
Focus on geography, asset quality,
lease and credit strength and
sector diversity of our occupiers
2023/24 priorities
Retain our overweight exposure
to logistics with a preference for
urban logistics
Remain highly disciplined to
ensure each asset remains fit
for purpose delivering attractive
income growth and total returns
Learn more on page 2
Strategic priorities
3
Protect and enhance the asset
value and cash flow with long
term decision making
4
Improve the quality and
sustainability of our assets by
adopting high standards and
supporting our stakeholders
and local communities
Long term strategy
Adopting an active asset
management approach to deliver
value accretive initiatives
Embed sustainability and high ESG
standards across all of our activities
2023/24 priorities
Retain high occupancy and long
average lease lengths
Continue to improve the average
EPC rating across the portfolio
whilst recognising our ability to
be a strong steward of under
invested assets
Learn more on page 4
Strategic priorities
5
Adopting a partner of choice
mindset, collaborating with
all stakeholders
6
Having the right people and
using the team’s breadth and
depth of expertise to make
well informed decisions and
act in the best interests of
our stakeholders
Long term strategy
Retain our rational and disciplined
approach driving our long term
decision making
Being a desirable place to work,
attracting and retaining some
of the best talent in the real
estate industry
2023/24 priorities
Retain high levels of employee
and occupier satisfaction
Maintain strong relationships
with all other stakeholders
Learn more on page 6
Strategic priorities
7
Generate reliable, repetitive
and growing income-
led cash flows from fit
for purpose assets
8
Bringing all our actions
together to deliver strong,
durable cash flows
underpinning highly attractive
total returns
Long term strategy
Deliver attractive total returns,
underpinned by a reliable,
progressive and covered
dividend policy
2023/24 priorities
Deliver and sustain EPRA
earnings per share growth,
facilitating our progressive and
covered dividend ambitions
Deliver top quartile performance
and outperform our benchmarks
Learn more on page 8
Own desirable real
estate that meets
occupiers’ needs
Manage and enhance
responsibly to improve
our assets and help
occupiers thrive
Maximise our expertise
and relationships to
build on our position as
partner of choice
Generate reliable,
repetitive and growing
income-led total returns
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An overview, purpose and strategy
Chief Executive's
review
The last year has been volatile
and led to a recalibration of real
estate values. However, the
fundamentals of our core sectors
remain strong and our fully let
portfolio is well placed to benefit.
12 years
WAULT
97%
Portfolio’s logistics and
long income weighting
Overview
We have endured a volatile economic and
political situation over the last year, which has
brought an end to the era of cheap money and
low inflation. It has created uncertainty and led
to a recalibration of real estate values.
However, as we look past the near term
uncertainty, it is clear that there will be
increasing polarisation. Those real estate sectors
and geographies that enjoy strong occupational
demand and continue to attract long term
patient capital will prove more resilient, whilst
those facing disruption from technology,
increasing environmental obsolescence and
changing consumer behaviour will struggle.
Our focus on the macro trends and how they
define the winners and losers in real estate has
served us well over the years and continues to
influence where we invest our capital.
Our core allocation into urban logistics within
the strongest geographies of London and the
West Midlands is ensuring that we benefit
from long term structural shifts and capture
elevated levels of rental growth from strong
demand/supply dynamics. Historically, we
have also consciously allocated capital into
grocery and convenience long income that
benefits from a growing consumer preference
for smaller format grocery spend, convenience
over experience and essential spend
over discretionary.
Furthermore, our active investment
management and abilities to leverage our
occupational relationships, give us a ‘black edge’
that has seen us regularly buy into assets to
capture sustainable rental growth and sell assets
to benefit from hot money flows.
Whilst there has been a slight improvement
of late, the macro environment still remains
uncertain. Whilst this has affected real estate
values, very little has changed in terms of the
drivers supporting our chosen sectors, which
is why we know that our fully let portfolio
will continue to provide reliable, repetitive
and growing income and allow us to not only
navigate uncertainty but also to profit from it.
Generate income
Income and income growth
We continue to believe that income and
income growth are the defining characteristics
of long term investment returns. Collecting and
growing income is fundamental to successful
investing and we appreciate the true benefit
of compounding over longer terms with an
absolute focus on the quantity, quality and
timing of when cash will be returned. After all,
investing is about laying out money today with
the expectation that more will be returned to
you over time.
Investors are aware that, even with higher
interest rates, the right real estate can offer
excellent inflation protection and total returns
materially higher than many alternatives with
the added security of the intrinsic value of land.
After all, five and ten year indexed gilts are
trading back close to 0%.
Our portfolio continues to achieve its objective
of delivering reliable, repetitive and growing
income as part of a total return strategy.
Its metrics remain very strong with occupancy
at 99%, a WAULT of 12 years and a gross to net
income ratio of 99% that reflects our very low
income leakage. 63% of our income benefits
from contractual rental uplifts, mainly RPI or CPI
linked which, together with strong open market
reviews on our logistics, is providing certainty of
income growth.
These dynamics are providing us with positive
earnings trajectory as evidenced by our growth
in EPRA Earnings Per Share of 3% over the
year and 12% over three years. We expect our
‘all weather’ portfolio will allow us to absorb
increased interest rate costs, continue to grow
earnings and progress our dividend over the
longer term.
Andrew Jones
Chief Executive
15
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LondonMetric Property Plc Annual Report and Accounts 2023
Our investment strategy is about
owning quality assets in the winning
sectors that are underpinned by
strong income
This approach allows us to avoid owning
difficult assets and the stress and valuable
thinking time that comes with owning ‘cheap’
assets. We continue to prioritise asset selection,
patience and strong conviction in the structural
tailwinds of our preferred sectors. When you
choose real estate for its quality and location,
you are more likely to be a price setter than a
price taker as occupiers will need you more,
you can attract quality companies at higher
rental levels and be more confident of future
rental growth.
Our disciplined and rational approach ensures
that we pursue quality returns and not just grow
assets under management. This has always
tempered our acquisition activity, limited
our development exposure and framed our
disposal decisions, the latter often characterised
by a long period of attractive returns and an
expectation that these may flatten or even
reverse as the building grows older and the
lease gets shorter. After all, one of our jobs is to
assess if the market is prepared to pay prices
ahead of our expectations.
It is why, over the last three years, we have sold
£640 million of property, primarily larger box
logistics where we felt supply would temper
rental growth and yields were exaggerating
the prospects for rental growth; it is no surprise
that big box logistics was the worst performing
logistics sub-sector in the year.
Own desirable real estate
Stirchley Trading Estate was sold in March 2023 as part of a larger £46m
portfolio of three multi-let industrial estates that had previously been
acquired through our takeover of A & J Mucklow Group Plc
An overview, purpose and strategy
Chief Executive’s review
continued
Significant disposals in the year
During the year, we undertook a targeted
sales campaign of mature and non core assets
which was well executed and included a
number of multi-let industrial units acquired
through the Mucklow acquisition in 2019.
We sold £273 million of assets at an average
1% premium to our prevailing book value, a
45% profit on cost and a NIY of 4.7%.
The proceeds from these transactions have
helped to reduce our more expensive floating
rate debt, thereby enhancing our earnings
and better protecting our LTV from adverse
valuation movements.
Conversely, our acquisitions were limited
at £120 million, most occurring early on in
the year and characterised by quality urban
buildings, in good geographies (69% located
in London and the South East) in sub-sectors
where we expect to enjoy income growth over
many years.
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43%
Portfolio’s urban logistics weighting
Our ambition in logistics, particularly
urban, remains undiminished
The demand/supply tension in logistics
continues to generate strong tailwinds with
occupational demand for logistics continuing to
hold up well and supply remaining constrained.
According to CBRE, logistics take up for 2022
was 38 million sq ft, which was 33% above
the ten year average. For Q1 2023, demand
remained robust and in line with average take
up over the past five years at 6.6 million sq ft.
Looking forward, Knight Frank estimates that
take up for the whole of 2023 will also be in
line with the five yearly pre-pandemic average,
despite a material reduction in requirements
from online retailers who have seen many
years of expansion.
The demand hopper for logistics is increasingly
being filled by a diverse range of occupiers,
including food producers, manufacturing
firms, data centres and film studios as well as
corporates that need to re-shore activities to
ensure compliance with post-Brexit legislation
and avoid costly tariffs or disruption. In addition,
certain sectors continue to rewire supply
chains as they meet sustainability targets and
transition away from low-cost labour toward
more automated facilities.
Despite demand normalising, CBRE estimates
that vacancy rates for logistics as at the
end of Q1 2023 remained below 3% with
little to suggest that this will rise materially.
In response to higher financing, rising build
costs and falling land values, new development
activity has fallen materially with only ten
new development starts in the first quarter
compared with 38 in the same period last year.
Our preferred logistics sub-sector remains
urban logistics, where we believe the demand/
supply tension is greatest and where 43% of
our portfolio is allocated. Urban warehouse
demand has been rising for a number of
years, accelerated by rapid growth in online
shopping, growing customer delivery
expectations and requirements from new
industries. Companies have been forced to
evolve operationally by locating closer to their
end customer to minimise delivery times and
increase accuracy of delivery.
We believe that this demand for urban is set
to continue and we have focused our recent
investment activity on urban assets to broaden
and improve the quality of our logistics
portfolio, our geographical exposure and
income granularity with the addition of exciting
occupiers in new, high growth sectors.
Own desirable real estate
Set against this high demand, we continue to
see a declining supply of urban warehousing in
the strongest cities with London losing 24% of
its industrial floorspace over the last 20 years,
whilst Manchester and the West Midlands have
lost c.20%.
After strong rental growth for logistics in
2022, the sector dynamics should guarantee
that rents continue to rise, with Knight
Frank estimating 4% rental growth in 2023.
Whilst commentators raise concerns on
affordability, rent continues to represent a small
proportion of the overall cost for occupiers
and, with other costs increasing materially, we
believe that occupiers will continue to seek
warehousing in better locations.
Over the year, our logistics assets saw ERV
growth of 11% and rent reviews settled at
16% above previous passing on a five yearly
equivalent basis. Urban was the strongest with
ERV growth of 12% and rent reviews 21% higher.
We again saw strong rental growth in London
and the South East, where nearly 60% of our
urban logistics is located.
Over the next two years, our attractive pipeline
of logistics rent reviews is expected to add a
further £9 million of annualised contracted rent
as we continue to capture in-built reversions.
Logistics
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Own desirable real estate
24%
Portfolio’s long income weighting
Long income assets remain appealing
and our opportunistic approach is
delivering attractive income returns
It is our long held belief that long income
assets with low operational requirements have
for a number of years been mispriced by the
real estate market and they remain attractive
propositions. These are well located assets,
let on long leases, to strong operators such
as convenience grocers, discounters, home
and DIY stores. Most of these operators have
resilient business models that offer essential
goods and omni-channel optionality.
Our long income portfolio accounts for 24% of
our total portfolio and continues to be 100%
let, offers a topped up NIY of 5.4%, a WAULT
of 13 years and 69% of income subject to
contractual rental uplifts. This offers a strong
income bedrock with inflation protection and
attractive compounding qualities.
Our recent investment activity has ensured that
grocery and roadside assets (mainly drive-thru
and auto repair) now account for a material
proportion of our long income portfolio, with
key operators such as McDonalds, Starbucks,
Costa and Halfords. In the year, we acquired
£35 million of long income assets, let on
average for 15 years to strong credits and with
70% located in London and the South East.
Acquisitions were more than offset by
£59 million of disposals (at share) where
sales prices exceeded our expectations.
Unsurprisingly, the strong metrics of our long
income assets have now become appreciated
by real estate investors providing opportunities
for us to monetise investments where buyers
have a greater appreciation of their future
returns than we do.
A Costa drive-thru that we built in the year at Weymouth as part of a
51,000 sq ft development
An overview, purpose and strategy
Chief Executive’s review
continued
Long income
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Manage & Enhance Responsibly
Our 296,000 sq ft logistics development in Ipswich that completed in the
year and was BREEAM Very Good certified
Embedding sustainability
Upgrading through investment
& development
Our investments are focused on high quality
buildings or assets where we can use our
expertise to materially upgrade the building.
Our developments are typically BREEAM
Very Good or Excellent and we work with
contractors to ensure sustainability is properly
considered as part of the project.
Extending the economic life of our assets
through environmental improvements
Cost effective improvements such as LED
lighting, new HVAC systems, removing gas,
better insulation and glazing are helping
to significantly improve EPC ratings.
Working with our occupiers to add solar
across our portfolio is helping to address their
ambitions to be Net Zero Carbon and mitigate
energy costs.
Our strategy supports a low
carbon approach
The portfolio is operationally light and
exposed to real estate sub-sectors which
have a lower carbon intensity
We are a strong steward of
underinvested assets, with the
necessary expertise
0.7m sq ft
BREEAM Very Good developments
in year
90%
of portfolio has an EPC rating A-C
We continue to strengthen our
income and the quality of our assets
During the year, 167 occupier initiatives added
£7.8 million per annum of rent and delivered
like for like income growth of 5.0%. Lettings and
regears added £5.1 million and were signed on
average lease lengths of ten years, with regears
achieving rents 21% ahead of our previous
passing. Rent reviews delivered £2.7 million of
additional rent, representing a 16% uplift on a
five yearly equivalent basis.
We continue to embed sustainability and high
ESG standards across our activities, driven by
our own aspirations as well as those of our
customers, occupiers and stakeholders. 90% of
our assets now have an EPC rating of between
A-C, which compares to 85% last year. We have
benefitted from the completion of further
developments, asset management initiatives
and the disposal of poorer quality industrial
warehousing in the year.
The percentage of the portfolio certified
BREEAM Very Good or Excellent has risen to
31%, helped by the completion of 0.7 million
sq ft of BREEAM Very Good developments in
the year. In addition, given the recent concerns
on energy security and prices, we have seen
a materially higher level of engagement
with occupiers on solar PV installations.
Over the year, five solar PV installations were
added to the portfolio, which increased total
installed capacity to 3.6 MWp, with potential
to add a further 4.5MWp over the next
12-18 months based on current activity and
occupier discussions.
In the year, we maintained our GRESB green
star and continue to make good progress in
implementing our Net Zero Carbon strategy.
Over the next year, we will progress our
pathway to Net Zero.
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An overview, purpose and strategy
Chief Executive’s review
continued
Expertise and relationships
Occupiers
Strong customer focus
We recognise that when our occupiers’
businesses thrive, our business also thrives.
We treat our occupiers as customers and put
them at the centre of our decision making.
Our occupier-led approach provides us with
market knowledge to better understand
future trends and make informed decisions.
Our high occupancy rate, rent collection
and customer satisfaction scores demonstrate
the strength of these relationships.
Extending existing relationships and
developing new contacts continue
to be a key focus for us.
Outcomes
99.1%
portfolio occupancy
8.7/10.0
landlord recommendation score
We continue to benefit from our
strong team and their relationships
Our team’s economic alignment to our success
ensures an ownership culture and a strong
conviction to make the right property and
financial decisions.
We work with all of our stakeholders to deliver
longer term benefits to our investors, occupiers,
people, local communities and contractors.
We maintain a highly rational and disciplined
property approach, selling assets that don’t
meet our strict investment criteria and waiting
patiently for attractive new opportunities.
We were pleased to see that our occupier
survey again showed high contentment.
We scored an average of 8.7 out of 10.0 for
whether our occupiers would recommend
LondonMetric as a landlord. This compares with
the 2022 result of 8.5. For our top ten occupiers,
the average was higher at 9.2, up from 9.1
in 2022.
Following the £780 million refinancing of debt
facilities in the previous year, we have continued
to leverage our financing relationships to ensure
our debt provides long term certainty with
flexibility at an attractive rate. Over the year,
we added £225 million of hedging, put in place
£275 million of new debt facilities and extended
the term on £400 million of existing debt.
This activity, along with our disposals, allowed
us to repay shorter dated debt facilities,
mitigate refinancing risk, maintain our healthy
debt maturity profile and continue to run
a conservative LTV. As at the year end, the
proportion of our drawn debt hedged increased
to 93%, our debt maturity was at 6.0 years,
our available undrawn facilities increased to
£380 million and LTV was 32.8%.
Our well positioned balance sheet and our
proactive approach ensure that we are well
protected from rising interest rates and in a
strong position to go fishing as the investing
waters begin to calm.
Our people are critical to the
success of the Company
The Company is highly focused with
35 employees and nine Non Executive
Directors. Since merger in 2013, employee
numbers have fallen despite a significant
increase in assets managed. This reflects
improved efficiencies and the lower
operational requirements of our portfolio.
Culture and approach
We have successfully attracted and retained
a talented and loyal team. This is reflected
in our low annual voluntary staff turnover
rate which has averaged 6% since merger.
We believe that this reflects a culture of
empowerment, teamwork as well as fair
and performance based remuneration.
Outcomes
6%
staff turnover since merger in 2013
94%
of staff are proud to work for LondonMetric
People
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Expertise and relationships
Communities
Outcomes
£104k
Charitable giving in year across 51 causes
We recognise the importance of supporting
our local communities and engaging with
all local stakeholders.
Our Charity and Communities Working
Group implements charity giving and
co-ordinates community involvement.
LondonMetric aims to allocate a minimum
of £100,000 per year for charitable giving.
In addition, we require our contractors to
focus on community initiatives as part of our
development and refurbishment activity.
Investors
Outcomes
Over 240
Investors seen in the year
Our investors are critical to the Company
and its ability to access capital, efficiently
and quickly.
We value our good relationships with our
shareholders. Over the year, we met with
over 240 equity investors and feedback
remains very supportive of our strategy
and the Company.
Access to debt financing is highly important
to us and we continue to enjoy very strong
banking relationships, as evidenced by our
successful debt refinancings in the year.
Contractors
and Advisers
Outcomes
100%
Contractor compliance
We rely on the support of a diverse group
of contractors and property advisors.
Our contractor relationships are highly
important in allowing us to deliver on
our developments and refurbishments.
In conjunction with our external project
managers, our development team ensures
that we select high quality and robust
contractors with a proven track record.
During the year, there was 100%
compliance with our Responsible
Development Requirements checklist.
Outlook
We are living in a period of uncertainty
and have had to navigate a weaker economic
backdrop with excessive inflation and 12
increases in interest rates. These conditions
have undoubtedly impacted our approach,
as we have managed our leverage and
exposure to floating rate debt.
This period will, however, pass. Inflation will
start to fall and interest rates will stabilise or
even fall; we hope for the best, but plan for
the worst.
Despite the volatility, we continue to have
a high conviction that evolving consumer
behaviour can produce a strong tailwind for
certain asset classes, in much the same way
that it can produce a strong headwind for
the wrong types of real estate. Too many
investors get wedded to a particular sector
and continue to play it, long after the wind
has changed direction.
Consequently, before we allocate capital, we
will always determine what direction the wind
is blowing so that we can assess what is a
structural opportunity and what is cyclical.
The fundamentals in our core sectors remain
strong with broadening occupational demand
and constrained supply, particularly around
our major cities where the entrepreneurial
spirit is seeing the creation of new industries
adding new requirements for warehouse
accommodation to support the evolving
demands of its population. At the same time,
our major cities are continually re-zoning
existing warehouse space for high value
alternative uses, particularly residential, which
is adding to the very attractive demand/supply
imbalance in the strongest geographies.
We do not expect these fundamentals to
change any time soon and will continue to
take advantage of the tailwinds as part of our
strategy to constantly strengthen our portfolio
by selling mature assets and replacing
them with quality assets that offer better
growth potential. As material shareholders
in the business, the management team is
fully aligned with shareholders and remains
laser focused on ensuring that the portfolio
remains fit for the future.
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An overview, purpose and strategy
The world around us
We are operating in an ever changing
macro environment which continues
to have a profound impact on property.
Lower yielding and high growth sectors certainly
took the brunt of the initial repricing in the latter
part of 2022, whilst higher yielding ex-growth
sectors remained largely unscathed. This seems
largely irrational and we would expect some
of these initial movements to unwind, with
other movements accelerating as market data
becomes more evident and reliable.
For a while now, the logistics sector has been
the only property asset class transacting,
which helps to explain why valuations in March
2023 are stronger than the market had been
expecting at the end of 2022. Whilst liquidity
is much improved from the days of the mini
budget, it is still likely to remain far from
optimum until five year swap rates fall back
below 300bps. We still have some way to go
as, whilst it is down materially from its highs of
540bps immediately following the mini budget
last Autumn, it remains elevated at around
400 bps, reflecting stubbornly high inflation.
For those sectors that have not seen material
re-pricing, when more liquidity returns, they will
surely print at yields materially softer than those
currently suggested by valuers’ yield sheets.
We expect the greatest fallout to be in those
troubled sectors facing structural headwinds
and a perfect storm of falling rental values,
weaker valuations and higher borrowing costs.
When interest rates are low and debt readily
available, many of the structural cracks in these
asset classes can be papered over. However, we
are now in a new paradigm and if the property
market won’t offer price discovery, then the
debt market inevitably will. One of the fallouts
from the recent banking crisis in the USA is
that debt availability will be more restricted.
Whilst many will point to this being a localised
issue, it would be naive to think that there will
not be implications on debt availability and/or
credit margins closer to home.
Troubled sectors including certain parts of retail
as well as offices seem the most exposed. Here,
debt refinancing will bring some serious pain
as owners discover that some of their troubled
assets presently yielding a positive carry and
attractive cash on cash metrics, will no longer
be so productive.
Macro events have significantly
increased volatility
We continue to witness significant global
economic and geopolitical uncertainty, from
the conflict in Ukraine to the tensions in Taiwan
and the impact of China’s reopening following
its zero Covid strategy. These macro issues
continue to influence how and where we
allocate capital and position our balance sheet.
Our occupiers have had to navigate soaring
energy costs, disruption to supply chains,
staff shortages, significant cost inflation
and consequently material increases in
borrowing costs. The good news is that the
UK has had a resilient consumer with almost
full employment, good wage growth, high
savings ratios and a significant proportion of
homeowners owning their homes without a
mortgage or benefiting from cheaper fixed
rate mortgages.
Consequently, and against most commentators'
expectations, the UK has continued to avoid a
recession, even a technical one. The days of the
Truss/Kwarteng mini budget are now behind us
and the money markets have been calmed.
Therefore, after 12 increases in interest rates,
we expect inflation to fall materially over the
remainder of 2023.
However, what is clear is that, after decades
of very low interest rates, the period of a ‘free
carry’ in real estate is over. Therefore, investors
will be more focused on delivering growth
opportunities from both macro shifts and heavy
lifting asset management initiatives that can
deliver higher levels of income; something that
not all sectors or management teams will be
able to deliver on.
The property market has seen
significant repricing but, outside
logistics, liquidity hasn’t returned
Interest rates remain the yardstick by which all
investments are assessed, and so the material
shift in monetary policy has had a profound
impact on real estate valuations. Whilst the
full impact is continuing to play out, we expect
some of the short term reactions to be
superseded by longer term trajectories.
Andrew Jones
Chief Executive
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UK listed REITs look best placed
The good news is that the UK listed sector is in
a much better position than the private sector
or indeed many of the European REITs, where
leverage is already higher. Many of the lessons
from the Global Financial Crisis were missed,
but, in the UK, lower leverage was not one
of them and so we do not expect a repeat of
2008/09. Asset quality is also much higher
and, either by choice or market forces, very few
UK REITs are now owning structurally obsolete
shopping centres and ageing regional offices.
The times are truly changing and today's debt
and equity markets offer no hiding places.
Outdated strategies have been unmasked
and sub-scale offerings are out of favour, and
this will become more apparent as pockets of
the market rerate in response to an improved
economic outlook.
Polarisation across real estate
will continue, driven by the wider
macro trends
As volatility subsides and rational thinking
returns, we believe that fundamentals will once
again come to the fore.
Technological disruption remains a powerful
force that continues to affect our daily lives in
how we communicate, travel, work and shop.
This will continue to have a profound and
permanent impact on which real estate sectors
win and which ones lose. After all, no matter
how clever we are or how hard we work our
assets, the macro trends will always outdo the
micro initiatives.
After years of above average take up, and
despite negative headlines around online
sales, demand for UK logistics warehousing
is still running at long term average levels.
Whilst online sales penetration has fallen back
from the peak seen during the pandemic to
currently stand at 26%, this is still materially
higher than the pre-pandemic level of 19%
and remains set to exceed 30% over the next
few years as consumers’ appreciation of online
convenience, price transparency and speed of
delivery continues to grow.
Together with further onshoring of operations
and a more diverse range of occupiers looking
for space, we believe that the structural
tailwinds will continue to provide strong
support for logistics, particularly in urban
locations, where land is a scarce and a reducing
commodity. These dynamics underpin current
rental levels which saw further strong growth
over the last year.
Conversely, much physical retail property
still faces significant challenges with reduced
demand and continuing over supply as
the consumer pivots further towards an
omni-channel shopping model. We are still
reading weekly headlines suggesting that
another national chain has announced further
store closures adding to already elevated
vacancy levels.
The shift in spending over the last decade
has resulted in massive value destruction
across large parts of retail real estate, with
department store and shopping centre values
facing the brunt of falling rents, failing tenants,
rising obsolescence and muted new demand.
Retail landlords are almost always a price taker;
not the price setter. Whilst the physical store has
a role to play in omni-channel retailing, it is clear
that the rents that it can justify are materially
lower than history suggests. As one retail CEO
commented: retail rents today are way out of
kilter with the role that shops now perform.
The adoption of omni-channel models is
however affording the retail parks market
some stability and we are starting to see
rising occupancy, reduced supply and pricing
equilibrium. Whilst these conditions are not
uniform it is particularly the case around the
strongest geographies, where existing space is
being lost to other higher value alternatives, like
residential. We expect this ‘de-retailing’ trend
to continue.
In the retail grocery sector, online penetration
is much lower than compared to general
merchandise. As a result, the grocery store
retains its important role in essential spending.
However, performances across grocery real
estate is already polarising as over-sized, over
rented larger format supermarkets face up
to the strong competition from the smaller,
right rented, fit for purpose convenience and
discount stores which consumers now prefer.
After years of rental compounding, the best
days for larger format supermarkets look like
they are behind them. Shortening leases
will inevitably expose their values; much as
department stores' valuations did when they
were exposed to true market fundamentals and
their credits failed.
For the office market, outside of the West
End, the sector is starting to attract similar
comments to those that were being made
about shopping centres seven or eight years
ago. Structural disruption to work from home
accelerated during the pandemic, and whilst
corporates are intensifying their return to work
policies, occupiers are materially reducing
their office footprint and demanding greater
flexibility. They are also conscious that the
stick on its own won’t work and so they are
also intensifying their offer of a carrot through
modern environments and better facilities.
This is at a time when offices are having to
be retrofitted to meet new sustainability
requirements. This will inevitably lead
to a polarisation of performances and a
large gap between the winners and losers.
Some commentators are already referring to
some older ‘brown’ offices as being unsaleable,
and what started out as murmurs of some
banks refusing to lend on certain office
buildings is now becoming reality. There is a
refinancing tsunami coming, and the smart
money is predicting that, as well as 'owning'
a number of shopping centres in the UK, the
lending banks will increasingly be the 'owners' of
regional offices.
The rental outlook across the various real estate
sub-sectors has rarely been more polarised.
However, we continue to live in a fast changing
world that shows no signs of slowing down.
It is clear that some sectors will benefit from
attractive tailwinds whilst others are facing
continued headwinds.
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Creating value
Our markets
There are many macro trends and structural
forces affecting real estate including demographic,
economic, political, regulatory and environmental
changes. These trends continue to influence the
investment decisions that we make to shape our real
estate portfolio.
1
Geopolitical &
economic
+75%
in energy costs over two years
2
Interest rates &
borrowing costs
c.400bps
five year interest rate swaps
3
Demographic
changes
+11%
increase in retirees
We continue to experience significant economic
and geopolitical uncertainty across the globe.
The invasion of Ukraine last year impacted
supply chains and caused material commodity
and energy price inflation, particularly in Europe.
This has been exacerbated by the tensions
in Taiwan and the impact of China’s delayed
reopening following their zero Covid strategy.
These factors have contributed towards an
economic slow down across the world as
central banks aggressively increased interest
rates in response to soaring inflation. Whilst the
UK has avoided a recession, businesses and
consumers face uncertain times and are having
to deal with a number of headwinds.
After decades of very low interest rates, the
period of a ‘free carry’ in real estate is over.
Investors can no longer rely on borrowing
money at low rates to invest into property to
generate a positive arbitrage.
Interest rates remain the yardstick by which
all investments are assessed, and so the
material shift in monetary policy has had a
profound impact on real estate valuations.
Whilst increases in rates has started to take
effect, inflation remains stubbornly high and is
unlikely to afford central banks much room to
loosen policy for the foreseeable future.
With five year swap rates still elevated at
c.400bps, liquidity in property is set to remain
limited and borrowing costs likely to stay high.
The UK population is expected to rise by 4%
to almost 70 million by 2040, with regional
differences expected and stronger growth likely
in London and the South East.
Similar to the rest of the western world,
however, the UK has an ageing population with
retirees projected to increase by 11% over the
next ten years. With a declining working age
population, this will increase the dependency
ratio to c.25% by 2032.
This has implications for property, including
increased demand for property that services
retirees, reduced demand for offices, labour
availability and costs, more efficient urban
infrastructure and retiree demand for real assets
which can deliver attractive income.
In a period of uncertainty, we continue to
ensure that our ‘all weather’ portfolio can
navigate a weaker economic backdrop and
deliver rental growth that can offset rising
borrowing costs. This means refining our
assets, recycling out of mature assets into
higher quality ones where we can add value
and benefit from demand/supply tension.
Global macro trends are favourable for
logistics warehousing as businesses
continue to rewire their operations and
build greater infrastructure resilience,
capability and sophistication. Therefore,
we will continue to align our portfolio to
those requirements.
At the same time, we are managing our
leverage position and exposure to floating
rate debt to ensure that we are in a strong
position to ride market volatility but also
take advantage of opportunities.
The right real estate can still offer excellent
inflation protection and income-led
returns, and we will continue to prioritise
strong and growing income.
What this
means for
LondonMetric
Macro trends
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1
Technology
disrupting
26%
Online sales penetration
Technology continues to power change across
society in the way we work, live and shop. As we
emerged from the pandemic, it was clear that
technology has been a true enabler to allow
many to work from home and it has created
a trend that is unlikely to reverse. The scaling
up of technology to service the UK economy
from online platforms was truly amazing –
something that simply wouldn’t have been
possible just ten years ago.
As a result, penetration and adoption of online
shopping continues its long term upward
trajectory, with online representing 26% of retail
sales compared to 19% pre-pandemic. This is
requiring greater logistics warehousing capacity.
Conversely, much physical retail property
still faces significant challenges with reduced
demand and continuing over supply as the
consumer pivots further towards an omni-
channel shopping model. The shift in spending
has caused value destruction across large
parts of retail real estate with falling rents,
failing tenants, rising obsolescence and muted
demand. However, certain parts of discount
and convenience retail remain relevant
and attractive.
Offices have also been disrupted, with occupiers
materially reducing their office footprint and
demanding greater flexibility, which is creating
greater uncertainty for the sector.
Our core allocation into logistics,
particularly urban logistics, is ensuring
that we benefit from long term structural
shifts and capture elevated levels of
rental growth.
Historically, we have also consciously
allocated capital into grocery and
convenience long income that benefits
from the growing consumer preference for
smaller format grocery spend, convenience
over experience and essential spend
over discretionary.
We will continue to align ourselves to
these sub-sectors and avoid those where
technology is disrupting and the outlook is
uncertain. In addition, we will continue to
look for new growth sectors.
What this
means for
LondonMetric
Deliveroo at our Norbury warehouse
At our site in Norbury in London, we let
a warehouse to Deliveroo in the year.
The unit will be used as a ‘dark store’ to
meet Deliveroo's demand for rapid grocery
services in urban areas through its ‘Hop’
brand.
Deliveroo launched Hop to compete with
rapid delivery grocery players such as
Getir and Gopuff. It offers its expertise and
technology to grocery partners to provide
rapid delivery of around 1,500 items
delivered “in a matter of minutes”. Its main
partners currently comprise Waitrose
and Morrisons.
Structural trends
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2
Supply/Demand tension
3
Sustainability high priority
-24%
loss of industrial
floorspace in London
79%
of our occupiers with
Net Zero Carbon target
ambitions
The continued migration to online shopping
and services requires real estate infrastructure to
meet consumer demands. As online adoption
continues to grow and become further
embedded in every day life, expectations grow
for faster and more accurate delivery times
which is fuelling further demand for the right
urban logistics assets.
Competing land use from residential, student
and self storage is creating supply pressures
with scarce urban logistics real estate often
commanding premium rental levels. Over the
last 20 years, London has lost 24% of its
industrial floorspace whilst Manchester and the
West Midlands have lost c.20%.
Loss of land to other uses is also having an
impact for retailers as they are increasingly
priced out of certain urban areas.
We are all more mindful of our impact on the
planet with the UK government and corporates
leading the way on Net Zero Carbon ambitions.
Ensuring real estate is fit for purpose with
enduring occupier appeal increasingly requires
buildings to be more energy efficient and better
adapted to climate change. Recent energy price
inflation is serving to accelerate the ambitions of
occupiers and landlords further to drive forward
the sustainability agenda.
In our recent occupier survey, of those that
responded, 79% have set or are considering Net
Zero Carbon targets.
Furthermore, valuations and the investment
market are increasingly reflecting sustainability
ratings of buildings in their assessments.
As part of our drive to upgrade the quality of our assets and
progress our Net Zero Carbon ambition, we continue to
invest in high quality buildings as well as progress energy
efficiency and clean energy initiatives in conjunction with our
occupiers. These include solar PV, LED lighting upgrades, roof
improvements and electric vehicle charging.
We see ourselves as strong stewards of underinvested
or poorer quality assets with the necessary expertise and
appetite to materially improve buildings and increase rents.
Creating value
Our markets
continued
Urban rent reviews
LondonMetric has seen
strong increases in urban
logistics rent reviews,
with reviews in 2023
delivering 21% uplifts.
We continue to have a high conviction that evolving consumer
behaviour coupled with diminishing supply of suitable space
for occupiers can produce a strong tailwind for certain asset
classes and deliver high rental growth.
It is why urban logistics remains our conviction sector call and
why we continue to focus on owning assets that are located in
strong urban geographies.
What this
means for
LondonMetric
Structural trends (continued)
21%
20%
17%
20 23
20 22
20 21
What this
means for
LondonMetric
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Logistics
Occupational demand remains robust
The demand/supply tension in logistics
continues to generate strong tailwinds with
occupational demand holding up well and
supply remaining constrained.
According to CBRE, logistics take up for 2022
was 38 million sq ft, which is 33% above the ten
year average. For Q1 2023, demand remained
robust and in line with average take up over the
past five years at 6.6 million sq ft. Knight Frank
estimates that take up for 2023 will also be in
line with the five yearly average.
CBRE estimates that vacancy rates for logistics
as at end of Q1 2023 remained low at just 3%,
with little to suggest that this will rise materially.
In response to higher financing, rising build
costs and falling land values, new development
activity has fallen materially.
After strong rental growth in 2022, the sector
dynamics should guarantee that rents continue
to rise, with Knight Frank estimating 4% rental
growth in 2023.
Rents remain largely affordable and still
represent a small proportion of the overall
cost for occupiers given that other costs have
increased materially.
Urban logistics is seeing the strongest rental
growth due to a perfect condition of rising
demand and falling supply, accentuated
by strong competition from more valuable
alternative land uses. This is particularly the case
around major conurbations, with the South East
continuing to experience high rental growth.
Long income
Long income real estate in demand
Long income assets with low operational
requirements have for a number of years been
mispriced by the real estate market.
These are well located assets, let on long
leases, to strong operators such as convenience
grocers, discounters, home, DIY, roadside
and auto-repair. These operators have
resilient business models that offer essential
goods, discount and value as well as omni-
channel optionality.
They have benefitted from the cost of
living crisis as shoppers have changed their
behaviours, as evidenced by the 25% surge in
sales over the last year for both Aldi and Lidl.
Unsurprisingly, their strong characteristics
have now become appreciated by real estate
investors and we expect these assets to
perform well going forward.
38m sq ft
Logistics take up in 2022
3%
Vacancy rate for logistics
as at the end of Q1 2023
+25% per annum
Increase in sales for Aldi and Lidl
Our preferred sectors
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Creating value
Business model
Our key stakeholders
are critical to our success
Our purpose is to own and manage desirable real
estate that meets occupiers’ demands, delivers
reliable, repetitive and growing income-led returns
over the long term. Our key stakeholders allow us to
achieve this growth and long term valuation creation.
Our people
Our success is dependent on
employing a talented, motivated and
diverse team with strong property
and finance expertise.
Our occupiers
We engage with occupiers across
all of our activities to provide real
estate solutions that deliver mutually
beneficial outcomes adopting a
partner of choice mindset.
Our local
communities
We recognise the importance of
supporting and properly engaging
with local communities. We work
closely with local authorities, residents
and businesses to ensure that our
activities consider and bring benefits
to local communities.
Our contractors
and suppliers
Delivering developments and asset
management initiatives on time, on
budget and in adherence with our
standards is a high priority. We select high
quality and robust contractors who have
a proven track record and we work in
collaboration with them.
Our investors
We value our good relationships
with investors and debt
providers to ensure we have
wide access to capital markets.
We also work closely with our
joint venture partners to fulfil their
business objectives.
We continue to benefit from our strong
team and their relationships. We work with
all of our stakeholders to deliver longer term
benefits to our investors, occupiers, local
communities and contractors.
Read more at page 63
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Own Manage Collaborate Generate
Our purpose drives our income
growth and value creation
Manage and
enhance responsibly
We aim to deliver real
estate solutions that will
help occupiers’ businesses
thrive. Our focus on ESG and
Responsible Business is helping
to grow and improve the
quality of our income and the
sustainability of our assets.
£7.8m
Additional income per annum
from occupier transactions in
the year
Maximise our expertise
and relationships
Using our expertise to
work closely with occupiers
and wider stakeholders to
understand their needs
results in high satisfaction
and occupancy levels.
99.1%
Occupancy
Generate reliable, repetitive
and growing income
Income and income growth is
central to our business model.
The income from our assets is
passed to our shareholders in
the form of a well covered and
progressive dividend.
£146.8m
Net rental income
Own desirable real estate
Owning the right asset in the
right sector is increasingly
critical to deliver future
outperformance. We have
aligned our portfolio towards
the logistics and long income
sectors and continue to upscale
the quality of our portfolio.
8.4%
ERV growth in the year
+32.5%
Total accounting return over
three year period
90%
Percentage of portfolio with
an EPC rating of A-C
+2.7%
Dividend growth in year, our eighth
consecutive year of progression
Generating value
and long term returns
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We track eight key performance indicators (‘KPIs’) to monitor
the performance of the business, which includes our share of joint
ventures. The KPIs are also used to determine how Executive
Directors and senior management are evaluated and remunerated.
Objective
Deliver long term
shareholder returns
Maximise long term
total accounting return
Maximise property
portfolio returns
Deliver sustainable
growth in EPRA
earnings
Drive like for like
income growth
Maintain a higher than
market benchmark
WAULT
Maintain strong
occupier contentment
EPC rating
KPI
-33.1
33.7
28.7
Total shareholder return in the year (%)
2023
2022
2021
-20.2
41.9
16.7
Total accounting return (%)
2023
2022
2021
-12.0
28.2
13.4
Total property return (%)
2023
20 22
20 21
10.33
10.04
9.52
EPRA earnings per share (p)
2023
20 22
20 21
5.0
5.4
3.1
Like for like income growth (%)
2023
2022
2021
11.9
11.9
11.4
WAULT (years)
2023
2022
2021
0.9
1.3
1.3
EPRA vacancy (%)
2023
2022
2021
90%
85%
74%
EPC rating (%)
2023
2022
2021
Performance Total Shareholder Return (‘TSR’), being the
share price movement together with the
dividend, in the ten years post merger was
165%, over four times that of the FTSE 350
Real Estate Super Sector index movement of
36%. 12 month TSR delivered -33.1%.
Total Accounting Return (‘TAR’) of EPRA net
tangible assets per share movement together
with dividend paid in the year.
12 month TAR delivered a return of -20.2%.
The full calculation can be found in
Supplementary note viii.
Unlevered Total Property Return (‘TPR’),
including capital and income return, of the
portfolio as calculated by MSCI.
12 months TPR delivered a return of
-12.0% compared to the MSCI All Property
benchmark of -12.6%.
EPRA earnings per share from
operational activities have
grown by 2.9% over the last
12 months.
In the ten years post merger,
EPRA earnings per share has
grown by 165% from 3.9p to
10.33p per share.
The movement in the
contracted rental income
on properties owned through
the period increased by 5.0%.
Additional income of £7.8
million was generated from
asset management activity
following lettings, regears
and rent reviews.
Weighted average unexpired
lease term across the
investment portfolio of 11.9
years as at 31 March 2023.
Occupancy rate of investment
portfolio at 31 March 2023
was 99.1%, maintaining
our vacancy at 0.9%.
The proportion of our portfolio
with an EPC rating of A to C.
As at 31 March 2023, this was
90%.
Remuneration Under the Remuneration Policy 37.5%
of LTIP awards are subject to TSR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
The TSR component of the 2019 LTIP award
vested in full in the year and 99.8% of the
TSR component of the 2020 LTIP award is
expected to vest.
The three year TSR for the 2020 LTIP was
11.7% compared to the FTSE 350 Real
Estate Super Sector excluding agencies
and operators of -4.9%.
Under the Remuneration Policy 37.5%
of LTIP awards are subject to TAR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
The TAR component of the 2019 LTIP
award vested in full in the year and the
TAR component of the 2020 LTIP award is
expected to vest in full.
The three year TAR for the 2020 LTIP
was 32.5% compared to the FTSE 350
Real Estate Sector excluding agencies
and operators of 0.6%.
35% of this year's annual bonus award is
subject to TPR outperforming the MSCI
benchmark.
This year TPR outperformed the benchmark
delivering a 50% bonus payout.
The three year TPR delivered a return of
8.5% compared to the MSCI All Property
benchmark of 1.9%.
Under the new Remuneration Policy
proposals for future years, 30% of the annual
bonus is subject to TPR outperforming the
MSCI benchmark.
35% of this year's annual
bonus award is subject to an
EPRA EPS growth target. This
year EPRA EPS outperformed
its growth target securing a full
bonus payout. Under the new
Remuneration Policy, 30% of
the annual bonus is subject to
growth in EPRA EPS.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 83% of the
2019 LTIP award vested in the
year and 39% of the EPRA
EPS component of the 2020
LTIP award is expected to vest.
Forms part of EPRA earnings
per share, which as noted
above, is a key financial
performance measure for the
Company’s variable incentive
arrangements.
Linked to individual personal
objectives, representing 30%
of this year's annual bonus
performance conditions.
Under the new Remuneration
Policy, 30% of the annual
bonus is subject to Strategic
objectives.
Linked to individual personal
objectives, representing 30%
of this year's annual bonus
performance conditions.
Under the new Remuneration
Policy, 30% of the annual
bonus is subject to Strategic
objectives.
Under the new Remuneration
Policy, 10% of the annual
bonus is subject to ESG
objectives.
2023/4
ambition
Three year TSR performance to be in the
upper quartile of the FTSE 350 Real Estate
Super Sector, excluding agencies and
operators.
Three year total accounting return to be in the
upper quartile of FTSE 350 Real Estate Super
Sector, excluding agencies and operators.
One year TPR outperformance against MSCI
benchmark.
Deliver and sustain EPRA
earnings per share growth
and dividend progression.
Deliver like for like
income growth.
Maintain high weighted
average unexpired lease
term targeting >10 years.
Maintain high occupancy
across the investment
portfolio, targeting in excess
of 95%.
Maintain the proportion of our
portfolio with an EPC rating of
A to C above 90%.
Creating value
Key performance
indicators
Full details of our strategic
priorities are set out on page 14
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
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Objective
Deliver long term
shareholder returns
Maximise long term
total accounting return
Maximise property
portfolio returns
Deliver sustainable
growth in EPRA
earnings
Drive like for like
income growth
Maintain a higher than
market benchmark
WAULT
Maintain strong
occupier contentment
EPC rating
KPI
-33.1
33.7
28.7
Total shareholder return in the year (%)
2023
2022
2021
-20.2
41.9
16.7
Total accounting return (%)
2023
2022
2021
-12.0
28.2
13.4
Total property return (%)
2023
20 22
20 21
10.33
10.04
9.52
EPRA earnings per share (p)
2023
20 22
20 21
5.0
5.4
3.1
Like for like income growth (%)
2023
2022
2021
11.9
11.9
11.4
WAULT (years)
2023
20 22
20 21
0.9
1.3
1.3
EPRA vacancy (%)
2023
20 22
20 21
90%
85%
74%
EPC rating (%)
2023
20 22
20 21
Performance Total Shareholder Return (‘TSR’), being the
share price movement together with the
dividend, in the ten years post merger was
165%, over four times that of the FTSE 350
Real Estate Super Sector index movement of
36%. 12 month TSR delivered -33.1%.
Total Accounting Return (‘TAR’) of EPRA net
tangible assets per share movement together
with dividend paid in the year.
12 month TAR delivered a return of -20.2%.
The full calculation can be found in
Supplementary note viii.
Unlevered Total Property Return (‘TPR’),
including capital and income return, of the
portfolio as calculated by MSCI.
12 months TPR delivered a return of
-12.0% compared to the MSCI All Property
benchmark of -12.6%.
EPRA earnings per share from
operational activities have
grown by 2.9% over the last
12 months.
In the ten years post merger,
EPRA earnings per share has
grown by 165% from 3.9p to
10.33p per share.
The movement in the
contracted rental income
on properties owned through
the period increased by 5.0%.
Additional income of £7.8
million was generated from
asset management activity
following lettings, regears
and rent reviews.
Weighted average unexpired
lease term across the
investment portfolio of 11.9
years as at 31 March 2023.
Occupancy rate of investment
portfolio at 31 March 2023
was 99.1%, maintaining
our vacancy at 0.9%.
The proportion of our portfolio
with an EPC rating of A to C.
As at 31 March 2023, this was
90%.
Remuneration Under the Remuneration Policy 37.5%
of LTIP awards are subject to TSR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
The TSR component of the 2019 LTIP award
vested in full in the year and 99.8% of the
TSR component of the 2020 LTIP award is
expected to vest.
The three year TSR for the 2020 LTIP was
11.7% compared to the FTSE 350 Real
Estate Super Sector excluding agencies
and operators of -4.9%.
Under the Remuneration Policy 37.5%
of LTIP awards are subject to TAR growth
compared with the FTSE 350 Real Estate
Super Sector excluding agencies and
operators.
The TAR component of the 2019 LTIP
award vested in full in the year and the
TAR component of the 2020 LTIP award is
expected to vest in full.
The three year TAR for the 2020 LTIP
was 32.5% compared to the FTSE 350
Real Estate Sector excluding agencies
and operators of 0.6%.
35% of this year's annual bonus award is
subject to TPR outperforming the MSCI
benchmark.
This year TPR outperformed the benchmark
delivering a 50% bonus payout.
The three year TPR delivered a return of
8.5% compared to the MSCI All Property
benchmark of 1.9%.
Under the new Remuneration Policy
proposals for future years, 30% of the annual
bonus is subject to TPR outperforming the
MSCI benchmark.
35% of this year's annual
bonus award is subject to an
EPRA EPS growth target. This
year EPRA EPS outperformed
its growth target securing a full
bonus payout. Under the new
Remuneration Policy, 30% of
the annual bonus is subject to
growth in EPRA EPS.
25% of LTIP awards vest after
three years subject to an EPRA
EPS growth target. 83% of the
2019 LTIP award vested in the
year and 39% of the EPRA
EPS component of the 2020
LTIP award is expected to vest.
Forms part of EPRA earnings
per share, which as noted
above, is a key financial
performance measure for the
Company’s variable incentive
arrangements.
Linked to individual personal
objectives, representing 30%
of this year's annual bonus
performance conditions.
Under the new Remuneration
Policy, 30% of the annual
bonus is subject to Strategic
objectives.
Linked to individual personal
objectives, representing 30%
of this year's annual bonus
performance conditions.
Under the new Remuneration
Policy, 30% of the annual
bonus is subject to Strategic
objectives.
Under the new Remuneration
Policy, 10% of the annual
bonus is subject to ESG
objectives.
2023/4
ambition
Three year TSR performance to be in the
upper quartile of the FTSE 350 Real Estate
Super Sector, excluding agencies and
operators.
Three year total accounting return to be in the
upper quartile of FTSE 350 Real Estate Super
Sector, excluding agencies and operators.
One year TPR outperformance against MSCI
benchmark.
Deliver and sustain EPRA
earnings per share growth
and dividend progression.
Deliver like for like
income growth.
Maintain high weighted
average unexpired lease
term targeting >10 years.
Maintain high occupancy
across the investment
portfolio, targeting in excess
of 95%.
Maintain the proportion of our
portfolio with an EPC rating of
A to C above 90%.
Financial performance
indicators
We monitor other financial
performance indicators in
respect of LTV, debt maturity
and cost of borrowing.
Risk management
The achievement of our
eight KPIs is influenced
by the identification
and management of risks
which might otherwise
prevent the attainment
of our strategic priorities.
The relationship between
our principal risks,
strategic priorities and
KPIs is reviewed in the Risk
management section.
Remuneration
The table on page 157 shows
how our KPIs are reflected
in and therefore aligned
to remuneration and
incentive arrangements.
ESG and Sustainability
Our Responsible Business
and ESG review on page 54
sets out our performance
over the year including
information on our Net
Zero Carbon ambitions,
green financing, EPC
ratings, BREEAM rating
on our portfolio and
developments and carbon
reduction performance.
ESG Key performance
indicator
This year we have introduced
a new KPI that measures the
proportion of our portfolio
with an EPC rating of A to
C. This is one of the targets
under our sustainability-
linked revolving credit
facilities and a good measure
of our ESG progress.
Read more in
Financial review
page 46
Read more in Risk
management and internal
controls page 82
Read more in
Remuneration Committee
report page 139
Read more in Responsible
Business and ESG review
page 54
Read more in Responsible
Business and ESG review
page 59
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We invest in real estate that
can deliver reliable, repetitive and
growing income returns. Our actions
aim to continuously improve the
portfolio’s quality, sustainability
and income longevity.
A review of our performance
We continue to focus on
strengthening our portfolio
metrics and are signing
long leases and delivering
attractive rental growth,
allowing us to grow like
for like income by 5.0%.
Mark Stirling
Asset Director
The property market has
seen significant repricing
during the year and our
activity has focused on
disposals of mature assets.
Valentine Beresford
Investment Director
12 years
WAULT
4.7%
Net Initial Yield on disposals
99%
Occupancy
£273m
Disposals
Portfolio activity
Investment activity
Highlights
Highlights
Property
review
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Investment activity continues to
improve the portfolio’s quality
During the year, we were significant net
disposers of assets, with sales totalling
£285.8 million (Group share: £272.5 million) and
reflecting a NIY of 4.7% and with a WAULT of
seven years.
Over 70% of sales related to mature logistics
assets and primarily consisted of a DHL
warehouse in Reading and several multi-let
industrial assets in Birmingham. The balance
comprised a number of long income assets,
primarily low yielding grocery and roadside
properties, and a 61,000 sq ft retail park in
Tonbridge which we sold for £22.0 million at a
NIY of 5.2%. Overall, the sales delivered a 45%
profit on cost.
Acquisitions in the year totalled £139.4 million
(Group share: £120.4 million) and were
transacted with a WAULT of 14 years and at
a NIY of 4.5%, which is expected to rise to
5.0% over the next five years from anticipated
income growth. These purchases were largely
focused on urban logistics assets, several
grocery/roadside properties and a retail park
in London.
Reflecting our focus on income growth and
strong geographies, 78% of the income
acquired was subject to contractual rental uplifts
and 69% of the assets are in London and the
South East.
The retail park acquisition on Old Kent Road,
South East London, marked our first purchase
in this sector for a number of years. Acquired for
£38.0 million (Group share: £19.0 million), it
reflected a NIY of 5.2%, which is expected to
increase to c.7.0% after further management.
The asset is let to B&Q, Pets at Home and
Halfords and, simultaneous with the acquisition,
we materially extended the WAULT to
13.5 years and increased the rent by 54%.
This demonstrates the occupiers' need to retain
representation in urban locations where retail
space is being lost to alternative uses. The site
has planning consent for 1,100 new flats.
Post year end, we have sold a further
£21.6 million of assets, with a WAULT of six
years at a 2% premium to book value.
Aligned to structurally supported
sectors and strong geographies
Our distribution portfolio is valued at
£2,185 million, representing 73.1% of the total
portfolio, with urban logistics remaining our
largest sector exposure at 43.1% of the portfolio.
Our long income weighting increased slightly
to 23.8% of the portfolio, up from 22.5%
previously, with grocery and roadside our largest
weighting within this sector.
The remaining 3.1% of the portfolio is split
between five offices and four retail parks.
Our focus on owning assets in strong
geographies, particularly around major urban
conurbations, is demonstrated by the portfolio’s
London and South East weighting of 48.2%,
with the Midlands accounting for a further
29.4%.
£3.0bn
portfolio
1
1
2
3
4
5
6
Urban logistics
43.1%
1 Urban Logistics 43.1%
2 Regional Distribution 19.6%
3 Mega Distribution 10.4%
4 Long Income 23.8%
5 Retail Parks 2.3%
6 Offices & Residential 0.8%
1 Including developments, based on value
A full reconciliation between transactions exchanged and completed in the year is set out in
Supplementary note xix.
£273m
Disposals
£120m
Acquisitions
-90
-22
-32
-129
76
23
21
21
LondonMetric Investment activity by quarter
Q1 Q2 Q3 Q4
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Our portfolio metrics continue
to reflect our focus on income quality
and growth
The portfolio’s WAULT has remained flat over
the period at 12 years, continuing to provide
good income security with only 9.4% of income
expiring within three years.
Occupancy remains high at 99.1% and our
gross to net income ratio of 98.9% continues
to reflect the portfolio’s very low property costs
and minimal operational requirements.
Contractual rental uplifts apply to 63% of
our income, which provides high certainty
of income growth:
• 50% is index linked: 30% is RPI linked,
whilst 20% is CPI or CPIH linked; and
• 13% is subject to fixed uplifts, with a
weighted average uplift of 2% per annum.
Our index linked rent reviews have a range of
collars and caps which are typically between
1% to 4% over a five year period:
• For RPI linked reviews, at 28% inflation over
a five year period (equivalent to 5% p.a.),
75% of inflation is captured; and
• For CPI linked reviews, at 22% inflation over
a five year period (equivalent to 4% p.a.),
86% of inflation is captured.
These reviews are mostly five yearly rather than
annually compounded meaning that higher
inflation in a particular year is often offset with
a lower rate of inflation in another to result in a
blended average rate over the five year period
that is nearer to being within the cap
and collar provisions.
The remaining 37% of our income that does
not benefit from contractual uplifts is subject
to market rents and relates mainly to our urban
logistics portfolio where we are capturing
average rental growth of 4-5% per annum.
A review of our performance
Property review
continued
Asset management activity
During the year, we undertook 167 occupier initiatives adding £7.8 million
per annum of rent and delivering like for like income growth of 5.0%.
Leasing activity consisted of 68 new leases and regears, mostly on our urban logistics assets,
delivering £5.1 million of increased rent with a WAULT of ten years. Rents achieved on regears
were on average 21% higher than previous passing rent.
Rent reviews settled in the year totalled 99 and added £2.7 million of rent at an average of 16%
above previous passing on a five yearly equivalent basis:
• Contractual rental uplifts, where 71 fixed and index linked reviews were settled, delivered
£1.7 million of increased rent at an average of 16% above previous passing on a five yearly
equivalent basis; and
• Open market rent reviews, where 28 reviews were settled, delivered £1.0 million of
increased rent at an average of 16% above previous passing. Open market reviews on urban
logistics continued to see substantial increases and were settled at 22% above passing.
Strong rental growth helped to partly counterbalance yield expansion
The portfolio saw a total property return of -12.0% over the year with a capital return of -15.7%.
Whilst ERV growth on the portfolio over the year was 8.4%, this was outweighed by a like for like
valuation yield expansion of 107bps. The investment portfolio’s EPRA topped up net initial yield
increased to 4.6% and the equivalent yield increased to 5.4%.
The total property return for distribution was -14.7%, ranging from -23.6% for mega logistics to
-11.6% for urban logistics. Long income was highly resilient with a total property return of -3.8%,
reflecting our alignment to grocery and roadside assets which delivered a -3.1% return.
Cumulative Property Return (Rebased, 2018=100)
109.0
2019
114.6
2020 2021
129.9
2022
166.5
2023
146.6
100
110
120
130
140
150
160
170
Based on annual TPR figures from MSCI.
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Top ten occupiers (% of income)
Income from
top ten occupiers
28%
2021: 36%
2019: 51%
We continue to have a strong focus
on income diversification and
occupier credit
Our investment and asset management
actions over a number of years have increased
the resilience of our portfolio by investing in
structurally supported sectors and improving
our income diversification, granularity
and security.
We have a diverse occupier base by type
of activity:
• Business Services & Trade accounts for
38% of income, spread across a broad
range of sectors;
• Retail Logistics accounts for 24%;
• Third Party & Parcel Logistics accounts
for 12%;
• Grocery & Roadside accounts for 10%;
• Electrical, Home & Discount Stores
account for 10%; and
• Leisure and other sectors account for 6%.
Our top ten occupiers account for 28% of
contracted income which is down from 51%
in 2019 and 36% in 2021.
Contracted rent increased over the year
from £143.3 million to £145.2 million.
Our latest occupier survey again
demonstrated strong contentment
Our annual occupier survey was carried out in
March 2023 and we continue to receive very
good feedback.
Occupiers representing 88% of our income
were contacted and responses were received
from 71 occupiers representing 46% of
our income.
We scored an average of 8.7 out of 10.0 for
whether occupiers would recommend us as a
landlord, which is up from 8.5 in the previous
year. For our top ten occupiers, this score was
higher at 9.2, which is also up from the 9.1
score in the previous year.
Encouragingly, wider sentiment from our
occupiers was upbeat, with 35% saying that
they are looking to increase their UK property
footprint. A further 58% said that they expect
their footprint to stay the same, whilst those
looking to reduce space was only 7%.
Occupier base by type of occupier (% of income)
6
1
3
4
2
5
1 Business Services & Trade 38%
Manufacturing & Packaging 11%
Building, Trade & DIY 7%
Food, Healthcare & Chemicals 7%
Aerospace, Auto & Transport 6%
TMT 5%
Education 2%
2 Retail Logistics 24%
Online & Omni Retail 20%
Store only Retail 4%
4 Grocery & Roadside 10%
Grocery 6%
Roadside 4%
5 Electrical, Home & Discount 10%
Electrical & Home 7%
Essential/Discount 3%
6 Leisure & Other 6%
Leisure 3%
Other 3%
3 Third Party & Parcel Logistics 12%
2.0%
2.3%
2.3%
2.5%
2.7%
2.9%
2.9%
2.8%
3.4%
4.1%
Movianto
Waitrose
DFS
Odeon
Currys
Eddie Stobart
THG
Argos
Amazon
Primark
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A review of our performance
Property review
continued
Our Net Zero Carbon (‘NZC’)
framework
We have set three specific NZC ambitions,
as part of our longer term target of becoming
NZC, and continue to work towards
progressing all three targets:
1
Operations will be NZC by end 2023
Operationally, we continue to make good
progress and have achieved a 92% reduction
in our absolute landlord energy consumption
since 2015. In the year, consumption fell by
10% to 752 MWh with a like for like reduction
of 3%.
We continue to reduce our own emissions
where possible and ensure that our energy
supplies are from renewable sources, aligned to
industry procurement best practice. From the
end of 2023, we have committed to offset
any residual carbon to ensure our operations
are NZC.
2
Developments will be NZC by 2030
We will continue to reduce emissions from
development activity and new developments
will be NZC by 2030.
Whilst our development activity has reduced
materially, we continue to focus on building
highly efficient buildings. 97% of our completed
developments in the year, totalling 0.7 million
sq ft, were certified BREEAM Very Good and we
have added a further 125,000 sq ft of BREEAM
Very Good asset post year end.
As part of our efforts to reduce carbon on
developments, we continue to challenge our
supply chains to minimise waste, select low
carbon materials and improve biodiversity.
We monitor embodied carbon on our main
developments and put in place on site carbon
reduction measures and amend material
specification where possible.
We have introduced shadow carbon pricing on
select direct flagship developments such that
carbon is either offset or an equivalent value
is reinvested into green initiatives.
3
Buildings will be NZC by 2035
We will assist occupiers to help them meet their
NZC targets and, from 2035, we will offset any
of their residual carbon.
We see the potential to upgrade the quality
of our urban assets through relatively
straightforward initiatives which can materially
improve energy efficiency, value, income and
occupier appeal, particularly as we continue
to focus on providing fit for purpose and NZC
ready buildings.
Our activity in the year has further improved
the proportion of our assets with an EPC
'A'–'C' rating from 85% to 90%. In the year, we
undertook a substantial number of EPC reviews
along with c.30 more in-depth energy reviews.
As part of progressing our NZC targets, we
continue to focus on understanding how
we can ensure that our buildings are able
to achieve NZC and undertook further NZC
assessments on several assets. In addition, as
part of understanding the NZC challenge and
measuring emissions from our occupiers, we
increased occupier energy data coverage from
59% last year to 68% in 2023.
We continue to engage with occupiers on
adding further solar installations to our portfolio.
In the year, five solar PV installations were
added to the portfolio, taking our total solar PV
capacity to 3.6 MWp. A number of discussions
are ongoing, and there is the potential to add
4.5 MWp of additional solar PVs over the next
12-18 months based on current activity and
occupier discussions.
In addition, whilst BREEAM ‘in construction’
certification is not a specific target for us, we
have increased the proportion of our assets built
to a BREEAM Very Good or Excellent standard
from 26% at the start of the year to 31%.
Over the next financial year, we will progress
our pathway to NZC.
Further reporting on ESG is provided
on pages 54 to 81
We continue to improve our
ESG focus, particularly on
environmental matters
We recognise the importance of a
comprehensive ESG focus. This includes
minimising the environmental impact of
our business, maximising energy efficiency
of our assets and improving the resilience
of our portfolio to climate change.
As part of our drive to upgrade the
quality of our assets and progress our
Net Zero Carbon ambition, we continue
to invest in high quality buildings as well
as progress energy efficiency and clean
energy initiatives in conjunction with our
occupiers. These include solar PV, LED
lighting upgrades, roof improvements
and electric vehicle charging.
We see ourselves as strong stewards
of underinvested or poorer quality assets
with the necessary expertise and appetite
to materially improve our buildings.
Following on from the prior year's climate-
related risk assessment, in which we
identified our key physical and transition
risks over the short, medium and long term,
we have continued to review our approach
to climate resilience and how we can better
understand the climate related risks on
our portfolio.
Over the year, we maintained our Green Star
status in the Global Real Estate Sustainability
Benchmark (‘GRESB’) survey and
also achieved:
• An 'A' rating by MSCI;
• A Gold Award by EPRA sBPR; and
• Continued inclusion in the
FTSE4Good Index.
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Our warehouses provide critical infrastructure to our occupiers and
continue to benefit from highly attractive supply/demand dynamics.
Overview
Our distribution assets are spread across the
urban, regional and mega sub-sectors.
Including developments, the value of these
assets was £2,185 million, accounting for 73.1%
of our portfolio. The WAULT on these assets
is 12 years and occupancy is high at 98.9%,
with our mega and regional assets fully let.
Our urban logistics occupancy increased over
the year from 96.9% to 98.1% and remaining
vacancies relate mainly to assets where we are
undertaking improvement works.
Urban logistics has been our strongest
conviction call for several years and our
urban logistics portfolio is now valued at
£1,288 million, located across 125 locations and
accounting for 59% of our distribution assets.
Our distribution assets delivered a total property
return over the year of -14.7%, with urban and
regional at -11.6% and -17.0% respectively,
whilst mega was -23.6%.
Over the year, we saw an outward yield
expansion of 127 bps across our logistics
portfolio. However, our actions and strong
market rental growth, as reflected in the
portfolio's ERV growth of 11.2%, helped to
mitigate c.40% of the outward yield shift,
resulting in an overall fall in the capital value
of 18.2%.
Strong rental growth potential
The portfolio continues to experience strong
rental growth and there is material rental growth
potential embedded.
In urban logistics, rental growth remains the
strongest, driven by severely restricted supply
and strong and broadening occupier demand.
Whilst the WAULT on our urban assets of nine
years is lower than for mega or regional, these
assets benefit from significant rental reversion,
with average ERVs 25% above average rents.
Furthermore, with 58% of our urban portfolio
located in London and the South East and a
further 28% in the Midlands, we expect these
locations to experience further ERV growth.
Our regional assets also have high reversionary
potential with ERVs 24% above average passing
rents and, over the next two years, 43% of our
regional rental income totalling £11.8 million
is subject to rent reviews, all of which are
contractual uplifts.
Across our distribution assets, based on just
rent reviews that are due to be settled over
the next two years, we expect to capture an
additional £9.2 million of annualised contracted
rent, which represents an uplift of 20% against
previous passing and a 10% growth in total
distribution rent.
As at 31 March 2023
1
2
3
Urban Regional Mega
Typical warehouse size
Up to
100,000 sq ft
100,000 to
500,000 sq ft
In excess of
500,000 sq ft
Value
1
£1,287.6m £586.1m £311.5m
WAULT 8.7 yrs 15.3 yrs 16.8 yrs
Average rent (psf) £8.30 £6.80 £5.90
ERV (psf) £10.40 £8.50 £7.70
Topped up NIY 4.3% 4.4% 4.3%
Contractual uplifts 41% 88% 100%
Total property return in 2023 -11.6% -17.0% -23.6%
1 Including developments
Selective investment activity
We recognised that, following material yield
compression in the prior year, the market was
pricing assets at levels that were unjustifiable
and decided that we would take advantage
of the strong market to sell down some more
mature assets. Post the summer, however, it
became evident that the investment market
was re-pricing rapidly and this materially
impacted liquidity.
However, over the year, we were able to
transact on £191.1 million of distribution sales,
reflecting a NIY of 4.7% and sold with a
WAULT of 4.3 years.
Unsurprisingly, our distribution acquisitions were
limited in the year. All of our acquisitions were
urban logistics assets and totalled £66.5 million,
acquired with a WAULT of 13.7 years and a NIY
of 4.3%, which is expected to rise to 4.9% after
five years from expected income growth.
Post year end, we sold a 142,000 sq ft DHL
warehouse in Solihull for £20.5 million,
reflecting a NIY of 4.2% and a 2% premium to
book value.
A review of our performance
Distribution
Distribution Portfolio
1
1
2
3
1 Urban Logistics 59%
2 Regional Distribution 27%
3 Mega Distribution 14%
1 Including developments, by value
Urban logistics
59%
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A review of our performance
Distribution
continued
Disposals
1.4m sq ft
15 assets
£191m
Value
4 years
WAULT
445,000 sq ft of multi-let urban
warehousing in Birmingham across three
properties comprising 145 units sold for
£46.0 million. The properties have a WAULT
of three years to first break and had been
acquired as part of the Mucklow acquisition
in 2019. They have delivered an ungeared
IRR of 19% over the hold period
235,000 sq ft of multi-let urban
warehousing across three locations in
Birmingham, comprising 53 units, sold for
£21.6 million. The properties have a WAULT
of three years and had been acquired as
part of the Mucklow acquisition in 2019.
They have delivered an ungeared IRR
of 20% over the hold period
229,000 sq ft regional warehouse let
to DHL for a further three years, sold for
£60.6 million. The property had been
acquired in 2015 and has delivered an
ungeared IRR of 15% over the hold period
198,000 sq ft of urban warehousing
in Coventry, Redfern, Warrington and
Birmingham sold for £25.5 million.
The properties had a WAULT of four
years and have delivered an ungeared
IRR of 10% over the hold periods
132,000 sq ft of urban warehousing
in Speke sold for £15.3 million and let to
GEFCO for nine years with a break option
in four years. The property had been
acquired in 2017 and has delivered an
ungeared IRR of 13% over the hold period
90,000 sq ft of urban warehousing in
Coventry sold for £9.3 million and let to
DHL for a further nine years and is held on
a long leasehold interest. The property had
been acquired in 2017 and has delivered an
ungeared IRR of 12% over the hold period
53,000 sq ft of urban warehousing in
Salford, sold for £6.6 million and let to
Restore Scan for a further seven years
30,000 sq ft of urban warehousing in
Digbeth, Birmingham, sold for £6.2 million
and let at a hold over rent
DHL, Reading disposal
In May 2022, LondonMetric agreed on the
sale of a 229,000 sq ft regional warehouse
in Reading for £61 million, reflecting a NIY
of 3.5% and with a WAULT of three years.
The property had been acquired in 2015
with ten years on the lease for £29.1 million,
reflecting a NIY of 5.7%.
Since acquisition, LondonMetric has settled
the 2020 open market rent review at 28%
above previous passing.
The sale was 20% above book value and
crystallised an ungeared IRR of 15%.
£61m
Disposal price
3.5%
Disposal yield
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0.3m sq ft
11 assets
£67m
Value
14 years
WAULT
63%
London & South East
Acquisitions
16,000 sq ft in Cranleigh acquired for
£6.2 million, let to Jewson with a WAULT
of ten years
12,000 sq ft acquired in Kings Langley
for £4.1 million where refurbishment works
were undertaken upon vacant possession
and the building was subsequently let
on a 15 year lease
11,000 sq ft urban warehouse in Stratford
acquired for £6.0 million with vacant
possession and subsequently let on a 11 year
lease to a roastery and coffee house
11,000 sq ft urban warehouse
redevelopment in Colliers Wood acquired
for £4.1 million
11,000 sq ft of urban warehousing acquired
in Hackney across two sites for £4.7 million.
One site is let to Jacuna and the other is
undergoing refurbishment
125,000 sq ft forward funding development
in Leicester acquired for £19.6 million.
The development is fully pre-let to EM
Pharma on a new 15 year lease
49,000 sq ft in Newhaven acquired for
£6.1 million, let to an LED lighting company
with a WAULT of seven years
33,000 sq ft in Ipswich acquired for
£5.3 million, let to Jewson with a WAULT
of ten years
29,000 sq ft in Canvey Island acquired
for £5.4 million, let to a hygiene supplies
company on a new 15 year lease
24,000 sq ft in Dulwich acquired for
£5.0 million, partly let to a coffee distributor
with a WAULT of nine years and where we
have let the remainder to Jacuna, a dark
kitchen operator, subject to planning
The 125,000 sq ft pre-let development was acquired
in April 2022 from a local developer. The property is
situated on an eight acre site north of Leicester city
centre and comprising two units of 90,000 sq ft and
35,000 sq ft. The buildings are BREEAM Very Good
and EPC A rated, let to EM Pharma on a 15 year lease
with five yearly RPI reviews (2-4%).
£19.6m
acquisition in Leicester
Acquisitions by type
1
2
3
1 Development 36%
2 Refurbishment 30%
3 Investment 34%
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Lettings and regears
57 distribution lettings and regears in the
year were signed on 1.1 million sq ft, adding
£4.0 million per annum of income, with a
WAULT of ten years. Regears contributed
£1.3 million of additional rent, representing an
uplift of 26% against previous passing.
The largest lettings and regears comprised:
• 290,000 sq ft regional logistics regear
with M&S in Sheffield, where the WAULT
was extended to ten years and the rent
increased by £0.8 million, a 50% uplift;
• 90,000 sq ft urban logistics regear with
DHL in Coventry, where the WAULT
increased to ten years;
• 62,000 sq ft urban logistics letting to Skate
Hut at Amber Way in Birmingham with a
WAULT of 15 years;
• 55,000 sq ft urban logistics letting to Air
Link Systems in Birmingham with a WAULT
of ten years;
• 46,000 sq ft urban logistics regear with
International Logistics Group in Crawley
where the WAULT was extended to five
years and the rent increased by £0.2 million,
a 35% uplift;
• 50,000 sq ft of urban logistics lettings
across four recently acquired and now fully
let assets in London comprising Tottenham,
Stratford, Kings Langley and Norbury with a
WAULT of 11 years;
• 35,000 sq ft urban logistics letting to EM
Pharma in Leicester with a WAULT of 15 years;
• 35,000 sq ft urban logistics regear with City
Plumbing in Birmingham where the WAULT
was extended to ten years and the rent
increased by £0.1 million, a 36% uplift;
• 30,000 sq ft of lettings and regears in Oldbury
with occupiers including Toolstation and City
Plumbing with a WAULT of eight years; and
• 26,000 sq ft urban logistics letting of a
vacant unit in Crawley with a WAULT of ten
years, adding £0.3 million of rent, a 19%
uplift against the previous passing rent.
Rent reviews
Distribution rent reviews in the year were
settled across 3.3 million sq ft, adding
£1.7 million per annum of income at 16%
above previous passing rent, on a five
yearly equivalent basis.
27 urban reviews were settled at 21% above
passing rent on a five yearly equivalent basis,
most of which were open market reviews.
One fixed mega review was settled at 8%
above passing rent on a five yearly equivalent
basis. Four index-linked regional reviews were
settled at 17% above previous passing on a
five yearly equivalent basis.
Distribution asset management
A review of our performance
Distribution
continued
Amber Way, Birmingham
At our 62,000 sq ft urban logistics warehouse
in Birmingham, we let the unit to Skate Hut
with a WAULT of 15 years. Skate Hut, a family
run ecommerce business focused on action
sports, had seen significant growth in their
business and we facilitated the move from
several smaller units of ours into this larger
unit that allowed them to consolidate and
add a retail outlet at the location. Skate Hut
will use the building as their headquarters.
Environmental and building considerations:
• New internal and external LED lighting
• Office and warehouse refurbishment
• EV charging
• EPC improved from an 'E' rating to 'B'
with potential to improve further with
the removal of gas and adding solar PVs
• Recycled/repurposed office furniture
+21%
Increase in rent on urban logistics reviews
+£5.7m
Additional rent on distribution deals
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1
2
3
4
5
6
7
8
Four London refurbishment/asset management initiatives were
undertaken during the year, and a further four are planned
1
Kings Langley
In the year, we acquired a
12,000 sq ft urban warehouse
with vacant possession, which
we upgraded and improved to
an EPC 'B' through the removal
of gas, installation of LED lighting
as well as new electric heaters
and an electric boiler. Further
works were identified that could
improve the rating to an EPC
A+/ Net Zero. The building was
let on a 15 year lease at a rent
25% ahead of our acquisition
underwrite.
Current opportunities:
5
Colliers Wood
6
Stockwell
7
Hackney
8
Dulwich
+£1.2m
Rental uplift from four lettings
11 years
WAULT
Distribution asset management – London
2
Tottenham
At our 22,000 sq ft urban
warehouse, we reconfigured the
unit to create an open warehouse,
upgraded the roof, added LED
lighting and rooflights, installed a
new heating and cooling system
and removed the gas. EV charging
was also installed. The building's
EPC improved to a 'B' with the
potential to achieve 'A' with solar
PVs. It was let to an international
fine art business for a nine year
term at a rent 20% ahead of
our acquisition underwrite.
3
Stratford
In the year, we acquired an
11,000 sq ft urban warehouse in
Stratford with vacant possession and
the intention to refurbish the unit.
Following acquisition, we let
the unit on a 11 year lease to
Gentlemen Baristas, a roastery
and coffee house for a new state
of the art roastery facility. As part
of the letting, the occupier has
undertaken certain identified works
to improve the EPC from an 'E' to
a 'B' rating.
4
Norbury
In the year, we let the final
unit at our 20,000 sq ft urban
logistics scheme to Deliveroo.
The property is let for a further
13 years at an average rent of
£26 psf, with other occupiers
comprising Jacuna and Screwfix.
The building has undergone a
comprehensive refurbishment
and upgrade, which increased
the EPCs from 'D/E' to
'B/C' with further potential
for improvements.
See more page 25
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Our long income assets are typically
single tenant assets with low
operational requirements that are
benefiting from the changes in the
way people live and shop.
They are insulated from structural
dislocation, continue to offer long
leases and are predominantly focused
on grocery, wholesale, roadside
services, discount and essential
retail, trade and DIY.
The value of our long income assets decreased from
£809 million at the start of the year to £713 million,
representing 23.8% of our total portfolio. They are
100% let to strong occupiers with a WAULT of
13.1 years, average rents of £16.20 psf and a topped
up NIY of 5.4% with 69% of income subject to
contractual rental uplifts. Nearly half of the assets
are located in London & South East.
Long income delivered a total property return
of -3.8% with ERV growth of 0.7% offset by
a 58bps equivalent yield outward movement,
with our largest long income sub-sector, Grocery
and Roadside, delivering -3.1%.
1 2 3 4
As at 31 March 2023
Grocery &
Roadside
NNN
Retail
Trade,
DIY & Other Leisure
Value
1
£295.0m
£227.2m £117.0m £73.7m
WAULT 14.7 yrs 9.7 yrs 13.9 yrs 17.0 yrs
Average rent (psf) £19.50 £18.80 £8.40 £20.20
Topped up NIY 4.8% 6.1% 4.7% 6.6%
Contractual uplifts 88% 38% 73% 93%
Total property return in 2023 -3.1% -3.7% -8.6% 0.2%
1 Including developments
2 Leisure primarily consists of five out of town cinemas let to Odeon
A review of our performance
Long Income portfolio breakdown
1
1
2
3
4
Long income
1
£713m
1 Grocery & Roadside 42%
2 NNN Retail 32%
3 Trade, DIY & Other 16%
4 Leisure 10%
1 Including developments, based on value
Long income
Trade, DIY & Other
A significant proportion of this segment
consists of assets that are trade/DIY focused
with particular investments over recent years
into autocentres and trade units located in the
South East.
Key occupiers
• Howdens • Safestore
• Jewson • Selco
• Kwik Fit • Topps Tiles
• MKM • Wickes
NNN Retail
These are primarily single or cluster assets let
to discount, essential, electrical and home retail
occupiers. A significant proportion of assets
are located in London and the South East, with
the largest located in New Malden, London.
These assets benefit from very high alternative
use values.
Key occupiers
• B&M • Halfords
• Currys • Home Bargains
• DFS • Pets at Home
• Dunelm • The Range
Grocery & Roadside
Comprises grocery-led convenience stores,
convenience stores with attached petrol filling
stations, drive-thru coffee outlets and automated
car washes. Assets are typically located in high
density urban areas.
Key occupiers
• Aldi • EG Group
• BP • Lidl
• Co-op • McDonalds
• Costco • Waitrose
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£34.9 million of long income assets were purchased
with a WAULT of 15 years and at a NIY of 4.3%.
The purchases were mainly in the first half of the
year and the majority were grocery and roadside
assets with c.70% in London and the South East
and 83% have contractual uplifts.
Rental uplifts are expected to increase the
acquisition yield to nearly 5.0% over five years.
They comprised:
• A £16.0 million asset let to Booker in Sidcup
with a WAULT of five years;
• A £6.7 million purchase of two data centres
in Hayes and New Malden, London, with a
WAULT of 38 years;
• A £4.5 million asset let to Sainsbury’s in
Spilsby with a WAULT of seven years;
£72.8 million (Group share: £59.4 million) of
assets were sold at a NIY of 4.8% and with a
WAULT of 14 years.
They comprised:
• A grocery store in Ashford for £18.0 million
(Group share: £9.0 million), let to Lidl;
• A NNN Retail asset in Cardiff for £8.9 million;
• A hotel in Ringwood for £8.7 million
(Group share: £4.3 million);
• A grocery store in Kendal let to M&S for
£7.5 million;
• A grocery store in Weymouth let to Aldi
for £6.8 million;
• Two petrol filling stations in Rushden and
Stamford Hill, London, for £6.5 million;
£35m
7 assets
15 years
WAULT
83%
Contractual uplifts
£73m
12 assets
14 years
WAULT
4.8%
NIY
Aldi disposal in Weymouth
As part of our first phase of development at
Weymouth in 2020, we built an 18,000 sq ft
foodstore let to Aldi for 20 years.
The Aldi was delivered to a high specification,
achieving EPC 'A' and BREEAM Very Good
certification with solar panels installed.
The sale completed in March 2023 and the
price of £6.8 million reflected a 4.25% NIY
and delivered a 30% profit on cost.
Disposals
Acquisitions
• A £3.6 million asset let to a restaurant operator
in Leeds with a WAULT of ten years;
• A £2.3 million asset in Peterborough with a
WAULT of 20 years; and
• A £1.8 million EV charging station and Starbucks
drive thru in Uttoxeter with a WAULT of 31 years.
• A trade and DIY asset in Oldbury for £5.7 million;
• A pub in Greenwich for £4.6 million, previously
acquired as part of the Savills IM portfolio;
• A trade and DIY asset in Littlehampton for
£4.0 million; and
• Two IMO car wash assets for £2.1 million.
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+£2.0m
Additional rent from long income asset
management transactions
Lettings and regears
Ten lettings and regears were signed with
a WAULT of 14 years adding £1.0 million per
annum of rent. The main transactions included:
• a 40,000 sq ft retail regear in Evesham let
to the Range where the WAULT doubled to
16 years and the rent remained unchanged;
• a 21,000 sq ft leisure letting to Jaegos
House on an asset that is being refurbished
in Fulham. The letting adds £0.9 million of
rent and has a WAULT of 15 years;
• a 20,000 sq ft retail regear in Birmingham
let to Currys where the WAULT increased
from one year to ten years and the rent
was reduced by 13%;
• a 3,000 sq ft roadside letting in Wisbech
to Euro Garages;
• a 2,000 sq ft letting to Costa in Glasgow
with a WAULT of 15 years; and
• a letting to Instavolt at two sites to install
ultra rapid EV chargers, with a WAULT
of 20 years. These lettings are part of a
wider partnership with Instavolt and are
in addition to our EV partnership with
Motor Fuel Group ('MFG').
Rent reviews
Rent reviews were settled on 62 assets in the
period generating an uplift of £1.0 million per
annum at 17% above previous passing on a
five yearly equivalent basis.
The two largest reviews were on a NNN retail
asset let to Currys in London, where a five yearly
RPI review increased the rent by 19%, and a
trade asset let to Jewsons in Exeter where the
rent increased by 36%. Most of the remaining
reviews were inflation linked or fixed uplifts,
and mostly related to grocery, roadside and
leisure assets.
A review of our performance
Long income
continued
EV charging
As part of LondonMetric’s wider ESG
commitments, we are working with our
occupiers to future-proof our assets through
installing sustainable features such as Electric
Vehicle ('EV') chargers.
We have partnered with leading EV operators
Instavolt and MFG in our ambition to
add EV charging stations across our long
income assets.
The partnership with Instavolt will see the
installation of chargers across an initial nine
sites. Leases have now been signed on
four sites, including at our asset in Totton,
Southampton, where six chargers are planned,
as shown in the picture above.
Long income asset management
Fulham
The 21,000 sq ft building was purchased
opportunistically as a vacant building in the
prior year.
Following a short marketing campaign, terms
were agreed with the Little Houses Group to
reposition the building into a family members
club and nursery.
The building is being comprehensively
refurbished and will be Little Houses Group's
second facility following the successful
opening of their club in Kensal Rise.
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Huntingdon
Development of a 300,000 sq ft regional
warehouse, let for 25 years, completed in the
year. The building is BREEAM Very Good and
is expected to benefit from solar PV.
Ipswich
Development of a 296,000 sq ft distribution
warehouse, let to an ecommerce company for
20 years, completed in the year. The building is
BREEAM Very Good and benefits from solar PV.
Weymouth
At our long income development, construction
of 51,000 sq ft completed in the year.
The BREEAM Very Good buildings are fully let
to McDonalds, Dunelm, B&M and Costa with
a WAULT of 16 years. Solar PV was installed
on two of the buildings.
Preston
Development of a 43,000 sq ft distribution
warehouse, let to Sainsbury’s for 15 years,
completed in the year. The building is
BREEAM Very Good.
Tottenham
23,000 sq ft refurbishment of a vacant logistics
warehouse in Tottenham completed in the year
and has been let.
Leicester
Development of a 125,000 sq ft distribution
warehouse completed post year end.
The building is fully let to EM Pharma for
15 years and is BREEAM Very Good.
Uckfield
Development of a 41,000 sq ft grocery-led
funding pre-let to M&S and Home Bargains
is expected to complete later in 2023.
London
• 21,000 sq ft in Fulham, which we
acquired vacant and have subsequently
let. A comprehensive refurbishment
is underway.
• 11,000 sq ft in Colliers Wood and 4,000
sq ft in Stockwell, where we are awaiting
planning approval and a pre-let.
Auditing of our contractors
Each year, we undertake a detailed
review of systems and processes at one
of our contractors, looking in particular
at compliance with our standards,
local sourcing, modern slavery and
minimum wage.
During the year, we reviewed Redwood
Contractors Limited, a contractor employed
on refurbishment work in the South of
England, on smaller contract values.
The audit found that Redwood had good
systems and procedures in place and key
findings included:
• 'Hands on' director engagement
• c.95% of work is awarded by
existing clients
• Typical supplier procurement approach
through negotiation using reliable supply
chain, selected based primarily on scale,
geography and workload
• High staff retention and a very open and
proactive approach to the audit process
In the year, 0.7 million sq ft of developments and redevelopments were
completed, adding £5.5 million of rent per annum. 97% of these developments
were certified BREEAM Very Good. A further 0.2 million sq ft was under
development or planned at the year end, which is expected to generate
£3.1 million of additional rent per annum.
Completed in year
Area sq ft
’000
Income
£m
Yield on cost
%
Huntingdon
1
300 2.0 3.7
Ipswich 296 1.8 4.6
Weymouth 51 0.9 6.4
Preston
1
43 0.3 3.9
Tottenham 23 0.5 5.2
Total 713 5.5 4.4
Under construction or planned (at year end)
Leicester
1
125 0.9 4.5
Uckfield
1
41 0.8 5.5
London redevelopments (x3)
2
36 1.4 4.8
Total 202 3.1 4.8
1 Forward fundings
2 Anticipated yield on cost and rents
0.7m sq ft
Developed in year
+£5.5m
Additional rent
0.2m sq ft
Under construction or planned
A review of our performance
Developments
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Financial
Review
Against a backdrop of volatile capital markets,
rising costs and interest rates, and the profound
impact this has had to real estate valuations
this year, we have continued to deliver against
our strategy of income growth and dividend
progression. Our trading performance has been
strong, and we have grown EPRA earnings by
8.1% to £101.1 million or by 2.9% on a per share
basis to 10.33p per share. We have maintained
dividend cover of 109% and have increased our
dividend for the year by 2.7% to 9.5p per share.
This was driven by a 10.3% increase in net
rental income and continued exceptional rent
collection rates, with 99.8% of rent due in the
year received.
However, we have not been immune from
the impact of sharp increases in interest rates
to our cost of financing and property portfolio
valuation, which has been impacted by a
significant outward yield shift and consequent
valuation decline. We are therefore reporting
an IFRS loss of £506.3 million this year, largely
due to the adverse movement of £587.5 million
or 60.0p per share in the value of our property
portfolio. This has also reduced IFRS net assets
by 22.4% to £1,995.2 million.
Similarly, EPRA net tangible assets (‘NTA’) per
share decreased 23.8% over the year to 198.9p
(2022: 261.1p).
Our strong balance sheet and structurally
supported sector choices have helped us
navigate the macroeconomic challenges and
focus on what is in our control. Despite the
deterioration in debt markets over the year, we
have utilised our strong banking relationships
to agree the first one year extension to our two
revolving credit facilities totalling £400 million
and complete a new £275 million revolving
credit facility with our banking group on similar
terms and pricing as our existing £225 million
facility. This refinancing, along with our
disposals, allowed us to repay a shorter dated
debt facility and mitigate refinancing risk in the
next three financial years. Post year end, we
have agreed the second one year extension on
two of our RCFs.
We have also mitigated our exposure to rising
interest rates on our floating rate debt by
purchasing £225 million interest rate swaps
at a total cost of £15.1 million. We secured an
average rate of 2.52% and have increased the
proportion of our drawn debt hedged to 93% at
the year end, up from 71% last year.
We have prioritised net divestment of mature or
non core assets in order to reduce our floating
rate debt and protect our loan to value from
adverse valuation movements. At the year
end, our loan to value remained modest at
32.8% (2022: 28.8%), providing flexibility to
execute transactions whilst maintaining ample
headroom under our banking covenants.
Alongside this, we continue to have significant
headroom from available debt facilities and
cash of £416.5 million (2022: £299.3 million)
providing optionality for further investment
when markets stabilise and opportunities arise.
We have continued to
deliver against our strategy
of income growth and
dividend progression.
Martin McGann
Finance Director
A review of our performance
46
LondonMetric Property Plc Annual Report and Accounts 2023
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Presentation of financial information
The Group financial statements have
been prepared in accordance with IFRS.
Management monitors the performance of
the business principally on a proportionately
consolidated basis, which includes the
Group’s share of joint ventures (‘JV’) and
excludes any non-controlling interest (‘NCI’)
on a line by line basis.
The figures and commentary in this
review are presented on a proportionately
consolidated basis, consistent with our
management approach, as we believe
this provides a meaningful analysis of
overall performance.
These measures are alternative performance
measures, as they are not defined
under IFRS.
The Group uses alternative performance
measures based on the European Public
Real Estate Association (‘EPRA’) Best Practice
Recommendations (‘BPR’) to supplement
IFRS, in line with best practice in our sector,
as they highlight the underlying performance
of the Group’s property rental business and
exclude property and derivative valuation
movements, profits and losses on disposal
of properties and financing break costs, all of
which may fluctuate considerably from year
to year.
These are adopted throughout this report
and are key business metrics supporting the
level of dividend payments.
Further details, definitions and reconciliations
between EPRA measures and the IFRS
financial statements can be found in note 8
to the financial statements, Supplementary
notes i to vii and xviii and in the Glossary.
Our strong balance
sheet and structurally
supported sector choices
have helped us navigate
the macroeconomic
challenges and focus
on what is in our control.
EPRA earnings per share
10.33p
2022: 10.04p
IFRS net assets
£2.0bn
2022: £2.6bn
Our 715,000 sq ft distribution asset in Bedford, which consist of five fully
let buildings and generates £5.5 million of rental income per annum
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LondonMetric Property Plc Annual Report and Accounts 2023
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A review of our performance
Financial review
continued
Income statement
EPRA earnings for the Group and its share of joint ventures are detailed as follows:
For the year to 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2022
£m
Gross rental income 145.6 4.3 (1.5) 148.4 131.5 4.5 (1.3) 134.7
Property costs (1.5) (0.1) – (1.6) (1.5) (0.1) – (1.6)
Net rental income 144.1 4.2 (1.5) 146.8 130.0 4.4 (1.3) 133.1
Management fees 1.1 (0.5) 0.1 0.7 1.3 (0.5) – 0.8
Other income – – – – 0.4 – – 0.4
Administrative costs (16.4) (0.1) – (16.5) (16.0) (0.1) – (16.1)
Net finance costs (29.5) (0.6) 0.2 (29.9) (23.9) (1.0) 0.2 (24.7)
Tax (0.1) – 0.1 – (0.1) – 0.1 –
EPRA earnings 99.2 3.0 (1.1) 101.1 91.7 2.8 (1.0) 93.5
Net rental income
Earnings and dividend progression for our
shareholders remains a key focus and at the
heart of our corporate strategy, particularly
given the volatility in capital markets this year.
Sustained growth in our net rental income
underpins dividend progression and we are
pleased to report a 10.3% increase in net
rental income this year to £146.8 million.
This reflected strong performance across our
existing portfolio through rent reviews and
asset management initiatives alongside new
incremental income from net acquisitions and
completed developments in previous periods
as reflected in the table opposite.
During the year, we undertook 167 occupier
initiatives adding £7.8 million per annum
to contracted rent, which increased to
£145.2 million. This will deliver 5.0% like for like
rental growth and is not yet fully reflected in the
income statement. Further detail is provided in
the Property review.
The detailed movements in net rental income
are prepared on a like for like basis based
on properties held, developed, acquired or
disposed throughout both the current and
previous periods commencing 1 April 2021.
£m £m
Net rental income in the year to
31 March 2022 133.1
Additional rent from existing
properties 3.6
Additional rent from
developments 4.7
Movement in surrender
premium income (1.6)
Additional rent from acquisitions 16.4
Rent lost through disposals (9.4)
Additional rent from net
acquisitions 7.0
Net rental income in the year to
31 March 2023 146.8
Property costs are unchanged from last year at
£1.6 million and our cost leakage ratio has fallen
marginally to 1.1% (2022: 1.2%).
Rent collection
Our rent collection rates continue to be
exceptionally strong, reflecting the quality of
our covenants and the importance we place on
credit control. We have collected 99.8% of rent
due in the year and £0.1 million remains unpaid.
Administrative costs and EPRA cost ratio
Despite inflationary cost pressures this year,
careful management of our cost base has
restricted the increase in our administrative
costs to £0.4 million or 2.5%, taking the total for
the year to £16.5 million. These costs are stated
after capitalising staff costs of £2.5 million
(2022: £2.5 million) in respect of time spent on
development projects in the year.
Notwithstanding this increase, our EPRA cost
ratio, which is used to monitor and manage our
operational cost levels, has once again fallen
80bps to 11.7% and remains one of the lowest
in the sector.
For the year to 31 March
2023
%
2022
%
EPRA cost ratio including direct
vacancy costs 11.7 12.5
EPRA cost ratio excluding direct
vacancy costs 11.3 11.8
The ratio reflects total operating costs as a
percentage of gross rental income.
The full calculation is shown in Supplementary
note iv.
Rent collection in the year
99.8%
2022: 99.5%
EPRA cost ratio
11.7%
2022: 12.5%
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Strategic report
Net finance costs
We have seen our average debt cost increase
to 3.4%, from 2.6% a year ago due to the
effects of central bank interest rate increases
on our floating rate debt. Net finance costs,
excluding fair value movements in derivatives
and financing break costs, have increased by
£5.2 million to £29.9 million. Despite our gross
debt falling by £23.2 million over the full year,
our average debt balance was £187 million
higher and further contributed to the increase
in interest costs.
To mitigate the impact of interest rate increases
on our floating rate debt, we purchased
£225 million interest rate swaps in the year at an
average rate of 2.52%, which helped to increase
the proportion of drawn debt hedged at the
year end to 93% (2022: 71%).
The increase in bank interest payable and
associated costs of £10.2 million was offset
by interest received under derivative swap
arrangements of £0.7 million, increased bank
interest receivable and interest from forward
funded investments of £1.7 million and
increased interest capitalised on developments
of £2.6 million.
Further detail is provided in notes 5 and 10
to the financial statements
Share of joint ventures
Our MIPP joint venture contributed £3.0 million
to EPRA earnings this year, an increase
of £0.2 million over last year due to the
completion of a development in Orpington.
Post year end, the bank debt facility was repaid
in full, utilising proceeds of sales and additional
equity funding from partners.
The Group received net management fees of
£0.7 million for acting as property advisor to
each of its joint ventures, which have fallen
by £0.1 million due to additional disposal fees
received last year.
Taxation
As the Group is a UK REIT, any income and
capital gains from our qualifying property rental
business are exempt from UK corporation
tax. Any UK income that does not qualify as
property income within the REIT regulations is
subject to UK tax in the normal way.
The Group’s tax strategy is compliance oriented;
to account for tax on an accurate and timely
basis and meet all REIT compliance and
reporting obligations. We seek to minimise the
level of tax risk and to structure our affairs based
on sound commercial principles. We strive to
maintain an open dialogue with HMRC with a
view to identifying and solving issues as they
arise. There were no issues raised in the year.
EPRA earnings
£101.1m
2022: £93.5m
Dividend for the year
9.5p
2022: 9.25p
We continue to monitor and comfortably
comply with the REIT balance of business tests
and distribute as a Property Income Distribution
(‘PID’) 90% of REIT relevant earnings to ensure
our REIT status is maintained. The Group paid
the required PID for the year to 31 March 2022
ahead of the 12 month deadline and has already
paid a large part of its expected PID for the
year to 31 March 2023. The balance is expected
to be paid in July 2023 as part of the fourth
quarterly dividend payment.
The tax charge in the year relates to the Group’s
non-controlling interest.
Our tax strategy was updated and approved by
the Board in the year and can be found on our
website at www.londonmetric.com.
IFRS reported profit
The Group’s reported loss for the year was £506.3 million compared with a profit of £734.5 million in 2022. A reconciliation between EPRA earnings
and the IFRS reported loss is given in note 8(a) to the accounts and is summarised in the table below.
For the year to 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2022
£m
EPRA earnings 99.2 3.0 (1.1) 101.1 91.7 2.8 (1.0) 93.5
Revaluation of property (577.4) (12.5) 2.4 (587.5) 615.2 19.7 (2.7) 632.2
Fair value of derivatives (4.0) (0.1) – (4.1) – 0.7 – 0.7
(Loss)/profit on disposal (14.7) (0.7) – (15.4) 8.0 0.2 – 8.2
Debt/hedging costs (0.4) – – (0.4) – (0.1) – (0.1)
IFRS reported
(loss)/profit (497.3) (10.3) 1.3 (506.3) 714.9 23.3 (3.7) 734.5
The principal driver of the IFRS loss this year was the revaluation deficit of £587.5 million. Whilst disposals generated a 1% premium over prevailing
book value, against the March 2022 valuation and after deducting costs, the loss on disposals in the year was £15.4 million. The total profit on cost of
sales in the year was 35% (net of sales costs).
The £225 million interest rate swaps acquired for £15.1 million reduced in value by £4.0 million in the year to £11.1 million.
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A review of our performance
Financial review
continued
Balance sheet
EPRA net tangible assets (‘NTA’) is a key performance measure that includes both income and capital returns but excludes the fair valuation of
derivative instruments that are reported in IFRS net assets. A reconciliation between IFRS and EPRA NTA is detailed in the table below and in note 8(c)
to the financial statements.
As at 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2022
£m
Investment property 2,944.9 70.8 (35.7) 2,980.0 3,494.6 96.6 (15.1) 3,576.1
Assets held for sale 19.8 – – 19.8 21.2 – – 21.2
Trading property 1.1 – – 1.1 1.1 – – 1.1
2,965.8 70.8 (35.7) 3,000.9 3,516.9 96.6 (15.1) 3,598.4
Gross debt (1,017.0) (13.5) – (1,030.5) (1,027.2) (26.5) – (1,053.7)
Cash 32.6 5.4 (1.5) 36.5 51.3 3.6 (0.6) 54.3
Other net liabilities (58.8) (1.2) 9.3 (50.7) (43.8) (1.2) 5.6 (39.4)
EPRA NTA 1,922.6 61.5 (27.9) 1,956.2 2,497.2 72.5 (10.1) 2,559.6
Derivatives 11.1 – – 11.1 – 0.1 – 0.1
IFRS equity
shareholders' funds 1,933.7 61.5 (27.9) 1,967.3 2,497.2 72.6 (10.1) 2,559.7
IFRS net assets 1,933.7 61.5 – 1,995.2 2,497.2 72.6 – 2,569.8
IFRS reported net assets have decreased 22.4%
over the year to £2.0 billion. EPRA NTA excludes
the derivative financial instruments asset of
£11.1 million and has decreased by 23.8% on
a per share basis to 198.9p. The movement in
EPRA NTA and EPRA NTA per share in the year
is reflected in the table below.
EPRA NTA
£m
EPRA NTA
p/share
At 1 April 2022 2,559.6 261.1
EPRA earnings 101.1 10.3
Dividends
2
(92.4) (9.4)
Property revaluation (587.5) (60.0)
Derivatives purchased (15.1) (1.5)
Other movements
1
(9.5) (1.6)
At 31 March 2023 1,956.2 198.9
1 Other movements include loss on sales (£15.4 million),
share based awards (£2.8 million) and debt break costs
(£0.4 million), offset by scrip share issue savings (£9.1 million)
2 Dividend per share is based on the weighted average number
of shares in the year. The actual dividend paid in the year was
9.45p as reflected in note 7 to the financial statements
The decrease in EPRA NTA per share was
principally due to the property revaluation loss
of 60.0p per share, as dividends paid in the year
were covered by EPRA earnings, adding 0.9p
to EPRA NTA per share. The cost of interest
rate swaps acquired to hedge our floating rate
unsecured credit facilities reduced EPRA NTA by
a further 1.5p per share.
The movement in EPRA NTA per share,
together with the dividend paid in the year,
results in a total accounting return of -20.2%.
Over the three year LTIP period our total
accounting return was 32.5%.
The full calculation can be found
in Supplementary note viii
Dividend
Our policy of paying a sustainable and
progressive dividend remains unchanged and
the dividend declared this year is 109% covered
by EPRA earnings.
We have continued to declare quarterly
dividends and offer shareholders a scrip
alternative to cash payments.
In the year to 31 March 2023, the Company
paid the third and fourth quarterly dividends
for the year to 31 March 2022 and the first two
quarterly dividends for the year to 31 March
2023, at a total cost of £92.4 million or
9.45p per share as reflected in note 7 to the
financial statements.
The Company issued 4.0 million ordinary shares
under the terms of the Scrip Dividend Scheme,
which reduced the cash dividend payment by
£9.1 million to £83.3 million.
The first two quarterly payments for the
current year of 4.6p per share were paid as
Property Income Distributions ('PIDs') in the
year. The third quarterly dividend of 2.3p per
share was paid as a PID in April 2023 and the
Company has approved a fourth quarterly
payment of 2.6p per share to be paid in July
2023, of which 1.5p will be a PID. The total
dividend payable for 2023 of 9.5p represents
an increase of 2.7% over the previous year.
The Board took the following into account when
considering its dividend payments:
• Its REIT obligations to distribute 90% of
property rental business profits;
• Its desire to pay a sustainable, covered and
progressive return to shareholders;
• Its EPRA earnings for 2023; and
• The outlook for 2024.
At the year end, the Company had
distributable reserves of £1,270.6 million
(2022: £1,136.7 million), providing substantial
cover for the dividend payable for the
year. When required and at least six
monthly, the Company receives dividends
from its subsidiaries which increase its
distributable reserves.
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Portfolio valuation
Our property portfolio including share of joint ventures fell by £600.1 million over the year to £2,993.8 million as reflected in the table below.
The portfolio closing valuation includes the value of assets held for sale and trading properties that are reflected separately in the balance sheet.
As at 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
Total
2022
£m
Opening valuation 3,512.4 96.6 (15.1) 3,593.9 2,583.6
Acquisitions
1
187.4 – (22.8) 164.6 457.5
Developments
2
87.4 – – 87.4 88.9
Capital expenditure
3
17.9 0.4 (0.2) 18.1 16.1
Disposals (269.0) (13.7) – (282.7) (184.4)
Revaluation (577.4) (12.5) 2.4 (587.5) 632.2
Property portfolio value 2,958.7 70.8 (35.7) 2,993.8 3,593.9
Head lease and right of use assets 7.1 – – 7.1 4.5
Closing valuation 2,965.8 70.8 (35.7) 3,000.9 3,598.4
1 Group acquisitions include purchase costs and represent completed investment properties as shown in note 9 to the financial statements
2 Group developments include acquisitions, capital expenditure and lease incentive movements on properties under development as reflected in note 9
3 Group capital expenditure and lease incentive movements on completed properties as reflected in note 9 to the financial statements
We have continued to invest in the property
portfolio, with acquisitions of £164.6 million
(including £72.4 million that exchanged last
year) and project expenditure of £105.5 million
in the year. Property disposal proceeds of
£271.7 million at share (including £21.2 million
that exchanged last year) have allowed us to
maintain a modest level of gearing despite
the significant outward yield shift in property
valuations this year. Property values have
decreased by £587.5 million as a result of the
outward yield shift of 107bps outweighing the
portfolio ERV growth of 8.4%.
Disposals reduced the book value of property
by £287.1 million (including the cost of
lease incentives written off for the Group of
£4.1 million and its share of joint ventures
of £0.3 million). We also exchanged to sell
two assets totalling £19.1 million and to
acquire one asset for £2.3 million in the year.
These transactions will be accounted for on
completion next year.
A full reconciliation between transactions
exchanged and completed in the year is set out
in Supplementary note xix.
Our Retail Warehouse joint venture acquired a
retail park in London for £38 million in the year and
the NCI increased its investment in the JV to 31%.
Our forward funded and pre-let developments
in Preston and Huntingdon completed in the
year and our development exposure at the year
end fell to 1.1% of the portfolio.
A breakdown of the property portfolio by sector is reflected in the table below.
As at 31 March
2023
£m
2023
%
2022
£m
2022
%
Mega distribution 311.5 10.4 425.2 11.8
Regional distribution 586.1 19.6 665.3 18.5
Urban logistics 1,262.3 42.2 1,551.5 43.2
Distribution 2,159.9 72.2 2,642.0 73.5
Long income 707.4 23.7 785.3 21.8
Retail Parks 70.2 2.3 70.6 2.0
Offices 21.7 0.7 27.3 0.8
Investment portfolio 2,959.2 98.9 3,525.2 98.1
Development
1
33.7 1.1 67.8 1.9
Residential 0.9 – 0.9 –
Property portfolio value 2,993.8 100.0 3,593.9 100.0
Head lease and right of use assets 7.1 4.5
3,000.9 3,598.4
1 Represents urban logistics £25.3 million (0.9%), long income £5.6 million (0.1%), office and other land £2.8 million (0.1%) at 31 March 2023. Split of prior year comparatives was regional distribution
£15.9 million (0.4%), urban logistics £25.8 million (0.7%), long income £23.2 million (0.7%), office and other land £2.9 million (0.1%)
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A review of our performance
Financial review
continued
Investment in our preferred sectors of
distribution and long income has been
maintained at 97% of the total portfolio.
At the year end, the Group had contractual
capital commitments of £20.3 million as
reported in note 9 to the financial statements,
relating primarily to the remaining costs for our
forward funded developments in Huntingdon,
Leicester and Uckfield. Further detail on
property acquisitions, sales, asset management
and development can be found in the
Property Review.
Financing
The key performance indicators used to
monitor the Group’s debt and liquidity position
are shown in the table below.
The Group and joint venture split
is shown in Supplementary note iii
As at 31 March
2023
£m
2022
£m
Gross debt 1,030.5 1,053.7
Cash 36.5 54.3
Net debt 994.0 999.4
Loan to value
1
32.8% 28.8%
Cost of debt
2
3.4% 2.6%
Interest cover³ (times) 4.7 5.2
Undrawn facilities 380.0 245.0
Average debt maturity 6.0 years 6.5 years
Hedging
4
93% 71%
1 LTV at 31 March 2023 includes the impact of sales and
acquisitions that have exchanged and will complete
next year of £19.8 million and £2.3 million respectively
(2022: £21.2 million and £72.4 million respectively), and
excludes the fair value debt adjustment of £2.0 million
(2022: £2.2 million)
2 Cost of debt is based on gross debt and including amortised
costs but excluding commitment fees
3 Net income divided by net interest payable as defined by the
Group’s private placement and RCF funding arrangements
4 Based on the notional amount of existing hedges and total
debt drawn
Net debt is broadly in line with last year at
£994.0 million. Loan to value has increased
to 32.8% (2022: 28.8%) due to the sharp
reduction in asset values, however remains at a
comfortable level due to our focus on disposals
in the year, which have also been marginally
earnings accretive.
Property portfolio
£3.0bn
2022: £3.6bn
Logistics
73.1%
2022: 74.6%
Gross debt
£1.0bn
2022: £1.1bn
Loan to value
32.8%
2022: 28.8%
New debt facilities
£275m
Sustainability linked loan
New hedging
£225m
Interest rate swaps
Proportion of debt hedged
93%
2022: 71%
Financing activity in the year
Despite the deterioration in debt markets
over the last year and rapid interest rate
increases in response to rising inflation, we
managed to secure the first one year extension
to our two revolving credit facilities ('RCFs')
totalling £400 million and complete a new
£275 million RCF this year. The new RCF is
with our banking group on similar terms and
pricing as our existing £225 million facility
and is sustainability-linked, with two one year
extension options. In such difficult markets,
this is testament to the strength of our banking
relationships and quality of our underlying
portfolio. Post year end, we have agreed the
second one year extension on two of our RCFs
and have repaid our MIPP facility in full.
This refinancing, along with our disposals,
allowed us to repay a shorter dated debt facility
in the year and mitigate refinancing risk in the
next three financial years. The expiry profile of
our debt facilities at the year end is reflected in
the chart on page 53.
The third tranche of our private placement
loan notes totalling £380 million includes a
£50 million green tranche to fund qualifying
expenditure on buildings which have high
sustainability standards. In addition, our three
£675 million RCFs are sustainability-linked loans
with preferential pricing for compliance with
ESG targets linked to EPC ratings, renewable
installations and developments meeting a
minimum BREEAM Very Good standard.
All targets for the first two RCFs were achieved
in the year and a margin saving of 0.02% was
added to funds allocated for charitable giving.
Hedging
The Group’s policy is to limit our exposure
to volatility in interest rates by entering
into hedging and fixed rate arrangements.
In response to rising interest rates, we acquired
£225 million interest rate swaps to hedge our
floating rate unsecured credit facilities, securing
an average rate of 2.52% and at a cost of
£15.1 million. Alongside this, we repaid floating
rate debt following sales, and increased the
proportion of our drawn debt hedged to 93% at
the year end, up from 71% last year.
Based on the year end SONIA rate, the
interest rate swaps generate a total saving of
£3.7 million per annum.
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Cash flow
During the year, the Group’s cash balances
decreased by £18.7 million as reflected in the
table below.
For the year to 31 March
2023
£m
2022
£m
Net cash from operating activities 133.0 119.5
Net cash used in investing activities (17.4) (367.2)
Net cash (used in)/from financing
activities (134.3) 247.6
Net decrease in cash and cash
equivalents (18.7) (0.1)
The net cash inflow from operating activities of
£133.0 million is £13.5 million higher this year,
reflecting the increases in net rental income and
also changes in working capital.
The Group spent £258.0 million acquiring and
developing property in the year and received
net cash proceeds of £258.6 million from
property disposals. Distributions from joint
ventures and interest received added cash
receipts of £1.6 million. Capital expenditure on
asset management, developments and other
investments cost the Group £19.6 million.
Cash outflows from financing activities reflect
net borrowings repaid of £10.0 million, dividend
payments of £83.3 million, financing costs of
£53.7 million and share purchases and awards
of £6.4 million. These outflows were offset
by net investment received from our non-
controlling interest of £19.1 million.
Further detail is provided in the Group Cash
Flow Statement.
Read more on page 185
Average debt maturity (based on debt drawn)
1
2
3
6.0 yrs
1 Debt expiring within 0-2 years 11%
2 Debt expiring within 3-10 years 61%
3 Debt expiring 10+ years 28%
Total facilities
1
2
3
4
£1.4bn
1 Unsecured facilities 48%
2 Private placement 47%
3 Secured SWIP fixed rate debt 4%
4 MIPP joint venture 1%
Based on debt drawn as at the date of this
report, a 0.25% increase in interest rates
would reduce our annual EPRA earnings by
£0.2 million. We are advised by Chatham
Financial and continue to monitor our hedging
profile in light of interest rate projections.
Financial position at 31 March 2023
At the year end, we had total debt facilities
of £1.4 billion and gross debt drawn of
£1,030.5 million. Our headroom available
from undrawn facilities and cash balances
remained significant at £416.5 million
(2022: £299.3 million), providing ample
cover for contracted capital commitments of
just £20.3 million and optionality for further
investment opportunities.
Our debt maturity was 6.0 years (2022: 6.5
years) and our average debt cost was 3.4%
(2022: 2.6%).
Financial loan covenants
The Group has comfortably complied
throughout the period with the financial
covenants contained in its debt funding
arrangements and has substantial levels of
headroom within these. Covenant compliance
is regularly stress tested for changes in capital
values and income. The Group’s unsecured
facilities and private placement loan notes,
which together account for 93% of debt drawn
at the year end, contain gearing and interest
cover financial covenants.
At 31 March 2023, the Group’s gearing ratio as
defined within these funding arrangements
was 51% which is significantly lower than the
maximum limit of 125%, and its interest cover
ratio was 4.7 times, comfortably higher than the
minimum level of 1.5 times.
Property values would have to fall by 38% to
reach the banking gearing threshold. A 38% fall
in property values would equate to an LTV ratio
of 53%. Similarly, rents would have to fall by
62% or interest costs rise by 180% before the
banking interest covenant is breached.
0
200
400
600
800
1000
1200
1400
1600
Debt facility expiry profile
1
(£m)
FY23 FY24 FY25 FY26 FY27 FY28 FY29+
1,408
78
40
275
225
175
615
1 Based on debt facilities at 31 March 2023
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Our sustainability performance
Responsible Business
and ESG review
Overview and progress 54
Environmental 56
Social 63
Governance and TCFD disclosure 76
Our framework
The Company recognises the need to consider
and address all environmental, social and
governance matters relevant to its business.
As well as meeting legislation, environmental
improvements are starting to translate into real
asset value enhancement as occupiers value
these improvements more highly than before,
and valuers begin to differentiate between
assets based on environmental attributes.
Our Responsible Business framework guides us
in mitigating climate-related risks, identifying
and progressing environmental and stakeholder
related opportunities as well as ensuring a high
standard of corporate governance.
Responsible Business is embedded across all of
corporate, investment, asset management and
development activities. We have shifted our
approach away from 'top down' analysis
to a more 'bottom up' one.
We have a policy in place and ESG targets
are set every year with progress against those
targets monitored at Working Group meetings
held monthly and attended by key business
representatives and a Board member.
ESG performance is reported to the Board at
regular intervals with the Audit Committee
responsible for overseeing ESG progress.
Executive Directors and relevant employees are
set individual ESG targets and remuneration is
linked to achieving those targets.
Regular ESG training for our property team is
undertaken throughout the year.
Our Responsible Business activities
aim to address our material ESG
risks and opportunities.
Environmental
Through our activities we look to
minimise the environmental impact
of our business, maximise opportunities
to improve the efficiency of our
assets and improve the resilience
of our assets to climate change and
the impact of transitioning to a low
carbon economy.
Read more on page 56
Social
Our actions consider the long term
interests of all our stakeholders
including those of our employees,
suppliers, customers and local
communities as well as ensuring
that we maintain a high standard
of business conduct.
Read more on page 63
Governance
The Board is committed to
upholding high standards of
corporate governance. In particular,
it ensures that appropriate health
and safety procedures and supply
chains are in place.
Read more on page 76
Our ESG objectives UN’s SDGs
Reducing portfolio's carbon intensity
& embodied carbon from our activities
Addressing climate change through
our Net Zero Carbon ambition
Helping cities to develop
sustainable infrastructure
Enhancing and supporting local
communities and wellbeing
of stakeholders
Improving the natural environment
Promoting good working conditions
and equality for all
LondonMetric supports
the UN’s 17 Sustainable
Development Goals
('SDGs'). The goals shown
above represent those
that we feel are the most
relevant to our business.
Martin McGann
Finance Director
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Overview and progress
We have maintained our ratings in external benchmarks, made good progress
against our internal ESG targets and put in place further green financing solutions.
External benchmarking
Maintained our Green Star
Achieved a score of 64% in the 2022 Global
Real Estate Sustainability Benchmark survey,
maintaining our Green Star status.
Continued inclusion in the FTSE4Good Index
In the latest assessment, we achieved a score
of 3.4 out of 5.0 compared to 2.6 for the
peer group.
'A' rating
In the latest assessment we were rated an 'A',
which is above the sector average.
Maintained our Gold Award
In EPRA’s last review, we maintained our Gold
Award in their Sustainability assessment.
Other benchmarks
In the latest ISS review, we maintained our
'C-' score, which remains above the peer
group average. In addition, in 2023/24, we will
respond to CDP for the first time.
ESG progress in the year
We have made good progress against our 12
corporate ESG targets that were set for 2022/23
and that are available on our website.
The below sets out outcomes for some of
our main ESG targets and further detail on
our progress is detailed on the following
pages. A full review of performance against
these targets will be detailed in our separate
Responsible Business and ESG report, which will
be made available on our website in June 2023.
Many of the targets remain relevant for next
year and will be rolled forward with updated
targets again made available on our website.
-3%
like for like reduction in energy consumption
over the last year
90%
of portfolio EPC rated 'A'-'C'
68%
of occupier energy data captured
8.7/10
landlord recommendation score
94%
of employees are proud to work
for LondonMetric
Sustainability linked refinancing
Over the last year, we have completed a new
revolving credit facility totalling £275 million.
This facility is sustainability linked and
structured in accordance with the Loan
Market Association’s Sustainability Linked
Loan Principles.
Sustainability performance targets (‘Targets’)
were set and are aligned to LondonMetric’s
corporate ESG targets. The Targets are similar
to those set for our £400 million sustainability
linked refinancing in 2022 and focus on:
• Improvements in EPC ratings;
• Adding renewable installations; and
• Developments meeting a minimum
BREEAM Very Good standard or,
where not applicable, an alternative
minimum standard.
The margin on these facilities is subject to a two
basis point adjustment for compliance with
the Targets, which are tested in each year of
the facility.
Where targets are met, the margin paid
will be reduced and LondonMetric will use
this saving to add to its funds allocated for
charitable giving.
During the year, all targets for the 2022
£400 million sustainability linked loans were
achieved. The two basis point reduction in the
margin resulted in a saving of £43,000 with
these funds allocated to charitable giving.
The new facility this year has increased the
value of our debt facilities that are sustainability
linked to £675 million.
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Environmental
Overview
Through our activities we look to minimise
the environmental impact of our business,
maximise building efficiency opportunities
whilst improving business and asset resilience to
climate change and the impact of transitioning
to a low carbon economy.
We understand the importance of addressing
climate change and the significant impact that
reducing emissions from real estate can have
on the UK’s 2050 Net Zero Carbon target.
LondonMetric recognises that it can have a
material impact by reducing its emissions as
well as supporting its occupiers in reducing
theirs. In 2021, we formalised our Net Zero
Carbon Framework.
During 2022/23, as well as preparing to be
fully Net Zero from our operations by the end
of 2023, we also continued to analyse the Net
Zero potential across our portfolio through
several NZC assessments.
Over the next year, we intend to map out our
NZC pathway and extend our NZC analysis
across a greater number of properties. As part
of this, we will consider setting Science Based
Targets for the Company, assessing stranding
asset risk and carbon value at risk using the
CRREM methodology.
Net Zero
Carbon (‘NZC’)
ambitions
1
Our operations will be net zero
by the end of 2023
Encompasses Scope 1, 2 and some of
Scope 3 emissions. Includes landlord-
controlled energy, water, waste,
refrigerants and purchased goods
and services at our assets, along
with energy, waste, refrigerants and
business travel relating to corporate
activity and offsetting residual
carbon to achieve net zero
2
We will reduce emissions from
developments which will be fully
net zero by 2030
Encompasses Scope 3 emissions,
includes embodied carbon, supply
chain emissions and offsetting
residual carbon to achieve net zero
3
We will work with our occupiers
to ensure that our buildings are
net zero by 2035
Encompasses Scope 3 emissions,
includes emissions from occupier-
controlled energy use at our asset
and offsetting residual carbon
to achieve net zero
Our sustainability performance
Responsible Business
and ESG review
continued
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Environmental
Our energy consumption and greenhouse
gas emissions have fallen significantly
over recent years.
This reduction has, in part, been due to the
Company’s strategic shift away from offices
and operational retail parks into distribution
warehousing and long income assets that are
typically single tenanted.
Consequently, together with our portfolio
actions, the operational intensity of our portfolio
and our carbon footprint where there is landlord
supply has fallen significantly.
Operational NZC Scope
LondonMetric
assets where it
has control and
management
Corporate
(including
head office)
Energy
(electricity,
fuels & heat)
Water
Waste generated
Refrigerants
Purchaser of goods and
services
Business travel
Current & future actions
With only a small proportion of the portfolio
with landlord controlled energy supply, this
limits our ability to further reduce our energy
consumption. However, we continue to
look to further mitigate our consumption
where possible by identifying energy
efficiency improvements.
As we prepare to become Operationally Net
Zero Carbon by the end of 2023, we will
look to implement our carbon offset strategy
over the first half of FY 2023/24. Our carbon
strategy was formalised in the prior year and
concluded that we would adopt a carbon
removal scheme with long lived storage that
is in line with the Oxford Principles for Net
Zero Aligned Carbon Offsetting, aiming to
achieve the Gold Standard accreditation.
Energy consumption (MWh)
1
Outcomes
-92%
reduction in absolute energy consumption
since 2015
-3%
like for like reduction in energy consumption
over the last year
77%
of landlord electricity supplies from
renewable sources
1
Operations (Scope 1 & 2)
Our operations will be net zero by the end of 2023, with all residual
carbon offset*.
*1 Offsetting excludes renewably sourced electricity consumed and non landlord occupier activities
2 Through recognised offset schemes
Since 2015, our absolute energy consumption
has fallen by 92% from 9,056 MWh to
752 MWh. Over a 12 month period to
31 December 2022, consumption fell by
10% from 833 MWh. Excluding void assets,
consumption fell by 5% from 674 MWh
to 640 MWh and, on a like for like basis,
consumption was 3% lower.
The high level of green tariff supplies
now in place have seen our GHG emissions
intensity (market based) remain low at
0.5 tCO
2
e per £million net income or
4.0 tCO
2
e per million sq ft.
1 Graph shows data according to reporting year. During the year, we changed our energy collection period to enable a longer
timeframe between the year end and reporting date for processing of data. Data for 2018-2021 is based on financial years
ended 31 March 2018, 2019, 2020 and 2021, whereas data for 2022 and 2023 is based on calendar years ended 31 December
2021 and 2022.
0
500
1000
1500
2000
2500
3000
3500
20 2320222021202020192018
Read more GHG Emissions on page 62
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Environmental
Outcomes
97%
percentage of developments BREEAM Very
Good across 0.7 million sq ft
Our development performance
Whilst our development activity has reduced
as we focus more on regenerating older urban
warehousing, we continue to focus on building
highly efficient buildings.
97% of our completed developments in
the year, totalling 0.7 million sq ft, were
certified BREEAM Very Good. BREEAM Very
Good is minimum standard that we apply
to our large direct developments and 100%
of these developments achieved the Very
Good standard.
As part of our efforts to reduce emissions,
we are measuring embodied carbon and
challenging our supply chains to minimise waste
and select low carbon materials. Over recent
years, we have seen progressive reductions in
embodied carbon across our projects and have
applied learning on future developments.
We continue to look at ways of achieving
EPC A+ as well as NZC in operations and are
integrating solar PVs into our developments,
either at the time of construction or
post completion.
In addition, we are trialling energy monitoring
systems to allow us to monitor energy
performance post construction and
continue to review energy performance on
previous developments.
In line with our shadow pricing initiative that
we implemented in the previous year on
large flagship developments, we are typically
offsetting the carbon cost associated with our
development activity through re-investment
into green initiatives on the wider portfolio.
FDS, Ipswich development
Completion of our 296,000 sq ft
development occurred in June 2022.
It was pre-let to an ecommerce company
on a 20 year lease and is located on a site
that serves the newly created Free Port
East Zone.
The development was BREEAM Very
Good certified and EPC 'A' rated. Solar PV
was installed that will supply c.10% of the
building's energy, with further potential
capacity. Ten EV chargers were installed with
capacity for an additional ten.
The building achieved a 50% reduction
in Carbon Emissions rate against Notional
Target Emissions.
The development achieved a net
biodiversity gain.
Biodiversity initiatives
60,000 new trees planted
Artificial bat cave
Four new ponds for a population of
Great Crested Newts
Two new badger setts
2
Development
We will continue to reduce emissions from developments which will
be fully net zero by 2030, with residual carbon offset thereafter.*
*1 Offset through recognised offset schemes
Current & future actions
• Benchmark embodied carbon
on developments
• Undertake whole life carbon assessments
where possible
• Align developments to supply chains that
target minimising embodied carbon and
selection of low-carbon materials
• Embed NZC aligned operational
performance targets in design,
monitoring asset performance
post construction
• Shadow carbon pricing on select
flagship developments
• Look to expand remote
energy monitoring
Our sustainability performance
Responsible Business
and ESG review
continued
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EPC rating of portfolio
We are conscious of the regulatory changes
to EPCs and are actively targeting a
minimum 'C' rating on all assets before 2027.
90% of our assets now have an EPC rating
of ‘A’-’C’, which is up from 85% last year and
materially up from 59% in 2015 and 74%
in 2021.
The increase in the year reflects the benefit
from our investment activity, where we
have acquired or developed higher rated
assets and disposed of some poorer quality
buildings. It also reflects environmental
improvements at our buildings and
subsequently refreshing of EPCs. In addition,
our development activity continues to
upscale the portfolio’s quality.
In the year, we undertook a substantial
number of EPC reviews along with
c.30 more in-depth MEES reviews that allow
us to have a better understanding of where
improvements can be made.
We recognise that better EPC ratings are
the first step towards achieving NZC and so
we are also undertaking NZC assessments
on certain assets, particularly ahead of
refurbishment works.
51%
39%
6%
1%
3%
A&B
C
D
E
Invalid/Expired
Over the year:
A-Bs increased from 47% to 51%
A-Cs increased from 85% to 90%
Environmental
Our own analysis suggests that occupier energy
consumption can be reduced by up to 40%
and EPC ratings improved materially as a result
of LED lighting upgrades.
BREEAM rating across portfolio
Whilst BREEAM ‘in construction’ certification
is not a specific target for us, the proportion
of assets built to a BREEAM Very Good or
Excellent standard is currently 31%, which is up
from 10% in 2015 and 26% last year.
Occupier energy data collection
We have again increased the proportion of
our occupiers' energy data (Scope 3) collected
across our portfolio, collecting 68% of data by
floor area compared to 59% last year and 43%
in 2021.
We are using this data to better understand
the carbon emissions across our portfolio
and which assets need prioritising for energy
improvement plans.
Green leases
In the year, we formalised our green lease
clauses and incorporate this wording on new
lettings and regears where possible. On some
recent lettings, we are requiring the occupiers to
achieve higher EPC standards as part of their fit
out works.
In the year, 31% of our lettings included green
lease clauses, with over 40% achieved for the
second half of the year.
Outcomes
90%
of portfolio EPC 'A'-'C' rated
31%
of portfolio BREEAM Very Good
68%
of occupier energy data captured
Overview
As part of our drive to upgrade the quality of
our assets, we continue to explore and progress
energy reduction and clean energy initiatives
across our portfolio.
These include solar PV installations, LED
lighting upgrades, building improvement
works, removal of gas and installation of EV
charging points.
These initiatives are mainly considered as part
of new lettings and regears and help to enhance
our properties, extend their economic life,
increase occupier contentment and ultimately
enable our occupiers to become
NZC in operation.
LED lighting upgrades and occupier survey
In our recent occupier survey where we asked
a number of environmental related questions,
80% of those that responded reported that
they now have LED lighting as standard in the
buildings that they lease from us.
3
Occupiers (Scope 3)
We will work with our occupiers to ensure our buildings are net zero
by 2035*, assisting our occupiers to help them meet their NZC
targets and focus on providing NZC ready buildings.
*1 Excludes renewably sourced electricity consumed
2 Where occupier hasn’t offset its operational carbon from our building (excludes occupier’s wider operational activity
unrelated to the building), we will offset through recognised offset schemes
3 Does not apply to leases signed before 2024 and where that lease hasn’t expired by 2035
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Environmental
Improving the quality of our assets
With a portfolio aligned to distribution, our
assets have a much lower carbon intensity than
sectors such as offices, residential and shopping
centres. As we have significantly increased our
urban logistics exposure, we have moved away
from larger and newer logistics to well located
but typically older buildings.
This provides significant scope for us to
make relatively cost-effective improvements
that can materially improve the building’s
energy efficiency and extend its life instead
of redevelopment.
We also see investment activity as a key way
of improving our assets and our acquisition
process and disposals analysis is increasingly
conscious of environmental considerations.
Solar PV installations
In the year, five solar PV systems were installed,
taking our total portfolio solar capacity to
3.6 MWp. These were relatively small scale
installations but we expect to materially add to
our solar capacity following the recent increase
in occupier interest; in our occupier survey, 55%
of occupiers said they were looking at installing
solar PVs. We are in discussion on a number of
near term projects and see the potential to add
4.5 MWp of solar based on current activity and
occupier discussions.
Improving energy efficiency at Kings Langley
In the year, we acquired a 12,000 sq ft urban
warehouse with vacant possession, which
we upgraded and targeted an improvement
from an EPC 'C' to 'B'. The rating was improved
through the removal of gas and installation of
LED lighting as well as new electric heaters and
an electric boiler. Further works were identified
that could potentially improve the rating to an
EPC A+/ Net Zero rating, including Air Source
Heat Pump, Heat Recovery System and
Solar PV.
EV car charging
As we recognise the growing importance of
EV charging, we have now signed two EV
partnership deals with Motor Fuel Group and,
most recently, Instavolt, to install EV charging
across a number of our long income sites.
The recently signed partnership with Instavolt
will see the installation of c.30 EV chargers
across an initial nine sites which will generate
c.£0.1 million of annual income. The real benefit
will come from reducing carbon emissions and
attracting visitors at our properties.
Outcomes
5
Solar PV installations in year
55%
of occupiers looking to install Solar PVs
Current & future actions
• Measure emissions across all of the
portfolio by increasing occupier
data coverage
• Continued inclusion of green leases on
letting events
• Continue programme of energy
assessments and develop energy
reduction plans with occupiers
• Measure and monitor improvements/
progress at our buildings against
NZC targets
• Increase number of NZC ready buildings
• Progress renewable, EV charging
and battery storage opportunities
with occupiers
Our sustainability performance
Responsible Business
and ESG review
continued
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Environmental
Climate risk
Our ESG focus has increasingly turned to
understanding the climate risks of our portfolio.
In the previous year, we undertook a significant
assessment of our business and asset resilience
against climate-related risks. The third party
assessment concluded that our sustainability
strategy is well-positioned to manage climate-
related risks and opportunities.
For the portfolio assessment, two climate
change scenarios were used to test a range of
outcomes and identify material climate-related
risks over the short, medium and long term
with likelihood and impact scores assigned to
each risk.
The table opposite shows that under the less
extreme scenario (RCP4.5), transition risks are
the most significant for our business, whereas
under the more extreme scenario (RCP8.5),
physical risks are the most prevalent and will
have a greater impact.
At the asset level, an in-depth review was
undertaken on representative assets, assessing
their resilience to physical and transition risks.
Again, transition risks were higher for the assets
we assessed.
We continue to embed climate risk analysis
in our acquisitions as well as our portfolio
management and challenge our advisers and
the team to build in greater assessment of
climate risk.
In the forthcoming year, we will:
• Extend our risk analysis of the portfolio
based on asset locations;
• Extend the transition risk analysis based on
energy performance and occupier carbon
emissions data;
• Work with our environmental experts to
further include climate risk analysis in our
procedures; and
• Build on our short, medium and long
term targets
Portfolio Flood Risk
We continue to increase our assessment of
the potential impact of physical changes on
our portfolio, such as extreme weather and
longer term shifts in climate pattern.
During the year, we continued to manage
and mitigate our portfolio flood risk
assessment. We sold one asset that was
most at risk of flooding and undertook
further analysis on the other high risk assets.
We believe that, in most instances, proper
flood mapping or better consideration of
building levels would lower the risk profile
further, both across our ‘high’ risk assets but
also our ‘medium’ risk assets. We continue to
look at risk reduction actions.
87%
12%
1%
Low risk
Medium risk
High risk
Only 1% of properties rated high risk
Full portfolio reviews every three
years with ongoing monitoring on
higher risk assets
Detailed flood reviews undertaken
on acquisitions
8.4
Extreme weather events
Heat Stress
Flooding (coastal, fluvial)
Heavy rainfall & pluvial flooding
13.3
9.9
13.913.9
12.8
16.6
13.1
17.1
Physical risks (risk scoring on key risks)
13.8
Occupier/market demand changes
Increased building standards
Financial markets impact
Fuel source transition
7.5
15.1
16.4
7.6
17.6
13.7
19.0
Transition risks
1
(risk scoring on key risks)
IPCC RCP4.5 global emissions scenario
(1.7-3.2°C of warming by 2100)
IPCC RCP8.5 global emissions scenario
(3.2-5.4°C of warming by 2100)
1 Risks shown in graphs are top risks for IPCC RCP 4.5.
Under RCP 8.5, risks from insurance challenges and increased
energy demand and cost would have been included as top
four transition risk with scores of 14.0 and 13.0
See pages 78 to 80 for further detail on climate
change scenarios
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Environmental
Data qualifying notes
This is the Company’s tenth year of disclosure
under the Mandatory Greenhouse Gas Emissions
Reporting regulations and third under the recently
introduced Streamlined Energy and Carbon
Reporting regulations.
During the year, the Company changed its reporting
period for Greenhouse Gas Emissions such that the
reporting period (current and historic) is the year
to 31 December and not the year to 31 March as
previously reported.
This statement has been prepared in line with the
main requirements of the GHG Protocol Corporate
Accounting and Reporting Standard and ISO 14064-
1:2006.
Within Scope 1 emissions, refrigerant-related
emissions for the period were de minimis.
Scope 2 dual reporting is undertaken, which
discloses one Scope 2 emission figure according to a
location-based method and another according to a
market-based method.
For the ‘location-based’ method of emissions
calculations, standard emissions factors from the
UK Government Emissions Conversion Factors for
Greenhouse Gas Company Reporting 2021 and
2022 were used.
For the ‘market-based’ method, the Company’s
contractual instruments for the purchase of certified
renewable electricity were accounted for. For the
remainder of electricity which is not Rego backed,
UK's residual mix factor was used to calculate the
associated emissions.
Emissions from employee business travel (by
vehicle) have been calculated and reported under
Scope 3 emissions. Emissions have been calculated
on a distance travelled basis, where the relevant
vehicle emissions factor has been applied to
expensed mileage.
Scope 3 Landlord-obtained energy sub-metered
to tenants, is calculated through submeter recharge.
These emissions are not included under Scope 2
to prevent double counting, however a Scope 2
conversion factor is applied to calculations.
An operational control consolidation approach has
been adopted.
Additional information has been provided through
the breakdown of void asset emissions in both
Scope 1 and Scope 2. This is to clearly demonstrate
where LondonMetric have operational control
throughout the year, and how void data impacts the
overall total emissions.
Sources of greenhouse gas emissions
3
Year to 31 December 2022 Year to 31 December 2021
Tonnes of CO
2
e
(location-based
calculation)
1
Tonnes
of CO
2
e
(market-based
calculation)
2
Tonnes of CO
2
e
(location-based
calculation)¹
Tonnes of CO
2
e
(market-based
calculation)²
Scope 1
Energy Landlord-controlled gas 15 15 24 24
Void Energy Void asset gas 8 8 7 7
Fugitive
emissions Refrigerant emissions De minimis De minimis De minimis De minimis
Scope 2
Energy Landlord-controlled electricity 88 31 125 21
Void Energy Void asset electricity 13 12 26 24
Scope 3
Energy
Transmission and
distribution losses 9 9 13 13
Tenant Energy Landlord-obtained energy
sub-metered to tenants 18 18 0 0
Travel Emissions from employee
business travel for which the
company does not own or control 9 9 4 4
Total 162 103 199 95
Total (Ex
voids) 141 84 167 63
Intensity (Scope 1 & 2)
tCO
2
e/£m net income after administration costs 0.96 0.51 1.57 0.66
1 For the ‘location-based’ method of emissions calculations, standard emissions factors from the UK Government Emissions
Conversion Factors for Greenhouse Gas Company Reporting 2021 and 2022 were used
2 For the ‘market-based’ method, the Company’s contractual instruments for the purchase of certified renewable electricity were
accounted for
3 Disclosed emissions are 100% UK based
Energy consumption
-3%
Over the year on
a like for like basis
Energy consumption fell 3% to 396MWh
on assets that were owned during both 2021
and 2022 (calendar years). The reduction
can be attributed to the ongoing asset
upgrades to incorporate energy efficiency
measures. Absolute energy consumption
across the whole portfolio decreased
by 10%.
Greenhouse gas
(GHG) emissions
-4%
Over the year on a like for like basis
(location based)
Emissions fell by 4% on assets that
were owned during both the 2021 and
2022 periods.
Absolute emissions have decreased overall
from 199tCO
2
e to 162tCO
2
e.
Our sustainability performance
Responsible Business
and ESG review
continued
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Building and nurturing relationships with our
stakeholders is integral to our business model
and the way we work.
Social
Occupiers
We work closely with our
occupiers to create high
occupational contentment
Learn more on page 64
People
Our employees are critical to
our success and delivering on
our strategy
Learn more on page 66
Contractors
and Advisors
We rely on the support of a
diverse group of contractors
and advisors
Learn more on page 70
100%
Contractor compliance
Investors
Strong relationships with
our investors are critical to us
accessing capital efficiently
Learn more on page 72
c.240
Equity investors met
during the year
Communities
Supporting local
communities and charities
is highly important to us
Learn more on page 74
51
Charitable causes
supported in year
Our
stakeholders
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Our sustainability performance
Responsible Business
and ESG review
continued
Strong customer focus
We recognise that when our occupiers’
businesses thrive, our business also thrives.
We treat our occupiers as customers and put
them at the centre of our decision making.
Our occupier-led approach provides us with
market knowledge to better understand
future trends and make informed decisions.
Our high occupancy rate, rent collection and
customer satisfaction scores demonstrate
the strength of these relationships.
Extending existing relationships and developing
new contacts continue to be a key focus for us.
Develop trusted relationships
Our strong occupier relationships reflect
our differentiated proposition where we:
• Are approachable and actively engage
with our occupiers;
• Strive to listen, fully understand
occupier requirements and create solutions
that are mutually beneficial; and
• Make quick decisions, act swiftly
and deliver on our promises.
Customer satisfaction
We undertake regular surveys across our key
occupiers and undertook our fifth occupier
survey in March 2023.
Responses were received from occupiers
representing 46% of our income and the
feedback continued to be strong with
an average score of 8.7 out of 10.0 for
whether our occupiers would recommend
LondonMetric as a landlord.
The survey continued to provide very helpful
information for us to follow up on and include
in our wider decision making.
How we engage with our occupiers
Annual occupier surveys
Leasing and regear activity
Regular site visits and inspections
Energy saving discussions
Wider property needs discussions
Board Engagement
• Board provided with detailed analysis
of occupier transactional activity on
a regular basis
• Executive Directors feedback results
of rent collection to the Board
• Results of the annual occupier survey
presented to Audit Committee each year
• Site visits provide an opportunity for
the Board to engage with customers
We aim to be a
real estate partner
of choice for our
occupiers.
Mark Stirling
Asset Director
Why they are important to us
Drivers of income and capital growth
Lie at the heart of our business purpose
What is important to them
Fit for purpose real estate
Lease terms that suit their business model
Well designed and sustainable buildings
Approachable and trustworthy landlord
Outcomes
99.1%
portfolio occupancy
8.7/10.0
landlord recommendation score
99.8%
of rent collected
167
occupier transactions
Occupier survey results page 65
Occupiers
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Social
Occupier survey (March 2023)
211 of our occupiers were surveyed,
representing 88% of rent. Responses were
received from 71 occupiers representing
46% of rent.
Questions were asked about occupiers’
satisfaction with our properties and their
locations, how satisfied they were with
LondonMetric and whether they would
recommend us as a landlord. We also
asked specific environmental questions.
As for the previous year’s survey, we will
address the results of the survey and any
specific feedback through our ongoing
occupier engagement.
Encouragingly, wider sentiment from our
occupiers was upbeat, with 35% saying that
they are looking to increase their UK property
footprint. A further 58% said that they expect
their footprint to stay the same, whilst those
looking to reduce space was only 7%.
Average
8.7/10
Recommend LondonMetric as a landlord
We scored an average of 8.7 out of 10.0 for
whether our occupiers would recommend
LondonMetric as a landlord. This compares
with the 2022 result of 8.5.
For our top ten occupiers, the average
was higher at 9.2, up from 9.1 in 2022.
Average
8.1/10
Satisfaction with our properties
We scored an average of 8.1 out of 10.0
for satisfaction with our properties.
This compares with the 2022 result of 8.3.
For our top ten occupiers, the average
was higher at 8.2.
Site visit at Eddie Stobart, Dagenham
Eddie Stobart has been a customer of ours for
a number of years and, in 2018, we facilitated
a major redevelopment and reconfiguration
of their 454,000 sq ft of logistics warehousing
in East London. We continue to remain close
to them and they kindly helped us to host
a large investor visit at their site recently.
Extremely hands on and outside
the box thinkers. Importantly,
they are a pleasure to work with
and I just wish every landlord
had the same approach.
Feedback from Eddie Stobart
as part of the occupier survey
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Our sustainability performance
Responsible Business
and ESG review
continued
Social
People
Overview
The Company is highly focused with
35 employees and nine Non Executive
Directors. Since merger in 2013, employee
numbers have fallen despite a significant
increase in assets managed. This reflects
improved efficiencies and the lower
operational requirements of our portfolio.
Culture and approach
We have successfully attracted and retained
a talented and loyal team.
This is reflected in our low annual voluntary
staff turnover rate which has averaged 6%
since merger. We believe this reflects our:
• Culture of empowerment, inclusion,
openness and teamwork;
• Fair and performance
based remuneration; and
• Small number of staff,
which allows a flexible
and individual approach.
We also have a flat management structure
with clear responsibilities and decision
making processes.
How we engage with our employees
Annual employee surveys
Annual appraisals
Training
Committee meetings
Regular business updates
Why they are important to us
Build relationships with our occupiers
and the property industry
Allow us to execute on investment, asset
management and development strategies
Responsibility for their wellbeing
What is important to them
Flexibility and wellbeing
Progression and career development
Reward and recognition
Fairness and equality
Outcomes
6%
staff turnover since merger in 2013
94%
of staff feel proud to work for the Company
Employee survey results page 68
Board Engagement
• Clear communication and regular
updates from the Chief Executive
• Direct interaction between the Board
and employees on an informal and
also formal basis at specific meetings
• Site visits for Non Executive
Directors facilitated and attended
by key employees
• Liaison with workforce Non Executive
Director through employee events
We continue to ensure
that our employees
are properly supported
and incentivised.
Martin McGann
Finance Director
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How we address employee needs
Flexibility, wellbeing, satisfaction & safety
Our 2023 employee survey reflects ongoing high levels of satisfaction.
We have implemented more flexible working arrangements over
recent years covering dress code, holiday buy back, improved
systems to enable home working and a core hours policy. We have
also significantly reduced office space, undertaken a major office
refurbishment and modernisation, as well as carried out a wellbeing
review. Recognising that employees are no longer working from home
on a regular basis, we intend to upgrade our working space further
over the next year. Health & Safety is a key priority for us and our
policy provides for appropriate equipment, workplace assessments,
operational processes and safe systems of work.
See page 76 for further details on health and safety
Reward & recognition
Remuneration is aligned to personal and Company performance
with LTIPs that replicate arrangements for Executive Directors.
All employees receive a pension contribution of 10% of salary and
medical insurance with access to childcare, cycle to work vouchers
and a company car scheme, which allows employees to access
electric and hybrid vehicles.
In the year, and in response to the cost of living crisis, we made
one off payments to some of our employees.
Progression & career development
An annual appraisal process is undertaken where training needs
and performance are discussed.
We actively encourage training and we continue to monitor our
staff training each year.
We continue to undertake ESG training across our employees,
encourage participation in Young Property Professionals’ groups
and offer secondment and work placement opportunities.
Inclusion, fairness & equality
We strongly encourage input on decision making from all staff, wide
participation in Committee meetings and collaboration across teams.
Regular business updates are provided by Executive Directors.
We promote diversity across knowledge, experience, gender, age
and ethnicity with a published diversity and inclusion policy in place
and support of the Real Estate Balance group. Whilst overall female
employee representation is good, we recognised that we needed to
specifically promote greater gender diversity. We continue to increase
female representation in our property team, supporting a recent
graduate joiner as she gains her relevant real estate qualifications.
Employee gender diversity
Directors
The number of Directors
by gender:
Senior Leadership Team
The number of members of the
Senior Leadership Team by gender:
All employees
The number of employees
by gender:
Females
Males
7 4
6 2 19 16
For more information on
diversity, see page 128
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Survey Findings
Overall the survey is positive with 94%
of employees feeling proud to work at
LondonMetric. Employees remain highly
supportive of the Company and working
environment. It was noted that overall scores
were down from previous highs in some areas,
likely reflecting the wider macro environment
together with the challenges and dislocation
experienced across real estate investment
markets during the year and real estate pricing
recalibrated in response to interest rate changes.
The highest scores were achieved as follows:
• Work gives the employee a sense of
personal achievement
• Employees enjoy working at LondonMetric
• The Company supports and promotes
social responsibility in its operations
• Employees feel they have access
to the technology and tools needed
to do the job well
• Employees know what they need
to do to be successful in their role
Whilst the office continues to be a desirable
place to work, the survey sought feedback on
improvements that could be made. Following this
feedback, plans are being considered to further
improve the office environment. The Company
does not operate a formal work from home
policy recognising the benefits of being
together to learn, collaborate and problem
solve when all together and driving a strong
entrepreneurial spirit.
On the question on a scale of 1-10 how likely are
you to recommend LondonMetric to a friend, a
score of 8 was achieved. This was the same as
last year and confirms that we are still a friendly
and positive employer.
Andrew Livingston is our designated workforce
Non Executive Director and will keep providing
feedback from this survey and informal meetings
and discussions with staff in the coming year.
Our sustainability performance
Responsible Business
and ESG review
continued
Social
People
2023 Staff survey
97%
staff survey engagement level
94%
are proud to work for LondonMetric
88%
agree the Company supports and promotes
social responsibility
85%
agree there is a strong culture of teamwork
and collaboration at the Company
Overview of satisfaction survey
In February 2023, we undertook our sixth
annual employee survey to track changes
in staff satisfaction.
In total, we asked 55 questions, focusing on
the Company, the working environment, and
the individual. Overall responses were received
from 33 staff members, with an engagement
of 97% compared to 94% in 2022.
Enjoy working at LMP
Company is considerate of life outside work
The leaders demonstrate that people are
important to the company’s success
Work gives a sense of personal achievement
Feel involved in decisions that affect my work
I believe I can make a valuable contribution
to the success of this organisation
Employee Company
2023
2022
85
100
2023
2022
79
63
2023
2022
79
77
2023
2022
82
79
2023
2022
73
73
2023
2022
94
83
Survey breakdown of scores (percentage
of employees that responded with agree
or strongly agree)
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As Chief Executive of Howden Joinery Group
Plc, Andrew has experience of managing and
motivating a large team of employees. His work
as designated workforce NED ensures that the
Board has access to the views of the workforce,
regardless of their role or position, and provides
meaningful information that can be used by the
Board when considering the potential impact
of key decisions on employees.
Each year since his appointment, Andrew
has hosted an informal off site session for a
select group of employees. The Remuneration
Committee Chair attended the meeting
to welcome any questions from staff on
executive pay.
The meeting was an opportunity for people
to speak freely and openly and ask about topics
discussed in the Boardroom and share their day
to day working experiences. Topics discussed
included the positives of being in the office full
time, work life balance, personal growth and
celebrations. Non attributable feedback was
relayed to the Board at its next meeting.
As a result of this feedback and subsequent
discussion, alongside the results of the
annual staff survey which Andrew also fed
back, the Board will focus on the following
action points to drive the right behaviour
and support the wellbeing of employees:
• Provide training and development
opportunities for staff, both professionally
and personally
• Retain a flexible working arrangement
where it is good for the business
• Ensure employees remain informed
of relevant business activities on an
ongoing basis
Social
How does the designated workforce
NED consult with the wider workforce?
Consults directly with members
of the Senior Leadership Team
Holds own meetings with small diverse
group of employees
Reviews results of staff surveys
Staff liaison at Board and
Committee meetings
Attends site visits alongside staff members
His role was set out by the Board
to include the following:
Attend all staff presentations and other
events to give staff the opportunity to
get to know and liaise with him
Monitor the results of employee
engagement surveys and any actions arising
Feedback to the Board at meetings any
staff concerns and the results of surveys
and other liaison at least annually
The work of the designated workforce Non Executive Director
Andrew Livingston was appointed as designated workforce
Non Executive Director by the Board in 2019.
Andrew Livingston
Appointed as designated workforce
Non Executive Director in 2019
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Our sustainability performance
Responsible Business
and ESG review
continued
Social
Contractors and Advisors
Our Responsible Procurement Policy
Our policy outlines our approach to
implementing supply chain and procurement
standards on developments and our existing
estate through our contractors and suppliers.
It focuses on areas such as labour, human
rights, health and safety, resource, pollution
risk and community.
Contractors
Our contractor relationships are highly
important in allowing us to deliver on
our developments and refurbishments.
In conjunction with our external project
managers, our development team ensures that
we select high quality and robust contractors
with a proven track record. We regularly review
the financial robustness of our contractors and
work closely with them throughout projects.
Our development team monitors progress and
tracks all elements of our projects including sub-
contracted works. We stay in close contact with
our contractors and arrange regular visits and
detailed reviews and checks of their systems
and processes.
Our Responsible Development Requirements
checklist is used on all projects and sets
minimum requirements for contractors.
Compliance with this checklist is mandatory for
all projects and sets minimum standards that
our contractors must meet. The checklist covers
environmental, responsible supply chain and
H&S standards. We also specify compliance by
contractors with the Considerate Constructors
Scheme on most of our projects where we
deem it appropriate.
At project meetings, we challenge all of our
contractors to consider the environment,
biodiversity, local community involvement
and local sourcing.
Why they are important to us
Being a small team we are dependent on
a diverse group of key suppliers including
professional advisors and contractors
What is important to them
Fair payment terms
and prompt settlement
Good, effective and
stable working relationship
Long term partnerships
Outcomes
13 days
Average payment
100%
compliance with our Responsible
Development Requirements checklist
Board Engagement
The Board or its Committees receive
regular presentations and reports from
its advisors who also regularly attend
Committee meetings.
We continue to advocate the Prompt
Payment Code and promote responsible
development standards.
The Board regularly visit development
sites with the Development team.
We value contractors that
we can trust and develop
long term partnerships with.
Nick Heath
Head of Development
How we engage with our contractors & suppliers
Regular project meetings
Annual reviews and audits on projects
Regular meetings with property
and managing agents
Sharing of learning between
different suppliers
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Social
Deeley Construction at our new Starbucks drive-thru development
LondonMetric has a longstanding relationship with Midlands based
contractor Deeley, having worked together on retail and industrial
projects for c.12 years. We continue to enjoy working with Deeley, as
we share similar values on areas such as responsible development and
procurement, and Deeley understand our requirements. They were
recently appointed to build our new 1,840 sq ft Starbucks drive-thru
in Birmingham, which is being constructed on land next to a Sofology
store that we own and that was successfully completed by them in
2021. Works are well underway with opening expected later in 2023.
Mildren Construction at our Weymouth development
Mildren has successfully worked as contractor on Phases 1 and 2 of our
Weymouth long income development totalling c.70,000 sq ft of new-
build pre-let retail space. Mildren were invited to tender for the scheme
due to their geographical location, expertise in similar construction
projects and their strong working relationship with LondonMetric.
Mildren has also been appointed on a new-build 41,000 sq ft pre-let
development in Uckfield, a development scheme that LondonMetric
are forward funding, which is due to complete in summer 2023.
Managing Agents
Managing Agents are an important part of
the supply chain on our assets where there
are multiple occupiers in place. We select a
few highly competent companies to deliver
our managing agent services.
Whilst our spend on these services is relatively
small, we continue to monitor their compliance
against our Managing Agents’ policies and
ensure that their sub-contractors are properly
appointed and compliant with our standards,
including responsible supply chain/anti-slavery
and human trafficking.
Over recent years, we have undertaken a
number of reviews of material sub-contractors
employed by our key Managing Agents with
a specific focus on sustainability, community,
legislation and employment.
Other Suppliers
We also rely on many other adviser
relationships as part of our activities.
These include investment agents, external
auditors, valuers, remuneration consultants,
tax advisors, environmental experts and
legal advisors.
c.50
Properties managed by
five managing agents
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Our sustainability performance
Responsible Business
and ESG review
continued
Social
Investors
Equity Investors
We value our good relationships with our
shareholders. Understanding their views
continues to be a top priority for the Board
and vital to the Company’s strategic direction.
The Company’s principal representatives
continue to be the Chief Executive and Finance
Director who, along with the Head of Investor
Relations and Sustainability, hold meetings
throughout the year and particularly following
results announcements.
Over the year, we met with c.240 equity
investors through one to one and group
meetings. Unsurprisingly, with greater
uncertainty and a recalibration of the real
estate sector over the year, we saw a significant
increase in investor questioning and interaction
over the second half of the year.
A breakdown of meetings by type of investor
is shown in the chart opposite and key
investor activities are shown on the next
page. The Company continues to place great
importance on and engage with its private
wealth shareholders, who represented a
third of all shareholder meetings in the year.
We continue to enjoy strong analyst coverage
and interaction with 13 brokers, which is
unchanged on the prior year.
Feedback remains very supportive and, as
would be expected, we continue to see a strong
focus on ESG matters, which are discussed in
nearly every meeting. Feedback on our ESG
performance remains very positive.
Following further investor requests, we
have decided to respond to CDP (a global
disclosure system for investors and corporates
on environmental issues) in their upcoming
annual assessment.
How we engage with our investors
Investor roadshows & conferences
Results presentations to analysts
Annual General Meeting
Senior Independent Director meetings
Debt refinancing activity
Site visits
Why they are important to us
Continued investment and support
Feedback and direction
What is important to them
Financial performance and progression
Well covered and growing dividend
Clear strategy, execution and reporting
ESG fully considered
Outcomes in the year
241
investor meetings
£675 million
debt facilities arranged or extended
2.7%
dividend progression
1
2
3
4
Equity meetings by
type of investor
1 Sector specialists 36%
2 Private Wealth 34%
3 Generalists 25%
4 Brokers 5%
Board Engagement
• Investor feedback provided regularly to
the Board by the Chief Executive
• Senior Independent Director participates
in half yearly roadshows, attending six
investor meetings during the year
• Board attended the Annual
General Meeting
• Board consulted with shareholders
on the Company's Remuneration
Policy proposals
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Our investor relations framework
The framework is set around our half yearly
results, and at other times in response to
ad hoc requests and where we undertake
UK regional and overseas roadshows and
investor conferences. Meetings and roadshows
keep investors informed of the Company’s
performance and plans and allows them to ask
questions. Specific topics discussed during the
year included development and implementation
of strategy, financial and operational
performance, the property market, the strength
of our occupiers and rent collection, our debt
structure and ESG considerations.
Shareholders are kept informed through results
statements and other regulatory announcements.
These are published on our website, affording all
shareholders full access to material information.
The website also includes an investor relations
section containing all RNS announcements,
share price data, investor presentations,
factsheets and Annual Reports.
A live and on demand webcast of results and
a CEO interview is posted twice a year on our
website. Individual shareholders can also raise
questions directly at any time through a facility
on the website. We complied with the European
Single Electronic Format (‘ESEF’) regulations for
filing our Annual Report.
We continue to offer a scrip dividend alternative
to shareholders, which enables them to opt for
shares rather than cash with no dealing costs
or stamp duty. This scheme was renewed for
a further three years in 2022 and we continue
to have good levels of take up.
Social
JP Morgan Asset Management –
investor site visit (November 2022)
As part of the launch of JP Morgan's sustainable
infrastructure SICAV (a thematic fund focusing
on sustainable, mission critical assets), we
organised a site visit for c.60 people consisting
of senior employees from across JP Morgan's
global offices as well as some of their clients.
The two hour presentation and visit to our facility
in Dagenham was led by LondonMetric's CEO,
Head of Development and Head of Investor
Relations and Sustainability, in conjunction
with key personnel from the occupier.
Debt investors and joint ventures
We continue to enjoy good relationships
across the debt capital markets and
continue to broaden our base of debt
providers. In addition, we continue
to enjoy strong relationships with our
remaining joint venture partners.
Further information on our financing activity
in the year is set out on page 55, including
details on our sustainability-linked debt
arrangements. We continued to organise site
visits for our debt investors and, in September
2022, we arranged a day of site tours of assets
in Bedford and Brent Cross.
Key investor activity in year
Q1
Site visit for c.20 investors in North London
Full year results announcement/roadshow
Private wealth meetings (Birmingham)
US roadshow (New York & Boston)
Q2
Site visit for debt investors
Analysts ad hoc meetings
Q3
Private wealth meetings (Manchester)
Half year results announcement/roadshow
Holland roadshow
UBS investor conference (London)
Q4
Barclays investor conference (London)
Bank of America conference (London)
Private wealth meetings (Liverpool)
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1
2
3
Our sustainability performance
Responsible Business
and ESG review
continued
Social
Communities
We recognise the importance of supporting
our local communities and engaging
with all local stakeholders. Our published
Community Policy outlines our approach
and we aim to maximise the local benefits
of our activities through:
• Investing in local infrastructure through
regeneration and creation of fit for
purpose buildings;
• Creating jobs during development and
refurbishment, typically using local
contractors and employment;
• Bringing in long term occupiers who create
significant local employment;
• Partnering with local authorities and councils;
• Engaging with local residents and
communities, particularly during and
post developments to ensure that
they are fully involved; and
• Ongoing involvement in areas local to our
properties by funding of local events and
facilities and engaging with schools.
Our Charity and Communities Working Group
implements charity giving and co-ordinates
community involvement. We aim to allocate a
minimum of £100,000 per year for charitable
giving across four key areas:
• Specific causes identified at a corporate level;
• Charitable causes identified by employees
with all employees able to nominate
charities of their choice or allocate funds
to match their own charitable activity;
• Development linked giving, supporting
causes near our development activity; and
• Occupier or asset related giving, supporting
causes in conjunction with occupiers or near
our local assets.
This year, under our banking arrangements
an extra £43,000 is available and has been
earmarked for charity giving as a result of us
hitting our banking related ESG targets.
Why they are important to us
Considering communities local to our
activities is an important part of our
Responsible Business approach to doing
business and delivering our strategy.
What is important to them
Environmental and social impact
of our activities
Employment opportunities
Investment into local infrastructure
Outcomes
£104k
Charitable giving in year
51
Charitable causes supported in year
Board Engagement
• Participation in charitable events
organised by LondonMetric
• Updates on charitable work
• Understanding of development
related community matters
through project updates
How we engage with our communities
Supporting local charities
Encouraging local sourcing on projects
Planning consultations
Resident updates on projects
Engagement with local authorities
Supporting local occupier initiatives
1 Corporate giving 59%
2 Employee giving 21%
3 Asset Management
Development giving 20%
Breakdown of
charitable giving
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Social
Opentrail/Burlish Bike Park
As part of the A&J Mucklow acquisition in
2019, we acquired 16 acres of woodland in
Worcestershire as part of the transaction.
For the last three years, we have engaged
with Opentrail, a local charity, to transfer
the woodland to them at no cost to create a
community bike park facility comprising seven
bike trails, a clubhouse, toilets and car parking.
Over that time, we have assisted them on
wider planning, construction and legal advice.
Opentrail has received over £200,000 of
contributions and grants, including £135,000
from Sports England and, following the
transfer of the woodland, is now on site
constructing the facility with completion
expected in summer 2023.
Further details of the bike park can be found
at opentrail.co.uk/burlish-bike-park/
Employee matching
Over the year the Company supported its employees charitable giving
initiatives donating £21,889 across a wide range of charities including
localised community initiatives.
Employee charitable giving included cycling 337 miles to Amsterdam
over four days for Keframa charity which supports building schools
in Uganda.
During the year, employees also spent their own time volunteering at
local foodbanks in their local communities. In addition, the Company
has also supported its employees local communities with small
donations to local community sport clubs.
Real estate sector led giving
We continue to support LandAid, the property industry charity and
contributed £10,000 to LandAid in the year, some of which related to
employee giving. Our participation in various LandAid initiatives means
that we remain a Foundation Partner.
LandAid runs a step challenge for two weeks each year raising money
to prevent youth homelessness. 94% of our employees participated
in the Steptober event, taking 6.3 million steps for the challenge, over
two weeks which is an increase of 20% on the previous year.
Investing in local communities
During the year, we continued to support local communities where
we have large investment exposure. In total we donated £58,149
to charities including foodbanks, the National Energy Action
and defibrillators.
As the cost of living continues to put pressure on families, during
the year we increased our contribution to foodbanks to £15,000 in
communities local to our assets and people including in Kingston,
Tyseley, Weymouth, Bedford and Dagenham.
In conjunction with the British Heart Foundation, we have agreed
to install 12 defibrillators across 12 assets at a total cost of £60,000.
Wider charitable initiatives
Through employee voice, the Company supported local charities
as well as global charities, in particular supporting causes related to
Ukraine, Turkey & Syria.
During the year, we gave £5,000 to Médecins sans Frontières to
support their activities in this part of the world. We continued to
support the Ukraine humanitarian crisis through a donation of £5,000.
Through an employee contact, we sponsored The Convoy of Hope
who drove ambulances full of medical supplies to Ukraine.
Highlight charitable activity in the year
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Health and safety in focus
Responsibility and procedures
The Board is responsible for ensuring that
appropriate health and safety procedures
are in place. Mark Stirling, Asset Director,
is responsible for overseeing implementation of
our procedures and reporting back to the Board.
RP&P Management Ltd (‘RP&P’) acts as our
Corporate Health and Safety Advisor.
H&S risks assessment and training
Where risks need to be assessed under a
specific duty or regulation, we ensure that an
assessment is carried out and that all necessary
actions are implemented. Health and safety
training is carried out for employees and
additional training is considered on a case
by case basis.
Health and safety policy
Our policy is regularly reviewed and addresses
three key areas of:
I. Employment – The policy ensures our
employees are offered a safe and healthy
working environment.
II. Construction – Procedures and processes
have been developed to ensure we comply
with current legislation with a Project
Manager, Principal Designer and Principal
Contractor appointed on all projects
to oversee, manage and monitor health
and safety.
III. Managed properties – The majority of
our assets are let on full repairing and
insuring leases. For single occupier assets,
the occupier is responsible for managing
health and safety matters at the property
and the wider estate.
Where there are multiple occupiers on
the same estate, we appoint a Managing Agent
to manage health and safety matters relating
to common parts. The Managing Agent is
responsible for ensuring health and safety
assessments are completed and regularly
reported back to us.
Our contractor requirements
We have implemented robust processes
to ensure that our contractors uphold our high
standards and minimise the environmental
impact from developments.
All of our contractors adhere to our Responsible
Development Requirements checklist, which
sets minimum requirements for our main
developments on areas including:
• Health and safety;
• BREEAM Very Good or better standard
(where appropriate);
• Considerate Constructors
Scheme compliance;
• Environmental impact monitoring;
• Management and reporting of progress;
• Promoting local employment
opportunities; and
• Fair remuneration for workers.
We continue to monitor compliance and
look at ways of improving our contractors’
performance. During 2023, as part of our
annual Contractor compliance audit, we
met with Redwood Contractors Ltd, who are
one of our smaller contractors we use for
refurbishment work in the South. Their systems
and processes were found to be robust,
including policies on human trafficking and
anti-slavery.
See page 45 for further details on our audit
Governance and compliance
The Board is committed to upholding the
high standards of corporate governance
and Responsible Business is an important
part of ensuring that we deliver on those
high standards.
Overview
Board representation
for Responsible Business
Martin McGann, Finance Director, represents
the Board at Responsible Business Working
Group meetings and his remuneration is
linked to the Company achieving certain
Responsible Business related objectives.
Policies and statements
The Company’s overall Responsible
Business policy is available on its
website along with other related
documents including:
• The Responsible Business Working
Group’s terms of reference;
• Responsible Business targets;
• Full Responsible Business reports;
• Our approach to health and safety;
• Compliance and anti-
corruption procedures;
• Responsible Procurement Policy;
• Community Policy; and
• Modern Slavery Act Statement.
Confirmations
The Company confirms that no human
rights concerns have arisen within its
direct operations or supply chains and that
it has not incurred any fines, penalties or
settlements in relation to corruption.
The Company continually reviews
and updates all of these documents
as required.
Health and safety in 2023
Quarterly internal meetings
Half yearly project audits on two sites
Zero reportable incidents on projects
Zero accident rate for employees
No prosecutions or enforcements
Health and safety policy updated
Governance
Our sustainability performance
Responsible Business
and ESG review
continued
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Our sustainability performance
TCFD Recommendation
and Alignment
LondonMetric has complied with the requirements of LR 9.8.6R by including our Task force on Climate-Related Financial Disclosures (‘TCFD’) Statement
below, which is consistent with the TCFD recommendations and recommended disclosures, save for our continued work on financial quantification
(Strategy B) and (Strategy C) and ongoing efforts to improve the measurement and coverage of Scope 3 emissions generated by our tenants (Metrics
& Targets B). To date financial quantification has focused on areas provisionally identified as potentially having the most impact. Over the coming year,
LondonMetric intends to expand financial quantification to other climate-related risks and opportunities currently not yet quantified. Similarly, Scope 3
emissions are material for LondonMetric and we are rapidly working on increasing tenant data coverage and aim to report in full compliance in due course.
Governance
A - Describe the Board’s oversight of climate-related risks and opportunities
The Board provides oversight of the Company’s Environmental, Social and Governance (ESG) matters and has overall responsibility for the Company’s risk
management framework, in which climate-related risks and opportunities are integrated. All principal risks, including those which are climate-related, are contained
within the Company’s risk register which is updated and reviewed at least annually.
The Audit Committee assists the Board by reviewing the register and providing assurance on the robustness of the systems in place for the identification, assessment
and mitigation of the principal risks facing the Company.
As part of this function, the Audit Committee monitors and oversees progress against objectives and targets for addressing climate-related issues, ensuring that climate-related
matters are escalated to the Board as necessary. The Audit Committee is informed by members from the Company’s Responsible Business Working Group (‘Working
Group’), which provides feedback on climate-related issues, facilitates proactive climate-related risk management and is a sub-committee of the Finance Committee.
During Board meetings, which are held quarterly, risks are considered at a strategic level, which ensures that new and emerging risks, including those climate-related,
are identified and appropriate action is taken to remove or reduce their likelihood and impact. The Board receives quarterly board papers with updates on ESG matters and
a specific ESG update is presented to the Board at least annually by the Working Group to ensure that the Board can monitor progress against climate-related goals and targets.
Further ESG related information is provided over the course of the year on specific matters where appropriate including all investments, developments and disposals over
a certain value threshold where environmental and climate-related risks are addressed, particularly around flooding risks, EPCs and costs to upgrade assets, where required.
For wider corporate governance reporting see page 102
B - Describe management’s role in assessing and managing risks and opportunities
The Working Group and the Senior Leadership Team (‘Senior Team’) work closely to ensure climate-related risks and opportunities are monitored and managed.
This collaboration is led by the Head of Investor Relations and Sustainability and the Finance Director, who are members of both and are ultimately responsible for
implementing Responsible Business matters.
Senior Team members report directly to the Board and Audit Committee. The Senior Team is responsible for ongoing risk identification, as well as the design, implementation
and maintenance of internal controls to mitigate identified risks. Certain members of the Senior Team attend the Investment, Asset Management and Finance sub-
committees to ensure that climate-related issues are monitored and escalated where appropriate as well as to ensure that opportunities are considered and captured.
The Senior Team and the Working Group track key risk metrics and opportunities on an ongoing basis. The Working Group supports the Senior Team in identifying
wider climate-related risks by escalating potential risks as well as ensuring the business is properly considering opportunities. The Audit Committee is responsible for
monitoring progress on Responsible Business initiatives as well as the effectiveness of risk management systems, internal controls and viability.
As part of our climate risk assessment, a detailed climate risk governance gap analysis was undertaken by JLL in 2022 in alignment with the TCFD recommendations.
This analysis is helping us to ensure that proper governance structures are in place to manage and oversee climate-related risks across the business.
Governance of climate-related risks and opportunities
Board
of Directors
Audit
Committee
Senior
Leadership Team
Investment
Committee
Asset Management
Committee
Finance
Committee
Responsible Business
Working Group
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Strategy
A - Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term
As part of the climate risk assessment carried out in 2022 by JLL, we identified our potential climate risks and opportunities. The assessment tested a range of
outcomes at the portfolio level, under the RCP4.5 (low emissions) and RCP8.5 (high emissions) climate scenarios up until 2100 to identify material risks. Each risk was
assigned a score based on an over likelihood score using four sub-factors including likelihood, frequency, duration and velocity and an overall impact score based on
impact, ease and cost of mitigation and financial impact. Transition risks are more prominent in the near-term under the low emission RCP4.5 scenario, while physical
risks materialize in the largest severity over the longer term under the high emission RCP8.5 scenario.
The table below outlines the key physical and transition risks we identified over the short term (1 -2 years), medium term (3 - 9 years) and long term (10 years+). In
selecting time horizons, we considered the fact that climate-related issues often manifest themselves over the medium and longer terms. The time horizons are based
on the profile of risks associated with real estate asset lifecycles, in line with the Climate Change Act. Climate transition opportunities are the most prevalent under the
RCP4.5 scenario, while for physical climate we only see risk mitigation under both RCP4.5 and 8.5 scenarios. This has been reflected in the opportunities section which
is covered off further below this table.
Timescale Risk Description
Short term
Occupier/market
demand
Occupier and market demand is shifting from unsustainable products to low or net zero carbon assets with embedded
on-site climate resilience. Demand may also shift away from certain geographies or sectors, while changing consumer
preferences could create occupier risk. As a result, occupiers could move away from less sustainable buildings and/or
suffer business failure resulting in lower occupancy levels across our assets.
Increased building
standards/regulation
Increasing policy mandates in the built environment that improve energy and resource efficiency and on-site climate
resilience, may potentially result in significant capex costs to meet the new standards. Failure to meet the regulations
could result in reduced asset value, known as a ‘brown discount’, tenancy default risk and loss of income. The main such
risk concerns meeting Minimum Energy Efficiency Standards (‘MEES’).
Medium term
Financial market
impacts/access to
capital
Market shifts in favour of low-carbon solutions and climate resilience as well as climate events impacting our portfolio
could create a competitive risk, particularly with respect to meeting stakeholder expectations and the potential risk from
reduced access to the equity and debt markets.
Increased energy
demand/costs
Changes to seasonal patterns, temperature extremes and carbon taxation each could increase the operational costs of
buildings and impact the rental value of inefficient assets as occupiers seek lower operational costs and in-built energy
resilience.
Supply chain
& resources
Physical impacts may cause widespread disruption to production within supply chains and resources, potentially
resulting in business disruption and tenant default risk, generating loss of income from our portfolio.
Exposure to litigation Increased policy and legislation requirements to meet the transition requirements of a low carbon economy could create
additional risks of legal action for breaches of compliance. In particular, further tightening of legislation on MEES or new
legislation that aims to help the UK meet its Net Zero targets could add to the risk.
Long term
Insurance challenges Physical climate events or risks may cause the insurance industry to reassess premiums and cover whereby premiums
could rise significantly or become difficult to secure.
Flooding
(coastal, fluvial)
Rising sea levels threaten coastal regions with flooding, erosion, salinisation and permanent land loss; excessive rainfall
or snow melt may cause rivers to exceed their capacity, triggering high capex costs to install resilience measures and
potentially significant repair costs to damaged assets which experience flooding. Only 1% of our assets have a high
flooding risk and, through our portfolio management, we believe that we are able to mitigate our high and medium flood
risks over the short to medium term.
Heavy rainfall &
pluvial flooding
There are increases in annual mean rainfall, where typically wet periods of the year see a further increase in daily rainfall.
Heavy rainfall or rainfall over a prolonged period may lead to more regular pluvial flooding (surface water flooding)
events, potentially causing business disruption and reduced asset values.
Heat stress Rising mean temperatures and extreme temperature highs put pressure on both people and infrastructure. Significant
cost may be incurred to install cooling systems while poorly ventilated/cooled assets may see a downward pressure on
value and demand.
Extreme
weather events
Storms, heavy winds, heavy precipitation, drought and snow are more frequent and severe, potentially leading to
significant clean-up and repair costs, capex costs for installing resilience measures and stranded asset risk for at-risk
assets.
Our sustainability performance
TCFD Recommendation
and Alignment
continued
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Strategy (continued)
Opportunities
As part of our climate risk assessment and our ongoing work, key opportunities have been identified as: securing a diverse range of premium tenants that have Net Zero
Carbon ambitions, enhancing LondonMetric’s reputation and increasing asset values by investing further in renewable energy, utilising low carbon technology and further
improving the energy efficiency of buildings. This includes the opportunities we expect to realise as we implement our Net Zero Carbon Framework. As strong stewards
of underinvested assets with the expertise and capital to improve buildings, we continue to see opportunities to acquire poorer quality assets from less sophisticated
property managers where we can make material improvements and increase the income and value of those assets. Additionally, these opportunities include further
improving asset and business strategy climate resilience by proactively assessing and managing identified climate-related risks; gaining a competitive advantage (both in
terms of the attractiveness of our buildings to occupiers but also maintaining an attractive cost of capital) and subsequently securing our long-term sustainability.
The Company expects to capture some of these opportunities in the short to medium term through enhanced specification on refurbishment and development activities
across our portfolio, as well as joint collaboration with occupiers. However, it may take longer to capture these opportunities on assets with longer term leases where we
have no operational control and where the occupier is less willing to engage on opportunities.
B - Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
Business strategy and financial planning are overseen by the Board, which recognises the importance of climate-related considerations across all activities. A key aspect of
LondonMetric’s asset management strategy is sustainability performance improvement. As well as reducing the carbon emissions from the small number of assets where
we have ongoing control, we are helping to improve assets that the occupier has control over to make them more resilient to climate change through maintenance, energy
efficiency upgrades and the provision of renewable energy, which help to mitigate physical and transition risks. During our investment process, and on an ongoing basis,
we assess flood risk, along with the building fabric and the energy efficiency of assets to understand the climate and carbon related risks and costs involved in mitigating
those risks. In terms of MEES, we estimate the cost of bringing all of our assets to an EPC rating of ‘B’ is c.£25 million. However, we do not expect this to have a material
business impact as the upgrade costs would, in most instances, either be offset through higher rents or paid for through normal occupier incentive arrangements.
As we implement our Net Zero Carbon (‘NZC’) strategy, in which we aim to reach Net Zero Carbon in operation (Scope 1 & 2 emissions) by the end of 2023, in
development by 2030 and in tenant emissions (Scope 3 emissions) by 2035, the robustness of our approach in mitigating climate-related risks will improve. As we
expect to achieve Net Zero for Scope 1 & 2 by the end of 2023, our plans for transitioning to our near term goals are nearing completion. We are therefore prioritising our
longer term Scope 3 emissions targets and aim to drive progress in the near term by further enhancing data coverage and developing asset level transition plans.
Over the coming year, LondonMetric will analyse the portfolio against the CRREM 1.5°C pathway to determine asset-level stranding risk and potential exposure to write-
downs. Supported by NZC energy audits, LondonMetric will be in a position to understand the technical interventions and the capital investment required to align stranded
assets. This includes the installation of Solar PV, where occupiers are increasingly installing their own systems or we are installing and receiving additional income. Here,
however, we are conscious that roofs of buildings need to be structurally strong enough to support solar PVs and this is increasingly being factored into our assessments.
As part of our strategy, we are collaborating with occupiers to assist them in mitigating their own exposure to climate-risks, through measures such as greater adoption of
green lease agreements and encouragement to improve the green credentials of buildings they lease from us. Whilst development is only a small part of our activities, we
are focusing on enhancing the sustainability features of our developments, which is seeing us undertake whole life embodied carbon assessments, build to high standards,
and minimise embodied carbon and offset remaining emissions. In addition, where we acquire assets with future redevelopment potential, we factor in a potential cost for
offsetting embodied carbon. These actions will help to future proof our buildings and allow us to take advantage of opportunities from the shift to a low carbon economy
by improving occupier contentment, rental values and the value of our assets.
Following our climate risk assessment in the prior year, we are working to further embed strong sustainability performance into our overall strategy. As part of this assessment,
we conducted climate scenario analysis to model our climate-related risks in two likely scenarios. We chose the Intergovernmental Panel on Climate Change (‘IPCC’)
Representative Concentration Pathways (Pathways) (IPCC RCPs) which model distinct and plausible pathways for greenhouse gas emissions and average global temperatures
over the coming years and is in alignment with best practice. These scenarios are outlined in the section below. We will continue to build on our climate resilience planning
and continue with our NZC approach, which will further assist in future-proofing our strategy and financial planning in light of climate-related risks and opportunities.
For our NZC strategy see page 56
C - Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario
Our investment strategy is to be agile in response to shifting market conditions. The Company’s shift out of multi-let retail parks and offices into distribution assets that
have lower energy requirements means that the overall carbon footprint of our buildings is significantly lower today. Furthermore, our significant investment and disposal
activity over recent years along with our ongoing upgrade work to buildings has upscaled the environmental quality of our portfolio. Where we have acquired assets over
recent years, principally in urban logistics, our approach has ensured that asset improvement is embedded in our business case and/or there is a high intrinsic value of the
land which makes highly sustainable redevelopment or repurposing commercially attractive.
Our detailed climate risk assessment, as summarised on the next page and in which one of the scenario ranges of 1.7-3.2°C was considered, has resulted in a better
understanding of our material climate-related risks and provided us with awareness of the mitigation measures to reduce our vulnerability and exposure to these risks,
which will enable us to proactively manage them. Additionally, as we implement our NZC strategy, this will help to mitigate a number of climate-related risks (transition
climate risks as well as heat stress). We recognise, however, that in order to fully assess resilience against different climate scenarios, LondonMetric first needs to quantify
the impact of all climate related risks and opportunities on our business, strategy and financial planning. Our plans to quantify stranding risk across our assets through
CRREM analysis will help us to better describe resilience across our portfolio.
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Risk management
A - Describe the organisation’s processes for identifying and assessing climate-related risks
LondonMetric’s overall risk management process is centred around the Senior Team, whose members are closely involved in day-to-day matters and have a breadth of
operational experience. They support the process of identifying all emerging risks and consider emerging climate-related risks that have the potential to adversely impact
the business and stakeholders. These climate related risks are then evaluated and monitored along with the other risk categories through Senior Team and Working Group
meetings. Any significant emerging risks are raised and discussed at Board level.
In addition our two climate-related risk exercises applied two key IPCC RCP scenarios to get a detailed understanding of exposure to risks. One exercise was conducted at
portfolio level to assess its resilience to these climate-related risks whilst the second parallel exercise looked at the resilience of certain representative portfolio assets. The
portfolio exercise used the IPCC RCP4.5 and RCP8.5 scenarios, which represent a lower global emissions scenario (1.7-3.2°C of warming by 2100) and a higher emissions
scenario (3.2-5.4°C of warming by 2100), respectively. The scenarios were selected to test a range of likely outcomes and identify material climate-related risks over the
short, medium and long term.
This assessment involved in-depth analysis of up-to-date, peer-reviewed scientific literature and was used to determine the frequency, duration, velocity and financial
impacts of a range of potential climate-related risks and an overall likelihood and impact score was assigned to our business’ principal climate risks. A summary of our
scoring on key risks under the different scenarios is covered on page 61.
The second exercise involved an in-depth review of representative assets’ characteristics and geographic location to determine resilience to physical and transition risks,
identifying where those assets are most at risk. Transition risks were the most prevalent at the asset level. In particular changing consumer preferences on occupier/market
demand and increased building standards from an expansion and strengthening of the regulations featured highly. An example of a regulatory risk, that LondonMetric
assesses on an ongoing basis, is exposure to the more stringent MEES requirements. This is regularly monitored and assessed at an asset level. by reviewing EPCs for new
acquisitions; renewing expiring EPCs and instructing EPC improvement plans for assets.
Both exercises have helped to identify robust risk management recommendations and these exercises will be refreshed at regular intervals.
B - Describe the organisation’s processes for managing climate-related risks
As outlined in the Governance section above, climate-related risks are managed collaboratively between the Board, Audit Committee, Senior Team and Working Group.
The risk register is updated at least annually and is used to monitor identified principal risks, along with corresponding mitigation measures. Risks are evaluated on the basis
of likelihood and impact, which allows evaluation of an overall measure of each risk which is communicated to relevant levels across the business.
Acquisition surveys undertaken as part of our due diligence process for new investments evaluate climate-related risks, such as flood risk and energy efficiency. They
enable us to avoid purchasing assets with an elevated risk and no viable mitigating measures to protect the portfolio from heightened climate-related risk. We use third
party professionals to provide regular updates and advice associated with regulatory changes to minimise non-compliance risk. In response to the upcoming tightening
of EPC requirements as outlined in MEES, we continue to proactively undertake EPC reviews on potential investments and across our portfolio, along with more detailed
MEES reviews where appropriate, to ensure that the business is well prepared for the new standards.
Our NZC strategy will allow us to mitigate several climate-related risks, for example increased cost of energy and carbon taxation, shifts in market demand and heat
stress. To enhance our ability to manage climate-related risks in tenant-controlled spaces, we seek to incorporate green lease clauses on lettings and are engaging with
occupiers around their operational behaviour, energy efficiency and data sharing. As part of our risk mitigation, we continue to dispose of assets where we feel that there
are potential climate-related risks and where the market is not properly assessing these risks in their offer pricing analysis.
Going forward, LondonMetric will undertake CRREM analysis for the portfolio and undertake Net Zero energy audits for potentially stranded assets. These findings will
then be incorporated into acquisition decisions, asset level business plans, planned refurbishments and asset disposal programmes to address transition risks. Additionally,
the climate risk assessment we have undertaken, as described above, has informed risk management recommendations that we look to continue to implement to further
improve our management of climate risks. These recommendations outline key actions that will allow us to prudently manage climate risks material to LondonMetric.
For overall risk management see page 82
C - Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management
The identification, assessment and management of LondonMetric’s climate-related risks is embedded into its overall risk management process. This is centred around the
Senior Team, whose members are closely involved in day-to-day matters and have a breadth of operational experience.
The inclusion of physical climate change and transition risks into our risk register reflects the integration of these risks into our overall risk management strategy, as outlined
in the Governance and Risk Management sections above. In the year, we began to integrate the outputs of the climate risk assessments into our risk management
framework. The updated climate-related risks were finalised by the Working Group and reviewed by Audit Committee at the end of the year.
For responsible business risks see page 92
Our sustainability performance
TCFD Recommendation
and Alignment
continued
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Metrics & targets
A - Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process
Based on our climate risks and opportunities and having reviewed both the TCFD all sector and sector specific guidance, we believe that the following metrics included
below are material and relevant.
As reported on pages 56-62 of this report, we inform our stakeholders about our key climate-related metrics for the portfolio by providing information on our energy
consumption and carbon emissions, EPC and BREEAM Very Good/Excellent ratings, flooding risk analysis, solar PV capacity installed (as well as near term potential to
install), proportion of leases signed with green lease clauses and the percentage of the portfolio that we have collected occupier (Scope 3) energy data on.
Energy consumption data provided includes- Absolute (MWh and % change) and like-for-like (% change); Scope 1, 2 and, to the extent procured by LondonMetric, Scope
3 GHG emissions - Absolute (tCO
2
e and % change) and like-for-like (tCO
2
e and % change).
We believe that these metrics are the most appropriate for the Company at the current time but continue to review them to ensure they are consistent with sector-wide
disclosure. At present, we don’t have an internal carbon price, but are looking at this as part of our activities for the forthcoming year. Under the Directors’ remuneration,
for 2024 ,and as set out on page 157, 10% of annual bonus is linked to achieving ESG objectives. ESG objectives relevant to the year are set out on page 165 and include
climate-related targets on solar PV installations, BREEAM ratings and EPC ratings.
B - Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
We disclose Scope 1, 2 and, to the extent procured by LondonMetric in service charge assets, Scope 3 greenhouse gas emissions on page 62.
As Scope 3 emissions, from landlord-controlled service charge assets and single let Full, Repairing and Insuring (‘FRI’) assets, account for more than 40% of our total
emissions, this is material to LondonMetric. The vast majority comes from downstream tenant energy consumption. Through enhanced data collection methods recently,
we have improved tenant data coverage considerably to 68% and are working to increase this further. But at this time, we are only in a position to disclose part of Scope 3
emissions and are therefore not compliant on this disclosure but aim to be in the near future.
Emissions are compared against calendar year 2021 to allow for comparison with the prior year.
GHG intensity metrics are reported as tCO
2
e/£m and tCO
2
e/sq ft. We have calculated and reported our emissions in line with the GHG Protocol Corporate Accounting and
Reporting Standard and ISO 14064-1:2006.
Although we are not required to do so, we intend to provide our occupier’s energy data (Scope 3) in our separate Responsible Business Report, which we expect to publish
in June 2023.
For GHG emissions table see page 62
C - Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets
12 ESG related targets were set in the year and these can be found at www.londonmetric.com/sustainability/policies-documents-reporting. Six of these targets are directly
related to the environment, including climate risk assessments, as well as targets that contribute towards improving LondonMetric’s climate resilience. They comprise:
1) minimising energy consumption on supplies that we as landlord are responsible for (Scope 1 &2) and targeting like for like reductions on a year by year basis;
2) increasing renewable energy tariffs to cover 100% of landlord controlled electricity consumption by the end of 2023 (as part of us achieving operational NZC by the
end of 2023).
3) tracking and upgrading environmental performance of assets including: a) year on year increases in the percentage of the portfolio with an EPC rating of 'C' or above;
and b) on all regears, lettings and vacancies, actively consider initiatives to improve the asset’s green credentials, including adding in green lease clauses where possible
and aiming to increase the proportion of new leases signed (year on year) that have green lease clauses.
4) helping to reduce occupier energy emissions through: a) increasing occupier energy data (Scope 3) collection levels (on a sq ft basis) year on year; b) encouraging
occupiers to source renewable energy & work with us to implement energy savings initiatives; c) targeting the addition of Solar PV systems p.a. to the portfolio;
5) Demonstrating sustainability considerations on developments, including matters relating to climate change adaptation, energy efficiency and use of low carbon
material; and
6) Applying higher development standards, including the targeting of a minimum BREEAM Very Good certification on all large direct developments.
For progress against these targets, see pages 56-62
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A review of our risk
Risk management
and internal controls
Our risk management
processes enable us to be
flexible and responsive to the
negative impact of risk on the
business and remain critical to
our strategy of investing in real
estate that provides reliable,
repetitive and growing income-
led total returns and long term
outperformance.
The Audit Committee
The Audit Committee assists the Board by
providing a key oversight and assurance role.
It appraises the risk management framework
in detail and seeks comfort that there is a
robust system in place for the identification,
assessment and mitigation of the principal risks
faced by the Group. The Committee reviews
the detailed risk register and management’s
assessment of the system of internal controls
annually, considers their effectiveness and
reports its findings to the Board. It also
undertakes thematic deep dives into significant
or areas of increasing risk.
Details of the Audit Committee’s work, findings
and recommendations during the year can be
found on page 85.
The Senior Leadership Team
The Senior Leadership Team ('SLT') is
responsible for key operational and financial
aspects integral to the management of the
business including ongoing risk identification
and the design, implementation and
maintenance of internal controls in light of
the risks identified. The SLT comprises of
departmental heads from all key business
functions with a diverse range of skills
and experience.
How we manage risk
Our risk management framework ensures that
risks are managed in line with our risk appetite.
Our Board
The Board is responsible for determining the
type and level of risk that the Company is willing
to take in achieving its strategic objectives and
has overall responsibility for establishing and
maintaining an effective risk management and
controls framework.
At each Board meeting, the Chief Executive
provides an informative market overview
covering overarching or longer term themes
and evolving trends within the sector, the
wider economy and the risk environment,
in conjunction with the Finance Director as
required. This provides context and acts as
the primary stimulus for debate around risk,
essential for strategic decision making. A high-
level risk dashboard is also used to monitor
material issues, identify new and emerging
risks and further promote regular discussion.
Detailed papers on matters reserved for the
Board’s attention highlight areas of risk and
where similar papers are circulated outside
of the Board’s regular forum, Directors are
provided with an opportunity to discuss the
proposals with senior management prior to
approval and later ratification by the Board as a
whole. Pertinent discussions between individual
Directors outside of scheduled meetings are
also brought to the Board’s attention.
Framework and responsibility
The Board
• Overall responsibility for risk
management and internal controls
• Assess and monitor the business’s going
concern and long term viability
• Set strategic objectives considering risk in
this process
• Determine appropriate risk appetite levels
• Set delegated authority limits for
senior management
Audit Committee
• Key oversight and assurance function on
risk management, internal controls, going
concern and viability
• Report to the Board on the
effectiveness of risk management and
control processes
Senior Leadership Team
• Identify, assess and quantify risk
• Implement and monitor risk
mitigation processes
Martin McGann
Finance Director
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The SLT is supported by three sub-committees:
the Investment, Asset Management and
Finance Committees, which meet regularly,
each focusing on different areas of the business.
There are informal meetings at other times
and due to the size of the organisation, the
Executive Directors and SLT members are
involved in all significant business discussions
and decisions. These meetings and short
reporting lines ensure that risk awareness is
embedded within the organisation, facilitating
the early identification and monitoring of
emerging risks and the development of
appropriate mitigation strategies based on
an assessment of the impact and likelihood
of a risk occurring. They also ensure that key
messages and decisions are fed down across
the wider workforce and significant emerging
risks are raised and discussed at Board level.
At a property level, deep occupier relationships
inform management and help them to
understand tenants' needs and contentment
and gain insights into their businesses.
These relationships are one of the key tools
used to help source potential off market
opportunities as well as the identification of
emerging risks and trends. Management also
have strong banking relationships and more
broadly, regularly meet industry representatives,
shareholders and analysts. These relationships
are also used to identify emerging risks.
In addition, reports are commissioned and
briefings arranged on wide ranging pertinent
topics to understand changes within the real
estate sector and the wider economic outlook.
Risk register
Our risk register is reviewed and updated at least
annually by the Company Secretary assisted
by members of the SLT and includes meetings
with risk owners as part of this process.
Specific risks are identified, their significance
and probability ranked by management from
high to low with corresponding weightings to
reflect the potential impact on the business
which, when combined mathematically, result
in a gross risk rating.
Specific safeguards are similarly
identified, rated from strong to weak with
corresponding weightings.
These are detailed in the register and combined
with the gross risk rating to produce an overall
colour coded net risk rating. Consideration is
given to the implementation of further actions
to reduce risk where necessary and every risk is
allocated an owner.
Details of how safeguards are evidenced are
noted in the register and risk owners and
timeframes are included for any action points
arising from the review.
The main register is supplemented by the high
level dashboard used by the Board at each
meeting as described on page 82.
An effective risk
management framework
provides the Board with
confidence that the risk
inherent in operating the
business is successfully
being managed to the
extent possible to meet
its appetite levels.
Martin McGann
Finance Director
The Board aims to maintain
a low risk appetite overall,
whilst balancing commercial
considerations.
Martin McGann
Finance Director
Internal control systems
An effective system of internal controls is
integral to the risk management framework.
The key elements of the Group’s internal
control framework are outlined below.
• A defined schedule of matters reserved
for the Board’s attention
• A documented appraisal and approval
process for all significant capital
expenditure and development
• A comprehensive and robust system
of financial budgeting, forecasting
and reporting
• Weekly cash flow forecasting that is
reviewed by the SLT
• An integrated financial and property
management system
• A simple and transparent organisational
structure with clearly defined roles,
responsibilities and limits of authority
that facilitates effective and efficient
decision making
• Most staff work closely with SLT
members, who are involved in all day
to day operations and decision making,
facilitating supervision and monitoring
• Disciplined meetings of the management
committees below Board
• The maintenance of a risk register and
risk dashboard highlighting movements
in principal and emerging risks and
mitigation strategies
• A formal whistleblowing policy and
annual performance reviews to enable
staff to voice concerns
The SLT oversees a detailed system of
processes and internal controls covering all
aspects of the business. These processes and
controls are considered on a continual basis
and modified periodically, most frequently
in response to changes in the Company’s
IT systems or management processes, for
example moving from third party to in house
rent billing.
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Risk is considered under the three main categories shown below, but it is recognised that these are often interlinked.
Risk categories:
Relating to the entire Group.
Risk considerations:
Culture, strategy, the market, political,
economic, employees, responsible
business practices, wider stakeholders,
security, systems, regulation.
Focusing on our core business.
Risk considerations:
Portfolio composition and
management, developments, valuation,
occupiers.
Focusing on business funding.
Risk considerations:
Capital markets, investors, joint
ventures, debt, cash management.
Corporate Property Financing
Key actions this year in response to changes in risk appetite
Risk considerations:
Appointment of new Chair in response
to stakeholder sentiment.
Risk considerations:
Net divestment including earnings
accretive sales to reduce floating rate
debt and protect loan to value from
adverse valuation movements.
Limited development exposure in
response to a deterioration in market
conditions and elevated inflation.
Risk considerations:
New £275 million revolving credit
facility to lock into similar terms and
pricing as our existing £225 million
facility due to the risk of tightening
credit and increased spreads and to
reduce refinancing risk for the next
three years.
£225 million of swaps purchased to
mitigate exposure to rapidly rising
interest rates.
Pages 88 to 99 include details of the Board’s risk appetite pertinent to each principal risk identified.
Determining appropriate
risk appetite levels
Our risk management framework provides the
Board with confidence that the risk inherent
in operating the business is successfully being
identified and mitigated to the extent possible
to meet its appetite levels.
Risk appetite is the amount and type of risk
that the Board is prepared to accept or tolerate
in delivering its strategic goals whilst ensuring
stakeholder interests are protected. The Board
aims to maintain a low risk appetite overall,
whilst balancing commercial considerations.
It acknowledges that no system can eliminate
risk entirely.
The Board carefully considers and debates
the wide range of factors under each category
below and the emergence of new risks.
These factors frame the extent to which
the Board is willing to accept some level
of risk or flex its existing risk appetite when
delivering strategic priorities and the Board
sets its risk appetite accordingly. This year,
due to the economic climate and the impact
of macroeconomic uncertainties, the Board
reduced its appetite for certain risks.
The second table below illustrates some of
the material actions taken by the Board during
the year in response to the market backdrop,
particularly continuing high inflation and the
impact of rapidly rising interest rates on the real
estate sector.
A review of our risk
Risk management
and internal controls
continued
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Audit Committee’s review of the effectiveness of risk management and internal controls
As described on page 82, the Audit Committee has a key oversight and assurance role and assists the Board in enabling it to confirm that a robust
assessment of the principal and emerging risks facing the Group, including those that would jeopardise its strategic priorities, has been carried out
during the year. The Committee does this by undertaking a number of detailed reviews and appraisals to satisfy itself on the effectiveness of the
systems in place for the identification, assessment and mitigation of the principal risks faced by the Group.
During the year, the Audit Committee carried out the following risk, internal control and thematic reviews on behalf of the Board taking into account the
evolving economic, geopolitical and regulatory considerations that have been prominent through the year.
Summary of the risk, internal control and thematic reviews carried out by the Audit Committee
Risks considered What was considered and outcome
ESG focused meeting
(open to all Directors)
The Company’s ESG framework, the Board’s obligations and responsibilities, external benchmarking, net zero carbon ambitions and legislation,
initiatives being undertaken, targets, TCFD and investor feedback.
Members were satisfied ESG is a key focus for management and a substantial amount of work is being undertaken with progress against targets.
Members considered the frequency of meetings and whether a separate ESG committee would be appropriate but decided against any changes
at this time as the current format works well and performance is best assessed over a 12 month period for a company with LondonMetric’s
portfolio and lease structure. Members recommended that a representative from the Company’s external ESG consultants attend the next
meeting.
The Company’s detailed
risk register
Review of the register last updated in March 2023.
Members were satisfied that: all significant risks have been identified, each bears an appropriate risk weighting, each has identifiable safeguards to
mitigate its occurrence and potential impact and an allocated risk owner. Details on assurance, changes in the year and action points are recorded
with appropriate timeframes provided. No recommendations were made by members.
Internal controls
evaluation report
Review of management’s assessment of the existence and effectiveness of key internal controls.
Based on their review and consideration, members were satisfied that no significant weaknesses have been identified in the Group’s internal
control structure and systems are effective. The Committee also considered and noted the controls work undertaken and reported on by the
external auditor. Members agreed a review of the Company’s financial processes may be beneficial in light of anticipated regulatory changes.
Report on the
Company’s IT and cyber
security system
How cyber risk is managed, initiatives undertaken in the year and those planned for the forthcoming year.
Members appraised the Company’s response to cyber risk and satisfied themselves that this risk continues to be actively but pragmatically
monitored and managed and staff training raises awareness of emerging issues and practices. They were assured by recent enhancements made
to the IT infrastructure to improve security, data storage, resilience and the speed at which servers could be fully restored in a disaster recovery
situation. They were also assured by the results of the independent penetration testing undertaken. No recommendations were made.
Credit analysis report Key information on the top 20 occupiers, new tenant due diligence undertaken and ongoing credit monitoring processes. Update on ‘watch list’
tenants.
Members were satisfied management have appropriate processes in place which aren’t heavily reliant on historic data. They were satisfied
management remain vigilant to the risk posed by the high inflationary environment and the pressure on occupiers particularly those tenants who
may be due material rent increases in the coming years. No recommendations were made.
Outcome
Based on its review and assessment, the Audit Committee was satisfied that no significant weaknesses have been identified in the Group’s internal
control structure and that an effective risk management system is in place. These findings were reported to and discussed with the Board. Accordingly,
the Board can confirm that a robust assessment of the principal and emerging risks facing the Group, including those that would jeopardise its strategic
priorities, was carried out during the year.
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Principal risks
Our principal risks and uncertainties are
identified and reported in pages 88 to 99.
They refer to those risks with the potential
to cause material harm to operations and
stakeholders and could affect the Company’s
ability to execute its strategic priorities or exceed
the Board’s risk appetite. Our principal risks
remain unchanged from last year.
Risk assessment update
This year has been dominated by a rapidly
changing economic and political environment
with geopolitical factors that have brought
an end to the era of low inflation and interest
rates creating material uncertainty and leading
to volatility and repricing across the real
estate sector.
Read more in the Chief Executive’s review
from page 15.
No new emerging risks have been identified
but several principal risks have increased as a
result of these and other factors. The Board has
modified its risk appetite where appropriate
and acted to mitigate heightened risk to the
extent possible.
Strategy, investment and valuation
Real estate as an asset class is particularly
sensitive to changes in interest rates and the
material shift in monetary policy that saw the
Bank of England’s base rate increase from
0.75% to 4.5% over the year to date has
had a profound impact on real estate values
and liquidity. This led the Board to shift and
evolve its strategic objectives for the year as
it progressed.
Unsurprisingly, lower yielding, high growth
sectors took the brunt of the initial repricing
in the latter part of 2022. Our portfolio
suffered a negative revaluation movement of
£587.5 million over the year and this was the
main contributor of our EPRA net tangible
assets (‘NTA’) decline of 23.8% per share to
198.9p. This should be taken in the context
of the £632.2 million valuation gain that we
announced only a year ago that helped move
our 31 March 2021 EPRA NTA from 190.3p per
share to 261.1p and illustrates why our portfolio
is not run over a 12 month investment period.
This year acquisitions have been limited at
£120 million, with most occurring before
the summer. These were characterised by
quality urban buildings, in good geographies
(69% located in London and the South East)
in sub-sectors where we expect to enjoy
income growth over many years. From the
summer, however, the changes in monetary
policy started to bite and it became evident
that the investment market was recalibrating
pricing rapidly with a material impact on
liquidity. Such conditions make it difficult to
establish fair value and consequently led the
Board to pivot away from net investment and
development funding.
Prior to the summer we also recognised that
following the material yield compression in the
prior year, the market was pricing certain assets
at levels that were unjustifiable. We decided
therefore that we would take advantage of
the strong market to sell down some more
mature and non core assets where their income
strength and/or growth was less certain and
where the prices offered exceeded our own
expectations. This sales window closed rapidly.
We recognised that in a deteriorating market
we needed a margin of safety so commenced
a targeted sales campaign of further mature
and non core assets at the start of 2023
when sentiment improved slightly driven by
the perception that political and economic
conditions were becoming more stable and
equally that the long term fundamentals
underpinning our preferred sectors remain
compelling. This sales campaign was well
executed and included a number of multi-let
industrial units acquired through the Mucklow
acquisition in 2019.
Our opportunistic sales were £273 million
for the year overall at a 1% premium to our
prevailing book value, crystallising a 45%
profit on cost, an attractive NIY of 4.7%
and demonstrating that, despite the macro
challenges, liquidity remains for well located
assets in structurally supported sectors.
By reducing floating rate debt, sales have
been marginally earnings accretive and have
helped to protect loan to value from adverse
valuation movements.
The lack of net investment has however directly
impacted our EPRA earnings ambitions for
the year.
Operationally, the Company continues to
perform strongly with the portfolio continuing
to achieve its objective of delivering reliable,
repetitive and growing income as part of a total
return strategy. This reflects the fundamentals
of the Company’s ‘all weather’ portfolio which is
supported by long term structural tailwinds.
Major event
We introduced this principal risk category last
year. It captures risks associated with external
factors outside the Company’s control such as
major political or economic events and ‘black
swan’ or unexpected global, regional and major
national events or series of events such as a
financial crisis, pandemic, acts of terrorism
or conflict.
This risk remains high due to heightened
geopolitical tensions including an increased risk
of escalation and a prolonged war in Ukraine
further impacting the economy and leading to
potentially higher for longer inflation. The recent
demise of several mid-tier US banks and Credit
Suisse's required rescue has also impacted
financial markets. This has further increased
the risk of higher credit spreads and more
conservative lending among lenders already
responding to falling property values and rising
debt costs before the banking turmoil hit.
The Board continues to monitor these events
and focuses on what is in its control.
Capital and finance risk
To mitigate our concerns over rising credit
spreads and a more conservative lending
environment we completed a new £275 million
revolving credit facility during the year to lock
into similar terms and pricing as our existing
syndicated £225 million facility. This three year
facility with two one year extension options
enabled a short dated facility to be repaid and
mitigates further refinancing risk for the next
three years. It also provides optionality for
investment opportunities coupled with the
proceeds of sales.
A review of our risk
Risk management update
No significant change
Increased risk
Decreased
86
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Post mitigation residual risk
The chart below illustrates the probability and post mitigation residual risk level of the principal risks which have been identified.
Risks are categorised in a manner consistent with the Board’s risk dashboard which it considers at each meeting.
Moderate
Moderate
Low
Probability
Negative impact on Group
Investment
Systems processes and financial management
Regulatory framework
Transactions and tenants
Capital and finance
Human resources
3
6
4
Development
8
Valuation
9
7
Responsible Business approach
5
10
11
Strategy & its execution
1
2
Major event
Corporate risks Property risks Financing risks
During the year, the Board also reduced its
appetite for the level of floating rate debt and
subsequent exposure to rising interest rates
by purchasing £225 million of swaps at a cost
of £15.1 million. At the year end, 93% of drawn
debt carried a fixed rate of interest.
Read more in the Financial review on page 46.
Responsible business and sustainability
Stakeholder focus on responsible business
practices continues to increase with
particular attention on climate change from
an environmental perspective. A failure to
keep pace could have a profound negative
impact on our reputation, earnings, asset and
share liquidity.
Our approach to environmental matters
is granular, on an asset by asset basis, and
embedded across all of our corporate,
investment, asset management and
development activities.
Information on our responsible business
objectives, initiatives undertaken and progress
against targets in our Responsible Business and
ESG review can be found on pages 54 to 76.
Looking ahead
We continue to live in a period of uncertainty
and current market conditions will
undoubtedly impact our approach over the
next 12 months.
Despite this uncertainty we continue to have
a high conviction that evolving consumer
behaviour can produce strong tailwinds for
certain asset classes. The fundamentals of our
core sectors remain strong with broadening
occupational demand and constrained supply,
particularly around our major cities where
land is a scarce and reducing commodity.
These dynamics underpin our current rental
levels which saw further strong growth over
the last year and will come to the fore as
volatility subsides and rational thinking returns.
We do not expect these fundamentals to
change any time soon and we will continue to
take advantage of the tailwinds as part of our
strategy to constantly strengthen our portfolio
by selling mature assets and replacing
them with quality assets that offer better
growth potential. This strategy, together with
capturing the embedded reversion through
active asset management, will continue to
deliver rental growth to offset the full impact
of the increased cost of finance and provide
earnings and dividend progression.
Over the next year we expect the
recent market volatility to offer up more
opportunities from motivated vendors,
refinancings and poorly structured portfolios.
We believe the logistics sector has seen the
most liquidity over the last few months which
is why logistics valuations in March 2023 are
stronger than the market had been expecting
at the end of 2022.
Higher yielding ex-growth sectors have
remained largely unscathed from the large
re-pricing movements that we saw in our
asset classes during the year which seems
irrational. While we expect some of our initial
movements to unwind, the decline in those
sectors is expected to accelerate as greater
liquidity returns and market data becomes
more evident and reliable. We believe
the greatest fallout is likely to be in those
sectors which face structural headwinds
and disruption from technology, increasing
environmental obsolescence and changing
consumer behaviour.
Read more in the Chief Executive’s review on
page 15
87
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Corporate risks
1.
Strategy and
its execution
Risk Impact Mitigation Commentary Appetite Change in the year
Strategic objectives may be:
• Inappropriate for the
current economic climate
or market cycle
• Not achieved due to
external factors or poor
implementation
• Suboptimal returns
for shareholders
• Missed opportunities
• Ineffective threat
management
• Wrong balance of skills and
resources for ongoing success
Impact on strategy
• Strategy and objectives are regularly reviewed by the Board and
adapted to changing market conditions and trends
• Strong occupier relationships and experience within our sectors
shape portfolio decisions
• Research assists our strategic decision making
• We have a UK based, predominantly logistics portfolio in a world
leading ecommerce market
• We continuously review and monitor our portfolio taking
into consideration sector weightings, tenant and geographical
concentrations, perceived threats and market changes, the
balance of income to non income producing assets and asset
management opportunities
• Our three year forecast is regularly flexed and reported to the Board
• The SLT comprises departmental heads from all key business
functions with diverse skills and experience
• Our relatively flat organisational structure makes it easier to identify
market changes, emerging risks and monitor operations
• High share ownership amongst the management team aligns their
interests with shareholders on all major decisions
• We remain alert to potentially disruptive technological
advancement
• We continually upscale the quality of our portfolio
to ensure it remains fit for purpose and can deliver
strong income growth choosing real estate for
its quality and location where we are more likely
to be a price setter than taker and attract quality
companies at higher rental levels
• Our £120 million of acquisitions were
characterised by quality urban buildings, in good
geographies (69% in London and the South East)
where we expect to enjoy income growth over
many years
• We reacted to bids for assets with £273 million
of sales of mature/non core assets where strong
income and/or income growth is less certain
and where the price offered exceeded our own
expectations
• Despite the market challenges and recalibration of
real estate values our portfolio metrics including
occupancy and rent collection remain strong
reflecting our asset selection. Even with net sales
and higher financing costs we have been able to
grow our EPRA earnings by 2.9% to 10.33p per
share and our dividend by 2.7% to 9.5p per share
while maintaining dividend cover at 109%
The Board continue to view the Company’s strategic
priorities as fundamental to the business and events
over the last year have not altered our long term
objectives. Our focus on the macro trends and how
they define the winners and losers in real estate
has served us well over the years and continues to
influence where we invest our capital. The Board’s
appetite for this risk is low.
Increased risk
The last 12 months have experienced a period of
dislocation and we needed to shift and evolve our
strategic objectives for the year as it progressed.
We pivoted away from net investment and
development funding, prioritising the divestment
of mature and non core assets in a market where it
has been difficult to establish fair value. This strategy
protected loan to value and the balance sheet
but lowered our EPRA EPS and dividend growth
expectations for the year.
We remain agile and our disposals and financing
activity put us in a strong position to take advantage
of the opportunities that we expect to see across
our preferred sectors where we can leverage our
asset management capabilities that will enable us to
continue to grow returns.
Read more in
Chief Executive’s review page 15
Property review page 32
Financial review page 46
2.
Major
event
Risk Impact Mitigation Commentary Appetite Change in the year
A market downturn, specific
sector turbulence or business
disruption resulting from:
• A political or economic event
or series of events
• A ‘black swan’ unexpected
global, regional or major
national event or series of
events such as a financial
crisis, pandemic, acts of
terrorism or conflict
• Impaired revenue
• Occupier demand
may decrease
• Asset liquidity and value
may reduce
• Debt markets may be
adversely impacted
• Workforce resilience may
be impacted
Impact on strategy
• We remain focused on what we can control within the business. This
includes maintaining a high WAULT and low vacancy on a portfolio
of well located, UK only assets in structurally supported sectors and
a broad tenant base
• Our strong occupier relationships provide market intelligence and
help us better understand our tenants’ businesses, their covenants,
needs, emerging trends and risks
• We limit development exposure
• We have flexible funding arrangements from a diverse pool of
lenders with significant covenant headroom and we regularly review
financing strategy
• We nurture relationships with new and existing debt and
equity providers
• We reforecast on a regular basis
• We test our business continuity plan and seek to ensure the integrity
of our IT systems and cyber security through third party specialists
and training
• Our property assets are safeguarded by appropriate insurance cover
• We are monitoring the uncertainty and
impact resulting from the war in Ukraine on
our economy, financial systems and tenants’
businesses and remain alert to a heightened risk
of cyber attacks targeting our utilities, transport,
communications and financial systems in
retaliation for sanctions imposed on Russia
and military support for Ukraine
• We are also monitoring the impact of the recent
Credit Suisse and US banking failures on debt
availability and credit margins in the UK
• Our transactional activity continues to ensure that
our portfolio remains modern, fit for purpose and
positioned to outperform. 96.9% of our portfolio
is weighted towards structurally supported sectors
with 73.1% in distribution and 23.8% in grocery
led long income which is operationally light and
let off low and sustainable rents to operators with
resilient business models. We will continue to
broaden and improve the quality of our portfolio,
our geographical exposure and income granularity
The Board monitors the impact of such events
which are outside of its control and flex operations
accordingly. Focus remains on maintaining a robust,
‘all weather’ portfolio to withstand such shocks to the
maximum extent possible.
Increased risk
This year has been dominated by heightened
geopolitical tensions including an increased risk of
escalation and a prolonged war in Ukraine. Recent
months have also seen the demise of several mid-
tier US banks and Credit Suisse’s rescue. Our strong
balance sheet and structurally supported sector
choices have helped us navigate the macroeconomic
challenges caused by such events and focus on what
is in our control.
We anticipate that we will continue to experience
significant economic and geopolitical uncertainty
over the next 12 months. These macro issues
continue to influence how and where we allocate
capital and position our balance sheet.
Read more in
Chief Executive’s review page 15
Property review page 32
A review of our risk
A review of our principal risks
No significant change
Increased risk
Decreased
88
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Corporate risks
1.
Strategy and
its execution
Risk Impact Mitigation Commentary Appetite Change in the year
Strategic objectives may be:
• Inappropriate for the
current economic climate
or market cycle
• Not achieved due to
external factors or poor
implementation
• Suboptimal returns
for shareholders
• Missed opportunities
• Ineffective threat
management
• Wrong balance of skills and
resources for ongoing success
Impact on strategy
• Strategy and objectives are regularly reviewed by the Board and
adapted to changing market conditions and trends
• Strong occupier relationships and experience within our sectors
shape portfolio decisions
• Research assists our strategic decision making
• We have a UK based, predominantly logistics portfolio in a world
leading ecommerce market
• We continuously review and monitor our portfolio taking
into consideration sector weightings, tenant and geographical
concentrations, perceived threats and market changes, the
balance of income to non income producing assets and asset
management opportunities
• Our three year forecast is regularly flexed and reported to the Board
• The SLT comprises departmental heads from all key business
functions with diverse skills and experience
• Our relatively flat organisational structure makes it easier to identify
market changes, emerging risks and monitor operations
• High share ownership amongst the management team aligns their
interests with shareholders on all major decisions
• We remain alert to potentially disruptive technological
advancement
• We continually upscale the quality of our portfolio
to ensure it remains fit for purpose and can deliver
strong income growth choosing real estate for
its quality and location where we are more likely
to be a price setter than taker and attract quality
companies at higher rental levels
• Our £120 million of acquisitions were
characterised by quality urban buildings, in good
geographies (69% in London and the South East)
where we expect to enjoy income growth over
many years
• We reacted to bids for assets with £273 million
of sales of mature/non core assets where strong
income and/or income growth is less certain
and where the price offered exceeded our own
expectations
• Despite the market challenges and recalibration of
real estate values our portfolio metrics including
occupancy and rent collection remain strong
reflecting our asset selection. Even with net sales
and higher financing costs we have been able to
grow our EPRA earnings by 2.9% to 10.33p per
share and our dividend by 2.7% to 9.5p per share
while maintaining dividend cover at 109%
The Board continue to view the Company’s strategic
priorities as fundamental to the business and events
over the last year have not altered our long term
objectives. Our focus on the macro trends and how
they define the winners and losers in real estate
has served us well over the years and continues to
influence where we invest our capital. The Board’s
appetite for this risk is low.
Increased risk
The last 12 months have experienced a period of
dislocation and we needed to shift and evolve our
strategic objectives for the year as it progressed.
We pivoted away from net investment and
development funding, prioritising the divestment
of mature and non core assets in a market where it
has been difficult to establish fair value. This strategy
protected loan to value and the balance sheet
but lowered our EPRA EPS and dividend growth
expectations for the year.
We remain agile and our disposals and financing
activity put us in a strong position to take advantage
of the opportunities that we expect to see across
our preferred sectors where we can leverage our
asset management capabilities that will enable us to
continue to grow returns.
Read more in
Chief Executive’s review page 15
Property review page 32
Financial review page 46
2.
Major
event
Risk Impact Mitigation Commentary Appetite Change in the year
A market downturn, specific
sector turbulence or business
disruption resulting from:
• A political or economic event
or series of events
• A ‘black swan’ unexpected
global, regional or major
national event or series of
events such as a financial
crisis, pandemic, acts of
terrorism or conflict
• Impaired revenue
• Occupier demand
may decrease
• Asset liquidity and value
may reduce
• Debt markets may be
adversely impacted
• Workforce resilience may
be impacted
Impact on strategy
• We remain focused on what we can control within the business. This
includes maintaining a high WAULT and low vacancy on a portfolio
of well located, UK only assets in structurally supported sectors and
a broad tenant base
• Our strong occupier relationships provide market intelligence and
help us better understand our tenants’ businesses, their covenants,
needs, emerging trends and risks
• We limit development exposure
• We have flexible funding arrangements from a diverse pool of
lenders with significant covenant headroom and we regularly review
financing strategy
• We nurture relationships with new and existing debt and
equity providers
• We reforecast on a regular basis
• We test our business continuity plan and seek to ensure the integrity
of our IT systems and cyber security through third party specialists
and training
• Our property assets are safeguarded by appropriate insurance cover
• We are monitoring the uncertainty and
impact resulting from the war in Ukraine on
our economy, financial systems and tenants’
businesses and remain alert to a heightened risk
of cyber attacks targeting our utilities, transport,
communications and financial systems in
retaliation for sanctions imposed on Russia
and military support for Ukraine
• We are also monitoring the impact of the recent
Credit Suisse and US banking failures on debt
availability and credit margins in the UK
• Our transactional activity continues to ensure that
our portfolio remains modern, fit for purpose and
positioned to outperform. 96.9% of our portfolio
is weighted towards structurally supported sectors
with 73.1% in distribution and 23.8% in grocery
led long income which is operationally light and
let off low and sustainable rents to operators with
resilient business models. We will continue to
broaden and improve the quality of our portfolio,
our geographical exposure and income granularity
The Board monitors the impact of such events
which are outside of its control and flex operations
accordingly. Focus remains on maintaining a robust,
‘all weather’ portfolio to withstand such shocks to the
maximum extent possible.
Increased risk
This year has been dominated by heightened
geopolitical tensions including an increased risk of
escalation and a prolonged war in Ukraine. Recent
months have also seen the demise of several mid-
tier US banks and Credit Suisse’s rescue. Our strong
balance sheet and structurally supported sector
choices have helped us navigate the macroeconomic
challenges caused by such events and focus on what
is in our control.
We anticipate that we will continue to experience
significant economic and geopolitical uncertainty
over the next 12 months. These macro issues
continue to influence how and where we allocate
capital and position our balance sheet.
Read more in
Chief Executive’s review page 15
Property review page 32
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
89
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Corporate risks
3.
Human
resources
Risk Impact Mitigation Commentary Appetite Change in the year
There may be an inability to
attract, motivate and retain
high calibre employees in the
small team.
The business may lack the skill
set to establish and deliver
strategy and maintain a
competitive advantage.
Impact on strategy
• Our staffing plan focuses on experience and expertise necessary to
deliver strategy
• Our organisational structure has clear responsibilities and
reporting lines
• Executive Directors and senior managers are incentivised in a
similar manner. Both have significant unvested share awards in the
Company which incentivise long term performance and retention
and provide stability in the management structure
• Annual appraisals identify training requirements and
assess performance
• Specialist support is contracted as appropriate
• Staff satisfaction surveys are undertaken and staff turnover levels
are low
• There is a phased Non Executive Director refreshment plan
• Key man insurance is in place for the Chief Executive
• The SLT promotes talent development below
Board level
• Alistair Elliott, former Senior Partner and Group
Chair of Knight Frank, has been appointed as
Board and Nomination Committee Chair on
Patrick Vaughan’s retirement
• Kitty Patmore, serving Chief Financial Officer of
Harworth Group plc, has been appointed Audit
Committee chair on Rosalyn Wilton’s retirement
• The appointment of Suzy Neubert, brings
extensive capital markets and financial services
experience to the Board
• The staff survey responses continue to be
extremely positive with respondents proud
and happy to be working for LondonMetric
and highly confident in the decisions made
by senior management
• Our designated workforce Non Executive Director
hosts round table meetings with a cross section
of employees annually to hear their views
and concerns
• Staff turnover remains low at only 6% over the
last ten years
• 63% of employees participated in the 2023 LTIP
The Board believes it is vitally important that the
Company has the appropriate level of leadership,
expertise and experience to deliver its objectives
and adapt to change. Its appetite for this risk is
therefore low.
No significant change
There has been no significant change in
perceived risk.
We anticipate no significant change in this risk over
the next 12 months.
Read more in
Management team page 110
People page 66
Nomination Committee report
page 124
Remuneration Committee report
page 139
4.
Systems,
processes
and financial
management
Risk Impact Mitigation
Commentary Appetite Change in the year
Controls for safeguarding
assets and supporting strategy
may be weak.
• Compromised asset security
• Suboptimal returns
for shareholders
• Decisions made on inaccurate
information
Impact on strategy
• The Company has a strong controls culture
• We have IT security systems in place with back up supported and
tested by external specialists
• Our business continuity plan is regularly updated
• We have safety and security arrangements in place on our
developments, multi-let and vacant properties
• Appropriate data capture procedures ensure the accuracy of the
property database and financial reporting systems
• We maintain appropriate segregation of duties with controls over
financial systems
• Management receive timely financial information for approval and
decision making
• Cost control procedures ensure expenditure is valid, properly
authorised and monitored
• We continue to take an active but pragmatic
approach towards cyber security, monitoring
and building on our technical solutions alongside
raising staff awareness of emerging issues
and practices
• During the year we enhanced our IT infrastructure
to improve security, data storage, resilience and
the speed at which servers could be fully restored
in a disaster recovery situation. We also tested our
resilience to cyber attacks through penetration
testing to ensure they continue to provide a
strong level of protection
The Board’s appetite for such risk is low and
management continually strives to monitor and
improve processes to ensure they are fit for purpose.
No significant change
There has been no significant change in perceived
risk. Cyber security remains an ever present risk.
We anticipate no significant change in this risk over
the next 12 months.
Read more in
Audit Committee report page 132
A review of our risk
A review of our principal risks
continued
No significant change
Increased risk
Decreased
90
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Corporate risks
3.
Human
resources
Risk Impact Mitigation Commentary Appetite Change in the year
There may be an inability to
attract, motivate and retain
high calibre employees in the
small team.
The business may lack the skill
set to establish and deliver
strategy and maintain a
competitive advantage.
Impact on strategy
• Our staffing plan focuses on experience and expertise necessary to
deliver strategy
• Our organisational structure has clear responsibilities and
reporting lines
• Executive Directors and senior managers are incentivised in a
similar manner. Both have significant unvested share awards in the
Company which incentivise long term performance and retention
and provide stability in the management structure
• Annual appraisals identify training requirements and
assess performance
• Specialist support is contracted as appropriate
• Staff satisfaction surveys are undertaken and staff turnover levels
are low
• There is a phased Non Executive Director refreshment plan
• Key man insurance is in place for the Chief Executive
• The SLT promotes talent development below
Board level
• Alistair Elliott, former Senior Partner and Group
Chair of Knight Frank, has been appointed as
Board and Nomination Committee Chair on
Patrick Vaughan’s retirement
• Kitty Patmore, serving Chief Financial Officer of
Harworth Group plc, has been appointed Audit
Committee chair on Rosalyn Wilton’s retirement
• The appointment of Suzy Neubert, brings
extensive capital markets and financial services
experience to the Board
• The staff survey responses continue to be
extremely positive with respondents proud
and happy to be working for LondonMetric
and highly confident in the decisions made
by senior management
• Our designated workforce Non Executive Director
hosts round table meetings with a cross section
of employees annually to hear their views
and concerns
• Staff turnover remains low at only 6% over the
last ten years
• 63% of employees participated in the 2023 LTIP
The Board believes it is vitally important that the
Company has the appropriate level of leadership,
expertise and experience to deliver its objectives
and adapt to change. Its appetite for this risk is
therefore low.
No significant change
There has been no significant change in
perceived risk.
We anticipate no significant change in this risk over
the next 12 months.
Read more in
Management team page 110
People page 66
Nomination Committee report
page 124
Remuneration Committee report
page 139
4.
Systems,
processes
and financial
management
Risk Impact Mitigation
Commentary Appetite Change in the year
Controls for safeguarding
assets and supporting strategy
may be weak.
• Compromised asset security
• Suboptimal returns
for shareholders
• Decisions made on inaccurate
information
Impact on strategy
• The Company has a strong controls culture
• We have IT security systems in place with back up supported and
tested by external specialists
• Our business continuity plan is regularly updated
• We have safety and security arrangements in place on our
developments, multi-let and vacant properties
• Appropriate data capture procedures ensure the accuracy of the
property database and financial reporting systems
• We maintain appropriate segregation of duties with controls over
financial systems
• Management receive timely financial information for approval and
decision making
• Cost control procedures ensure expenditure is valid, properly
authorised and monitored
• We continue to take an active but pragmatic
approach towards cyber security, monitoring
and building on our technical solutions alongside
raising staff awareness of emerging issues
and practices
• During the year we enhanced our IT infrastructure
to improve security, data storage, resilience and
the speed at which servers could be fully restored
in a disaster recovery situation. We also tested our
resilience to cyber attacks through penetration
testing to ensure they continue to provide a
strong level of protection
The Board’s appetite for such risk is low and
management continually strives to monitor and
improve processes to ensure they are fit for purpose.
No significant change
There has been no significant change in perceived
risk. Cyber security remains an ever present risk.
We anticipate no significant change in this risk over
the next 12 months.
Read more in
Audit Committee report page 132
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
91
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Corporate risks
5.
Responsible
business and
sustainability
Risk Impact Mitigation
Commentary Appetite Change in the year
Non-compliance with
Responsible Business practices.
• Reputational damage
• Suboptimal returns
for shareholders
• Asset liquidity may
be impacted
• Reduced access to debt
and capital markets
• Poor relationships
with stakeholders
Impact on strategy
• We monitor changes in law, stakeholder sentiment and best
practice in relation to sustainability, environmental matters and our
societal impact supported by specialist consultants, and we consider
the impact of changes on strategy
• We give proper consideration to the needs of our occupiers and
shareholders by maintaining a high degree of engagement. We also
consider our impact on the environment and local communities
• Responsibility for specific obligations is allocated to SLT members
• A Responsible Business Working Group meets at least three times a
year and reports to the Board
• Staff training is provided
• EPC rating benchmarks are set to comply with current and future
Minimum Energy Efficiency Standards (‘MEES’) that could impact
the quality and desirability of our assets leading to higher voids,
reduced income and liquidity
• We consider environmental and climate change risk relating to our
assets and commission studies and reports
• We work with occupiers to improve the resilience of our assets and
their business models to climate change and a low carbon economy
• Sustainability targets are set, monitored and reported
• Contractors are required to conform to our responsible
development requirements
• We held meetings with c.240 investors and
potential investors over the year
• We continue to score well in ESG benchmarks
• 31% of our portfolio by area is rated BREEAM Very
Good or better, including 97% of developments
completed this year
• 90% of our portfolio has an EPC rating of A-C.
We are targeting a minimum C rating on all assets
by 2027 and have introduced EPC rating as a new
KPI this year
• Our Net Zero Carbon framework sets out our
ambitions to become a zero carbon business.
We have undertaken Net Zero Carbon studies on
various assets along with reviewing our approach
to carbon offsets
• Revolving credit facilities totalling £675 million
incorporate sustainability linked targets which
have all been met in the year
• We continue to score highly in stakeholder
surveys with a landlord recommendation score of
8.7/10.00 in our latest occupier survey
• Our Communities and Charity Committee has
spent £104,000 in the year
• In response to the cost of living crisis, we made
one-off payments to some of our employees
The Board has a low tolerance for non-compliance
with risks that adversely impact reputation,
stakeholder sentiment and asset liquidity.
Increased risk
ESG significance continues to increase
for stakeholders, particularly in relation to
climate change.
We anticipate this risk will continue to increase
over the next 12 months.
Read more in
Responsible Business and ESG review page 54
Investors page 72
TCFD page 77
Developments page 45
Our full Responsible Business report can be
found at www.londonmetric.com
6.
Regulatory
framework
Risk Impact Mitigation Commentary Appetite Change in the year
Non-compliance with legal or
regulatory obligations.
• Reputational damage
• Increased costs
• Reduced access to debt and
capital markets
• Fines, penalties, sanctions
Impact on strategy
• We monitor regulatory changes that impact our business assisted by
specialist support providers
• We consider the impact of legislative changes on strategy
• We have allocated responsibility for specific obligations to
individuals within the SLT
• Our health and safety handbook is regularly updated and audits are
carried out on developments to monitor compliance
• Our procurement and supply chain policy sets standards for areas
such as labour, human rights, pollution risk and community
• Staff training is provided on wide ranging issues
• External tax specialists provide advice and REIT compliance
is monitored
• No significant new regulatory changes have
impacted the business this year
• We continued to undertake health and safety
site audits on our developments assisted by
external specialists. This year this included our
developments at Weymouth and Hackney.
Feedback has been positive and no significant
issues were identified
The Board has no appetite where non-compliance
risks injury or damage to its broad range of
stakeholders, assets and reputation.
No significant change
There has been no significant change in perceived
risk. New regulations and evolving best practice will
continue to impact the business.
We anticipate no significant change in this risk over
the next 12 months.
Read more in Responsible
Business and ESG review page 54
A review of our risk
A review of our principal risks
continued
No significant change
Increased risk
Decreased
92
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Corporate risks
5.
Responsible
business and
sustainability
Risk Impact Mitigation
Commentary Appetite Change in the year
Non-compliance with
Responsible Business practices.
• Reputational damage
• Suboptimal returns
for shareholders
• Asset liquidity may
be impacted
• Reduced access to debt
and capital markets
• Poor relationships
with stakeholders
Impact on strategy
• We monitor changes in law, stakeholder sentiment and best
practice in relation to sustainability, environmental matters and our
societal impact supported by specialist consultants, and we consider
the impact of changes on strategy
• We give proper consideration to the needs of our occupiers and
shareholders by maintaining a high degree of engagement. We also
consider our impact on the environment and local communities
• Responsibility for specific obligations is allocated to SLT members
• A Responsible Business Working Group meets at least three times a
year and reports to the Board
• Staff training is provided
• EPC rating benchmarks are set to comply with current and future
Minimum Energy Efficiency Standards (‘MEES’) that could impact
the quality and desirability of our assets leading to higher voids,
reduced income and liquidity
• We consider environmental and climate change risk relating to our
assets and commission studies and reports
• We work with occupiers to improve the resilience of our assets and
their business models to climate change and a low carbon economy
• Sustainability targets are set, monitored and reported
• Contractors are required to conform to our responsible
development requirements
• We held meetings with c.240 investors and
potential investors over the year
• We continue to score well in ESG benchmarks
• 31% of our portfolio by area is rated BREEAM Very
Good or better, including 97% of developments
completed this year
• 90% of our portfolio has an EPC rating of A-C.
We are targeting a minimum C rating on all assets
by 2027 and have introduced EPC rating as a new
KPI this year
• Our Net Zero Carbon framework sets out our
ambitions to become a zero carbon business.
We have undertaken Net Zero Carbon studies on
various assets along with reviewing our approach
to carbon offsets
• Revolving credit facilities totalling £675 million
incorporate sustainability linked targets which
have all been met in the year
• We continue to score highly in stakeholder
surveys with a landlord recommendation score of
8.7/10.00 in our latest occupier survey
• Our Communities and Charity Committee has
spent £104,000 in the year
• In response to the cost of living crisis, we made
one-off payments to some of our employees
The Board has a low tolerance for non-compliance
with risks that adversely impact reputation,
stakeholder sentiment and asset liquidity.
Increased risk
ESG significance continues to increase
for stakeholders, particularly in relation to
climate change.
We anticipate this risk will continue to increase
over the next 12 months.
Read more in
Responsible Business and ESG review page 54
Investors page 72
TCFD page 77
Developments page 45
Our full Responsible Business report can be
found at www.londonmetric.com
6.
Regulatory
framework
Risk Impact Mitigation Commentary Appetite Change in the year
Non-compliance with legal or
regulatory obligations.
• Reputational damage
• Increased costs
• Reduced access to debt and
capital markets
• Fines, penalties, sanctions
Impact on strategy
• We monitor regulatory changes that impact our business assisted by
specialist support providers
• We consider the impact of legislative changes on strategy
• We have allocated responsibility for specific obligations to
individuals within the SLT
• Our health and safety handbook is regularly updated and audits are
carried out on developments to monitor compliance
• Our procurement and supply chain policy sets standards for areas
such as labour, human rights, pollution risk and community
• Staff training is provided on wide ranging issues
• External tax specialists provide advice and REIT compliance
is monitored
• No significant new regulatory changes have
impacted the business this year
• We continued to undertake health and safety
site audits on our developments assisted by
external specialists. This year this included our
developments at Weymouth and Hackney.
Feedback has been positive and no significant
issues were identified
The Board has no appetite where non-compliance
risks injury or damage to its broad range of
stakeholders, assets and reputation.
No significant change
There has been no significant change in perceived
risk. New regulations and evolving best practice will
continue to impact the business.
We anticipate no significant change in this risk over
the next 12 months.
Read more in Responsible
Business and ESG review page 54
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
93
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Property risks
7.
Investment
risk
Risk Impact Mitigation Commentary Appetite Change in the year
We may be unable to source
rationally priced investment
opportunities.
Ability to implement strategy
and deploy capital into value and
earnings accretive investments
is at risk.
Impact on strategy
• Management’s extensive experience and their strong
network of relationships provide insight into the property
market and opportunities
• We have a dedicated Investment Committee led by SLT members
which meets regularly
• Management have a proven track record of executing transactions,
making good sector choices and growing income even through
periods of uncertainty and volatility
• As future interest rate expectations moderate
some confidence is returning and we are moving
away from price discovery towards greater
equilibrium in our preferred sectors. A current
lack of stock ‘on the market’ and sellers in
short supply has even resulted in some recent
competitive bidding
• We remain keen to seek further investment
opportunities at a fair price but will continue
to be patient, prioritising resilient returns from
high quality assets in strong locations within our
preferred structurally supported sectors. This
approach, coupled with strong investor alignment,
has always tempered our acquisition activity,
limited our development exposure and framed
our disposal decisions
• We continue to build on our strong occupier,
developer and industry relationships and attract
off market opportunities through these
The Board continues to focus on having the right
people and funding in place to take advantage of
opportunities as they arise. The Board’s aim is to
minimise this risk to the extent possible.
Increased risk
Our opportunistic sales of mature and non core
assets have been at attractive yields and a narrow
surplus to prevailing book values crystallising
attractive returns and demonstrating that, despite
the macro challenges, liquidity remains for well
located assets in structurally supported sectors.
Read more in Property review
page 32
8.
Development
Risk Impact Mitigation Commentary Appetite Change in the year
• Excessive capital may be
allocated to activities with
development risk
• Developments may fail to
deliver expected returns due
to inconsistent timing with
the economic or market cycle,
adverse letting conditions,
increased costs, planning or
construction delays resulting
from contractor failure or
supply chain interruption
• Poorer than expected
performance
• Reputational damage
Impact on strategy
• As an income focused REIT, development exposure as a percentage
of our total portfolio is limited, typically well below 5%
• We only undertake short cycle and relatively uncomplicated
development on a pre-let basis or where there is high
occupier demand
• Development sites are acquired with planning consent
whenever possible
• Management have significant experience of complex development
• We use standardised appraisals and cost budgets and monitor
expenditure against budget to highlight potential overruns early
• External project managers are appointed
• Our procurement process includes tendering and the use of highly
regarded firms with proven track records
• We review and monitor contractor covenant strength
• Having completed forward funding developments
at Huntington and Preston during the year, our
current development exposure accounts for
only 1.1% of the portfolio by value and largely
comprises of two further pre-let fundings
• The volatile economic and political environment
that has dominated events over the past 12
months has created material uncertainty
and escalating inflation and borrowing costs.
Development risk has increased and we don’t
feel now is the time to have significant
development exposure
• Land values have fallen considerably which,
as a well funded and experienced developer,
may create attractive opportunities for future
developments. Our funding structure and track
record also enables us to source and enter into
accretive forward funding opportunities where
development risk is mitigated
The Board takes on limited speculative development,
although its overall tolerance for this risk is low. The
Board made a decision to keep new development
and forward funding activity low during the year in
response to the economic and market conditions,
particularly increasing inflation and finance costs and
falling real estate values.
No significant change
Our development exposure remains limited,
meaning there has been no significant change in
perceived risk during the year.
We anticipate our development exposure will remain
limited over the next 12 months.
Read more on Developments
page 45
A review of our risk
A review of our principal risks
continued
No significant change
Increased risk
Decreased
94
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Property risks
7.
Investment
risk
Risk Impact Mitigation Commentary Appetite Change in the year
We may be unable to source
rationally priced investment
opportunities.
Ability to implement strategy
and deploy capital into value and
earnings accretive investments
is at risk.
Impact on strategy
• Management’s extensive experience and their strong
network of relationships provide insight into the property
market and opportunities
• We have a dedicated Investment Committee led by SLT members
which meets regularly
• Management have a proven track record of executing transactions,
making good sector choices and growing income even through
periods of uncertainty and volatility
• As future interest rate expectations moderate
some confidence is returning and we are moving
away from price discovery towards greater
equilibrium in our preferred sectors. A current
lack of stock ‘on the market’ and sellers in
short supply has even resulted in some recent
competitive bidding
• We remain keen to seek further investment
opportunities at a fair price but will continue
to be patient, prioritising resilient returns from
high quality assets in strong locations within our
preferred structurally supported sectors. This
approach, coupled with strong investor alignment,
has always tempered our acquisition activity,
limited our development exposure and framed
our disposal decisions
• We continue to build on our strong occupier,
developer and industry relationships and attract
off market opportunities through these
The Board continues to focus on having the right
people and funding in place to take advantage of
opportunities as they arise. The Board’s aim is to
minimise this risk to the extent possible.
Increased risk
Our opportunistic sales of mature and non core
assets have been at attractive yields and a narrow
surplus to prevailing book values crystallising
attractive returns and demonstrating that, despite
the macro challenges, liquidity remains for well
located assets in structurally supported sectors.
Read more in Property review
page 32
8.
Development
Risk Impact Mitigation Commentary Appetite Change in the year
• Excessive capital may be
allocated to activities with
development risk
• Developments may fail to
deliver expected returns due
to inconsistent timing with
the economic or market cycle,
adverse letting conditions,
increased costs, planning or
construction delays resulting
from contractor failure or
supply chain interruption
• Poorer than expected
performance
• Reputational damage
Impact on strategy
• As an income focused REIT, development exposure as a percentage
of our total portfolio is limited, typically well below 5%
• We only undertake short cycle and relatively uncomplicated
development on a pre-let basis or where there is high
occupier demand
• Development sites are acquired with planning consent
whenever possible
• Management have significant experience of complex development
• We use standardised appraisals and cost budgets and monitor
expenditure against budget to highlight potential overruns early
• External project managers are appointed
• Our procurement process includes tendering and the use of highly
regarded firms with proven track records
• We review and monitor contractor covenant strength
• Having completed forward funding developments
at Huntington and Preston during the year, our
current development exposure accounts for
only 1.1% of the portfolio by value and largely
comprises of two further pre-let fundings
• The volatile economic and political environment
that has dominated events over the past 12
months has created material uncertainty
and escalating inflation and borrowing costs.
Development risk has increased and we don’t
feel now is the time to have significant
development exposure
• Land values have fallen considerably which,
as a well funded and experienced developer,
may create attractive opportunities for future
developments. Our funding structure and track
record also enables us to source and enter into
accretive forward funding opportunities where
development risk is mitigated
The Board takes on limited speculative development,
although its overall tolerance for this risk is low. The
Board made a decision to keep new development
and forward funding activity low during the year in
response to the economic and market conditions,
particularly increasing inflation and finance costs and
falling real estate values.
No significant change
Our development exposure remains limited,
meaning there has been no significant change in
perceived risk during the year.
We anticipate our development exposure will remain
limited over the next 12 months.
Read more on Developments
page 45
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
95
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Property risks
9.
Valuation
risk
Risk Impact Mitigation Commentary Appetite Change in the year
Investments may fall in value. Pressure on net asset value
and potentially loan to value
debt covenants.
Impact on strategy
• Our portfolio is predominantly in structurally supported sectors with
few non core assets remaining
• Our focus remains on sustainable income and lettings to high
quality tenants within a diversified portfolio of well located assets.
We aim to maintain a high portfolio WAULT and low vacancy rate.
These metrics provide resilience and reduce the negative impact of
a market downturn
• Trends and the property cycle are continually monitored with
investment and divestment decisions made strategically in
anticipation of changing conditions
• Portfolio performance is regularly reviewed and benchmarked on an
asset by asset basis
• The majority of our assets are single let and operationally light with
little or no cost leakage and defensive capital expenditure
• We stay close to our tenants to understand their occupational
requirements to mitigate vacancy risk
• We monitor tenant covenants and trading performance
• We maintain a low loan to value, materially below maximum loan
covenant thresholds
• The UK logistics occupational market remains
robust despite demand moderating towards more
normalised levels. Vacancy continues near an
all-time low and a reduction in new development
underpins rental growth, particularly for urban
where there is competing demand from a diverse
range of occupiers and land uses
• 48% of our portfolio is in the high growth regions
of London and the South East of England where
nearly 60% of our urban logistics is located
• The ERV on our logistics portfolio grew 11% last
year. Our urban logistics rent reviews were settled
at 21% higher than previous passing rents driving
like for like income growth of 5%. Over the next
two years, our pipeline of rent reviews alone is
expected to add a further £11 million of annualised
contracted rent as we capture in built reversions
• We continue to have high occupancy at 99%,
a strong WAULT of 12 years and a gross to
net income ratio of 99%. 63% of income has
contracted rental uplifts, 50% indexed linked with
caps typically at 4%, materially below current
inflation. These, coupled with strong open market
reviews on the remainder of the portfolio, provide
positive earnings trajectory, inflation protection
and total returns materially higher than many
alternatives with the added security of the intrinsic
land value
There is no certainty that property values will be
realised. This is an inherent risk in the industry. The
Board aims to keep this risk to a minimum through its
asset selection and active management initiatives.
Increased risk
We were not immune to the changes in monetary
policy that caused the cost of capital to exceed the
low yields of our high growth sectors and which
caused a recalibration of values across the real estate
sector. We believe the quick repricing of the logistics
sector reflects a higher level of pricing evidence that
contrasts with other sectors where there has been
far less transactional evidence and more limited
pricing adjustments.
A recent uptick in confidence provides evidence
of some yield hardening for prime industrial and
distribution investments. Further softening feels
more likely for secondary, poorly located assets
and asset classes that face structural head winds.
Our portfolio remains strategically aligned to
structurally supported sectors where investor
demand is high and the prospects for value
preservation and growth are significant.
Read more in
Chief Executive’s review page 15
Property review page 32
10.
Transaction
and tenant
risk
Risk Impact Mitigation
Commentary Appetite Change in the year
• Acquisitions and asset
management initiatives may
be inconsistent with strategy
• Due diligence may be flawed
• Tenant failure risk
Pressure on net asset value,
earnings and potentially
debt covenants.
Impact on strategy
• Thorough due diligence is undertaken on all acquisitions
including legal and property, tenant covenant strength and
trading performance
• We screen all prospective tenants and undertake regular
reviews thereafter
• Portfolio tenant concentration is considered for all acquisitions and
leasing transactions
• We have a diversified tenant base and limited exposure to occupiers
in bespoke properties
• Asset management initiatives undergo cost benefit analysis prior
to implementation
• External advisors benchmark lease transactions and advise on
acquisition due diligence
• Our experienced asset management team work closely with
tenants to offer them real estate solutions that meet their business
objectives. This proactive management approach helps to reduce
vacancy risk
• We monitor rent collection closely to identify potential issues
• During the year, 167 occupier initiatives added
£7.8 million per annum of rent and like for like
income growth of 5.0%. Lettings and regears
added £5.1 million on average lease lengths of
ten years, with regears achieving rents 21% ahead
of our previous passing. Rent reviews delivered
£2.7 million of additional rent, representing a 16%
uplift on a five yearly equivalent basis
• Rent collection has remained high at 99.8%
• Through our strong tenant relationships we are
monitoring the impact on our top occupiers of
high inflation
• Dependency on our top ten occupiers is only
28%. No one tenant accounts for more than 4.1%
of income
The Board has no appetite for risk arising out of poor
due diligence processes on acquisitions, disposals and
lettings. A degree of tenant covenant risk and lower
unexpired lease terms are accepted on urban logistics
assets where there is high occupational demand,
redevelopment potential or alternative site use.
No significant change
Portfolio resilience has been demonstrated through
our high occupancy and rent collection statistics.
We anticipate no significant change in this risk over
the next 12 months but will continue to monitor the
effects of the challenging economic backdrop and
high inflationary pressures on tenant businesses.
Read more in
Chief Executive’s review page 15
Property review page 32
Financial review page 46
A review of our risk
A review of our principal risks
continued
No significant change
Increased risk
Decreased
96
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
Property risks
9.
Valuation
risk
Risk Impact Mitigation Commentary Appetite Change in the year
Investments may fall in value. Pressure on net asset value
and potentially loan to value
debt covenants.
Impact on strategy
• Our portfolio is predominantly in structurally supported sectors with
few non core assets remaining
• Our focus remains on sustainable income and lettings to high
quality tenants within a diversified portfolio of well located assets.
We aim to maintain a high portfolio WAULT and low vacancy rate.
These metrics provide resilience and reduce the negative impact of
a market downturn
• Trends and the property cycle are continually monitored with
investment and divestment decisions made strategically in
anticipation of changing conditions
• Portfolio performance is regularly reviewed and benchmarked on an
asset by asset basis
• The majority of our assets are single let and operationally light with
little or no cost leakage and defensive capital expenditure
• We stay close to our tenants to understand their occupational
requirements to mitigate vacancy risk
• We monitor tenant covenants and trading performance
• We maintain a low loan to value, materially below maximum loan
covenant thresholds
• The UK logistics occupational market remains
robust despite demand moderating towards more
normalised levels. Vacancy continues near an
all-time low and a reduction in new development
underpins rental growth, particularly for urban
where there is competing demand from a diverse
range of occupiers and land uses
• 48% of our portfolio is in the high growth regions
of London and the South East of England where
nearly 60% of our urban logistics is located
• The ERV on our logistics portfolio grew 11% last
year. Our urban logistics rent reviews were settled
at 21% higher than previous passing rents driving
like for like income growth of 5%. Over the next
two years, our pipeline of rent reviews alone is
expected to add a further £11 million of annualised
contracted rent as we capture in built reversions
• We continue to have high occupancy at 99%,
a strong WAULT of 12 years and a gross to
net income ratio of 99%. 63% of income has
contracted rental uplifts, 50% indexed linked with
caps typically at 4%, materially below current
inflation. These, coupled with strong open market
reviews on the remainder of the portfolio, provide
positive earnings trajectory, inflation protection
and total returns materially higher than many
alternatives with the added security of the intrinsic
land value
There is no certainty that property values will be
realised. This is an inherent risk in the industry. The
Board aims to keep this risk to a minimum through its
asset selection and active management initiatives.
Increased risk
We were not immune to the changes in monetary
policy that caused the cost of capital to exceed the
low yields of our high growth sectors and which
caused a recalibration of values across the real estate
sector. We believe the quick repricing of the logistics
sector reflects a higher level of pricing evidence that
contrasts with other sectors where there has been
far less transactional evidence and more limited
pricing adjustments.
A recent uptick in confidence provides evidence
of some yield hardening for prime industrial and
distribution investments. Further softening feels
more likely for secondary, poorly located assets
and asset classes that face structural head winds.
Our portfolio remains strategically aligned to
structurally supported sectors where investor
demand is high and the prospects for value
preservation and growth are significant.
Read more in
Chief Executive’s review page 15
Property review page 32
10.
Transaction
and tenant
risk
Risk Impact Mitigation
Commentary Appetite Change in the year
• Acquisitions and asset
management initiatives may
be inconsistent with strategy
• Due diligence may be flawed
• Tenant failure risk
Pressure on net asset value,
earnings and potentially
debt covenants.
Impact on strategy
• Thorough due diligence is undertaken on all acquisitions
including legal and property, tenant covenant strength and
trading performance
• We screen all prospective tenants and undertake regular
reviews thereafter
• Portfolio tenant concentration is considered for all acquisitions and
leasing transactions
• We have a diversified tenant base and limited exposure to occupiers
in bespoke properties
• Asset management initiatives undergo cost benefit analysis prior
to implementation
• External advisors benchmark lease transactions and advise on
acquisition due diligence
• Our experienced asset management team work closely with
tenants to offer them real estate solutions that meet their business
objectives. This proactive management approach helps to reduce
vacancy risk
• We monitor rent collection closely to identify potential issues
• During the year, 167 occupier initiatives added
£7.8 million per annum of rent and like for like
income growth of 5.0%. Lettings and regears
added £5.1 million on average lease lengths of
ten years, with regears achieving rents 21% ahead
of our previous passing. Rent reviews delivered
£2.7 million of additional rent, representing a 16%
uplift on a five yearly equivalent basis
• Rent collection has remained high at 99.8%
• Through our strong tenant relationships we are
monitoring the impact on our top occupiers of
high inflation
• Dependency on our top ten occupiers is only
28%. No one tenant accounts for more than 4.1%
of income
The Board has no appetite for risk arising out of poor
due diligence processes on acquisitions, disposals and
lettings. A degree of tenant covenant risk and lower
unexpired lease terms are accepted on urban logistics
assets where there is high occupational demand,
redevelopment potential or alternative site use.
No significant change
Portfolio resilience has been demonstrated through
our high occupancy and rent collection statistics.
We anticipate no significant change in this risk over
the next 12 months but will continue to monitor the
effects of the challenging economic backdrop and
high inflationary pressures on tenant businesses.
Read more in
Chief Executive’s review page 15
Property review page 32
Financial review page 46
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
97
LondonMetric Property Plc Annual Report and Accounts 2023
102-174
Governance
175-232
Financial statements
1-101
Strategic report
A review of our risk
A review of our principal risks
continued
Financing risks
11.
Capital and
finance risk
Risk Impact Mitigation Commentary Appetite Change in the year
The Company has insufficient
funds and available credit.
Strategy implementation
is at risk.
Impact on strategy
• We maintain a disciplined investment approach with competition
for capital. Assets are considered for sale when they have achieved
target returns and strategic asset plans
• Cash flow forecasts are closely monitored
• Relationships with a diversified range of lenders are nurtured
• The availability of debt and the terms on which it is available is
considered as part of the Company’s long term strategy
• Loan facilities incorporate covenant headroom, appropriate cure
provisions and flexibility
• Headroom and non financial covenants are monitored
• A modest level of gearing is maintained
• The impact of disposals on secured loan facilities covering multiple
assets is considered as part of the decision making process
• Interest rate derivatives are used to fix or cap exposure to rising rates
as deemed prudent following specialist hedging advice
• Due to concerns over rising credit spreads and
a more conservative lending environment we
completed a new £275 million revolving credit
facility during the year to lock into similar terms
and pricing as our existing syndicated £225 million
facility. This three year facility with two one year
extension options enabled a short dated facility to
be repaid
• £225 million of swaps were purchased at a cost
of £15.1 million to mitigate exposure to rapidly
rising interest rates. Sales have reduced floating
rate debt further. At the year end, 93% of our
drawn debt carried a fixed rate of interest up from
71% last year. Our cost of debt now sits at 3.4%
compared to 2.6% a year ago
• During the year, we secured our first one year
extension over the £400 million in our two older
revolving credit facilities. Post year end, we also
agreed the second one year extension on these
• Following the year end, the bank facility on our
MIPP joint venture matured and was repaid
from the proceeds of sales and additional equity
funding from partners
• We have substantial headroom under our loan
covenants and our modest loan to value of 32.8%
provides flexibility to execute transactions whilst
continuing to maintain ample headroom under
our covenants
• As at the year end, our debt maturity was at
six years with available undrawn facilities up to
£380 million
The Board has no appetite for imprudently low levels
of available headroom in its reserves or credit lines.
The Board has some appetite for interest rate risk and
loans are not fully hedged as they are not fully drawn
all the time. In response to the rapidly rising interest
rate environment, the Board reduced its appetite to
the level of unhedged debt and mitigating action
was taken.
Decreased risk
Our refinancing activity has extended debt maturity
and mitigates further refinancing risk for the next
three years.
We continue to live in a period of uncertainty which
will undoubtedly impact our approach over the next
12 months but feel we are approaching the point
where interest rates will start to stabilise or even fall.
Read more in
Financial review page 46
Going concern and viability page 100
No significant change
Increased risk
Decreased
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3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
Financing risks
11.
Capital and
finance risk
Risk Impact Mitigation Commentary Appetite Change in the year
The Company has insufficient
funds and available credit.
Strategy implementation
is at risk.
Impact on strategy
• We maintain a disciplined investment approach with competition
for capital. Assets are considered for sale when they have achieved
target returns and strategic asset plans
• Cash flow forecasts are closely monitored
• Relationships with a diversified range of lenders are nurtured
• The availability of debt and the terms on which it is available is
considered as part of the Company’s long term strategy
• Loan facilities incorporate covenant headroom, appropriate cure
provisions and flexibility
• Headroom and non financial covenants are monitored
• A modest level of gearing is maintained
• The impact of disposals on secured loan facilities covering multiple
assets is considered as part of the decision making process
• Interest rate derivatives are used to fix or cap exposure to rising rates
as deemed prudent following specialist hedging advice
• Due to concerns over rising credit spreads and
a more conservative lending environment we
completed a new £275 million revolving credit
facility during the year to lock into similar terms
and pricing as our existing syndicated £225 million
facility. This three year facility with two one year
extension options enabled a short dated facility to
be repaid
• £225 million of swaps were purchased at a cost
of £15.1 million to mitigate exposure to rapidly
rising interest rates. Sales have reduced floating
rate debt further. At the year end, 93% of our
drawn debt carried a fixed rate of interest up from
71% last year. Our cost of debt now sits at 3.4%
compared to 2.6% a year ago
• During the year, we secured our first one year
extension over the £400 million in our two older
revolving credit facilities. Post year end, we also
agreed the second one year extension on these
• Following the year end, the bank facility on our
MIPP joint venture matured and was repaid
from the proceeds of sales and additional equity
funding from partners
• We have substantial headroom under our loan
covenants and our modest loan to value of 32.8%
provides flexibility to execute transactions whilst
continuing to maintain ample headroom under
our covenants
• As at the year end, our debt maturity was at
six years with available undrawn facilities up to
£380 million
The Board has no appetite for imprudently low levels
of available headroom in its reserves or credit lines.
The Board has some appetite for interest rate risk and
loans are not fully hedged as they are not fully drawn
all the time. In response to the rapidly rising interest
rate environment, the Board reduced its appetite to
the level of unhedged debt and mitigating action
was taken.
Decreased risk
Our refinancing activity has extended debt maturity
and mitigates further refinancing risk for the next
three years.
We continue to live in a period of uncertainty which
will undoubtedly impact our approach over the next
12 months but feel we are approaching the point
where interest rates will start to stabilise or even fall.
Read more in
Financial review page 46
Going concern and viability page 100
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
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A review of our risk
Going concern and viability
Based on the results of their
assessment which is detailed
below, the Directors have a
reasonable expectation that
the Company will be able to
continue in operation and
meet its liabilities as they fall
due over the three year period
to 31 March 2026.
In accordance with the 2018 UK Corporate
Governance Code, the Board has assessed
the prospects of the Group over the following
time horizons:
• Short term – a period of 12 months from the
date of this report as required by the ‘Going
Concern’ provision; and
• Longer term – a period of three years to
31 March 2026 as required by the ‘Viability
Statement’ provision.
Short term assessment
The Directors’ going concern assessment,
as required under provision 30 of the Code,
included consideration of the following:
• Principal risks and uncertainties facing the
Group’s activities, future development
and performance, as discussed in the Risk
management and internal controls section
of this report on pages 82 to 99;
• The business strategy and outlook as
discussed throughout the Strategic report;
• The impact of higher inflation and a shift in
monetary policy to increase interest rates,
on the property market, our occupiers,
valuations and earnings;
• The financial position and liquidity including
available cash and undrawn facilities, timing
of debt repayments and headroom under
financial loan covenants;
• The Group’s short term cash flow forecast
which is reviewed regularly by the Senior
Leadership Team ('SLT'); and
• Rent collection rates, which are circulated
weekly to the Executive Directors and
senior managers.
The Directors’ took into account the
following key financial metrics to support
their assessment:
• The Group’s financial position was
strengthened in the year by a new
£275 million revolving credit facility and
extended maturity on £400 million of debt;
• Post year end, we agreed the second one
year extension on two of our revolving credit
facilities and the MIPP debt facility was
repaid in full;
• As at the date of this report, the Group has
mitigated refinancing risk in the next three
financial years;
• The purchase of £225 million interest rate
swap derivatives at an average rate of 2.52%,
and the repayment of floating rate debt
following disposals, increased the proportion
of debt hedged to 93% at the year end;
• Loan to value remains modest at 32.8%;
• The Group had available cash and undrawn
facilities of £416.5 million at the year end
and significant headroom under financial
loan covenants;
• At 31 March 2023, the Group’s gearing ratio
as defined within its unsecured facilities
and private placement loan notes, which
together account for 93% of debt drawn, was
51% (maximum 125%) and interest cover
was 4.7 times (minimum 1.5 times); and
• Rent collection rates continue to be very
strong, with 99.8% of rent due in the year
collected. Occupancy remains exceptionally
high at 99.1%.
Going Concern Statement
On the basis of this review, together with
available market information and the
Directors’ experience and knowledge
of the portfolio, they have a reasonable
expectation that the Company and the
Group can meet its liabilities as they fall due
and has adequate resources to continue in
operational existence for at least 12 months
from the date of signing these financial
statements. Accordingly, they continue to
adopt the going concern basis in preparing
the financial statements for the year to
31 March 2023.
Longer term assessment
The Board reviews and challenges the period
over which to assess viability on an annual basis
and have determined that the three year period
to 31 March 2026 remains an appropriate
period over which to assess the Group’s viability,
as in previous years, for the following reasons:
• The Group’s financial business plan and
detailed budgets cover a rolling three
year period;
• It is a reasonable approximation of the time
it takes from obtaining planning permission
for a development project to practical
completion of the property;
• The average length of the Group’s
developments that completed in the year
was less than one year;
• The weighted average debt maturity at
31 March 2023 was 6.0 years; and
• Three years is considered to be the optimum
balance between long term property
investment and the difficulty in accurately
forecasting ahead given the cyclical nature of
property investment.
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Assessment of viability
The Board conducted this review taking account
of the Group’s business strategy, principal and
emerging risks, financial position and outlook as
discussed throughout the Strategic review and
as already considered as part of the assessment
of going concern above.
The Group’s strategy is reviewed by the Board at
each meeting to ensure it remains appropriate
given changing macroeconomic conditions and
shareholder expectations.
Strategy was also discussed at three off site
lunches in the year that were also attended by
the Investment, Asset and Strategy Directors.
As the Group’s hybrid model of logistics and
long income continues to generate strong and
sustainable returns for shareholders, no changes
were made to the business model which
focuses on income progression through asset
management and on its financing strategy to
manage interest rate and refinancing risk.
The business plan is structured around the
Group’s strategy and consists of a rolling
three year profit forecast, which factors in
deals under offer, committed developments
and reinvestment plans. It considers capital
commitments, dividend cover, loan covenants
and REIT compliance metrics. The SLT
provides regular strategic input to the financial
forecasts covering investment, divestment
and development plans and they consider the
impact to earnings and liquidity. Forecasts are
reviewed against actual performance and
reported quarterly to the Board.
When assessing longer term prospects, the
Board is mindful of the following:
• Income certainty, with 63% of the
Group’s rental income benefiting from
contractual uplifts;
• Income diversity, with 28% of rent due from
our top ten occupiers;
• Strong relationships with debt providers,
evidenced by the new £275 million facility
completed in the year and one year
extensions on two RCFs;
• Substantial liquidity, with undrawn debt
facilities and cash of £416.5 million at the
year end, mitigating refinancing risk in the
next three years;
• The Group’s proven track record of executing
transactions, making good sector choices
and growing income even through periods of
significant uncertainty and volatility; and
• The Group’s ability to be flexible and react
to changes in the macroeconomic and
property markets, including over the past
year where the strategic pivot to disposals
has helped to manage LTV as property
values have fallen and reduce exposure to
floating rate debt.
The business plan was stress tested to ensure it
remained resilient to adverse movements in its
principal risks including:
• Changes to macroeconomic conditions,
including higher inflation and interest
rates impacting rent, finance costs and
property values;
• Changes in the occupier market including
tenant failures impacting occupancy levels
and lettings;
• Changes in the availability of funds and
interest rates; and
• Changes in property market
conditions impacting investment and
development opportunities.
Reverse stress testing was undertaken, which
considered the following scenarios:
• The amount by which property values would
need to fall before the gearing covenant
was breached;
• The amount by which rent would need to
fall before the interest cover covenant was
breached; and
• The amount by which interest costs would
need to rise before the interest cover
covenant was breached.
Under the Group’s unsecured and private
placement debt facilities, that together account
for 93% of the Group’s borrowing including its
share of joint ventures, property values would
need to fall by 38% before the banking gearing
threshold was reached and this would equate to
a loan to value ratio of 53%.
Similarly, rental income would need to fall by
62% or interest payable rise by 180% to breach
the interest cover covenant.
Throughout the scenario testing, the Group had
sufficient reserves to continue in operation and
remain compliant with its banking covenants.
This testing, combined with the Group’s strong
financial position, rent collection evidence,
and mitigation actions available including
deferring non committed capital expenditure
and selling assets, supports the Group’s ability
to weather unexpected and adverse economic
and property market conditions over the longer
term viability period.
Although the Board’s review focused on the
three year viability assessment period, it also
considered the Company’s longer term success
as noted on page 120 of the Governance report.
Viability Statement
Based on the results of their assessment,
the Directors have a reasonable expectation
that the Company will be able to continue
in operation and meet its liabilities as they
fall due over the three year viability period to
31 March 2026.
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Governance Overview
Governance Overview
Our strong governance framework
underpins the way we manage the
business and supports the successful
delivery of our strategy in a way that is
both legally compliant and responsible.
This report sets out the Company’s
governance policies and practices
and explains how the Board and its
Committees discharge their duties,
apply the principles and comply with
the provisions of the UK Corporate
Governance Code.
106
Board leadership
and company purpose
Provides an overview of how the Board leads, its
activities in the year and how it has considered its
stakeholders and S172 responsibilities.
Chair's introduction 106
Board of Directors 108
Management team 110
Our cultural framework 112
How the Board monitors culture 113
The Board in action 115
Companies Act 2006 Section 172 Statement 118
Board meetings and attendance during the year 120
121
Division of responsibilities
Sets out the roles of Board members and framework
for Board Committees.
Leadership framework 121
Leadership roles and responsibilities 122
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124
Composition, succession
and evaluation
Sets out the practices in place which ensure the
Board and its Committees have the appropriate
balance of skills to govern the business and
operate effectively.
Nomination Committee report 124
Board composition and succession planning 125
Board appointment, induction and training 127
Diversity and inclusion 128
Board performance evaluation 129
132
Audit, risk and internal control
Sets out how we monitor the Integrity of the
financial statements and oversee risk management
and internal control.
Audit Committee report 132
Financial reporting and significant matters 134
Risk management and internal control 136
External audit and audit tender 136
Regulatory compliance 137
139
Remuneration
Sets out Directors’ remuneration arrangements,
implementation and alignment with strategy and the
wider workforce.
Remuneration Committee report 139
Directors’ Remuneration Policy 144
Annual Report on Remuneration 158
Directors’ remuneration at a glance 159
Implementation of policy next year 160
171
Report of the Directors
Sets out our regulatory compliance and provides
details of the 2023 Annual General Meeting.
Report of the Directors 171
Directors’ Responsibilities Statement 174
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v
At a glance
36%
Female representation
At 31 March 2023
1 Board member
Ethnic diversity
At 31 March 2023
100%
Board meeting attendance
During the year
70%
Board independence
At 31 March 2023
Earnings growth and a progressive dividend
Arranged new debt and hedging
Focus on LTV
Approved transactions totalling £393 million
Progressed ESG journey
Determined new Remuneration Policy
Audit tender and recommendation
Internal performance evaluation
In January 2023, we announced
that Alistair Elliott, who joined the
Board as a Non Executive Director
in May 2022, will be appointed as
Chair of the Board and Nomination
Committee with effect from 11 July
2023, succeeding Patrick Vaughan
who served throughout the year.
As a result, from the date of his
appointment as Chair of the Board,
we will be fully compliant with
Provision 19 of the Code.
In March 2023 we announced the appointment
of Suzy Neubert as a Non Executive Director of
the Board, succeeding Rosalyn Wilton who has
served for nine years and retires in May 2023.
Female representation on the Board was 36% at the
year end.
Kitty Patmore replaces Rosalyn Wilton as Audit
Committee Chair following her retirement in May
2023 and Suzy Neubert becomes a member of the
Audit Committee.
Board changes A Balanced Board
Board focus
Read more about Board appointments on page 127
9.5p dividend
2022: 9.25p
£273m disposals
£275m new debt
32.8% LTV
2022: 28.8%
Read more about the Board in action on page 115
Read more about the
Board of Directors on page 108
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v
Statement of compliance with UK Corporate Governance Code
The Board has considered the Company’s compliance with the provisions of the UK Corporate Governance Code (the ‘Code’)
published by the Financial Reporting Council in July 2018, publicly available at www.frc.org.uk.
The Board considers that the Company has complied with the provisions set out in the Code throughout the year under review
and to the date of this report, except as set out below:
Provision Explanation Current status
19 The Chair should not remain in post
beyond nine years from the date of their
first appointment to the board.
For the period 1 April 2022 to 11 July 2023, we were not
compliant with Provision 19 of the Code as our Chair
during this period (Patrick Vaughan) had served for more
than nine years. The Board felt that this was necessary
on a short term basis in order to facilitate an orderly
succession and protect the stability in the leadership
team during particularly uncertain times.
We appointed Alistair Elliott as independent
Non Executive Chair with effect from 11 July
2023 and are now fully compliant with
Provision 19.
38 The pension contribution rates for
Executive Directors, or payments in lieu,
should be aligned with those available to
the workforce.
The maximum pension contribution for newly appointed
Executive Directors is 10% in line with employees.
From 1 April 2022 to 31 May 2022 Executive Directors
received a salary supplement of 12.5% in lieu of pension
contributions which reduced to 10% from 1 June 2022.
We were fully compliant with Provision 38 from
1 June 2022 as the pension contribution rates for
all Executive Directors was 10% (aligned with
the wider workforce).
3 In addition to formal general meetings,
the Chair should seek regular
engagement with major shareholders
in order to understand their views on
governance and performance against
strategy.
During the year, Robert Fowlds, as SID, attended six
meetings and conferences with shareholders alongside
the Executive Directors, and independently fed back
matters arising and viewpoints at Board meetings. The
Chair did not attend investor meetings as it was felt that
Robert had significant relevant experience and was an
independent sounding board for investors and therefore
an appropriate point of contact.
The Board feels that it will be beneficial for
Alistair, as the newly appointed Chair, to attend
investor meetings outside of the AGM in
addition to the existing SID engagement. We
expect to be compliant with this provision next
year.
Statement on Board Diversity
The Board has considered Listing Rule 9.8.6R (9) relating to Board diversity as at 31 March 2023.
The Board considers that the Company has met the target set out in Listing Rule 9.8.6R (9)(a)(iii) that at least one
Board member is from an ethnic minority background but has not met the other two targets as set out below:
Provision Explanation Current status
9(a)(i) At least 40% of the individuals on the
Board of Directors are women.
At 31 March 2023, female representation on the Board
was 36%, up from 33% last year end and 30% at the last
AGM. Female representation will fall to 33% following
the AGM in July 2023.
Female representation throughout the year from
the AGM in July 2022 was 30%. This progressed
in March to 36% following the appointment
of Suzy Neubert and to 33% following Board
changes at the AGM. We are committed to
improving female representation on the Board
and progressing towards the 40% target to the
extent that we have the opportunity.
9(a)(ii) At least one of the senior positions
of Chair, Chief Executive, Senior
Independent Directors or Finance
Director on the Board of Directors is held
by a woman.
At 31 March 2023, all of these senior positions were held
by men.
We will be addressing this imbalance later this
year in September as Robert Fowlds will be
stepping down as SID and we will be replacing
him with one of our current female Non
Executive Directors.
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Governance
Whilst the disruption caused by
the pandemic is largely behind
us, geopolitical and economic
uncertainty has persisted this
year. War in Ukraine and the
macroeconomic challenges of rising
inflation and interest rates have
destabilised the investment market.
Once again, the strength and stability of
our leadership team has helped us navigate
these uncertain times. The executive team
has worked hard to protect the interests
of shareholders, consider the needs of our
occupiers and execute our business strategy.
My statement on page 11 looks at our overall
business performance and resilience during the
year. This introduction focuses on our continued
commitment to strong governance processes.
Board changes and succession
As previously announced, I will retire as Chair
and step down from the Board with effect from
11 July 2023 and Alistair Elliott will become
both Board and Nomination Committee Chair.
My tenure was extended to protect the stability
of the leadership team through the pandemic
and more recently until a suitable replacement
was found. Alistair joined the Board as a Non
Executive Director in May 2022 and, having
previously been former Senior Partner and
Group Chair of Knight Frank, brings a unique
combination of property and managerial skills
to the Board. It has been a privilege to Chair the
Board for the last ten years, working alongside
an exceptionally dedicated and successful CEO
and management team to whom I extend my
sincere thanks.
We announced last year that Rosalyn Wilton’s
tenure was approaching nine years, so the
Nomination Committee has led the search
for her replacement. Russell Reynolds were
appointed to search for suitable candidates for
both my successor and also for Rosalyn and I
am delighted to have welcomed Suzy Neubert
to the Board as a Non Executive Director and
member of Audit Committee.
Suzy is a qualified barrister by training and has
enjoyed a long and successful career in financial
services and asset management, having
previously been Managing Director of Equities
at Merrill Lynch and Global head of sales &
marketing at J O Hambro Capital Management.
Suzy brings to the Board a wealth of knowledge
and experience of the fund management
industry and capital markets, over ten years’
experience as a board director and has the right
personal qualities to complement and enhance
the existing skill set of the Board.
Rosalyn continued in her role as Audit
Committee Chair to oversee the year end audit
and financial statements and has stepped down
following the approval of the Annual Report
and announcement of results in May. I would
like to take this opportunity to thank Ros for
her valuable contribution to the Company and
excellent leadership of the Audit Committee.
We have also appointed Kitty Patmore to
succeed her as Chair of the Audit Committee.
In order to protect the stability of the leadership
team and with two Board departures already
announced this year, James Dean has continued
to serve as a Director despite his tenure
reaching 13 years. We believe he continues to
exercise objective and independent judgement
and adds great value to all Board decisions,
drawing on his extensive property expertise.
However, we are mindful of Provision 10 of the
Code on independence and, given the length
of James's service, have not categorised him
as an independent Board member this year.
We remain fully compliant with the Code's
requirement with 70% independent Board
members at the year end.
Culture, Stakeholders and S172
Our culture is not a set of rules but desired
behaviours that we seek to demonstrate
through leading by example. With only 35
employees, the Board works in close proximity
to all staff members and is involved in all
significant decisions. Our NEDs are regular
visitors to the office and keep abreast of
transactions, financing and other corporate
activity through discussions with the Senior
Leadership Team.
We encourage staff to behave in an open,
honest and respectful way in a collaborative
and supportive environment that allows each
individual to thrive and develop whilst delivering
our strategy.
Chair’s
introduction
Board leadership and company purpose
Patrick Vaughan
Chair
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LondonMetric Property Plc Annual Report and Accounts 2023
We believe our culture is a key strength that
has enabled us to perform well despite the
economic challenges we have faced, and we
are proud of our high staff retention rates
and contented workforce, as demonstrated
by our employee engagement scores.
Staff understand and support our strategy and
are focused on delivering it.
Read more on Our cultural framework on page 112
Our stakeholder relationships are critical to
our longer term success and our investment,
asset management and development teams
have a continuous dialogue with a wide range
of stakeholders and have built very strong
relationships with them. This strength enables
us to capture growth and deliver financial
returns in an increasingly sustainable way.
Whilst the Board’s direct engagement is with
shareholders and employees, we have oversight
of the wider team’s relationships with occupiers,
suppliers and the communities within which
we operate.
This is set out on pages 63 to 75 along with the
feedback received and any resulting outcomes
Shareholder engagement is led by the
Executive Directors and we are proud of the
comprehensive programme they maintain.
This has been strengthened this year by the
attendance of Robert Fowlds, our Senior
Independent Director, at six meetings and
investor conferences.
Our strong banking relationships helped us
secure a new £275 million sustainability-
linked debt facility in the year and lengthen
the maturity on a further £400 million of
debt facilities, such that we have considerably
reduced our refinancing risk. We have also
mitigated our exposure to rising interest rates by
purchasing £225 million of interest rate swaps at
an average rate of 2.52%, which has increased
the proportion of debt hedged as at the year
end to 93%.
Diversity and inclusion
We recognise that a diverse organisation brings
a wide range of perspectives to the table, and
therefore look to employ and retain individuals
with a range of skills, expertise and beliefs, and
to operate in a working environment that is free
of discrimination and bias.
We continue to support initiatives including Real
Estate Balance, to promote gender diversity
in the real estate sector and the FTSE Women
Leader’s target of 40% female representation
on the Board. We are mindful of the new
Listing Rule requirements on Board diversity
and meet one of the three targets that at least
one Board member is from an ethnic minority
background. Female representation on the
Board progressed from 30% throughout the
year from the last AGM, to 36% at the year
end and 33% following the 2023 AGM. We are
committed to improving this to the extent that
we have the opportunity. Robert Fowlds will be
stepping down as SID in September and we will
replace him with one of our current female Non
Executive Directors.
Read more in the Nomination Committee report on
page 124
Remuneration Policy
The Remuneration Committee’s focus
this year was to review and update our
Remuneration Policy for Executive Directors
with the assistance of our advisors PwC and
ahead of the shareholder vote at the 2023
AGM. Robert Fowlds as Chair consulted with
22 major shareholders representing 63% of
the Company’s share capital as well as the
Investment Association and proxy agencies.
Key issues raised by shareholders were taken
into consideration and the final proposed Policy
was amended accordingly. We believe the new
Policy continues to fairly reward and incentivise
the Executive Directors whilst aligning with the
interests of shareholders and complying with
the Code.
Read more on new Remuneration Policy on
page 144
Internal Board evaluation
Our performance evaluation follows a three
year cycle and this year it was undertaken
internally. I am pleased to report that the
Board and its Committees continue to
operate effectively, in an open and supportive
environment with the right balance of skills and
knowledge to carry out their duties and support
the business. I would like to thank my fellow
Board members for their continued support
and for the valuable contribution they make.
Next year’s review will be externally facilitated in
accordance with the Code’s recommendations.
Read more on Board performance
evaluation on page 130
Our ESG journey
We continue to see our stakeholders,
particularly our investors, elevate the
importance of ESG in their decision making.
Our strategy continues to embed responsible
practices into our day to day activities in order
to create resilience in our portfolio and progress
our Net Zero Carbon ambitions, which are
discussed in detail on page 36.
We continue to assist our occupiers by
providing buildings that can meet their net
zero targets and seek to reduce emissions from
our developments.
The Board fully understands the increasing
importance of ESG and has committed to
holding a separate meeting each year to focus
on our ESG journey, targets and progress.
This year the meeting was held in February and
was led by the Head of Investor Relations and
Sustainability and the Strategy Director.
We strive to maintain and improve the clarity
of our reporting to you and are once again
proud to have achieved EPRA Gold Awards for
both our sustainability and financial reporting
last year.
Read more in the Responsible Business and ESG
review on page 54
Looking ahead
We continue to focus on the resilience of our
business to the current economic and political
uncertainties, most particularly the challenges
of higher inflation and interest rates and the
impact these are having on the UK property
market. This has had a major adverse effect on
our property values but not to our profitability
or high level of property occupation. We believe
these will continue and values will respond in
our favour as interest rates return to normal.
Our clear strategy is to maintain a strong
balance sheet to allow us to navigate these
challenging times and make the right decisions.
I would like to take this opportunity to thank
my fellow Board members for their tireless
dedication and support over the long period
that I have presided and wish Alistair every
success in his new role as your Chair.
Patrick Vaughan
Chair
24 May 2023
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Left to right: Andrew Livingston, Suzanne Avery, Patrick Vaughan, Andrew Jones, Robert Fowlds
Board leadership and company purpose
Board of Directors
Patrick Vaughan
Chair of the Board and
Nomination Committee
Appointed: 13 January 2010
Retires from the Board: 11 July 2023
Patrick has been involved in the UK property
market since 1970. He was a co-founder and CEO
of Arlington, of Pillar, and of London & Stamford,
leading all three of the companies to successful
listings on the FTSE main market. Upon completion
of London & Stamford’s merger with Metric in
January 2013, he was appointed Chair, becoming
Non Executive Chair on 1 October 2014. Patrick also
served as an Executive Director of British Land 2005
to 2006, following its acquisition of Pillar.
Other appointments: None
Andrew Jones
Chief Executive
Appointed: 25 January 2013
Andrew was a co-founder and CEO of Metric from
its inception in March 2010 until its merger with
London & Stamford in January 2013. On completion
of the merger, Andrew became Chief Executive of
LondonMetric. Andrew was previously Executive
Director and Head of Retail at British Land.
Andrew joined British Land in 2005 following
the acquisition of Pillar where he served on the
main Board.
Other appointments: Non Executive Director of
Instavolt Limited.
Martin McGann
Finance Director
Appointed: 13 January 2010
Martin joined London & Stamford as Finance
Director in September 2008 until its merger with
Metric in January 2013, when he became Finance
Director of LondonMetric. Between 2005 and
2008, Martin was a Director of Kandahar Real
Estate. From 2002 to 2005 Martin worked for Pillar,
latterly as Finance Director. Prior to joining Pillar,
Martin was Finance Director of the Strategic Rail
Authority. Martin is a qualified Chartered Accountant,
having trained and qualified with Deloitte.
Other appointments: None
Robert Fowlds
Senior Independent
Director and Chair of
Remuneration Committee
Appointed: 31 January 2019
Robert was appointed to the Board in January
2019. He has 40 years’ experience in real estate
and finance and is a Chartered Surveyor. He was
head of real estate investment banking at J.P.
Morgan Cazenove until retiring in 2015 and, prior
to joining J P Morgan Cazenove in 2006, an
equity analyst at Merrill Lynch and Dresdner
Kleinwort Benson.
Other appointments: Member of the Supervisory
Board of Klepierre S.A.
Alistair Elliott
Independent Director
Appointed: 26 May 2022
Becomes Board and Nomination
Committee Chair: 11 July 2023
Alistair was appointed to the Board on 26 May
2022. He was previously Senior Partner and Chair
of the Knight Frank Group Executive Board, where
he drove the group’s global strategy. Alistair has
also previously been Vice Chair and Trustee of
LandAid, a member of the BPF Policy Committee
and the real estate representative of the Professional
and Business Services Council, Chairman of the
Office Agents Society and Chair of the Property
Advisors Forum.
Other appointments: Member of the Prince’s
Council and Chairman of The Commercial
Property and Development Committee for the
Duchy of Cornwall. Council member for the
Duchy of Lancaster. Non Executive Director to
the Board of Grosvenor Great Britain and Ireland.
A N R
Committee membership
A
Audit Committee
N
Nomination Committee
R
Remuneration
Committee
Committee Chair
Committee
member
The Board is made up of a group of talented
individuals with wide-ranging commercial
experience from a range of industries
and sectors.
N
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Left to right: Andrew Livingston, Suzanne Avery, Patrick Vaughan, Andrew Jones, Robert Fowlds
Left to right: Rosalyn Wilton, Suzy Neubert, Martin McGann, Alistair Elliott, James Dean, Katerina Patmore
Andrew Livingston
Independent Director
Appointed: 31 May 2016
Andrew was appointed to the Board in May 2016.
In April 2018, Andrew was appointed Chief Executive
of Howden Joinery Group Plc, having been the Chief
Executive of Screwfix since 2013 and previously
their Commercial and Ecommerce Director from
2009 to 2013. Before joining Screwfix, Andrew was
Commercial Director at Wyevale Garden Centres
between 2006 and 2008 and then Chief Operating
Officer between 2008 and 2009. Andrew has
worked previously at Marks & Spencer, CSC Index
and B&Q where he was Showroom Commercial
Director from 2000 to 2005.
Other appointments: Chief Executive of
Howden Joinery Group Plc and Director of
Vedoneire Limited.
Suzanne Avery
Independent Director
Appointed: 22 March 2018
Suzanne was appointed to the Board in March 2018.
She has over 25 years’ experience in corporate
banking, holding various Managing Director roles
at RBS, including Managing Director of Real Estate
Finance Group & Sustainability, where she was
responsible for REITs, Property Funds and London
based private property companies as well as for the
RBS corporate bank sustainability strategy.
Other appointments: Church Commissioner and
Chair of the Church Commissioners Property
Group, senior advisor to Centrus Advisors,
Non Executive Director of Richmond Housing
Partnership Limited, and Deputy Chair of Real
Estate Balance.
Katerina Patmore (Kitty)
Independent Director
Appointed: 28 January 2021
Becomes Audit Committee Chair: 24 May 2023
Kitty was appointed to the Board in January 2021,
joining as part of the Company’s Audit Committee.
Kitty is Chief Financial Officer of Harworth Group plc
and has 16 years of finance, banking and real estate
lending experience drawn from roles at Harwood,
DRC Capital and Barclays Bank PLC. She was also
formerly a National Director of the Investment
Property Forum.
Other appointments: Chief Financial Officer of
Harworth Group plc.
James Dean
Director
Appointed: 29 July 2010
James was appointed to the Board in July 2010. He is
a Chartered Surveyor and has worked with Savills plc
since 1973, serving as a Director from 1988 to 1999.
Other appointments: Non Executive Director of
Capsicum Holdings Ltd and Chair of London &
Lincoln Properties Ltd and Patrick Dean Ltd.
N R
A N R
A
Rosalyn Wilton
Independent Director and
Chair of Audit Committee
Appointed: 25 March 2014
Retires from the Board: 24 May 2023
Rosalyn was appointed to the Board in March
2014, becoming Chair of the Audit Committee
in March 2015. She has held a number of non
executive directorship positions, including with AXA
UK Limited where she acted as Chair of the Risk
Committee, and Optos Plc, where she was Chair
of Remuneration. She has previously served as
Senior Advisor to 3i Investments and Providence
Equity Partners, Chair of Ipreo Holdings LLC, and has
previously worked for Reuters Group where she was
a member of the Executive Committee. Until March
2022, Rosalyn was Trustee and Vice Chair of the
Harris Federation and Chair of Governors of Harris
Academy Bromley.
Other appointments: Independent Trustee,
Deputy Chair and Chair of Finance of the
University of London.
R
A
Suzy Neubert
Independent Director
Appointed: 29 March 2023
Joins the Audit Committee: 24 May 2023
Suzy was appointed to the Board on 29 March 2023
and became a member of the Audit Committee on
24 May 2023. She has extensive capital markets
and financial services experience as both Executive
and Non Executive Director. Her Executive Director
roles have included Managing Director of Equities
at Merrill Lynch followed by 14 years as Global
head of sales & marketing at J O Hambro Capital
Management. Suzy previously held the position of
Senior Independent Director of Witan Investment
Trust, having recently retired.
Other appointments: Non Executive Director
of Jupiter Fund Management plc, Non Executive
Director of LV= and Non Executive Director of Isio
Topco Limited the pensions & actuarial firm.
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Andrew Jones
Chief Executive
Read Andrew’s full biography on page 108
A
I
F
Martin McGann
Finance Director
Read Martin’s full biography on page 108
F
I
A
Valentine Beresford
Investment Director
Joined: 25 January 2013
Skills and experience: Valentine was co-founder and
Investment Director of Metric from its inception in
March 2010 until its merger with London & Stamford
in January 2013. Prior to setting up Metric, Valentine
was on the Executive Committee of British Land
and was responsible for all their European retail
developments and investments. Valentine joined
British Land in July 2005, following the acquisition
of Pillar, where he also served on the Board as
Investment Director.
Mark Stirling
Asset Director
Joined: 25 January 2013
Skills and experience: Mark was co-founder and
Asset Management Director of Metric from its
inception in March 2010 until its merger with London
& Stamford in January 2013. Prior to the setting up
of Metric, Mark was on the Executive Committee of
British Land and as Asset Management Director was
responsible for the planning, development and asset
management of the retail portfolio. Mark joined
British Land in July 2005 following the acquisition of
Pillar where he was Managing Director of Pillar Retail
Parks Limited from 2002 until 2005.
Board leadership and company purpose
Management team
A
Staff
wellbeing
Risk &
mitigation
Acquisitions
& disposals
Asset
management,
development
& valuation
Cash flow,
liquidity, debt
Financial
forecasts
and results
Responsibilities of the Senior Leadership Team
The Board delegates the execution
of the Company’s strategy and day
to day running of the business to the
Senior Leadership Team which
operates under the direction and
leadership of the Chief Executive.
The team comprises departmental heads from
all key business functions with a diverse range
of skills and experience and meets regularly to
discuss the key operational and financial aspects
integral to the management of the business
including the evolution of strategy, risk, financial
and operating targets and performance,
investment opportunities, allocation of capital
and employee matters.
Regular meetings facilitate talent development
below Board level and promote the culture
and values of the business, as key messages
and decisions are fed down from departmental
heads to the wider workforce.
There are informal meetings at other times
and due to the size of the organisation, the
Executive Directors and Senior Leadership
Team are involved in all significant business
discussions and decisions.
The Senior Leadership Team is supported
by three sub-committees, each focusing on
different areas of the business: the Investment,
Asset Management and Finance Committees,
which meet regularly.
25%
Female representation
(excluding Executive Directors)
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Governance
Committee membership
A
Asset Management Committee
I
Investment Committee
F
Finance Committee
Andrew Smith
Strategy Director
Joined: 6 May 2014
Skills and experience: Andrew joined LondonMetric
in May 2014 from British Land where he worked
for nine years. Previously Andrew worked for
Pillar. At British Land he was a senior member of
the retail team and Head of Investment Portfolio
Management. Since joining LondonMetric,
Andrew has been responsible for the
development of the Company’s strategy as well as
portfolio management.
A
I
Will Evers
Head of Long Income
Joined: 17 May 2010
Skills and experience: Will joined Metric from
inception in 2010 having previously worked
at LaSalle Investment Management and Bear
Stearns. Will’s primary focus is to source and
execute investment opportunities whilst having
responsibility for the portfolio management and
performance of the long income and retail portfolio.
Ritesh Patel
Corporate Finance
Joined: 21 November 2011
Skills and experience: Ritesh is a Chartered
Accountant and joined London & Stamford in 2011
having previously qualified with BDO LLP. Ritesh is
an integral part of the banking and corporate finance
team and is also responsible for the corporate
forecasting model.
F
F
F
I
F
Jackie Jessop
Head of Finance
Joined: 1 March 2006
Skills and experience: Jackie joined London &
Stamford as Financial Controller on its inception
in 2006 having worked previously for Pillar as
Financial Controller. She became Head of Finance at
LondonMetric in 2013. Jackie is a qualified Chartered
Accountant and is responsible for all aspects of
financial management and reporting.
Gareth Price
Head of Investor Relations
and Sustainability
Joined: 5 January 2015
Skills and experience: Gareth joined LondonMetric
in 2015 having previously worked in corporate
broking at Cantor Fitzgerald and Oriel Securities.
He supports the Executive Directors at shareholder
roadshows and events and also heads our
Responsible Business and Sustainability team.
Jadzia Duzniak
Company Secretary
Joined: 23 April 2007
Skills and experience: Jadzia joined London &
Stamford in 2007 prior to its IPO and became
Company Secretary on merger with Metric in
2013. Jadzia is a qualified Chartered Accountant
and her role extends to corporate finance, banking
arrangements and transactions.
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Board leadership and company purpose
We are a small and highly focused
team with strong real estate and
financial expertise. We strive to
operate in an open, honest and
respectful manner, listening and
engaging with stakeholders and
acting with integrity to deliver our
strategic objectives.
We believe in open and collaborative
communication and a ‘can do’
attitude, doing the right thing for the
long term, through empowerment,
inclusion, openness and teamwork.
Our purpose sets out to employees, occupiers
and other stakeholders what we do and why.
It is documented on page 1 and underpins our
strategic priorities and long term direction set by
the Board, and guides our decision making.
Our values articulate what we believe in and
drive desired behaviours and our underlying
approach to doing business. Our values are
embedded into our everyday practices by the
direct involvement of the Executive Directors
and Senior Leadership Team, who lead by
example and demonstrate the behaviour that
underpins our culture, which can be broadly
defined as:
• Operating with honesty, integrity and
respect for the people we work and
interact with;
• Working together in an environment
characterised by openness, trust
and fairness;
• Empowering and trusting our employees to
take responsibility and make decisions; and
• Promoting diversity and inclusion
throughout the organisation and the equality
of progression and reward.
Our culture embodies our values and guides the
way we work and interact with each other and
our stakeholders. It drives the right behaviours
and is therefore key to our long term success.
We believe our culture is a key strength that
has enabled us to perform well despite the
economic challenges we have faced this
past year, and we are proud of our high staff
retention rates and contented workforce, as
demonstrated by our employee engagement
scores. Staff understand and support our
strategy and are focused on delivering it.
You can read more on our
values and culture on page 66
Promote
diversity
throughout the
organisation
and the equality
of opportunities
Work together in
an environment
characterised by
openness, trust
and fairness
Our
behaviours
Operate with
honesty, integrity
and respect
for the people
we work and
interact with
The way we work
Trusting our
employees
to take
responsibility and
make decisions
EmpowermentOur values InclusionWhat we believe in Openness Teamwork
Our strategy
How we achieve
this through our
strategic priorities
Own Manage Collaborate Generate
Our Purpose What we do and why
To own and manage desirable real estate that meets occupiers' demands,
delivers reliable, repetitive and growing income-led returns and outperforms
over the long term
Read more
on page 1
Read more
on page 14
Read more
on page 66
Our cultural
framework
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Board leadership and company purpose
How the Board monitors culture
Our Board and Senior Leadership Team
recognise that the culture within the Company
is set from the top and is demonstrated by the
way in which they conduct themselves.
Our culture is not a set of rules but desired
behaviours that we seek to demonstrate
through leading by example. The Chair is
responsible for setting this tone from the top
and fostering the culture and values of the
Board and wider organisation. When hosting
Board meetings, he facilitates a collaborative
atmosphere in which all Directors are able
to voice their opinions and contribute to the
debate and no one individual dominates.
The ability for Board members to speak freely
in a supportive environment is crucial for
effective decision making. This culture and
thinking permeates throughout the organisation
through the close interaction of the Executive
Directors and Senior Leadership Team in day
to day activities, who lead by example and
demonstrate the behaviours that underpin
our culture. The close proximity between the
Board and small workforce makes it easier for
the Board to engage with staff and monitor the
culture in a way that is much more difficult for
larger companies. Our NEDs are regular visitors
to the office and keep abreast of transactions,
financing and other corporate activity.
A key objective for the Board is to monitor our
culture and address any instances of where it is
concerned that policy, practices or behaviour are
not in line with the Company purpose, values
or strategy. In such cases, the Board would seek
assurance from the Senior Leadership Team
that it has taken corrective action. There were
no concerns raised in this regard in the year.
Our size, being only 35 employees and the
regularity of Board interaction with employees,
facilitates the monitoring of culture and
implementation of our values, which we do in a
number of ways as follows:
• Inclusion of culture and value-led questions
within our annual employee survey;
• Regular face to face engagement with
employees through the annual designated
workforce NED meeting, attendance at
Board and Committee meetings and at
Board site visits as well as ad hoc interaction
in the office;
• Regular reporting and feedback from
the Executive Directors and designated
workforce NED following staff surveys
and the annual designated workforce NED
meeting, highlighting what we do well and
where improvements can be made;
• Involvement of staff in the induction and
training sessions for new Board members
which followed the appointment of Suzy
Neubert as a new Non Executive Director;
Read more on page 127
• Annual one-to-one staff appraisals
undertaken by the Executive Directors and
Senior Leadership Team members provide
the opportunity to freely discuss career
progression, training and development and
wellbeing and to reflect on and reinforce
desired behaviours, as well as providing a
forum for staff to raise issues and concerns;
• Feedback from other stakeholder
engagement programmes including our
annual occupier survey help the Board
assess how our behaviours are embedded
into the way we do business; and
• Monitoring of staff turnover rates, whistleblowing
and health and safety incidents.
With the pandemic and enforced periods of
home working thankfully behind us, we have
successfully returned our operations to the
office for all staff, whilst learning from the
positive changes made to practices as a result
of the pandemic, including the ability to work
flexibly from home when it is best for the
business, most productive and for the wellbeing
of our staff, and the widespread use of virtual
meeting platforms. We do not believe in a
companywide work from home policy as we
recognise the incredible value of collaborating
together, innovating together, and working
together, especially for employees who are
at the beginning of their career and at the
transactional end of our business. We firmly
believe that we are better together in an office
environment that facilitates better sharing of
ideas, creativity and collaboration.
The Board believes that we continue to retain
a highly motivated and engaged team that
demonstrate our desired behaviours. However,
they continue to look for opportunities to
strengthen our culture and drive our values,
which this year included the following action
points following the results of the annual
staff survey:
• Retain a working arrangement to best
accommodate team working and
collaboration alongside flexibility where it is
good for the business;
• Take specific feedback into account when
reorganising the office space next year,
including stand-up desks and more quiet
areas; and
• Promote and encourage training and
development opportunities.
Read more on People on pages 66 to 68
Read more on work of the designated workforce
NED on page 69
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Governance
Board leadership and company purpose
How the Board monitors culture
continued
The Board continues to monitor the culture of the
Company through a variety of ways including consideration
of the following key indicators and feedback:
94%
Feel proud to work for the Company
97%
Employee engagement with 33
responses received
Results of the annual
employee survey
85%
Agree there is a strong culture of
teamwork and collaboration
6%
Average staff turnover since merger
Low staff
turnover rate
Strong promoter
score
8/10
Recommending LondonMetric as a
place to work
Involvement of senior
managers in the induction
and training sessions for
new Board members
Learn more on page 127
Learn more on page 68
Whistleblowing
incidents
None
Words employees
used to describe
LondonMetric
“Agile”
“Teamwork”
“Successful”
“Entrepreneurial”
“Supportive”
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Governance
Board leadership and company purpose
The work of the Board in 2023
The Board attended six scheduled meetings during the year to discharge its
duties and regularly received briefing papers to consider significant transactions.
The Board has oversight of property acquisitions and disposals and approved
all transactions over £10 million.
A summary timeline of key events is provided below and further detail
on matters considered, decisions made and resulting outcomes is set out
in the table on pages 116 to 117.
The Board
in action
12 April 2022
2022 Q3 dividend payable to shareholders
on the register on 11 March 2022
26 May 2022
2022 full year
results announcement
May 2022 and June 2022
Full year roadshow in the UK and US (New York and
Boston) led by the Executive Directors and Head of
Investor Relations. Robert Fowlds attended six meetings
20 July 2022
Robert Fowlds (SID) visited six sites in Bedford
and Luton accompanied by the Asset Director
and two senior managers
13 July 2022
First in person AGM since 2019
2022 Q4 dividend paid
23 November 2022
2023 half year results announcement
18 October 2022
Alistair Elliott visited six sites in Birmingham and
Coventry accompanied by the Asset Director and
two members of the Asset Management team
December 2022
The Executive Directors and Head of Investor
Relations met with investors following the half
year results announcement, including an overseas
roadshow in Holland
26 January 2023
Company announced that Patrick Vaughan will step
down as Chair of the Board and Nomination Committee
on 11 July 2023 and be succeeded by Alistair Elliott
8 February 2023
Dedicated ESG meeting held by the Audit Committee and led by the
Strategy Director and Head of Investor Relations and Sustainability
Deloitte presented their annual corporate governance update to the
Board and finance team
28 March 2023
Remuneration Committee
recommended to the Board
the new Remuneration Policy
following an extensive shareholder
consultation process
2.2p per share
10 January 2023
2023 Q2 dividend paid
2.3p per share
29 March 2023
Suzy Neubert appointed
as a Non Executive Director
2.3p per share
7 October 2022
2023 Q1 dividend paid
2.65p per share
2022
2023
c.240 investor meetings in the year
12 September 2022
Suzanne Avery and Alistair Elliott visited four
sites in Bedford, Luton, Hertford and Hemel
Hempstead accompanied by the Asset Director
and three senior managers
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Board leadership and company purpose
The Board in action
continued
£393m
transactions approved
c.240
investor meetings and
conferences in the year
6%
Average staff turnover
over the last ten years
Strategy & Operations
Matters considered Decisions made and outcomes
Strategy was discussed at each
meeting, led by the CEO and
in-depth at three off site lunches
which were also attended by the
Investment, Asset and Strategy
Directors. Particular focus and
debate this year on the impact
inflation and interest rate increases
were having on the investment and
occupier markets and whether
there was a need for any changes
to strategy.
Hybrid model of logistics and long
income retained.
Focus on income progression and
asset management.
Focus on financing strategy to
mitigate against interest rate and
refinancing risk.
Focus on disposals to manage LTV.
Considered the capital allocation
for investment acquisitions and
developments, taking into
consideration property yields,
uncertainty in the investment
market and the impact on gearing
levels.
Approved acquisitions and
disposals over £10m including the
sale of our distribution warehouse
in Reading for £60.6m and forward
funded investments in Leicester
and Uckfield.
Approved total disposals of £273m
and acquisitions of £120m.
Property tours arranged for three
Non Executive Directors to
accompany the Asset Director and
members of the Asset
Management and Development
teams.
16 sites were visited across
Birmingham, Bedfordshire and
Hertfordshire and two sites in
London covering logistics, long
income, trade and development
assets.
Governance, Leadership & Regulatory
Matters considered Decisions made and outcomes
Appointed Russell Reynolds to
assist in the search for a new Non
Executive Director and Chair of the
Board, with particular focus on
Board diversity.
Appointment of Alistair Elliott as
Chair from July 2023.
Appointment of Suzy Neubert as
NED in March 2023.
Participated in the annual
performance review of the Board
and its Committees led by the
Nomination Committee, and
evaluated the results.
Concluded that the Board and its
Committees continue to operate
effectively and recommendations
made will be considered and an
update provided next year.
The Audit Committee led the
external audit tender process
in line with best practice
recommendations.
Invited four firms to participate and
received reports and presentations
from Deloitte and BDO, following
which a recommendation was
made to the Board to reappoint
Deloitte as external auditor for the
next financial year.
36%
Female representation
at 31 March 2023
70%
Independent at 31 March 2023
£275m
new debt to mitigate
refinancing risk
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Governance
Finance & Risk
Matters considered Decisions made and outcomes
Considered the Group’s financing
arrangements, focusing on debt
maturity, hedging and the optimal
level of gearing, which included
input from external advisors
Chatham Financial and a paper
from the Finance Director on
hedging options and cost.
Approved the refinancing of shorter
term debt facilities with a new
£275m RCF to mitigate refinancing
risk.
Approved the purchase of £225m
interest rate swaps at a cost of £15m
to mitigate exposure to rising
interest rates.
Managed LTV through disposals.
Attended meetings with
independent valuers’ and Deloitte
to scrutinise the interim and annual
property valuations included in the
half year and full year results.
Approved the half year and full year
results announcements and Annual
Report.
The Audit Committee reviewed the
internal control framework and risk
register and also considered cyber
security and tenant covenants
The Audit Committee received a
paper setting out the processes
undertaken to support the Board's
governance statements
Concluded that the risk
management system continues to
be effective and the internal control
framework is sound.
Approved the Board statements on
S172 viability, going concern and
whether the Annual Report is fair,
balanced and understandable.
In addition to the specific work of the Board
noted, regular matters are discussed at each
meeting including:
• Property investment market yields and trends in light
of economic and political uncertainties including rising
inflation and interest rates
• Quarterly performance against budgets and
analyst consensus
• Rolling three year financial forecasts, liquidity and
banking covenants
• Risk dashboard and emerging risks
• Quarterly dividend, scrip and PID
People & Stakeholders
Matters considered Decisions made and outcomes
Continued to monitor culture by
considering the results of the
annual staff survey and report from
the designated workforce NED
following his annual roundtable
with a small group of employees,
which was attended by the
Remuneration Committee Chair to
welcome questions and explain
the components and
determination of executive pay.
Low staff turnover of 6% on
average over the last ten years and
good survey results, with 94% of
staff feeling proud to work for the
Company, indicating a happy and
motivated workforce.
Feedback received has led to action
points as discussed on page 113.
Attendance at Board and
Committee meetings and
presentations given by members
of the Senior Leadership Team and
wider organisation.
Wider viewpoints encouraged.
Promotes increased interface with
NEDs and staff development and
progression.
Annual presentation from
members of the Senior Leadership
and Development Teams on the
Company’s ESG journey in
response to increasing regulation
and investor focus.
Progress against targets and
ambitions will be reviewed at a
separate dedicated meeting of the
Audit Committee on an annual
basis going forward.
Shareholder consultation exercise
to consider the new Remuneration
Policy proposals.
Remuneration Committee
considered feedback and revised
the final Policy which was
recommended to the Board.
Remuneration Committee
considered wider workforce pay and
alignment to Executive Directors.
Agreed Directors’ pay increases in
line with the workforce average of
4.2%.
Feedback from shareholder
roadshows, meetings and
presentations was provided by the
Executive Directors who have met
with 241 investors in the year.
The SID also attended six meetings
and conferences and fed back to
the Board.
An important and extensive
investor liaison programme
continues to be followed and
feedback received, including ESG
and diversity considerations, is
instrumental to future decision
making both operationally and
from a governance perspective.
Considered feedback from the
2022 occupier survey presented
by the Strategy Director.
Satisfaction score was consistent
with the previous year but fewer
responses were received.
Environmental focus had increased
and asset managers are pursuing
green initiatives in partnership with
occupiers.
2023 occupier survey results were
strong with on average 8.7 out of
10.0 recommending LondonMetric
as a landlord as reported on page 65.
Key focus in 2024
• Continue work on Board diversity
and replacement of SID
• Continued focus on ESG journey
• External Board and Committee
performance evaluation
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Governance
Board leadership and company purpose
Companies Act 2006
Section 172 Statement
The Board of Directors can confirm that during the year ended 31 March 2023 they have, both individually and collectively, acted in a way that they
consider in good faith would be most likely to promote the long term success of the Company for the benefit of its members as a whole, having regard
to the matters set out in S172(1)(a) to (f) of the Companies Act 2006. We set out in the table below how we have considered each of the requirements
of S172 with references to further reading.
S172 matter Board consideration Further reading
1(a)
The likely consequences
of decisions in the long
term
The Board sets the Company’s purpose, which is to own desirable real estate that outperforms over
the long term. It oversees management’s execution of strategy to deliver this and reviews progress
against targets at each Board meeting.
As a REIT we hold assets for long term income generation and maintain a covered dividend.
We seek to improve and enhance our properties through asset management and development
actions, with particular focus on environmental considerations. Our average lease length is 11.9 years.
Our story page 1
Chief Executive's review page 15
Promoting long term success
page 120
Our strategic priorities page 14
1(b)
The interests of
employees
Our small team of 35 employees is critical to the successful delivery of strategy and we strive to
ensure they are motivated, happy and engaged.
We are supporting one female graduate through an apprenticeship programme to study for her
Masters in Real Estate Management, and actively encourage staff development and training, which
this year has included specific real estate financial modelling training and ESG workshops.
People page 66
2023 staff survey page 68
1(c)
Fostering the Company’s
relationships with
suppliers, customers
and others
Our occupiers are at the heart of our core purpose and, being a small team, we are reliant on our
suppliers and advisors to help deliver our plans. Our proactive engagement allows us to build strong
relationships and we listen and try to assist tenants in need. We treat our suppliers fairly ensuring
prompt settlement of their invoices.
Our latest occupier survey was undertaken in March 2023 and we received responses from 71
occupiers representing 46% of rent.
Occupiers page 64
2023 occupier survey page 65
1(d)
The impact of the
Company’s operations on
the community and the
environment
In February, the Board received an ESG update from members of the Senior Leadership and
Development teams which focused on our Net Zero pathway, responsible development and ESG
measurement against industry standards.
The Responsible Business Working Group is headed by the Finance Director, meets monthly and has
approved charitable giving of £104,000 this year.
We have introduced an ESG key performance indicator this year which measures the proportion of
the portfolio with an EPC rating of A to C.
Communities page 74
TCFD page 77
ESG key performance indicator
page 112
1(e)
The Company’s
reputation and
maintaining high
standards of
business conduct
Our values set the standards of conduct and desired behaviours of staff and we lead by example from
the top.
Companywide training on anti-money laundering, market abuse, whistleblowing, conduct and ethics
was provided to all staff in the year to ensure these matters are taken into consideration when making
decisions.
We are proud to be a FTSE4Good business.
Our cultural framework page 112
GRESB page 55
FTSE4Good page 55
1(f)
The need to act fairly as
between members of the
Company
The Board, through the Executive Directors, embraces an open and constructive dialogue with
shareholders and is proud of its active engagement programme, which this year consisted of
c.240 meetings and presentations. The Remuneration Committee Chair consulted on the new
Remuneration Policy proposals with 22 major shareholders representing 63% of our issued share
capital as well as the Investment Association and proxy voting agencies ISS and Glass Lewis.
Investors page 72
Directors' Remuneration Policy
page 144
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Governance
Our stakeholders
Throughout this report we set out our key
stakeholders as our people, our occupiers, our
investors, our contractors and suppliers, and our
communities. Their importance to our business
strategy and long term success is described on
pages 63 to 76.
We believe that in order to generate value
and long term sustainable returns we need to
understand the views and take account of what
is important to our key stakeholders, through
building and nurturing the relationships we have
with them. We do this through effective and
proactive engagement.
Read more on our stakeholders from page 63
Stakeholder engagement
Engagement with stakeholders is both at
Board level, principally with employees
and shareholders, and through dedicated
management teams who keep the Board fully
apprised of material issues through regular
reports and briefing papers. Methods of
engagement include one to one meetings and
roadshows both face to face and through virtual
platforms, regular liaison, formal employee
appraisals and occupier and employee surveys.
We set out on pages 63 to 76 of the Strategic
report details of our stakeholder engagement,
including the methods used, the feedback
gathered and any resulting actions. We set out
below how the Board considered the interests
of stakeholders and the information it received
through engagement when making decisions in
the year.
How stakeholders and feedback from
engagement has influenced Board decisions
We have continued to embed stakeholder
interests into our culture and business
model and nurture the strong relationships
we have built with tenants and suppliers to
provide workable solutions. All significant
Board decisions proposed must demonstrate
that the impact to stakeholders has been
duly considered.
Board and Committee minutes record
the consideration of stakeholders in the
decision making process where relevant, and
an explanation of Directors’ duties under
S172 is provided on induction for all newly
appointed Directors.
Some examples of how the Board has
considered and responded to stakeholder
needs this year are set out below:
1. The Remuneration Committee Chair
consulted with 22 major shareholders
representing 63% of the Company’s share
capital, the Investment Association and
proxy agencies on the proposed new
Remuneration Policy ahead of a shareholder
vote at the 2023 AGM. Key issues raised
relating to bonus deferral, ESG targets and
a dividend cover metric were discussed by
the Committee and with the Company’s
remuneration advisors, PwC. The feedback
received was taken into consideration and
the proposed new policy was amended.
2. In response to shareholder voting at the
2022 AGM and 79.2% of votes received in
favour of the re-election of Patrick Vaughan
as Chair of the Board and Nomination
Committee, we engaged with relevant
shareholders to understand the rationale
for their voting. Having concluded that this
was due to female representation on the
Board falling to below 33% at the AGM and
ongoing concern that the Chair’s tenure
had exceeded nine years we made the
following decisions:
– Appointed Alistair Elliott to succeed Patrick
Vaughan on 11 July 2023;
– Appointed Suzy Neubert as a Non
Executive Director in March 2023,
replacing Ros Wilton who retires from the
Board in May 2023 ; and
– Increased female representation on the
Board to 36% as at the year end and 33%
following the AGM.
3. In response to the economic pressures of
rising interest rates, the Board approved
the acquisition of £225 million interest
rate swaps which helped to increase our
proportion of debt hedged at the year end
to 93% and mitigate our exposure to further
interest rate increases on floating rate debt.
4. The Board approved a new £275 million
sustainability-linked loan facility, lengthened
the maturity on £400 million of existing
debt facilities and repaid shorter dated
facilities to protect against refinancing risk
and maintain a healthy debt maturity profile.
Read more in the Financial review page 46
5. The Board spent a significant amount of
time at each meeting reflecting on market
conditions and the outlook and implications
for property transactions and ongoing
strategy, being forever mindful of
shareholder and employee interests.
The following decisions were made:
– A commitment to recycle capital out of
mature and non core assets in order to
protect LTV;
– Disposals totalling £273 million; and
– LTV at the year end was 32.8%.
Read more in the Property review page 32 and the
Financial review page 46
6. The Board's continued focus on the
importance of ESG to stakeholders is
reflected in the following activity undertaken
in the year:
– We completed a 296,000 sq ft
development in Ipswich and achieved
a 50% reduction in carbon emissions.
The development was BREEAM Very
Good and certified EPC 'A' rated. Solar PV
and ten EV chargers were installed;
– We undertook a number of EPC reviews
which, alongside net investment into more
highly rated assets, has led to an increase
in the proportion of assets rated 'A' to 'C',
from 85% last year to 90% this year;
– We installed five solar PV systems in
response to increased occupier interest
and rising energy costs; and
– We partnered with Motor Fuel Group and
Instavolt and plan to install EV charging
across a number of our long income sites.
7. In response to the cost of living crisis, the
Board approved one off payments to some
of our employees.
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Governance
The Board has a regular schedule of meetings,
timed around the financial calendar, together
with further ad hoc meetings as required to deal
with transactional, routine or administrative
matters. The Company Secretary maintains a
rolling agenda for the Board and its Committees
and, in consultation with the Chair, she ensures
agenda items cover the schedule of matters
reserved for the Board, compliance with the
Code and other regulatory requirements.
All Directors are expected to attend all meetings
of the Board and of the Committees on which
they serve, and to devote sufficient time to
the Company’s affairs to enable them to fulfil
their duties as Directors. On the rare occasion
that a Director is unable to attend a meeting,
papers will still be provided in advance and their
comments and apologies for absence provided
to the Board prior to the meeting.
Selected members of the Senior Leadership
Team attend Board and Committee meetings
and present on topics of relevance, fostering
talent development below the Board and
bringing fresh ideas and wider perspectives
to discussions. This also promotes the
interaction of Non Executive Directors with
senior managers throughout the organisation.
This year the Strategy Director, Head of
Investor Relations and Sustainability, Head of
Finance and Development managers attended
Committee meetings to present and discuss
relevant operational topics including ESG,
cyber security and the occupier survey results.
In addition, the Investment and Asset Directors
provided valuable transactional updates at
Board meetings and strategy is discussed
at length at offsite Board lunches which are
also attended by the Investment, Asset and
Strategy Directors.
Minutes of all Board and Committee
meetings are circulated to Directors after each
meeting and are included in the next Board
or Committee pack. A detailed action list is
prepared by the Company Secretary, followed
up by management and reviewed at the
next meeting.
Board leadership and company purpose
Board meetings and
attendance during the year
Board Nomination
Committee
Audit
Committee
Remuneration
Committee
Scheduled meetings
6 2 6 5
Number of members
11 4 4 4
Attendance
100% 100% 100% 100%
Member
Appointed
to the Board Independent
Patrick Vaughan 13/1/2010
n/a
Chair
Andrew Jones 25/1/2013
N
Martin McGann 13/1/2010
N
Suzanne Avery 22/3/2018
Y
James Dean 29/7/2010
N
Alistair Elliott 26/5/2022
Y
Robert Fowlds 31/1/2019
Y
Chair
Andrew Livingston 31/5/2016
Y
Suzy Neubert 29/3/2023
Y
Kitty Patmore 28/1/2021
Y
Rosalyn Wilton 25/3/2014
Y
Chair
Promoting long term success
The Board is collectively responsible for the
long term success of the business. Real estate
is an inherently long term cyclical business and
the Board therefore takes a longer term view
when making decisions. Some examples of
this include:
• The Group's financial budgets cover a three
year rolling period;
• The Board discusses the Group's longer term
strategy at each meeting and in-depth at off
site lunches. Through these discussions, the
Board and Senior Leadership Team reviews
the appropriateness of its business model;
• The risk register and dashboard includes
consideration of both short and longer term
emerging risks;
• Alongside our strategic priorities on page 14,
we consider our longer term strategy and
focus for the next year;
• In the year, we increased our longer term debt
funding and repaid shorter dated facilities; and
• We transacted on £393 million of property
assets in the year which promoted the
Company's long term strategy and
value creation.
There has been volatility in investment markets
this year due to the macroeconomic challenges
of higher interest rates and inflation.
Our resilience throughout the global pandemic
and the economic challenges we have faced
this year demonstrates that we have a strong
business model and clear strategic focus to
generate long term sustainable value for our
shareholders and other stakeholders.
Looking ahead, the combination of additional
income from our development programme
and asset management initiatives help to
support sustainable and progressive earnings
and dividends.
Our strategy, activities and financial results are
set out in the Strategic report and our longer
term focus is clearly disclosed alongside each of
our strategic objectives on page 14.
Our long term sustainable growth is evidenced
by the Performance highlights and Key
performance indicators on pages 10 and
30 respectively.
70% Independent
Board members as at 31 March 2023
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Governance
Division of responsibilities
Leadership framework
Investment Committee Asset Management Committee Finance Committee
Chair: Valentine Beresford
• Reviews investment and divestment opportunities and
allocation of capital
• Approves transactions of less than £10 million and
recommends higher value transactions to the Board
Chair: Mark Stirling
• Reviews value enhancing operational activities and
development opportunities
Chair: Martin McGann
• Reviews budgets and forecasts, achievement of targets,
funding requirements and liquidity
• Responsible Business Working Group oversees ESG
workstreams and targets
Board Committees
The Board has three Committees of Non Executive Directors to which it has delegated a number of its responsibilities. The Committees ensure a strong governance framework for decision making
and each operates within defined terms of reference which are reviewed annually. The Chair of each Committee provides a verbal update on the matters discussed at each meeting to the Board.
Chair: Patrick Vaughan
The Board provides leadership and direction to the business,
establishes and fosters the culture, values and ethics within
the organisation and oversees management’s execution of
strategy with appropriate challenge and support.
The work of the Board both complements and supports the
work of the Senior Leadership Team. The Board is made up of
a group of talented individuals with wide-ranging commercial
experience from a range of industries and sectors including
property, finance, banking, capital markets, risk management,
sustainability and retail. Through this diversity, experience
and deep understanding of the business, its culture and its
stakeholders, the Board delivers sustainable value as set out in
the Strategic report.
Chair: Rosalyn Wilton
The Audit Committee has oversight of the Group’s financial
reporting, risk and internal control processes, monitors
the integrity of the financial statements and maintains an
effective relationship with the Group’s external auditor.
• Oversees financial reporting process
• Scrutinises significant judgements made by management
• Monitors effectiveness of risk management systems,
internal control and viability
• Evaluates the external audit process
• Oversees regulatory compliance
Chair: Robert Fowlds
Responsible for determining and implementing a fair
reward structure to incentivise Executive Directors to
deliver the Group’s strategic objectives whilst maintaining
stability in the management of its long term business.
• Determines and implements Remuneration Policy
• Sets remuneration packages and incentives for
Executive Directors and certain members of the Senior
Leadership Team
• Approves annual bonus and LTIP targets and outcomes
• Has oversight of workforce remuneration arrangements
and alignment
Chair: Patrick Vaughan
Responsible for ensuring that the Board and its Committees
have the right balance of skills, knowledge and experience,
having due regard to succession planning and diversity.
• Recommends appointments
• Board composition and succession
• Considers skills and diversity
• Leads performance evaluation
The Board delegates the execution of the Company’s
strategy and day to day running of the business to the Senior
Leadership Team which operates under the direction and
leadership of the Chief Executive. It is supported by three sub-
committees, focusing on different areas of the business.
• Implementation of strategy
• Sets budgets and monitors operational and
financial performance
• Day to day management of the business
• Manage, appraise and develop staff
• Employee remuneration and wellbeing
• Manages allocation of capital
• Identifies and assesses business risks and implements
mitigation strategies
• Responsible Business and ESG workstreams
Board of Directors
Audit Committee Remuneration Committee Nomination Committee
Senior Leadership Team
Management Committees
Read more on page 124Read more on page 139Read more on page 132
Read more on page 110
Read more on Board biographies pages 108 to 109
Read more on The Board in action page 115
Read more on Leadership roles &
responsibilities page 122
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Governance
Division of responsibilities
Leadership roles and responsibilities
The following table sets out the key roles and responsibilities of Board members.
The responsibilities of the Chair, Chief Executive, Senior Independent Director, Board and
Committees are set out in writing and approved by the Board.
Division of responsibilities
The roles of Chair and Chief Executive are
separately held and their responsibilities are
defined in writing and approved by the Board.
There is a clear division of responsibilities
between the Chair, who is responsible
for leading the Board and monitoring its
effectiveness and the Chief Executive, who is
responsible for the day to day management of
the Group and the implementation and delivery
of the Board’s agreed strategic objectives.
The Chair is responsible for ensuring a
constructive working relationship between
Executive and Non Executive Directors and
for encouraging and fostering a culture of
boardroom challenge and debate.
He sets the Board agenda and maintains regular
contact with individual Directors outside of
formal Board meetings, which ensures he is
kept abreast of individual views, any issues
arising and fosters an open and two way
debate about Board, Committee and individual
members’ effectiveness.
During the year, the Chair had regular calls and
lunches with the other Non Executive Directors
to discuss a wide range of business matters
including succession plans, Board appointments
and strategy as well as to assess performance,
often in an informal setting.
Role Responsibilities
Chair
Patrick
Vaughan
• Leads the Board and ensures it operates effectively
• Sets Board culture, style and tone of discussions to promote boardroom debate
and openness
• Promotes Company purpose, values and ethics
• Builds relationships between Executive and Non Executive Directors
• Monitors progress against strategy and performance of the Chief Executive
• As Chair of the Nomination Committee, ensures succession plans are in place
Chief Executive
Andrew Jones
• Manages dialogue and communication with shareholders and key stakeholders
and feeds back views to the Board
• Develops and recommends strategy to the Board and is responsible for
its implementation
• Day to day management of the business operations and personnel assisted by
the Senior Leadership Team
Finance Director
Martin McGann
• Supports the Chief Executive in developing and implementing strategy and
alignment to financial objectives
• Stewardship of financial resources, the ESG agenda, risk management and
internal control
Non Executive
Directors
Suzanne Avery
James Dean
Alistair Elliott
Robert Fowlds
Andrew Livingston
Suzy Neubert
Kitty Patmore
Rosalyn Wilton
• Support and constructively challenge the Executive Directors in determining
and implementing strategy
• Bring independent judgement and scrutiny to decisions recommended by the
Executive Directors and approve decisions reserved for the Board as a whole
• Contribute a broad range of skills and experience
• Monitor delivery of agreed strategy within the risk and control framework set by
the Board
• Review the integrity of financial information and risk management systems
Senior
Independent
Director
Robert Fowlds
• Acts as a sounding board for the Chair and trusted intermediary for the
other Directors
• Available as a communication channel for shareholders if other means are
not appropriate
• Leads performance evaluation of Chair
Designated
Workforce NED
Andrew Livingston
• Liaison with employees and attendance at key employee and business events
• Monitors the results of staff surveys and reports to the Board
• Reviews messages received through the whistleblowing system
Company
Secretary
Jadzia Duzniak
• Advises the Board and is responsible to the Chair on corporate
governance matters
• Ensures good flow of information to the Board, its Committees and
senior management
• Promotes compliance with statutory and regulatory requirements and
Board procedures
• Provides guidance and support to Directors, individually and collectively
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Governance
Non Executive Directors
The Non Executive Directors are a diverse
group with a wide range of business experience
encompassing property, finance, banking,
capital markets, risk management, sustainability
and retail.
They provide a valued role by independently
challenging and scrutinising aspects of
decisions made by the Executive Directors and
monitoring the delivery of the agreed strategy,
adding insight from their varied commercial
backgrounds. Many either currently or have
previously served on other listed boards,
bringing different views and perspectives to
Board debates.
Each of the Non Executive Directors, other than
the Chair and James Dean, is considered by the
Board to be independent from management
and has no commercial or other connection
with the Company. Tenure is measured from
the date of election to the LondonMetric
Board as in previous periods and the Board’s
composition throughout the year met the
Code’s requirement that at least half of its
members, excluding the Chair, are independent
Non Executive Directors. This balance
ensures that no one individual or small
group of individuals dominates the Board’s
decision making.
The Senior Independent Director is Robert
Fowlds. He acts as a sounding board for the
Chair and an intermediary to the other Directors
and shareholders as required. He is available
to meet with shareholders at their request to
address concerns or, if other communication
channels fail, to resolve queries raised.
Although no such requests were received from
shareholders in the year, Robert attended six
investor meetings following the announcement
of results and the half yearly results
presentations to investors. This enabled him
to provide reassurance to the Board that the
feedback provided by the Executive Directors
was reflective of these meetings and noted the
support of the shareholders.
Robert also held a meeting of the Non
Executive Directors, to appraise the
performance of the Chair as part of the annual
performance evaluation.
Non Executive Directors are encouraged to
communicate directly and openly with the
Executive Directors and Senior Leadership
Team between scheduled Board meetings
to enhance their understanding, build
relationships, provide expertise and thereby
contribute to the delivery of strategy. This ad
hoc communication is supplemented by
property visits which provide further
opportunities to engage with employees and
other stakeholders.
This year, Robert Fowlds, Suzanne Avery
and Alistair Elliott accompanied the Asset
Director and senior asset and development
managers to 16 sites in Birmingham,
Bedfordshire and Hertfordshire and two sites
in London. This provided insight into the strong
relationships management have with occupiers
and any issues they may be facing which helps
drive strategy.
Information flow
The Chair, supported by the Company
Secretary, ensures that the Directors receive
clear and timely information on all relevant
matters to enable them to discharge their
responsibilities. Comprehensive reports and
briefing papers are circulated one week prior
to Board and Committee meetings to give
the Directors sufficient time to consider their
content prior to the meeting and to promote
an informed boardroom discussion and debate
and to facilitate robust and informed decision
making. The Board papers contain market,
property, financial, risk and governance updates
as well as other specific papers relating to
agenda items. Specific briefing papers were
provided to the Board and its Committees on
debt refinancing and hedging, the ESG agenda,
cyber security and tenant covenants.
The Board receives other ad hoc papers of a
transactional nature at other times for their
review and approval which are ratified at the
next Board meeting.
How we make decisions
To retain control of key decisions and to ensure
there is a clear division of responsibilities
between the running of the Board and the
running of the business, certain matters are
reserved for the Board’s attention and approval.
These include the approval of strategy,
budgets, financial reports, capital allocation and
dividend policy. In addition, decision making for
acquisitions, disposals and capital expenditure is
delegated according to value.
The delegated authority limits throughout
the business are as follows:
>£10m+
Chief Executive
Board
>£2.5m+
Senior Leadership Team
>£50k+
Department manager
<£50k
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Governance
Composition, succession and evaluation
Nomination Committee report
Much of our time this year
was spent considering
Board succession and
performance, and I am
delighted to welcome
Suzy Neubert as a new
Non Executive Director.
Patrick Vaughan
Nomination Committee Chair
Key responsibilities
Board composition, succession
and appointment
• Review and evaluate the size, structure
and composition of the Board and its
Committees, including the diversity and
balance of skills, knowledge and experience
• Consider succession planning for Directors
• Lead the process for new Board and
Committee appointments and Board and
Committee membership changes
See pages 125 to 128
• Led the search for a new Board Chair
and Non Executive Director to replace
Patrick Vaughan and Rosalyn Wilton,
who had served for nine or more years
and informed the Board of their decision
to retire. Appointed an external search
agency, Russell Reynolds, to assist with
the search and provide a list of suitable
candidates. Considered CVs, interviewed
candidates and recommended the
appointment of Alistair Elliott as Chair,
Suzy Neubert as a new Non Executive
Director, and Kitty Patmore as Audit
Committee Chair
• Led the internal Board and Committee
performance evaluation
• Reviewed its Terms of Reference which
are available on our website
Highlights
this year
Diversity
• Promote the Company’s policy on diversity
at Board and Committee level and
throughout the organisation
See pages 128 to 129
Performance evaluation
• Lead the Board and Committee
performance evaluation exercise
See pages 129 to 131
Election and re-election of Directors
• Assess the time commitment required
from Non Executive Directors and consider
their annual re-election
See page 131
Membership and attendance
The number of Committee members and their attendance during the year was as follows:
Member
Date
appointed
Tenure
(years)
Meetings
attended
Patrick Vaughan (Chair) 1/11/2012 10 2 (2)
Andrew Livingston 19/9/2018 5 2 (2)
Suzanne Avery 31/1/2019 4 2 (2)
Robert Fowlds 28/1/2021 2 2 (2)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2023, rounded to the nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
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Governance
Dear Shareholder,
I am pleased to present the Nomination
Committee’s report for the year to
31 March 2023.
Our work this year has focused on succession
planning for myself as Chair of the Board
and Nomination Committee and for Rosalyn
Wilton, Non Executive Director and Chair of the
Audit Committee.
Having served as Directors for nine or more
years, we had both informed the Board of our
intention to retire once suitable replacements
could be found and I am very pleased to
welcome Suzy Neubert as a Non Executive
Director and to hand over to Alistair Elliott in
July. Details of the search and appointment
process can be found later in this report.
The Committee also led its annual evaluation
of Board and Committee performance, which
this year was undertaken internally as described
on page 129. The findings concluded that
the Board and its Committees continued to
operate to a high standard and work very well
together. I would like to thank my fellow Board
members for their honest and valuable input
to this exercise and their continued hard work
and support.
Looking forward, our focus will be on promoting
diversity in its widest sense both at Board
level and throughout the wider organisation,
as we aspire to meet the new Listing Rule
requirements on diversity.
The Committee will also monitor and facilitate
a smooth handover of my role to Alistair and
will also be replacing Robert Fowlds as Senior
Independent Director with one of our current
female Non Executive Directors.
Role of the Committee
Our role is to ensure the Board and its
Committees continue to have the right
balance of skills, experience and knowledge
to independently carry out their duties and
provide strong and effective leadership to drive
the future success of the Company.
We lead the succession planning process and
ensure that it is properly planned and managed
to maintain stability in the leadership team and
mitigate against business disruption.
Board composition and succession planning
The Committee discusses Board and
Committee composition, size and structure
at each meeting and monitors the tenure
of Directors to ensure it adequately plans
in advance of retirement and facilitates an
orderly succession.
The table on page 120 details the composition
of the Board’s three Committees as at 31 March
2023. Biographies are reflected on pages 108
to 109 and Board diversity is summarised on
page 126.
As noted above, much of the Committee’s
time this year was spent considering Board
succession, as two Directors had served for
nine or more years and had informed the
Board of their intention to retire. We invited
two external search agencies to tender and
appointed Russell Reynolds to assist us with our
search. The detailed appointment and induction
process is described on page 127. As a result
of the search, the Committee recommended
the appointment of Suzy Neubert as a Non
Executive Director on 29 March 2023 and
member of the Audit Committee with effect
from 24 May 2023, and Alistair Elliott as Board
and Nomination Committee Chair with effect
from 11 July 2023.
My tenure as Chair was extended to protect
the stability of the leadership team through the
pandemic and more recently until a suitable
replacement was found. Alistair joined the
Board as a Non Executive Director in May
2022 and, having previously been former
Senior Partner and Group Chair of Knight Frank,
brings a unique combination of property and
managerial skills, and has the right personal
qualities to direct and lead the Board.
Suzy is a qualified barrister by training and has
enjoyed a long and successful career in financial
services and asset management, having
previously been Managing Director of Equities
at Merrill Lynch and Global head of sales &
marketing at J O Hambro Capital Management.
Suzy brings to the Board a wealth of knowledge
and experience of the fund management
industry and capital markets, over ten years’
experience as a board director and has personal
attributes that complement and enhance the
existing skill set of the Board.
Rosalyn continued in her role as Audit
Committee Chair to oversee the year end audit
and financial statements and has stepped down
following the approval of the Annual Report
in May. I would like to take this opportunity
to thank Ros for her valuable contribution to
the Company and excellent leadership of the
Audit Committee.
The Committee has also recommended the
appointment of Kitty Patmore to succeed her
as Chair of the Audit Committee. Being Chief
Financial Officer of Harworth Group plc, and
with over 16 years of finance, banking and
real estate experience, Kitty has the perfect
attributes and skillset for the role.
We are mindful of Provision 10 of the Corporate
Governance Code relating to tenure and
independence as James Dean has also served
on the Board for over ten years. However, James
has continued to serve as a Director in order
to protect the stability of the leadership team
with two Board departures already announced
this year. We believe he continues to exercise
objective and independent judgement and
adds great value to all Board decisions, drawing
on his extensive property expertise. However,
we are mindful of Provision 10 of the Code
and, given the length of his service, will not
be reflecting James as an independent Board
member this year.
We remain fully compliant with the Code's
requirement with 70% independent Board
members at 31 March 2023.
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Governance
Executive succession planning and talent
development
The Committee is responsible for Board
succession, including for the Executive
Directors. The review process includes
considering talent development within the
organisation to create a pipeline to the Board,
as we recognise the need to nurture our own
talent pool and give opportunities to those high
performing middle managers to enable them to
develop and grow into more senior roles.
Below the Board, succession planning is
delegated to the Senior Leadership Team which
includes the Executive Directors, to ensure
we retain and recruit suitable future leaders to
serve as the next generation of Directors and
support the Company’s longer term plans.
Although there are no immediate vacancies
and execution of the Company’s strategy is
not dependent on any one individual, we
recognise the need to develop our internal
talent and to have contingency plans for
unforeseen absences.
Staff appraisals are undertaken on an annual
basis and provide a forum to discuss targets,
progress and future prospects. Regular contact
with Board members is encouraged, both in
and outside of meetings, through presentations,
property tours and on an ad hoc basis to discuss
specific issues. NEDs are regular visitors to
the office and keep abreast of transactions,
financing and other corporate activity through
discussions with staff.
Training needs and requests can be raised
and discussed through the annual appraisal
process or at other times with line managers.
The Company is currently supporting one
female employee through an apprenticeship
programme to study for her Masters in Real
Estate Management, promoting the Real Estate
Balance initiative of developing a female talent
pipeline. The Group’s talent pipeline has been
strengthened this year through the recruitment
of two qualified accountants to support the
corporate finance team.
Composition, succession and evaluation
Nomination Committee report
continued
Board tenure
3 (27%)
2 (18%)
1 (9%)
5 (46%
)
0-3 years
3-6 years
6-9 years
9+ years
Board skills
2
Property
Finance & banking
Risk management
Sustainability
Retail
8 (73%)
6 (55%)
2 (18%)
2 (18%)
1 (19%)
A Balanced Board
1
Board independence
Chai
r
I
ndependent Non
E
xecutive Directors
1 (9%)
O
ther Directors
7 (64%
)
3 (27%
)
Board gender diversity
7 (76%)
4 (36%
)
Male
Female
1 Based on Board composition as at 31 March 2023
2 Some Directors are represented in more than one category in terms of their experience
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Governance
Board appointment
Board appointment
The Nomination Committee is responsible for
identifying and recommending candidates
to fill Board vacancies and leads the selection
process, ensuring it is formal, rigorous
and transparent.
This year, we appointed an executive agency,
Russell Reynolds, to begin the search for an
independent Non Executive Director to replace
Rosalyn Wilton who, having served for almost
nine years, had informed the Board of her
intention to retire once a suitable replacement
could be found.
Russell Reynolds had no former connection
with the Company or its Directors.
Russell Reynolds focus was on diversity, both
gender and ethnicity, and previous board
and committee exposure. From a long list of
excellent candidates produced and reviewed,
five were shortlisted for interview by myself
and the Finance Director, with assistance
from Robert Fowlds as SID, and two were
then invited for a second interview with
the Chief Executive and other Nomination
Committee members.
Suzy was chosen as the preferred candidate and
recommended for appointment by the Board.
Suzy has enjoyed a long and successful career
in financial services and asset management,
having previously been Managing Director
of Equities at Merrill Lynch and Global
head of sales & marketing at J O Hambro
Capital Management.
Suzy brings to the Board a wealth of knowledge
and experience of the fund management
industry and capital markets, over ten years’
experience as a board director and has the right
personal qualities to complement and enhance
the existing skill set of the Board.
Russell Reynolds were also asked to consider
candidates for the position of Chair to compare
to the Board’s preferred internal candidate,
but no suitable candidates were put forward
by them.
On appointment, the Company arranges a
tailored induction programme to help new
Directors develop an understanding of the
business including its strategy, portfolio,
governance framework, stakeholders, finances,
risks and controls.
Appointment process
Appointment of external search
agency, Russell Reynolds
Discussed candidate specification
with agency, with focus on diversity
and board experience, ideally in a
listed environment
Review of potential candidates
by agency
Shortlist of candidates was provided
Initial interviews with Executive
Directors, the Senior Independent
Director and Nomination
Committee members
Final proposal circulated with CV
for consideration
Committee recommends candidate
to the Board
Induction programme organised by
the Finance Director
Proposed election by shareholders at
the first AGM following appointment
1
2
4
5
6
7
8
9
3
Board induction
Key induction events for Suzy included
the following:
• One to one meetings with the Finance
Director, Company Secretary and other
members of the Senior Leadership Team
to discuss:
– the investment portfolio, asset selection,
capital allocation and strategy;
– financial forecasting and reporting
processes, banking and hedging strategy,
risks and internal controls;
– regulatory matters;
– shareholder engagement; and
– our ESG targets and ambitions.
• Provision of past Board and Committee
papers, the Risk Register and Internal Control
Questionnaire, minutes and finance reports
• Guidance and information on annual Board
timetables, governance processes, S172
responsibilities and regulatory procedures
including share dealing
• Meeting with external audit partner
• Property tours arranged
Suzy Neubert
Non Executive Director
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Governance
Board training
Oversight of the training needs of individual
Directors is the responsibility of the Chair.
However, Directors are also expected to identify
and develop their own individual training
needs, skills and knowledge and ensure they
are adequately informed about the Group’s
strategy, business and responsibilities. They are
encouraged to attend relevant seminars and
conferences and receive technical update
material from advisors and are offered
training and guidance at the Company’s
expense. The Deloitte Academy is available to
all Directors.
During the year, information updates were
provided through briefing papers prepared
by senior management and external advisors
on regulatory and accounting updates, the
Corporate Governance Code compliance, debt
and hedging, ESG, cyber security and tenant
covenants. In addition, all Board members
were invited to attend a corporate governance
update session presented by Deloitte
in February.
Diversity and inclusion
We recognise the importance of diversity in
its broadest sense and the benefits it brings to
the organisation, in terms of skills, experience,
differing perspectives and fresh ideas, which
ultimately leads to better decision making.
We strive to operate in a working environment
of equal opportunity and promote a culture of
openness, respect and inclusion.
Read more on Our cultural framework page 112
The Board sets the tone on diversity and gives
full consideration to achieving a diverse working
environment by applying the principles of the
Company’s Diversity and Inclusion Policy when
considering new appointments. At 31 March
2023, 36% of our Board were women and
we had one Director from an ethnic minority
background. Whilst our Audit Committee
has a female chair, our other senior Board
positions are held by men. However, we will
be addressing this imbalance later this year
in September as Robert Fowlds has decided
to step down as SID and we will be replacing
him with one of our current female Non
Executive Directors.
Gender representation as at 31 March 2023
Number of
Board members % of the Board
Number of
senior positions
1
Number
of Senior
Leadership Team
members
2
% of Senior
Leadership Team
Men 7 64% 4 6 75%
Women 4 36% – 2 25%
Non-binary – – – – –
Not specified/prefer
not to say – – – – –
Female (number) Female (%) Male (number) Male (%)
Senior Leadership Team and direct reports
3
6 33% 12 67%
Group 16 46% 19 54%
Ethnic representation as at 31 March 2023
Number of
Board members % of the Board
Number of
senior positions
1
Number
of Senior
Leadership Team
members
2
% of Senior
Leadership Team
White British or other
White
10 91% 4 7 87.5%
Mixed/Multiple ethnic 1 9% – – –
Asian/Asian British – – – 1 12.5%
Black/African/
Caribbean/Black British – – – – –
Other ethnic group,
including Arab – – – – –
Not specified/ prefer
not to say – – – – –
1 Senior Board positions include the Chair, Chief Executive, Finance Director or Senior Independent Director
2 The Senior Leadership Team, as set out on pages 110 to 111 is considered to be the Company’s executive management as defined by
the Listing Rules and senior management as defined by the Code
3 The Senior Leadership Team’s direct reports are the next layer of management below senior management
1
2
3
4
1
2
3
4
Other Group diversity
Age (years)
1 20-30 4 12%
2 31-40 7 20%
3 41-50 12 34%
4 51+ 12 34%
Total 35 100%
Length of service (years)
1 0-5 13 37%
2 6-10 14 40%
3 11-15 6 17%
4 16+ 2 6%
Total 35 100%
Composition, succession and evaluation
Nomination Committee report
continued
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Governance
We acknowledge that our ambition to improve
diversity is, to a large extent, determined by
the quality of recruitment, and we actively
engage with recruiters to promote a diverse
candidate selection and only appoint those
firms who have signed up to the Voluntary
Code of Conduct for Executive Search firms.
However, we realise that the diversity of
recruitment will be subject to the availability
of suitable candidates and vacancies within
the organisation.
Ultimately, all appointments to the Board and
throughout the Company are based on merit,
suitability for the role and alignment with
our values, as an appointment on any other
basis would not be in the best interests of
shareholders or the Company. We are proud of
our low level of staff turnover which, at 6% on
average over the past ten years, signifies a loyal
and content workforce but recognise that this
also constrains the pace of change.
We continue to support the Real Estate
Balance group, whose objective is to improve
gender diversity by promoting and supporting
the development of a female talent pipeline
and are mindful of the new Listing Rule
requirements and the amendments to the
Disclosure Guidance and Transparency Rules on
Board diversity, that apply this year.
Female representation on the Board has
progressed from 30% following last year's AGM
to 36% at the year end and 33% following this
year's AGM. We are committed to improving
this to the extent that we have the opportunity.
Our Senior Leadership Team manages the day
to day running of the business and comprises
departmental heads from all key business
functions with a diverse range of skills and
experience. We will continue to work towards
compliance with the FTSE Women Leader’s
target of 40% female representation in
leadership teams but acknowledge that this is
likely to remain a challenge, as increasing the
size of the leadership team is not considered
an effective solution and there are no known
natural succession changes anticipated at the
present time. In the wider organisation, 46%
of all employees are female and the culture
of the organisation promotes inclusion and
equal opportunity.
Our ambition is to increase gender diversity
throughout the Senior Leadership Team and
wider organisation when suitable vacancies
arise and appropriate candidates can be
found. Further information on the Company’s
commitment to promoting diversity and
inclusion is included in the Responsible Business
and ESG review on page 66.
The tables on page 128 are presented to meet
Listing Rule 9.8.6R(10) and reflect the gender
and ethnic diversity of the Board, Senior
Leadership Team and across the Company at
31 March 2023.
We collect gender and ethnicity data on a
self-identifying basis in a questionnaire which
asks the Board and employees to identify their
gender and ethnicity based on the categories
set out in the tables on page 128.
Board performance evaluation
A key requirement of good governance is to
ensure that the Board operates effectively.
The annual evaluation enables us to monitor
and improve the effectiveness of the Board and
its Committees.
In line with our three year cycle, both last
year and this year’s review and evaluation
of performance was undertaken internally.
The Board is committed to undertaking an
external evaluation next year.
Progress against targets set last year is set
out on page 131. The findings from this year’s
questionnaire-based evaluation led by the
Committee were collated and summarised
by the Company Secretary and tabled for
discussion in January. The key findings and
recommendations are summarised on
page 130.
Overall the results were extremely positive
with no significant areas of concern. The Board
welcomed the recommendations for continued
development to its practices and procedures.
Progress will be reported at future meetings.
In addition, as Chair, I had regular calls with each
of the Non Executive Directors throughout
the year to discuss relevant issues including
succession, Board appointments and strategy,
and to discuss their contribution and any
future expectations.
Year 3
Internal review to focus on
progress against year 2 and any
new issues raised ahead of an
external evaluation
Year 2
Internal review to monitor
progress against year 1 and any
new issues raised
Year 1
Independent
externally
facilitated review
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Governance
2023 Performance evaluation
The process covered the following areas:
• Objectives, strategy and remit
• Performance
• Relationships with shareholders
• Risk management
• Board function and Directors
• Board constitution and succession
• Board Committees
• Chair
The key findings and recommendations
from the 2023 performance
evaluation review are listed below.
Key findings
• The Board has a clear, dynamic strategy
and set of objectives which are agreed with
management and supported by all Directors
and strategy is continually reviewed and
debated at meetings. Market updates,
competitor analysis and investor feedback
facilitate this. Individual NEDs discuss
strategy directly with the CEO between
meetings. Strategy is working well and
there is little appetite for change at the
present time.
• Management reporting to the Board is
regular, timely, comprehensive yet succinct
making it easy to review and digest.
• The business has performed extremely well
operationally in the challenging economic
environment in terms of earnings and
disposals and management continues to
focus on what is in their control.
• The Company’s relationship with its
shareholders continues to be a key focus
for the Executive Directors and investor
sentiment towards the Company is highly
supportive of strategy. Investor governance
issues over succession and diversity are
being addressed. The SID's feedback on
roadshow meetings at Board meetings
is welcomed.
• The Board and its members are risk aware
and respond well to problems and crises.
NEDs receive early warning signals from
management of problems ahead which may
adversely affect the business, and Directors
are confident that risks are taken into
account in decision making processes.
Directors welcomed the additional focus
on ESG risk through the introduction
of a standalone ESG meeting of the
Audit Committee.
• The Board is cohesive with a complimentary
range of expertise, skills and personalities.
It is well chaired and combines management
support together with appropriate challenge.
• Meeting attendance and engagement levels
at meetings are high and Board discussions
are open and transparent. The attendance of
senior management at meetings is helpful
and welcome.
• The Board is well balanced and has a good
breadth and depth of experience to allow it
to effectively discharge its responsibilities
and to face current and future challenges.
The appointment of Alistair with his
wealth of property experience has been
a welcomed and valuable addition to the
Board in the year.
• Management are considered to be
exceptionally well connected, respected
and trusted and well positioned to get early
warning signs and see opportunities in the
market. They are accessible and responsive
in their dealings with the Board and NEDs
have confidence in them.
• Committees have the right balance of skills
and are very well chaired and supported by
external advisors, the Executive Directors
and wider management team.
• The Chair continues to provide guidance
to the management team and leadership
of the Board. He brings sharp focus to big
issues, listens, provides broader context and
manages time. He encourages Directors
to share their views and have a thorough
and open debate before major decisions
are made.
Recommendations
• It may be appropriate to hold a strategy
specific meeting incorporating scenario
stress testing earlier than usual in the
year given the current economic climate,
market conditions and Board and
Committee membership changes.
• The Board should be mindful of
regulatory changes relating to risk
management and internal control
systems which may require additional
documentation and consideration in
due course.
• All Directors are again encouraged to
contribute and express their views more
readily during meetings.
• Wider participation from some Non
Executive Directors outside of regular
board meetings is encouraged.
• The Chair could meet NEDs more
regularly on a one-to-one and group
basis without the Executives present.
• Future Questionnaires could include
a question on what could improve
the performance of the Board or a
particular Committee.
Composition, succession and evaluation
Nomination Committee report
continued
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Governance
Election and re-election of Directors
Following the Board evaluation and appraisal
process, the Committee concluded that each of
the Directors seeking election and re-election
continues to make an effective and valuable
contribution to the Board and has the necessary
skills, knowledge, experience and time to enable
them to discharge their duties properly in the
coming year. All Directors excluding myself
and Rosalyn Wilton will offer themselves for
election and re-election at the forthcoming
AGM on 12 July 2023 and I encourage
shareholders to support us and vote in favour of
these resolutions.
Time commitment
In making recommendations to the Board on
Non Executive Director appointments, the
Nomination Committee considers the expected
time commitment of the proposed appointee
and other commitments they already have.
Suzy Neubert has other Non Executive
Director engagements with Jupiter Fund
Management plc, LV= and Isio Topco Limited,
which were considered by the Nomination
Committee and cleared before recommending
her appointment.
Before taking on any additional external
commitments, Directors must seek the prior
agreement of the Board to ensure possible
conflicts of interest are identified and to
confirm they will continue to have sufficient
time available to devote to the business
of the Company and fulfil their duties.
Executive Directors are required to devote
almost all their working time to their executive
role at LondonMetric although certain external
appointments are permitted. In November
2022, Andrew Jones was appointed as a Non
Executive Director of Instavolt Limited and
earned fees of £13,333 during the year to
31 March 2023.
Independent advice
All Directors and Committees have access
at all times to the advice and services of
the Company Secretary, who is responsible
for ensuring that Board procedures are
followed and that governance regulations are
complied with and high standards maintained.
The Directors may, in the furtherance of their
duties, take independent professional advice
at the expense of the Company. None of
the Directors sought such advice in the year.
The Chairs of the Audit and Remuneration
Committees communicate regularly and
independently with relevant staff and external
advisors including the Company’s external
auditor, Deloitte LLP, and remuneration
advisors, PwC.
Conflicts of interest
Directors are required and have a duty to
notify the Company of any potential conflicts
of interest they may have. Any conflicts are
recorded and reviewed at each Board meeting.
There have been no conflicts of interest noted
this year.
Patrick Vaughan
Chair of the Nomination Committee
24 May 2023
Recommendation in 2022 Progress in 2023
Continue to provide greater visibility and focus on succession planning
for the Chair
Alistair Elliott appointed as new Board and Committee Chair from
11 July 2023
Have regard to the Parker Review recommendation for one ethnic
minority Board member from 2024 when making appointments
One Board member from an ethnic minority background appointed in
the year
Encourage the inclusion of wider management team members in
strategy and other discussions
Board and Committee meetings and lunches regularly attended by
Investment and Asset Directors, Strategy Director, Head of Investor
Relations and Sustainability, Head of Finance and other senior managers
At least one annual strategy focused discussion is a good discipline to
facilitate a deeper review which may not be practical at every meeting
Strategy discussed separately at three Board lunches in the year, also
attended by the Investment, Asset and Strategy Directors
More in-depth investor feedback would be welcomed periodically as well
as more frequent circulation of analysts’ notes
Six investor meetings also attended by SID and further feedback to the
Board provided. Peel Hunt and RMS feedback from investor roadshows
circulated to Board members
The schedule of matters reserved for the Board should be expanded to
include specific references to the Board’s ESG responsibilities
Oversight of the Company’s ESG strategy added to the schedule of
matters reserved for the Board
The Board should keep under review how best to ensure focus on ESG.
Climate risk reporting is an area to watch given the pace of change and
ever increasing focus
One meeting of the Audit Committee was dedicated to ESG, led by the
Strategy Director and Head of Investor Relations and Sustainability and
all Board members were invited
In person attendance at meetings is encouraged following easing of
Covid-19 restrictions to generate increased energy, collaborative spirit
and exchange of ideas
All Board and Committee meetings in the year were held in person at our
Curzon Street office
Directors should update the Board in respect of bilateral challenges and
debates held outside of Board meetings
Directors have been mindful of this at Board meetings
The Board should consider whether the £10 million Board approval
limit is still appropriate given the Company’s growth since that limit was
first introduced
Considered and the Board decided to leave the limit unchanged
The Remuneration Committee Chair may benefit from holding individual
discussions with Senior Leadership Team members to hear their views
and aspirations directly both pre and post award, in line with the previous
Chair’s practice
Remuneration Committee Chair met with both the Investment and
Asset Directors
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Governance
Audit, risk and internal control
Audit Committee report
• Led the audit tender process and
recommended the reappointment of
Deloitte to the Board
• Dedicated one meeting to ESG
matters and received an update on the
Company’s performance and ambitions
• Received a technical update from
Deloitte on corporate governance
• Reviewed the effectiveness of risk
management and internal controls
including consideration of emerging
risks, cyber security, tenant covenants
and TCFD
• Considered the occupier survey results
Highlights
this year
The Committee continues
to play a key assurance role
by overseeing the integrity
and accuracy of financial
reporting and by ensuring
there is a sound system
of internal control and risk
management in place.
Rosalyn Wilton
Audit Committee Chair
Key responsibilities
Financial reporting
• Monitor the integrity of the financial
reporting process
• Scrutinise the full and half year
financial statements
• Consider and challenge the key
financial judgements
See pages 134 to 135
Risk management and internal control
• Oversee the internal control processes and
risk management framework
• Ensure risks are carefully identified,
assessed and mitigated
• Assess the need for an internal
audit function
See page 136
External auditor
• Review the performance, independence
and effectiveness of the external auditor
and audit process
See pages 136 to 137
Regulatory compliance
• Review the Viability Statement and going
concern basis of preparation
• Consider whether the Annual Report is ‘fair,
balanced and understandable’
• Monitor compliance with applicable laws
and regulations
See pages 137 to 138
Membership and attendance
The number of Committee members and their attendance during the year was as follows:
Member
Date
appointed
Tenure
(years)
1
Meetings
attended
2
Rosalyn Wilton (Chair) 25/3/2014 9 6 (6)
Suzanne Avery 22/3/2018 5 6 (6)
Robert Fowlds 31/3/2019 4 6 (6)
Kitty Patmore 28/1/2021 2 6 (6)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2023, rounded to the nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
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Governance
Dear Shareholder,
I am pleased to present the Audit Committee’s
report for the year to 31 March 2023, which
describes the work we have undertaken in the
year. This will be my last report to you, as I will
be stepping down from the Committee and
Board following the announcement of these
results. It has been a pleasure to have worked
alongside an exceptional leadership team at
LondonMetric, and I wish Kitty every success as
my successor and your new Committee Chair.
The Committee continues to play a key role
within the Company’s governance framework to
support the Board in risk management, internal
control and financial reporting. As part of this,
we discuss with management and the external
auditors any significant transactions and areas
of judgement, which continues to be in relation
to the valuation of investment properties, and
we independently meet with external valuers to
scrutinise and challenge the property valuations.
One of our top priorities each year is to
review the Risk Register and internal control
procedures to ensure they remain relevant
and suitably robust. I am pleased to report that
no significant weaknesses were identified as a
result of our review, which is described in detail
on page 85.
We also oversee the external audit process
and this year have undertaken an external
audit tender process in line with best practice
recommendations, as Deloitte LLP (‘Deloitte’)
have now served ten years in office.
In addition this year, we considered progress
against ESG targets and ambitions at a separate
dedicated meeting in February, to which all
Board members were invited. We received a
report and presentation from two members
of the Senior Leadership Team and were also
joined by members of the Development Team.
Topics discussed included our achievement
against industry benchmarks, EPC ratings, TCFD
and future workflows. We were satisfied that
ESG continues to be increasingly embedded
into all business operations and remains a key
focus area for the Senior Leadership Team.
Membership
The Committee comprised of four independent
Non Executive Directors throughout the year.
Suzy Neubert will join as a new member of the
Committee following the announcement of our
results on 24 May 2023. Suzy joined as a Non
Executive Director in March 2023 and details of
her appointment and induction process can be
found in the Nomination Committee report on
page 127.
Committee members have considerable
commercial knowledge and diverse industry
experience including property, finance,
banking, capital markets, risk management
and sustainability.
The Board is satisfied that all current members
bring recent and relevant financial experience
as required by the Code and considers that
the Committee as a whole has the appropriate
commercial and industry specific knowledge
and competence to enable it to discharge its
duties, through the positions members currently
or have previously held.
Biographies of the Committee members which
set out the relevant skills, knowledge and sector
experience they bring can be found on pages
108 to 109.
Meetings
The Committee met six times during the
year and follows an annual programme
which is agreed at the start of the year.
Meetings were aligned to the Company’s
financial reporting timetable, with the May and
November meetings scheduled to precede
the approval and issue of the full and half year
financial reports.
Separate meetings were held with the
Company’s property valuers to challenge
the valuation process and review their
independence. At the March meeting, the
Committee reviewed risk management and
internal control processes and considered the
year end audit plan.
As usual, the Group’s external auditor,
independent property valuers, Finance Director
and Head of Finance attended meetings by
invitation, as well as other employees who
presented on specialist topics.
This year, the Strategy Director, Head of
Investor Relations and Sustainability and Head
of Finance presented to the Committee on
ESG, cyber security and the occupier survey
results. This interaction is extremely valuable
as it focuses discussion on topical issues and
allows the Committee to meet the pool of
emerging talent below Board.
Time is allocated for the Committee to meet
the external auditor and property valuers
independently of management.
As Chair of the Committee, I report to the
Board any matters considered and conclusions
reached after each meeting.
In addition to formal Committee meetings, I
have regular contact and meetings with the
Finance Director, to understand and keep
abreast of key matters in advance of meetings,
facilitating informed and constructive debate.
Committee effectiveness
During the year, the Board led by the
Nomination Committee carried out an internally
facilitated evaluation of its performance and
that of its Committees as reported on pages 129
to 130.
The review concluded that the Committee
continued to operate effectively and to a high
standard, was very well supported by the
Finance Director, his team and the external
auditors and provided the appropriate level of
independent challenge and scrutiny.
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Governance
Our work in 2023
Throughout the year, the Committee acted in accordance with its terms of reference, which were
last reviewed and updated in March 2023 and can be found at www.londonmetric.com.
The work undertaken this year is set out in the table below and has included the consideration,
review and approval of each of the items noted.
Role Responsibilities
Financial
reporting
• Interim and full year results announcements and the Annual Report
• Accounting treatment of significant transactions and areas of judgement
• The valuation process, the half yearly valuations and the independence of
the Group’s valuers
• Processes undertaken to ensure that the financial statements are fair,
balanced and understandable
Risk
management
and internal
control
• The Group’s risk register, principal and emerging risks
• Specific consideration of cyber risk
• The adequacy and effectiveness of the Group’s internal controls
• The appropriateness of the going concern assumption
• The Viability Statement and longer term forecast
• The need for an internal audit function
External audit • Scope of the external audit plan
• The independence and objectivity of the external auditor
• Performance of the external auditor and effectiveness of the audit process
• Auditor’s fee for the year
• Audit tender process and reappointment of Deloitte LLP as
external auditor
• Non audit services and ratio of fees
Regulatory
compliance
• Committee’s composition, performance, terms of reference
and constitution
• S172 and TCFD statements
• ESG matters, occupier survey results and tenant covenants
• Tax strategy and REIT status
Financial reporting
One of our principal responsibilities is
to monitor the integrity of the financial
information published in the interim and annual
statements and the overall tone, messaging and
clarity of reporting. In conducting its review, the
Committee considers:
• The extent to which suitable accounting
policies and practices have been adopted,
consistently applied and disclosed;
• Significant matters by virtue of their size,
complexity, level of judgement and potential
impact on the financial statements; and
• Compliance with relevant accounting
standards and other regulatory reporting
requirements including the Code.
Developments in accounting regulations
and best practice are monitored and,
where appropriate, reflected in the financial
statements. The Committee and finance
team are kept informed of developments in
accounting and corporate governance through
technical briefing material and webinars as well
as an annual technical update presentation led
by Deloitte.
The significant matters considered by the
Committee, discussed with the external auditor
and addressed during the year are set out on
page 1353. Further details can be found in note 1
to the financial statements on page 186.
In addition to the significant matters, the
Committee considered a number of other
judgements made by management, none
of which were material in the context of the
Group’s results or net assets.
Management confirmed that they were not
aware of any material misstatements and the
auditor confirmed they had not found any
material misstatements in the course of their
work, as reported in their independent report on
page 176.
Audit, risk and internal control
Audit Committee report
continued
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Significant accounting matter - Property valuations
Reporting issue
The property valuation is a critical part of the
Group’s reported performance. It continues to
be the most significant matter for consideration,
being a key determinant of the Group’s
profitability, net asset value, total property
return and a variable element of remuneration.
Property valuations are inherently subjective as
they are based on assumptions and judgements
made by external valuers and are underpinned
by transactional market evidence, which may
not prove to be accurate. In an uncertain
market, this empirical data may be less relevant
and valuations may become more subjective.
Property valuations are a key area of focus for
the external auditor.
It remains a principal recurring risk for the
Group as reported in the Risk management and
internal controls section on pages 82 to 99.
The Group and its share of joint ventures has
property assets of £3.0 billion as reflected
in the Financial review and as detailed in
Supplementary note ix.
The Committee’s role
All investment properties, including those held
in joint ventures, are externally valued each half
year by independent property valuers, CBRE
Limited and Savills (UK) Limited.
The Committee met twice during the year with
the property valuers, as part of the interim and
year end reporting process, to scrutinise and
challenge the integrity of the valuation process,
methodologies and results.
The key judgements applied and any issues
raised with management were considered to
ensure that the valuers remained independent
and objective throughout the process and had
not been subjected to undue influence from
management. Supporting market evidence
was provided to enable the Committee to
benchmark assets and yields and conclude that
the assumptions applied were appropriate.
The Committee reviewed key assumptions
including future rental growth, market yield,
capital expenditure, letting timeframes, void
costs and incentive packages and were content
with those applied.
Any valuations requiring a greater level of
judgement were debated, including property
under development, post period end sales and
valuation movements that were not broadly in
line with benchmarks.
The Committee challenged assumptions and
discussed the impact on values of changes to
the key assumptions.
As part of their audit work, Deloitte use their
own in house property valuation expert
to assess and independently challenge
the valuation approach, assumptions and
judgements. They meet separately with
the valuers and report their findings and
conclusions to the Committee.
Conclusion
The Committee confirmed to the Board
that it was satisfied that the external
property valuation included within the
financial statements had been carried
out appropriately, independently
and in accordance with industry
valuation standards.
Significant accounting matter – Significant transactions
Reporting issue
The Group transacted on £393 million of
property acquisitions and sales in the year, as
discussed in detail in the Property review from
page 32.
Certain transactions are large and/or complex
in nature and require management to make
judgements when considering the appropriate
accounting treatment including how and when
a transaction should be recognised.
There is an inherent risk that an inappropriate
approach for a significant transaction could
lead to a material misstatement in the Group’s
financial statements.
The Committee’s role
The Committee, in conjunction with the
external auditor, received and challenged
management’s accounting proposals in relation
to corporate acquisitions and other significant
transactions to the extent that there were
unusual terms and conditions or judgement.
There was one corporate acquisition in the
year and minimal assets were acquired other
than the property portfolio, and there were
no employees or corporate debt balances.
Therefore, it was considered to be a property
acquisition and not a business combination in
accordance with IFRS 3.
The timing of recognition of certain transactions
was also considered, particularly those that had
exchanged before the year end and were due to
complete post year end.
Conclusion
The Committee concurred with the
approach adopted by management in
each case.
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Governance
Risk management and internal control
The Board understands the importance of
the Company’s risk management framework
and internal control processes in managing
business risks and delivering our strategy.
There is a culture of risk awareness embedded
into the decision making processes and
robust procedures are in place to support the
identification and management of risk.
The framework, responsibilities and detailed
review processes, including a full description of
the work of the Audit Committee, are set out
in the Risk management and internal controls
section from page 82.
The Committee has continued to assist the
Board this year by providing a key oversight
and assurance role in undertaking its annual
in-depth review of the risk register and internal
control questionnaire prepared by the Senior
Leadership Team. It also received a cyber
security update paper from the Finance
Director, which highlighted improvements to
processes and systems made in the year and
areas of focus for the year ahead.
Read more on Risk management and
internal controls pages 82
Internal audit
The Group does not have a dedicated internal
audit function and the Committee reviews the
requirement for one each year. Due to the size
of the organisation, relatively simple structure of
the Group and close involvement of the Senior
Leadership Team in day to day operations,
the Committee did not feel an internal audit
function was either appropriate or necessary.
However, from time to time and when
considered necessary, external advisors are
engaged to carry out reviews to supplement
existing arrangements and provide further
assurance. This has included testing of IT
systems and security including penetration and
social engineering testing.
The Committee agreed that external assurance
would be sought for any complex, specialist or
high risk issue.
The Committee also agreed that a review
of the Company's financial processes
may be beneficial, in light of anticipated
regulatory changes.
External audit
The Committee has continued to have a
constructive working relationship with the
external auditor and its new lead partner this
year, Rachel Argyle.
Audit tender
Deloitte has been the external auditor since
2013 and therefore this year we invited four
firms, Deloitte, BDO, EY and PwC, to tender
for the audit ahead of the 2024 year end in
line with current UK regulations.
Two firms, PwC and EY declined to
participate. The Committee, Finance Director
and Head of Finance received reports and
presentations from the remaining two firms.
A comparison of the salient points was
undertaken, including consideration of
the following:
• Knowledge and understanding of the
Real Estate industry and REITs;
• Sector specific exposure and experience
of the lead partner;
• Technical support teams;
• Audit approach and use of data analytics;
• Extent of transitionary work; and
• Proposed fees.
Following the tender, the Audit Committee
has made a recommendation to the Board
to retain Deloitte as external auditor to the
Company and Group for the financial year
commencing 1 April 2023.
Current UK regulations require rotation of the
lead audit partner every five years, a formal
tender of the auditor every ten years and a
change of auditor every 20 years. We are
supportive of these regulatory requirements.
The Company has complied with the
provisions of the Competition and Markets
Authority Order 2014 in relation to audit
tendering and the provision of non audit
services for the year under review.
Oversight
As in previous years, Deloitte presented their
audit plan to the Committee. This highlighted
the key audit risk area consistent with previous
years as property valuations.
The level of audit materiality was also discussed
and agreed. They presented their detailed audit
findings to the Committee ahead of the interim
and full year results.
The Committee probed and challenged the
work undertaken and the key assumptions
made in reaching their conclusions, with
particular focus on the audit risk areas identified.
As part of their work, the Committee allocate
time to meet privately with the auditor without
management present.
Effectiveness
The Committee assesses the effectiveness
of the external audit process by its review of
the following:
• Audit plan and deliverables;
• Independence and objectivity; and
• Fees and reappointment.
In making its assessment, the Committee
considers the expertise and consistency
of the audit partner and team as well
as the quality and timeliness of the
audit deliverables.
It reviewed the extent to which the audit plan
was met, the level of independent challenge
and scrutiny applied to the audit and the
depth of understanding of key matters and
accounting judgements.
It also considered the interaction with
and views of management, which
included feedback received following the
audit clearance meeting held between
management and the audit team.
Audit, risk and internal control
Audit Committee report
continued
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Governance
Independence
The Committee recognises the importance
of auditor objectivity and independence and
understands that this could be compromised by
the provision of non audit services.
The Company’s policy on non audit services
stipulates that they are assessed on a case
by case basis by the Executive Directors who
observe the following guidelines:
• Pre approval of fees by the Executive
Directors up to a limit of £100,000 or
referral to the Audit Committee for review
and approval;
• Proposed arrangements to maintain
auditor independence;
• Confirmation from the auditor that they are
acting independently; and
• Certain services are prohibited from
being undertaken by the external auditor
including bookkeeping, preparing financial
statements, design and implementation of
financial information systems, valuation,
remuneration and legal services.
All taxation services and remuneration
advice is provided separately by PwC.
Corporate due diligence work and the audit
of certain subsidiary companies is undertaken
predominantly by BDO LLP.
Deloitte has confirmed to the Audit Committee
that they remain independent and have
maintained internal safeguards to ensure the
objectivity of the engagement partner and audit
staff is not impaired.
They have also confirmed that they have
internal procedures in place to identify
any aspects of non audit work which could
compromise their role as auditor and to ensure
the objectivity of their audit report.
The table above sets out the fees payable
to Deloitte for each of the past three years.
In addition, audit fees paid to the external
auditor in respect of joint ventures totalled
£14,850 at share (2022: £13,500 at share).
The three year average ratio of non audit fees
(primarily the cost of the interim review) to audit
fees continues to be low at 17%, supporting
the Committee’s conclusion that Deloitte
remains independent.
Having undertaken its review, in the opinion
of the Audit Committee, this year’s audit was
appropriately planned, executed and of a
consistently high quality.
Deloitte continued to provide the appropriate
level of professional challenge and remained
objective and independent throughout.
Regulatory compliance
Section 172 duties
The Board of Directors, both individually
and collectively, is aware of its duty under
Section 172 Companies Act to act in the
way it considers, in good faith, would be
most likely to promote the success of the
Company for the benefit of its members as
a whole, having regard to:
• The likely consequences of decisions in
the long term;
• The interests of its employees;
• The Company’s relationships with
suppliers, customers and others;
• The impact of the Company’s operations
on the community and environment;
• The Company’s reputation and
maintaining high standards of business
conduct; and
• The need to act fairly as between
members of the Company.
The Board’s Section 172 statement is on
pages 118 to 119 and engagement with
stakeholders is set out in the Responsible
Business and ESG review on pages 54 to 72.
The Committee continues to focus on
the long term success of the business and
its stakeholders through its work on the
following key areas:
• Assessing whether the Annual Report
is fair, balanced and understandable
to provide shareholders and other
stakeholders with clear information on
the Company and its long term outlook.
Our review is set out on page 138;
• Reviewing the appropriateness of the
going concern assumption and assessing
the Company’s viability and longer term
prospects. Our work is set out on page
138 and the Board’s Going Concern and
Viability Statements are on pages 100 to
101; and
• Ensuring the Company’s risk
management framework is sufficiently
robust to safeguard its future for the
benefit of its stakeholders. Our work is set
out on pages 82 to 99.
Audit and non audit fees
Year to 31 March
2023
£000
2022
£000
2021
£000
Audit fees 252 225 201
Review of interim results 42 38 35
Total 294 263 236
Ratio of non audit fees (including interim review)
to audit fees 17% 17% 17%
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Governance
Going concern and viability
Although the statements on going concern and
viability are a matter for the whole Board, the
Audit Committee reviewed the appropriateness
of preparing the financial statements on a
going concern basis and the analysis prepared
to support the Board’s longer term Viability
Statement required by the Code.
Its assessment included a review of the principal
risks and risk appetite, the chosen period of
assessment, headroom under loan covenants,
liquidity, investment commitments and the
level of stress testing of financial forecasts
undertaken. It considered the impact of higher
inflation and interest rates to the Company,
its suppliers, tenants and the wider property
market, and the impact to the Group of
property yield movements, increasing costs,
rental defaults, vacancy costs and letting voids.
Following its review, the Committee was
satisfied that the going concern basis of
preparation remained appropriate and
recommended the Viability Statement be
approved by the Board. The Board’s statements
on Going Concern and Viability are set out on
pages 100 and 101.
Fair, balanced and understandable
At the request of the Board, the Audit
Committee considered whether this Annual
Report was a fair, balanced and understandable
assessment of the Group’s position and
prospects. In reaching its decision, the
Committee performed a detailed review of the
content and tone of the Annual Report and
considered the preparation process adopted by
management, which included the following:
• The establishment of a team of experienced
senior managers, drawn from finance,
investor relations and property with clear
responsibilities for the preparation and
review of relevant sections of the report;
• A corporate governance update presented
by the external auditor attended by relevant
staff, the Audit Committee and other Board
members in February 2023;
• Regular team liaison during the drafting
stages to ensure consistency of tone and
message, balanced content and appropriate
linking of the various sections;
• Early input from Executive Directors to the
overall message and tone of the report;
• Close involvement of the Executive Directors
throughout with extensive review of drafting;
• A verification exercise undertaken by the
finance team to ensure factual accuracy and
consistency throughout the report; and
• Review by the Audit Committee before
being presented to the Board for approval.
In carrying out its review, the Committee
had considered the following:
Fair
• Does it provide shareholders information
to assess the Group’s position and
performance, business model
and strategy?
• Does it include relevant and necessary
transactions and balances?
• Does it include the required
regulatory disclosures?
• Is it honest, reporting success and
opportunities alongside challenges to
the business?
Balanced
• Does it present the whole story and are
key messages appropriately reflected?
• Is it consistent throughout with
sufficient linkage?
• Is there an appropriate mix of statutory
and alternative performance measures?
• Are alternative performance measures
explained and reconciled to the
financial statements?
Understandable
• Is it written in straightforward language
and without unnecessary repetition?
• Does it use diagrams, charts,
tables and case studies to break up
lengthy narrative?
• Is there a clear contents page to aid
navigation and sufficient signposting?
The Committee concluded that the
Annual Report was fair, balanced and
understandable, allowing the Board to make
its statement on page 174.
Audit, risk and internal control
Audit Committee report
continued
Climate-related disclosures
The Committee considered the requirement
to disclose, on a comply or explain basis,
compliance with the recommendations of
the Task Force on Climate-related Financial
Disclosure (‘TCFD’). The Committee received an
update from management on the assessment
undertaken and the TCFD disclosure which can
be found in the Responsible Business and ESG
review on pages 77 to 81.
Whistleblowing procedures, anti-corruption
and anti-bribery
As a company, we seek to operate in an
honest and professional manner, with integrity
and respect for others. We do not tolerate
inappropriate behaviour or malpractice of
any kind.
Employees are encouraged to speak out if they
witness any wrongdoings and are provided with
a compliance procedures manual on joining
which sets out our whistleblowing policy and
anti-corruption procedures.
This year, companywide anti-money
laundering, market abuse, whistleblowing,
conduct and ethics refresher training was
undertaken through Fulcrum Compliance, our
external advisor.
Responsibility for reviewing and monitoring
whistleblowing rests with the Board and
the Committee will report to the Board any
incidents that are brought to its attention.
During the year under review, there were no
whistleblowing incidents to report to the Board.
I would like to extend my sincere thanks
to my fellow Committee members, wider
management team and Deloitte for their
support and valued contribution over the many
years that I have led this Committee.
This year, our AGM will be held at The
Connaught in Mayfair for shareholders to
attend and Kitty, as your new Chair, will
be in attendance and available to answer
any questions.
Rosalyn Wilton
Chair of the Audit Committee
24 May 2023
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Governance
Remuneration
Remuneration
Committee report
• Reviewed the Directors' Remuneration
Policy and consulted with shareholders
on Policy design and performance
measures, amending the final proposals
based on the feedback provided and
advice from PwC as remuneration
consultants as appropriate
• Considered the wider workforce pay
when setting Executive Directors’ and the
Senior Leadership Team’s remuneration
• Considered employees views on
Executive pay through attendance
by Chair at Workforce Non Executive
Director’s annual staff meeting
• Approved the performance targets of the
annual bonus and LTIP awards and tested
their achievement as required
Highlights
this year
Our remuneration
framework is designed to
align executive pay with the
Company’s strategic goals
and wider workforce pay,
and to motivate and reward
exceptional performance.
Robert Fowlds
Remuneration Committee Chair
Key responsibilities
Remuneration Policy
• Set and review the Remuneration Policy
for Directors and ensure it is aligned to the
Company’s purpose and values and the
delivery of its strategy
• Set the remuneration of the Executive
Directors and certain members of the
Senior Leadership Team and oversee
workforce remuneration arrangements
See pages 144 to 157
Remuneration packages and payouts
• Determine and review individual
remuneration packages
• Approve salaries, bonuses and LTIP awards
See pages 158 to 170
Variable incentives
• Determine and review the Long Term
Incentive Plan (‘LTIP’) and Annual Bonus
Plan arrangements
• Approve targets and outcomes
See pages 158 to 170
There have been no changes to the
Committee’s membership or primary role
this year, which is to operate a fair and
transparent reward structure that motivates
and incentivises the Executive Directors to
deliver the Group’s strategic goals, reward
exceptional performance and retain high
calibre individuals for the long term.
Membership and attendance
The number of Committee members and their attendance during the year was as follows:
Member
Date
appointed
Tenure
(years)
1
Meetings
attended
2
Robert Fowlds (Chair) 31/1/2019 4 5 (5)
Rosalyn Wilton 14/7/2016 7 5 (5)
Suzanne Avery 19/9/2018 5 5 (5)
Andrew Livingston 28/1/2021 2 5 (5)
1 Tenure is measured from date of appointment to the Committee and as at 31 March 2023, rounded to the nearest whole year
2 Bracketed numbers indicate the number of meetings the member was eligible to attend
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Governance
I am pleased to present the Remuneration
Committee’s report on Directors’
remuneration for the year to 31 March 2023,
which is structured as follows:
• My annual statement as Chair, which
summarises our work, the key decisions taken
and outcomes (pages 140 to 143);
• Our new Directors’ Remuneration Policy
(‘Policy’) which will be subject to a binding vote
at the 2023 AGM (pages 144 to 157); and
• The Annual Report on Remuneration which
describes how the Remuneration Policy has
been applied for the year ending 31 March
2023 and how we intend to implement the
new policy for 2024 (pages 158 to 170).
Remuneration aligned to purpose and strategy
Our remuneration framework continues to be
strongly aligned with the Company’s purpose,
strategy and performance as well as the
interests of our shareholders as reflected in the
chart on page 157.
Delivery of these strategic objectives is
measured using key performance metrics that
are embedded within the variable elements of
remuneration, being EPRA Earnings per Share
(‘EPS’), Total Property Return (‘TPR’), Total
Accounting Return (‘TAR’) and Total Shareholder
Return (‘TSR’). Strategic and ESG based metrics
have also been incorporated into the annual
bonus as part of the changes set out below.
Performance during the year
We have seen significant volatility in the capital
markets this year, underpinned by high inflation
and increases in interest rates, alongside
heightened geopolitical uncertainty. This has
disproportionately impacted the listed real
estate sector which is perceived to be more
sensitive to interest rate increases, and our
TSR in the year was disappointing, but taking
a longer term view in line with our strategy,
we have delivered TSR over the past three
and ten years since merger of 12% and 165%
respectively, both significantly outperforming
the FTSE 350 Real Estate Super Sector of -5%
and 36%.
The material upward movement in interest
rates has also had a significant negative impact
on real estate valuations, and we are reporting
an IFRS loss of £506.3 million this year, largely
due to the adverse movement of £587.5 million
in the value of our property portfolio. However,
despite this backdrop, we have focused on
what is in our control and have delivered a
strong trading performance that has enabled
us to increase our EPRA earnings by 2.9% to
10.33p per share and grow our dividend by
2.7%. This good outcome was achieved through
strong asset management on rent reviews,
lease renewals and lettings, helping to grow
our income and keep occupancy high at 99.1%.
In addition, the team focused on managing
the LTV through £273 million sales of non-core
assets, an excellent result given the difficult
market conditions, and which allowed the
LTV to settle at a comfortable level of 32.8%.
Non core asset sales have improved the quality
and environmental metrics of the portfolio,
with the proportion of the portfolio with an
EPC rating of 'A' to 'C' increasing to 90%. This is
testament to the hard work and commitment
of our executive team and all colleagues
throughout the organisation.
Given this strong operational performance
despite the macroeconomic challenges this
year, and the longer term progressive returns
enjoyed by shareholders both in terms of
dividend yield and share price performance,
the Committee considers it entirely appropriate
to reward the Executive Directors with the
variable elements of this year’s annual bonus
and LTIP in line with the formulaic outcomes as
detailed below.
Salary increases
The Committee approved a 4.2% increase to
Executive Director salaries to apply from 1 June
2023, which is in line with the average increase
provided to the workforce.
Pension alignment
In line with best practice, from 1 June 2022 the
Executive Directors’ pension contributions have
been aligned with the rate available to the wider
workforce (10% of salary) and this will continue
under the proposed Remuneration Policy.
Annual bonus
As set out in last year’s Remuneration
Committee report, the targets for the
annual bonus for the year to 31 March 2023
were based on growth in EPRA EPS (35%
weighting), growth in TPR (35% weighting)
and performance against personal objectives
(30% weighting). The maximum opportunity
was 165% of salary for the Chief Executive and
140% of salary for the Finance Director.
In response to the deterioration in market
conditions during the year, the Board
materially changed its strategy away from
new investments and development funding
to a focus on net disposals to manage LTV
and retain a robust balance sheet. This directly
impacted the Company’s EPRA EPS and
therefore the Committee has taken this into
account when assessing the EPS target.
The impact of the reduced investment and
withdrawal of project funding was excluded
from the original EPS targets and on this revised
basis, the EPS growth measure was achieved in
full as EPRA EPS of 10.33p per share met the
maximum target.
In line with best practice and consistent with
the previous year, TPR has been measured on
a multi-year basis (over one and three years)
to reflect performance against the All Property
Index and the index for the Group’s portfolio
of assets. The Committee is satisfied that this
approach measures and rewards the longer
term investing principles inherent in the real
estate sector. On this basis, the TPR element
paid out 50% of maximum.
The Committee also assessed that 87% of
maximum for the Chief Executive and 80% of
maximum for the Finance Director in respect
of their personal objectives would pay out
reflecting the strong operational, financial and
ESG progress made during the year (full details
of this assessment are set out on pages 164
to 165).
Overall, the Committee determined annual
bonuses for the Chief Executive and Finance
Director to be at 78.5% and 76.5% of their
respective maximum levels. The Directors
have decided to opt out of the annual bonus
deferral provision in accordance with the current
Remuneration Policy, as they have exceeded
the minimum shareholding requirement of
700% of salary.
The Committee considered this to be fair and
reasonable given that both Executive Directors
held over 14 times their salary in shares as at
31 March 2023.
Remuneration
Chair’s introduction
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Governance
LTIP vesting
Vesting of the LTIP awards granted to Executive
Directors in 2020 is dependent on Company
performance over the three years to 31 March
2023. Performance is measured by reference
to TAR and TSR relative to the FTSE 350 Super
Sector Real Estate index excluding agencies and
operators (37.5% weighting each) and EPRA
EPS growth (25% weighting).
The Committee assessed that over the
three-year performance period relative TAR
performance was in the top quartile of the
measurement index leading to full vesting
for this element. TSR growth of 11.7% was
positioned just below the upper quartile (11.8%),
resulting in 99.8% vesting.
The EPRA EPS growth targets are set with
reference to RPI measured on a spot to spot
basis over the three financial years ending
on 31 March 2023. Given the unforeseen
and exceptional increase in RPI during the
performance period driven by external
macroeconomic factors, the Committee
determined to cap the RPI rate at which the EPS
growth targets were to be assessed consistent
with the approach used last year. In determining
an RPI cap of 4.5% per annum, the Committee
considered the following factors:
• Anticipated inflation rates when the targets
were set in early 2020;
• The lease structures of our tenants, 63% of
which contain contractual uplifts capped
on a weighted average basis at 3.7% per
annum and significantly below current RPI,
which reduce the downside for shareholders
whilst limiting the ability of management to
capture elevated levels of inflation;
• The combination of the above with the
standard five-yearly rent review pattern;
• The substantial net divestment in the year,
driven by the change in strategy to manage
the LTV in more challenging markets;
• The other 20 recipients of the LTIP award;
and
• EPS performance over the three
financial years.
The Committee is satisfied that although the
RPI cap is lower than that used last year (7% per
annum), it is representative of the Company’s
current portfolio composition. To ensure
consistency in future years, the Committee will
use this approach for all in-flight LTIP awards.
Based on this approach and EPRA EPS for
the year to 31 March 2023 of 10.33p per
share, vesting is 39% of the maximum for
this element. The Committee considered
the calculation methodology to be fair and
reasonable for the Executive Directors and
also for the 20 LTIP participants in the wider
workforce and that the approach generated a
vesting outcome which was aligned with the
Company’s strong corporate performance and
the shareholder experience (LondonMetric was
placed just below the upper quartile of sector
peers in terms of TSR performance over the
past three years).
On vesting, the Committee will determine
whether any adjustment should be made in
relation to windfall gains. However, it notes
that the 2020 LTIP award was granted in June
2020 when the Company’s share price had
recovered close to its pre-Covid level and above
the share price used to determine the 2019 LTIP
awards. Overall, 84.7% of the 2020 LTIP will
vest in June 2023, subject to continued service,
using the formulaic approach outlined above.
The awards are subject to a two-year post-
vesting holding period.
LTIP awards
The Group’s LTIP arrangements seek to
align executive pay with the delivery of long
term growth in shareholder value. This year
727,222 share awards were granted to the
Executive Directors and 901,037 LTIP awards
vested. The Directors disposed of 436,059
shares to settle tax liabilities and retained the
remaining 464,978 shares which increased
their holding in the Company to a total of
8.6 million shares.
Policy review
Our current Policy, which was approved by
shareholders at the 2020 AGM by over 95%
of votes in favour, is approaching the end
of its three year term. During the year, the
Committee conducted a comprehensive review
of its executive remuneration framework with
the assistance of its remuneration advisors,
PwC, and consulted with 22 major shareholders
representing 63% of our issued share capital
as well as the Investment Association and the
proxy voting agencies, ISS and Glass Lewis, on
the proposed new Policy.
Overall, the Committee believes that the
current Policy continues to be broadly fit
for purpose and aligned with the business
strategy to continue to grow earnings and
deliver sustainable and progressive dividend
returns. Therefore, the core components are to
be retained.
During our review the Committee considered
a range of factors, but key amongst these was
the recognition that remuneration opportunities
for our Executive Directors did not fully reflect
the successful business growth achieved during
the period since the merger in 2013 and that
total pay levels should be positioned more
towards the upper quartile of the real estate
sector. In particular, the Committee identified
the following:
• The current Policy does not provide
sufficient scope to continue to recruit, retain
and motivate at a level which is consistent
with the success, scale and complexity of
our business
• The Executive Director pay packages are well
below the desired competitive positioning
of LondonMetric, particularly given the
consistent above-market performance
achieved by our talented management team
• The lack of bonus deferral, despite high
shareholding requirements and the strong
alignment through the Executive Directors’
material personal shareholdings, does
not fully align with investors’ expectations
around the operation of malus and clawback
and effective risk management
• The performance measures do not fully
incorporate progress on our ESG targets
• Other areas of the Policy lack the required
flexibility for the Remuneration Committee
to operate it effectively
The Remuneration Committee considered the
level of increases that would be required to
achieve the desired market positioning and is
proposing what we believe are the minimum
necessary increases to annual bonus and LTIP
maximum opportunities. It also concluded
that any additional remuneration opportunity
should only be paid if warranted by strong
corporate performance.
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Remuneration
Chair’s introduction
continued
Overall, shareholders were supportive of the
proposals, however some provided challenge
on certain aspects. The Committee actively
listened to the feedback provided and, in some
areas, made changes to the Policy proposals
and its implementation. For the Policy
proposals where feedback was provided, the
table on page 143 outlines the initial proposals,
the feedback received from shareholders, and
the Committee’s final proposal and rationale.
The proposed changes are set out in full on
page 143. The key improvements are as follows:
• The maximum bonus opportunity for the
Chief Executive increases from 165% to
200% of salary and for the Finance Director
from 140% to 175% of salary
• The introduction of bonus deferral such
that for existing Executive Directors, 50%
of any bonus earned over 120% of salary
will be deferred and will vest equally after
two and three years. For newly appointed
Executive Directors, one third of the annual
bonus will be subject to deferral into shares
vesting equally after two and three years.
Once a new Director has built up a 700% of
salary shareholding, the deferral mechanism
reverts to that for the existing Directors
• The maximum LTIP award for the Chief
Executive increases from 200% to 225%
of salary and for the Finance Director from
165% to 200% of salary. However, mindful
of the share price performance over the
past year, the Committee determined not
to implement this increase, such that the
new 2023 LTIP awards, vesting in 2026,
will be reduced to 190% and 150% of
salary for the Chief Executive and Finance
Director respectively
• The pension contribution rate for Executive
Directors will be aligned with the wider
workforce (currently 10% of salary), with
flexibility for the Committee to re-align their
contribution to the wider workforce rate if
it increases during the life of the policy at
its discretion
• Increase the maximum year of recruitment
incentive levels in exceptional circumstances
to 210% of salary for annual bonus and
235% of salary for LTIP. There is no current
intention to use this discretion.
In addition to the changes to Policy set out
above, the Committee is also making changes
to how it will implement the Policy in the
coming year, including to the performance
measures and weightings under the annual
bonus and LTIP. The proposals in relation to
the performance measures were consulted on
with shareholders as part of the Committee’s
engagement exercise, with the main change
being the inclusion of Strategic and ESG
elements in the annual bonus. Further details
of the operation, performance measures,
weightings and targets attached to the incentive
awards are set out in the implementation of
Policy for next year on pages 160 to 162.
The Committee believes that its proposals are
consistent with existing arrangements which
have supported the Company and shareholders
well but have been amended to better reflect
current investor preferences, the regulatory
environment, and some changes to the strategy
of the Company since 2013. The Committee
believes the proposals, taken together, will more
effectively attract, retain, and motivate a high
quality leadership team to deliver growth and
sustained strong financial performance and that
they are in the best interests of the Company
and its shareholders.
Looking forward
Our focus next year will be to oversee the
implementation of the new Policy following
shareholder approval at the 2023 AGM and
ensure that remuneration arrangements
and packages continue to incentivise and
motivate management.
We will continue to be mindful of the impact
of high inflation and the cost of living to the
wider workforce.
Conclusion
The Company has performed very well this year
despite the challenging market and economic
conditions and the Committee believes that the
remuneration outcomes are entirely appropriate
and reflective of the business performance and
wider macroeconomic environment.
The proposed Policy and remuneration packages
for the year ahead provide the appropriate
incentive and reward to motivate and retain the
Executive Directors and I look forward to your
support at our forthcoming AGM. We welcome
feedback from shareholders and I will be available
at the AGM should you have any questions. I can
also be contacted through the Company Secretary
at other times at info@londonmetric.com.
I would also like to thank my fellow Committee
members for their hard work, input and support
over the past year. Finally, I want to recognise
that the Company’s performance would not be
possible without the dedication shown by our
employees. To all employees – thank you for
your hard work and commitment.
Robert Fowlds
Chair of the Remuneration Committee
24 May 2023
Remuneration Committee assessment
The Committee is satisfied that the amount
payable under the variable incentive
plans is a fair reflection of the underlying
performance of the business. As such, no
discretion was exercised by the Committee
in relation to the formulaic outcomes.
In making this assessment, the Committee
took account of the following factors:
• The Company achieved a strong set of
financial results, allowing the Board to
propose an increase to the dividend for
the year to 31 March 2023 of 2.7%
• The financial results were also reflected
in strong share price growth which led to
TSR growth of 11.7% over the three years
to 31 March 2023 which was just below
the upper quartile growth of 11.8% over
the same period
• Maintained strong portfolio composition
of logistics and long income assets, which
represents 97% of the portfolio
• Maintained the quality of the portfolio
and tenant mix with a WAULT of 11.9
years and occupancy of 99.1%
• Maintained high EPC ratings, with 90%
assets rated A to C (2022: 85%)
• All employees received an annual bonus
and the Committee is delighted that 63%
of our employees will benefit from the
2023 LTIP award
The Committee is satisfied that the
remuneration policy operated as intended in
the year to 31 March 2023.
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Governance
Table of main changes as a result of shareholder feedback to the Policy Review consultation
Initial proposal Feedback received from shareholders Final proposal and rationale
Bonus quantum
Increase maximum bonus for
CEO from 165% to 200%
of salary.
Increase maximum bonus
opportunity for Finance
Director from 140% to 175%
of salary.
Given the current economic climate,
shareholders are alert to increases in
executive remuneration.
As such, whilst shareholders recognised
the rationale for the increases, being to
increase the overall total remuneration
opportunity without a material one-off
increase in salaries, some shareholders
raised concerns regarding the level of
the annual bonus increases, particularly
when compared to peers.
No change to the initial proposal.
The Committee has listened to shareholder feedback and has recognised that restraint is
appropriate, particularly in the current economic environment. However, the Committee
maintains the view that the proposed increases are an appropriate reflection of
management’s exceptional reputation within the sector and the current aggressive market
for talent.
The Committee recognises that the proposed annual bonus opportunity is at the top
end of the market range. However, this is consistent with the desired positioning of total
pay levels towards the upper quartile of the real estate sector to reflect the management
team's past performance that has consistently achieved upper quartile levels. The
Committee felt that an increase in the performance driven bonus opportunity was an
appropriate method of meeting this objective, taking into account the significant level of
equity already held by management discouraging more material LTIP increases.
Bonus deferral mechanism
Introduce bonus deferral
for three years into shares,
such that 50% of any bonus
earned over 120% of salary
will be deferred into shares.
50% of deferred shares vest
after two years and 50%
after three years.
Whilst the introduction of bonus
deferral was welcomed by shareholders,
some shareholders indicated a
preference for a fixed percentage of
bonus to be deferred into shares, rather
than the amount above a percentage
earned.
Current Executive Directors
No change to the initial proposal. This is on the basis that the key driver behind the
introduction of deferral for the current Executive Directors was to improve the efficacy/
capability of malus/clawback provisions under the annual bonus, rather than encouraging
shareholder alignment. The Committee will review this policy in three years’ time.
However, the Committee did review its proposals in relation to new executives as set out
below.
New Executive Directors
One third of the annual bonus will be subject to deferral into shares. 50% of deferred
shares vesting after two years and 50% after three years.
Deferring one third of the annual bonus is standard market practice for a FTSE 250
business, is aligned with our FTSE 350 real estate peers, and therefore the Committee
believes it is appropriate to operate this structure for a new Executive Director. It will help
them build up a meaningful shareholding alongside the LTIP.
Once a new executive has built up a 700% of salary shareholding then the deferral
mechanism will revert to that proposed for the current Executive Directors.
LTIP quantum
Increase maximum LTIP
award size for CEO from
200% to 225% of salary.
Increase maximum LTIP
award size for Finance
Director from 165% to
200% of salary.
Shareholders were generally supportive
of an increase to the LTIP opportunity
ensuring that pay is more heavily
weighted to long term performance.
Shareholders recognised the rationale
for the increases and were comfortable
considering the level of stretch that will
be applied to the performance targets.
No change to the initial proposal.
However, the Committee determined not to increase LTIP awards levels for 2023 given
the fall in the share price. 2023 LTIP awards will be reduced to 190% and 150% of salary
for the Chief Executive and Finance Director respectively.
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Governance
Our current Policy, which was
approved by shareholders at the
2020 AGM by over 95% of votes
in favour, is approaching the end
of its three year term.
This section outlines the new
proposed 2023 Policy which,
subject to shareholder approval,
will take effect for three years
from 12 July 2023.
The Policy has been prepared in accordance
with The Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations
2008 as amended and the provisions of the
current Corporate Governance Code and the
Listing Rules.
The Board delegated its responsibility to the
Remuneration Committee to establish the
Policy on the remuneration of the Executive
Directors and the Chair. The Board has
established the Policy on the remuneration of
the other Non Executive Directors.
The Committee sets the Policy for Executive
Directors and other senior executives, taking
into account the Company’s strategic objectives
over both the short and the long term and the
external market.
The Committee oversees the operation
of employee pay practices, ensuring that
incentives for employees support the culture
and values of the Company.
In order to manage conflicts of interest, no
Director or employee participates in discussions
pertaining to their own remuneration.
The Committee reviews the performance of its
external advisers on an annual basis to ensure
that the advice provided is independent of any
support provided to management.
Overview of our Policy
The Group’s Remuneration Policy is designed
to align executive pay and incentives with
the Company’s goals and encourage and
reward exceptional overall and individual
performance. As well as motivating,
remuneration plays a key role in retaining
highly regarded individuals and needs to
be competitive.
The principles which underpin the
Remuneration Policy ensure that Executive
Directors’ remuneration:
• Is aligned to the business strategy and
achievement of business goals;
• Is aligned with the interests of
shareholders by encouraging high levels of
share ownership;
• Attracts, motivates and retains high
calibre individuals;
• Is competitive in relation to other
comparable real estate companies;
• Is set in the context of pay and
employment conditions of other
employees; and
• Rewards superior performance through the
variable elements of remuneration that are
linked to performance.
Policy review
The Committee undertook an extensive
review of the current Policy, working with our
independent remuneration advisors PwC, to
ensure that it continued to support the pay
principles set out above.
Overall, the Committee believes that the
current Policy continues to be broadly fit
for purpose and aligned with the business
strategy to continue to grow earnings and
deliver sustainable and progressive dividend
returns. Therefore, the core components are to
be retained.
During our review the Committee considered
a range of factors, but key amongst these was
the recognition that remuneration opportunities
for our Executive Directors did not fully reflect
the successful business growth achieved during
the period since 2013 and that total pay levels
should be positioned more towards the upper
quartile of the real estate market.
The Committee consulted extensively with
our largest shareholders and the investor
representative bodies in relation to changes
to Policy.
The Committee is grateful to all shareholders
who took part in the consultation and provided
valuable input, the result of which were a
number of changes to the Committee’s original
Policy proposals which are set out in the
Remuneration Committee Chair’s statement.
The Remuneration Committee considered the
level of increases that would be required to
achieve the desired market positioning and is
proposing what we believe are the minimum
necessary increases to annual bonus and LTIP
maximum opportunities. It also concluded
that any additional remuneration opportunity
should only be paid if warranted by strong
corporate performance.
Details of the proposed Policy changes and the
associated rationale are set out in the table on
page 145.
In addition to the changes highlighted in this
table, the Committee has proposed some
amendments to the current Policy wording to
ensure there is an appropriate level of flexibility
within the Policy, these are set out in the Policy
table on pages 146 to 155.
Remuneration
Directors’
Remuneration Policy
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Governance
Element Current Policy Proposed change Rationale for change
Pension The maximum contribution for
current Executive Directors is 15%
of salary, reducing to 12.5% of
salary in June 2021 and 10% of
salary in June 2022.
New Executive Directors will have
a pension contribution in line with
other employees.
The pension contribution rate for Executive
Directors will be aligned with the wider workforce
(currently 10% of salary).
Introduce flexibility for the Remuneration
Committee to align the Executive Directors’
pension contribution to the wider workforce rate
if this increases during the life of the policy at the
discretion of the Committee.
The Committee reduced Executives Directors'
contribution rates to 10% of salary on 1 June 2022,
such that they are currently aligned with the wider
workforce. The proposed policy embeds this
alignment with the wider workforce.
Annual bonus
- maximum
opportunity
Currently, the annual bonus
has a maximum opportunity of
165% and 140% of base salary
for the CEO and other Executive
Directors respectively.
Increase maximum bonus for CEO from 165% to
200% of salary.
Increase maximum bonus opportunity for other
Executive Directors from 140% to 175% of salary.
The Committee feels the proposed increases will
support the retention and incentivisation of the
management team to execute the strategy for
further growth in the business and deliver strong
returns to shareholders. This is consistent with
the desired positioning of total pay levels towards
the upper quartile of the real estate sector. The
Committee considered that an increase in both
the performance driven incentive opportunities,
but with a slightly greater increase in the annual
bonus opportunity was the most appropriate
method of meeting this objective, taking into
account the significant level of equity already held
by management. The proposed increases reflect
management’s exceptional reputation within the
sector and the current aggressive market for talent.
The increases to remuneration levels will only be
earned for continued excellent performance as
they are all performance linked.
Long Term
Incentive Plan
- maximum
opportunity
The LTIP has a maximum
opportunity of 200% and
165% of base salary for the CEO
and other Executive Directors
respectively.
Increase maximum LTIP award size for CEO from
200% to 225% of salary.
Increase maximum LTIP award size for other
Executive Directors from 165% to 200% of salary.
Annual bonus -
deferral
Executive Directors who have
met their minimum shareholding
requirement have the option to
receive the annual bonus paid
in cash. For those who are yet to
meet the minimum shareholding
requirement, up to 100%, and at
least 50% of the annual bonus
will be paid in deferred shares
vesting over 3 years.
Introduce compulsory bonus deferral in shares.
For existing Executive Directors, 50% of any bonus
earned over 120% of salary will be deferred into
shares. 50% of deferred shares vest after two
years and 50% after three years.
For new Executive Directors, one-third of the
bonus will be subject to deferral (50% for
two years and 50% for three years). Once a
new executive has built up a 700% of salary
shareholding then their deferral mechanism
will change to align with the existing Executive
Directors.
Dividend equivalents will be payable on deferred
shares.
Movement towards market practice.
The increased bonus quantum is almost entirely
deferred, which supports the retention of a highly
experienced management team.
Improves the efficacy/capability of malus/clawback
provisions under the annual bonus.
Deferring 1/3rd of annual bonus is standard market
practice for a FTSE 250 business, is aligned with
our FTSE 350 real estate peers, and therefore the
Committee believes it is appropriate to operate
this structure for a new Executive Director. It will
also help them build up a meaningful shareholding
alongside the LTIP.
Recruitment Policy Bonus: 175% of salary in
exceptional circumstances
LTIP: Maximum award of
200% of salary in exceptional
circumstances.
Maximum variable remuneration
which may be granted in normal
circumstances is 365% of salary.
An increase to the maximum annual bonus award
of up to 200% in normal circumstances and
up to 210% of salary in exceptional recruitment
circumstances.
An increase to the maximum LTIP award which
may be granted of up to 225% in normal
circumstances and up to 235% of salary in
exceptional circumstances.
Maximum variable remuneration which may be
granted in normal circumstances is 425% of salary.
Provides flexibility to enable senior-level
appointees to achieve stake in the Company and
facilitates recruitment of an exceptional candidate.
Aligns with proposals for increased annual bonus
and LTIP award levels.
There is however no current intention to use this
headroom.
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Governance
Remuneration
Directors’
Remuneration Policy
continued
Executive Directors’ Remuneration Policy Table
The policy table below sets out the key elements of the remuneration package for Executive Directors.
Base salary
Purpose and link to strategy Provide a competitive level of fixed pay to attract and retain Executive Directors of the required calibre to deliver the Group’s strategy.
Level of pay reflects individuals’ skills, seniority and experience and complexity of the role.
Operation An Executive Director’s basic salary is set on appointment and reviewed annually with changes normally taking effect from 1 June or
when there is a change in position or responsibility.
When determining an appropriate level of salary, the Committee considers:
• Pay increases to other employees
• Remuneration practices within comparable real estate companies
• Any change in scope, role and responsibilities
• The general performance of the Company and each individual
• The experience of the relevant Director
• The economic environment
Individuals who are recruited or promoted to the Board may, on occasion, have their salaries set below the targeted policy level until
they become established in their role. In such cases subsequent increases in salary may be higher than the general rise for employees
until the target positioning is achieved.
Maximum opportunity The Committee ensures that maximum salary levels are positioned in line with companies of a similar size to the Group and validated
against other real estate companies, so that they are competitive against the market.
The Committee intends to review the comparator group each year and will add or remove companies as it considers appropriate.
In general, salary increases for Executive Directors will be in line with the increase for employees. However, larger increases may be
offered if there is a material change in the scope and responsibilities of the role, including significant changes in Group size and/or
complexity or if it is necessary to remain competitive to retain a Director.
The Company will set out in the section headed Implementation of Remuneration Policy, in the following financial year, the salaries for
that year for each of the Executive Directors.
Performance measures The Directors are subject to an annual performance assessment, the outcome of which is taken account of in setting base salaries.
Changes to previous policy No changes.
Pension
Purpose and link to strategy Provide a competitive post-retirement benefit to attract and retain individuals.
Operation The Company provides a pension contribution allowance in line with practice relative to its comparators to enable the Company to
recruit and retain Executive Directors with the experience and expertise to deliver the Group’s strategy.
This allowance will be a non-consolidated allowance and will not impact any incentive calculations.
Maximum opportunity The maximum pension contribution rate is 10% of salary for Executive Directors, aligned to the wider workforce. Where there is any
increase to the pension contribution rate received by the wider workforce, the Executive Directors will be entitled to receive the same
contribution level at the discretion of the Remuneration Committee which, for the avoidance of doubt, could be more than 10% of salary.
No element other than base salary is pensionable.
Performance measures None.
Changes to previous policy See table on page 145 for details.
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Governance
Benefits
Purpose and link to strategy Provide a comprehensive and competitive benefit package to aid recruitment and the retention of high quality Executive Directors.
Operation Each Executive Director receives the following:
• Car allowance
• Private medical insurance
• Life insurance
• Permanent health insurance
The Committee recognises the need to maintain suitable flexibility in the determination of benefits that ensures it is able to support
the objective of attracting and retaining personnel. Accordingly, the Committee would expect to be able to adopt benefits such as
relocation expenses, tax equalisation and support in meeting specific costs incurred by Executive Directors to ensure the Company and
the individuals comply with their obligations in the reporting of remuneration.
Additional benefits which are available to other employees on broadly similar terms may be offered.
Maximum opportunity Car allowance is £20,000 per annum for each Executive Director.
Other benefits are provided at the market rate and therefore the cost will vary from year to year based on the cost from third party
providers.
Performance measures None.
Changes to previous policy Non-material changes provide the Committee with flexibility in line with standard market practice.
Annual bonus
Purpose and link to strategy Incentivise the achievement of annual financial targets consistent with the Group’s business plan for the relevant financial year as well
as the delivery of non financial targets.
Operation Annual performance measures, targets and their weightings are set by the Committee at the start of the financial year, linked
to the Group’s long term strategy.
For existing Executive Directors, 50% of any bonus earned over 120% of salary will be deferred into shares. 50% of deferred shares will
vest after two years and 50% after three years subject to continued employment. The portion of the bonus earned and not deferred
into shares will be paid in cash.
For new Executive Directors, one-third of any bonus earned will be deferred into shares. 50% of deferred shares will vest after two
years and 50% after three years subject to continued employment. The portion of the bonus earned and not deferred into shares will
be paid in cash.
Once a new Executive Director has built up a 700% of salary shareholding then the deferral mechanism will revert to that set out
above for existing Executive Directors.
Dividend equivalents will be payable on deferred shares.
The annual bonus contains malus and clawback provisions as noted on page 154.
Maximum opportunity The maximum bonus for the Chief Executive is 200% of salary and 175% of salary for other Executive Directors. Target bonus is 100%
of salary for the CEO and 87.5% of salary for the other Executive Directors, representing 50% of the maximum opportunity. The
threshold for the bonus is 25% of the maximum opportunity.
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Governance
Remuneration
Directors’
Remuneration Policy
continued
Annual bonus continued
Performance measures Performance is assessed against target financial and non financial measures depending on the annual priorities of the business. The Committee
may amend the measures used each year in line with the Group’s general business strategy as well as vary weightings from year to year.
At least 60% of the bonus will be linked to key property and financial metrics and a further 15% (as a minimum) will be subject to other
quantifiable metrics, so that at least 75% of the bonus metrics will be quantifiable. Non financial targets will be set to measure strategic and
ESG performance and contribution to the achievement of portfolio management initiatives and other operational management objectives.
The Committee will set challenging annual targets that are appropriately stretching, but achievable. The Committee is of the opinion
that due to the commercial sensitivity of annual targets, they will be disclosed retrospectively.
In exceptional circumstances where the Committee believes the original measures and/or targets are no longer appropriate, the
Committee has discretion to amend performance measures and targets during the year.
The Committee retains discretion to make downward or upward adjustments to the amount of bonus payable resulting from the
application of the performance measures if it believes that the outcomes are not a fair and accurate reflection of business performance.
Changes to previous policy See table on page 145 for details and the commitment that at least 75% of the bonus metrics will be quantifiable.
Long term incentives
Purpose and link to strategy Incentivise and reward the delivery of long term Group performance and sustained growth in line with business strategy, thereby
building a shareholding in the Group and aligning Executive Directors’ interests with shareholders.
Operation The LTIP rules were approved by the shareholders at the 2013 AGM and have been updated to reflect changes in this proposed Policy
and corporate governance best practice for approval at this year's AGM.
Awards are granted annually to Executive Directors in the form of a conditional share award or nil cost option.
Details of the performance conditions for grants made in the year will typically be set out in the Annual Report on Remuneration
on a prospective basis. If the Committee decides that any metric is commercially sensitive for future grants, details will be disclosed
retrospectively in the Annual Report on Remuneration.
Awards will normally vest at the end of a three year period subject to:
• The Executive Director’s continued employment at the date of vesting
• Satisfaction of the performance conditions
Vested awards will be subject to a further two year holding period during which Executive Directors cannot dispose of shares other than
for tax purposes.
The Committee may award dividend equivalents on awards that vest.
The LTIP contains malus and clawback provisions as noted on page 154.
Maximum opportunity Annual awards with a maximum value of up to 225% of salary for the Chief Executive and 200% of salary for other Executive Directors.
25% of the award will vest for threshold performance.
100% of the award will vest for maximum performance. There is straight line vesting between these points.
Performance measures The performance measures for the LTIP are set by the Committee and are based on a combination of metrics, with at least 50% being
financial in nature. The performance period is three years.
The Committee may change the balance of the measures or use different measures for awards as appropriate.
No material change will be made to the type of performance conditions without prior shareholder consultation.
In exceptional circumstances the Committee retains the discretion to:
• Vary, substitute or waive the performance conditions applying to LTIP Awards if it considers it appropriate and the new performance
conditions are deemed reasonable and are not materially less difficult to satisfy than the original conditions
• Make downward or upward adjustments to the amount vesting under the LTIP award resulting from the application of the
performance measures if it believes that the outcomes are not a fair and accurate reflection of business performance
Changes to previous policy See table on page 145 for details.
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Performance measures and targets
The table below sets out the performance measures chosen in respect of the annual bonus and LTIP in respect of the financial year ending 31 March 2024.
Annual Bonus
Performance measures
and weightings
• 30% Growth in EPRA EPS
• 30% growth in Total Property Return
• 30% Strategic objectives
• 10% ESG objectives
Performance targets The relative TPR measurement will be based on a conventional performance schedule with threshold and maximum performance
levels at median and upper quartile of the MSCI index. Equal weighting will be given to one and three year performance against the all
property benchmark and to one and three year performance against the reweighted property benchmark.
The Board deems all other annual bonus targets to be commercially sensitive.
Full details of the FY2024 targets and their achievement will be disclosed retrospectively in next year's Directors’ Remuneration Report.
Why measures were chosen Incentivise the achievement of annual financial targets consistent with the Group’s business plan with particular focus on TPR and
EPRA EPS.
The introduction of the strategic objectives in the annual bonus replaces the current personal objectives. This will directly measure
management’s performance against the strategic imperatives set annually by the Board. For the avoidance of doubt, many of these
strategic objectives will be financial in nature such that at least 75% of the annual bonus will be subject to quantifiable metrics.
Linking the Executive Directors’ annual bonus to ESG objectives is reflective of broader investor views and ensures the Executive
Directors are incentivised to deliver the Company’s ESG strategy.
How targets are set The performance targets are calibrated by the Committee considering the Company’s business plan, strategic and operational
objectives and market conditions.
Setting the TPR threshold and maximum performance levels at median and upper quartile respectively aligns with the TAR and TSR
relative vesting scales in the LTIP (see below).
LTIP
Performance measures
and weightings
• 37.5% Total Shareholder Return ('TSR') versus FTSE 350 Real Estate Super Sector Index (excluding agencies and operators)
• 37.5% on relative Total Accounting Return ('TAR') against the same peer group as TSR
• 25% on EPRA EPS growth
Performance targets The relative TSR and TAR target at threshold level is performance equal to the Index and maximum performance is equal to the upper
quartile, with straight line vesting in between.
The Committee will assess TSR if negative at the end of the performance period given market volatility and will adjust vesting
outcomes accordingly if it feels there is misalignment between remuneration outcomes and the shareholder experience.
In relation to EPS, vesting will be based on the EPS achieved in the year ending 31 March 2026. Threshold vesting will be achieved for
EPS growth equal to CPIH and maximum vesting for EPS growth of CPIH + 4.5%. CPIH will be capped at 4.5%. Straight-line vesting in
between threshold and maximum performance.
Why measures were chosen The relative TSR and TAR measures have been selected to reward senior executives for the generation of strong and sustainable long-
term growth and the delivery of long term sustainable value for the benefit of shareholders.
EPS has been selected as it remains the Company’s primary measure of profitability.
Each measure is consistent with the objective to generate reliable, repetitive and growing income-led total returns.
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Remuneration
Directors’
Remuneration Policy
continued
LTIP continued
How targets are set The relative TSR and TAR targets have been set, in line with standard practice, such that threshold vesting is achieved for performance
in line with an appropriate index, with full vesting for upper quartile.
The current formulaic positive TSR underpin has been updated as it creates the possibility for perverse outcomes in which
management is not appropriately rewarded for delivering strong relative performance due to negative absolute returns (which may be
outside management’s control and is particularly relevant in the current uncertain and volatile market) and is misaligned with standard
market practice.
The Group’s three year financial forecast was taken into account when setting the EPS targets along with consideration of strategic goals
and priorities, proposed investment and development plans, gearing levels, previous years’ results and the Company’s portfolio lease
structure. The CPIH cap is consistent with the approach taken for in-flight LTIP awards.
Shareholding guidelines
Minimum shareholding requirement
In line with the Group’s remuneration principles, the Remuneration Policy places significant importance on aligning the long term interests of
shareholders with those of management by encouraging the Executive Directors to build up over a five year period and then subsequently hold
a shareholding equivalent to a percentage of base salary. Adherence to these guidelines is a condition of continued participation in the equity
incentive arrangements.
In addition, Executive Directors will be required to retain at least 50% of the post tax amount of vested shares from the Company incentive plans until
the minimum shareholding requirement is met and maintained. The following table sets out the minimum shareholding requirements.
Role Shareholding requirement (% of salary)
Chief Executive 700%
Other Executive Directors 700%
Newly appointed Executive Directors 400%
The Committee has set the requirement at 400% of salary for the Policy period for newly appointed Executive Directors to reflect the practical level
that could be achieved if all incentives were earned over the Policy period and paid in shares.
Post cessation shareholding requirement
There is a post cessation shareholding requirement for the Executive Directors, who must retain shares equivalent in value to the minimum of 200% of
salary and their actual shareholding on cessation for two years post cessation of employment.
This requirement provides further long term alignment with shareholders and ensures a focus on successful succession planning.
Difference in policy for directors and for other employees
The table illustrates the cascade of pay structures throughout the business for the Chief Executive, Finance Director and the Senior Leadership Team for
the year to 31 March 2023. The Committee believes this demonstrates a fair and transparent progression of remuneration throughout the Company
which is in line with one of its core pay principles that variable performance based pay increases with seniority.
Participation/ Annual Bonus Entitlement
Element of pay Chief Executive Finance Director Senior Leadership Team
LTIP award 190% of salary 150% of salary 40% to 150% of salary
Annual bonus 130% of salary 107% of salary 56% to 107% of salary
Pension 10% to 12.5% of salary 10% to 12.5% of salary 10% to 12.5% of salary
The following differences exist between the Company’s Policy for the remuneration of Executive Directors as set out in the Policy table above and its
approach to the payment of employees generally:
• All employees are eligible for a performance based annual bonus. A lower level of maximum annual bonus opportunity applies to employees
when compared to the Executive Directors.
• Executive Directors participate in the LTIP. Currently 20 other employees are invited to participate in the LTIP at the Remuneration
Committee’s discretion.
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In general, these differences arise from the development of remuneration arrangements that are market competitive for the various levels of seniority.
Non Executive Directors’ Remuneration Policy Table
Fees and benefits
Purpose and link to strategy To attract and retain suitably qualified Non Executive Directors by ensuring fees are competitive. Non Executive Directors are not
eligible to receive benefits other than travel, hospitality related or other incidental benefits linked to the performance of their duties as
a Director.
Operation The Board is responsible for setting the remuneration of the Non Executive Directors (specifically the Chair and the Executive
Directors). The Remuneration Committee is responsible for setting the Main Board Chair’s fees.
Non Executive Directors are paid an annual fee and additional fees for the Chair of Committees and for the Senior Independent
Director. The Company retains the flexibility to pay fees for the membership of Committees. The Chair does not receive any additional
fees for membership of Committees.
Fees for a Chair/membership of a new Committee will be in line with this Policy.
Fees are reviewed annually based on equivalent roles in the comparator group used to review salaries paid to the Executive Directors.
Non Executive Directors and the Chair do not participate in any variable remuneration arrangements or other benefits arrangements.
Maximum opportunity The fees for Non Executive Directors and the Chair are broadly set at a competitive level against the comparator group.
In general, the level of fee increase for the Non Executive Directors and the Chair will be set taking account of any change in
responsibility. The aggregate fee for Non Executive Directors and the Chair will not exceed £1 million.
The Company will pay reasonable expenses incurred by the Non Executive Directors and Chair and may settle any tax incurred in
relation to these.
Non Executive Directors’ fees
The fees for Non Executive Directors and the Chair are broadly set at a competitive level against the comparator group and increases take account of
any change in responsibility. The aggregate fee for Non Executive Directors and the Chair will not exceed £1 million.
The base fee for Non Executive Directors has been increased by 3% to £54,350 from 1 June 2023. The new Chair’s letter of appointment set his fees for
the period to 31 March 2024.
Chair (from 11 July 2023) £200,000
Base Non Executive Director fee £54,350
Senior Independent Director additional fee £5,000
Additional fee for Audit/Remuneration Committee Chair £10,000
Additional fee for Audit/Remuneration Committee membership £5,000
Recruitment remuneration arrangements
The Company’s principle is that the remuneration of any new executive recruit will be assessed in line with the same principles as for the existing
Executive Directors, as set out in the Remuneration Policy table.
The Committee is mindful that it wishes to avoid paying more than it considers necessary to secure a preferred candidate with the appropriate calibre
and experience needed for the role.
In setting the remuneration for new recruits, the Committee will have regard to guidelines and shareholder sentiment regarding one-off or enhanced short
term or long term incentive payments as well as giving consideration for the appropriateness of any performance measures associated with an award.
Where an existing employee is promoted to the Board, the Policy would apply from the date of promotion but there would be no retrospective
application of the Policy in relation to subsisting incentive awards or remuneration arrangements. Accordingly, prevailing elements of the remuneration
package for an existing employee would be honoured and form part of the ongoing remuneration of the person concerned. These would be disclosed
to shareholders in the Annual Report on Remuneration for the relevant financial year.
New Non Executive Directors will be appointed through letters of appointment and fees set at a competitive market level and in line with the
other existing Non Executive Directors. Letters of appointment are normally for an initial term of three years and are subject to a notice period of
three months by either party.
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Governance
Remuneration
Directors’
Remuneration Policy
continued
Remuneration element Recruitment Policy
Salary, Benefits and Pension These will be set in line with the policy for existing Executive Directors.
Annual Bonus Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not exceed 200%
of salary (210% of salary in exceptional circumstances).
LTIP Maximum annual participation will be set in line with the Company’s policy for existing Executive Directors and will not exceed 225% of
salary (235% of salary in exceptional circumstances).
Maximum Variable
Remuneration
The maximum variable remuneration which may be granted in normal circumstances is 425% of salary (445% of salary in exceptional
circumstances). This excludes in both cases the value of any buyouts.
‘Buyout’ of incentives
forfeited on cessation of
employment
Where the Committee determines that the individual circumstance of recruitment justifies the provision of a buyout, the equivalent
value of any incentives that will be forfeited on cessation of an Executive Director’s previous employment (the lapsed valued) will be
calculated taking into account the following:
• The proportion of the performance period completed on the date of the Executive Director’s cessation of employment
• The performance conditions attached to the vesting of these incentives and the likelihood of them being satisfied
• Any other terms and conditions having a material effect on their value
The Committee may then grant up to the same value as the lapsed value under the Company’s incentive plans. To the extent that it
was not possible or practical to provide the buyout within the terms of the Company’s existing incentive plans, a bespoke arrangement
would be used.
Relocation Policies In instances where the new Executive Director is required to relocate or spend significant time away from their normal residence, the
Company may provide one-off compensation to reflect the cost of relocation for the Executive Director. The level of the relocation
package will be assessed on a case by case basis but will take into consideration any cost of living differences and schooling.
Internal appointment to the
Board
Where an existing employee is promoted to the Board, the Policy would apply from the date of promotion but there would be no
retrospective application of the Policy in relation to subsisting incentive awards or remuneration arrangements.
Service contracts and payment for loss of office
The service contracts for the Executive Directors were reviewed and revised following the merger in 2013 of London & Stamford and Metric Property.
Service contracts are terminable by either party with notice of 12 months. The Committee considers this appropriate for all existing and newly
appointed Directors.
The Non Executive Directors do not have service contracts but are appointed under letters of appointment.
Each Non Executive is subject to an initial three year term followed by annual re-election at the Company’s AGM.
The following definition of leavers will apply to both the annual bonus and the LTIP. A good leaver reason is defined as cessation in the
following circumstances:
• Death
• Ill-health
• Injury or disability
• Redundancy
• Retirement
• Employing company ceasing to be a Group company
• Transfer of employment to a company which is not a Group company
• At the discretion of the Committee
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Cessation of employment in circumstances other than those set out above is cessation for other reasons.
Remuneration element Treatment on cessation of employment
General The Committee will honour Executive Directors’ contractual entitlements. Service contracts do not contain liquidated damages clauses.
If a contract is to be terminated, the Committee will determine such mitigation as it considers fair and reasonable in each case. There
is no agreement between the Company and its Directors or employees, providing for compensation for loss of office or employment
that occurs because of a takeover bid. The Committee reserves the right to make additional payments where such payments are made
in good faith to discharge an existing legal obligation, or by way of damages for breach of such an obligation or by way of settlement or
compromise of any claim arising in connection with the termination of an Executive Director’s office or employment.
Salary, Benefits and Pension These will be paid over the notice period. The Company has discretion to make a lump sum payment in lieu.
Cash bonus Good leaver: performance conditions will be measured at the bonus measurement date.
Bonus will normally be pro-rated for the period worked during the financial year.
Other reason: no bonus payable for year of cessation.
Discretion: the Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained in full to shareholders
• To determine whether to pro-rate the bonus to time. The Committee’s normal policy is that it will pro-rate bonus for time. It is the
Committee’s intention to use discretion to not pro-rate in circumstances where there is an appropriate business case which will be
explained in full to shareholders
Deferred share awards Good leaver: all subsisting deferred share awards will vest.
Other reason: lapse of any unvested deferred share awards.
Discretion: the Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained in full to shareholders
• To vest deferred shares at the end of the original deferral period or at the date of cessation. The Committee will make this
determination depending on the type of good leaver reason resulting in the cessation
• To determine whether to pro-rate the maximum number of shares to the time from the date of grant to the date of cessation. The
Committee’s normal policy is that it will not pro-rate awards for time. The Committee will determine whether or not to pro-rate
based on the circumstances of the Executive Director’s departure
LTIP Good leaver: pro-rated to time and performance in respect of each unvested LTIP award.
Other reason: lapse of any unvested LTIP awards.
Discretion: the Committee has the following elements of discretion:
• To determine that an Executive Director is a good leaver. It is the Committee’s intention to only use this discretion in circumstances
where there is an appropriate business case which will be explained in full to shareholders
• To measure performance over the original performance period or at the date of cessation. The Committee will make this
determination depending on the type of good leaver reason resulting in the cessation
• To determine whether to pro-rate the maximum number of shares to the time from the date of grant to the date of cessation. The
Committee’s normal policy is that it will pro-rate awards for time. It is the Committee’s intention to use discretion to not pro-rate in
circumstances where there is an appropriate business case which will be explained in full to shareholders
LTIP award in a holding
period
Where cessation of employment occurs during any holding period, the holding period will normally continue to apply to vested LTIP
award shares as normal. However, the Committee retains discretion to allow the shares to be released when cessation of employment
occurs in certain exceptional circumstances
Buy-out awards Where cessation of employment occurs in relation to a new Executive Director who has been granted a buy-out award, the treatment
would be in line with the terms of the buy-out award. The Committee has discretion in line with the terms of the buy-out award.
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Governance
Remuneration
Directors’
Remuneration Policy
continued
The following table outlines the policy for the treatment of incentives in the event of a change of control:
Change of control
Remuneration element Change of control Discretion
Annual bonus
(cash)
Pro-rated to time and performance
to the date of the change of control.
The Committee has discretion regarding whether to pro-rate the bonus to time. The
Committee’s normal policy is that it will pro-rate the bonus for time. It is the Committee’s
intention to use its discretion to not pro-rate in circumstances only where there is an
appropriate business case which will be explained in full to shareholders.
Annual bonus
(deferred shares)
Subsisting deferred share awards
will vest on a change of control.
The Committee has discretion regarding whether to pro-rate the award to time. The
Committee’s normal policy is that it will not pro-rate awards for time. The Committee will
make this determination depending on the circumstances of the change of control.
LTIP The number of shares subject to
subsisting LTIP awards will vest on
a change of control, pro-rated to
time and performance.
The Committee has discretion regarding whether to pro-rate the LTIP awards to time.
The Committee’s normal policy is that it will pro-rate the LTIP awards for time. It is the
Committee’s intention to use its discretion to not pro-rate in circumstances only where
there is an appropriate business case which will be explained in full to shareholders.
Buy-out awards The treatment would be in line with the
terms of the buy-out award.
The Committee has discretion in line with the terms of the buy-out award.
Malus and clawback
The following definition of malus and clawback will apply to both the annual bonus (including any deferred shares) and the LTIP.
Malus is the adjustment of the annual bonus payments or unvested LTIP awards because of the occurrence of one or more circumstances listed.
The adjustment may result in the value being reduced to nil.
Clawback is the recovery of payments made under the annual bonus or vested LTIP awards as a result of the occurrence of one or more
circumstances listed.
Clawback may apply to all or part of a participant’s payment under the annual bonus or LTIP award and may be effected, among other means, by
requiring the transfer of shares, payment of cash or reduction of awards or bonuses.
The circumstances in which malus and clawback could apply are as follows:
• Discovery of a material misstatement resulting in an adjustment in the audited accounts of the Group or any Group company
• The assessment of any performance condition or condition in respect of an annual bonus payment or LTIP award was based on error, or inaccurate
or misleading information
• The discovery that any information used to determine the annual bonus payment or LTIP award was based on error, or inaccurate or
misleading information
• Action or conduct of a participant which amounts to fraud or gross misconduct
• Events or the behaviour of a participant have led to the censure of a Group company by a regulatory authority or have had a significant detrimental
impact on the reputation of any Group company provided that the Board is satisfied that the relevant participant was responsible for the censure
or reputational damage and that the censure or reputational damage is attributable to the participant
• Where, as a result of an appropriate review of accountability, the Remuneration Committee determines that the Executive Director has caused
wholly or in part a corporate failure of the Company
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The following table outlines the time periods during which these recovery provisions may apply for each element of remuneration:
Remuneration element Malus Clawback
Annual bonus
(cash)
Up to the date of the cash payment Two years post the date of any cash payment
Annual bonus
(deferred shares)
To the end of the vesting period n/a
LTIP To the end of the three year vesting period Two years post vesting
Other directorships
Executive Directors are permitted to accept external, non executive appointments with the prior approval of the Board where such appointments are
not considered to have an adverse impact on their role within the Group. Fees earned may be retained by the Director. In November 2022, Andrew
Jones was appointed as a Non Executive Director of Instavolt Limited and earned fees of £13,333 during the year to 31 March 2023.
Employee considerations
Chief Executive Wider workforce
+4.2%
Salary increase
from June 2023
-5.7%
Bonus movement
in 2023
+4.2%
Average salary
increase from June 2023
-5.1%
Average bonus
movement in 2023
1484%
Of salary held in
Company shares
10%
Pension contribution from
1 June 2022 in line with workforce
100%
Of employees received
a bonus in 2023
63%
Of employees participate
in the LTIP in 2023
The Company applies the same principles to the remuneration of all employees as it applies to the Executive Directors, namely that:
• The remuneration is competitive in relation to other comparable real estate companies;
• The incentive elements reward superior performance through the variable elements of remuneration that are linked to the same performance
targets as for the Executive Directors that are aligned to the business strategy; and
• The remuneration encourages employees to become shareholders.
The Committee considers employee views carefully and Andrew Livingston is the designated workforce Non Executive Director responsible for
gathering employee views, ensuring that key points raised by employees are discussed at Committee and Board meetings and feeding back to
employees how their views have been considered in the decision making process.
Andrew fed back results of the latest employee survey to the Committee and Board in March, noting that 94% of staff continued to be very proud to
be part of the LondonMetric team. Further details are provided on page 68.
In addition, the Remuneration Committee Chair attended the annual meeting held by the designated workforce NED with a group of employees and
welcomed questions on the principles and components of executive pay. He explained how executive pay was determined with reference to peer
group comparison and alignment to the wider workforce, and outlined important decision areas during the year given the continued very high levels of
inflation and volatile property markets.
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Illustration of application of Proposed Remuneration Policy
The charts below show the application of the Remuneration Policy in its first year and provide an indication of the potential remuneration for each
element of remuneration for each of the two current Executive Directors under various scenarios.
The elements of remuneration have been categorised into three components: (i) Fixed; (ii) Annual bonus (including deferred bonus); and (iii) LTIP.
The assumptions used in determining the remuneration illustrations are set out in the table below.
Scenario Fixed Annual Bonus (including Deferred Bonus) LTIP
Minimum • Base salary: As at 1 June 2023
• Pension: 10% of base salary
• Benefits: In line with those paid in year
ending March 2023
Nil Nil
Target 50% of maximum (in line with target
payout)
25% vesting (in line with threshold
vesting)
Maximum 100% of maximum 100% vesting
Maximum with LTIP share
price growth of 50% over
three years
100% of maximum 100% vesting with 50% share price
growth
For comparison, we have also shown the actual single figure for the year to 31 March 2023.
Andrew Jones Martin McGann
Fixed
100%
728
43% 23% 19%
38%
19%
1,676
37%
32%
40%
33%
3,844
3,234
16%
2,3 94
Bonus LTIP Share price growth
ActualOn target MaximumMinimum
Fixed
100%
498
48%
26%
22%
36%
16%
1,035
34%
29%
40%
34%
2,21 6
1,894
15%
1,384
Bonus LTIP Share price growth
ActualOn target MaximumMinimum
Remuneration
Directors’
Remuneration Policy
continued
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Strategy link to Remuneration Policy
The Committee’s remuneration decisions are steered by the Group’s strategic direction and corporate objectives. It is important that the incentive
arrangements operated by the Company are directly linked to the achievement of the Company’s strategy and overall corporate objectives. It is the
Committee’s belief that the incentive elements of the new Remuneration Policy align with these objectives.
The following table demonstrates how the Company’s key performance indicators (‘KPIs’) are aligned to its variable incentive arrangements of the
annual bonus and LTIP.
Key performance indicators
Link to remuneration
Annual bonus LTIP Link to strategy
Total shareholder return
37.5%
Total accounting return
37.5%
EPRA earnings per share
30% 25%
Total property return
30%
Strategic objectives
30%
ESG objectives
10%
Our strategic priorities
1
Align portfolio to macro
trends that are structurally
supported
2
Focus on long-let property with
strong occupier contentment
and rental growth prospects
3
Enhance asset value and
cash flow
4
Improve quality
and sustainability
of our assets
5
Partner of choice mindset
6
Use the team’s expertise to
make informed decisions
7
Generate reliable,
repetitive and growing
income
8
Deliver strong cash flows
and attractive total returns
Collaborate GenerateManageOwn
Statement of consideration of shareholder views
Following a thorough review of the current Remuneration Policy, the Committee carried out an extensive consultation seeking to engage with our top
shareholders representing over 63% of issued share capital as well as proxy voting agencies, on the changes featured in the proposed Policy.
We recognise the heightened attention placed on executive pay at the current time and have proposed a Policy which the majority of shareholders
were supportive of.
During the consultation process, we actively listened to shareholders and took their feedback into account when proposing the final Policy. The changes
made in response to this feedback, and the Committee’s rationale, are set out in the Remuneration Committee Chair’s introduction on page 143.
The Committee remains committed to ongoing dialogue with the Company’s shareholder base to ensure the views of all stakeholders are taken into
account in order to ensure the correct decisions are made for the Company.
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On the following pages we
set out the Annual Report on
Remuneration for the year ending
31 March 2023 which provides
details of how the Remuneration
Policy was applied and how we
intend to apply the proposed
Policy for the year ahead to
31 March 2024.
The Annual Report on
Remuneration including the Chair’s
introduction, are subject to an
advisory vote at the forthcoming
AGM on 12 July 2023.
The report complies with the 2018 UK
Corporate Governance Code, Listing Rules and
The Large and Medium Sized Companies and
Groups (Accounts and Reports) (Amendment)
Regulations 2013.
The areas of the report which are subject to
audit have been highlighted.
The role of the Remuneration Committee
The Committee determines Executive
Directors’ remuneration in accordance with
the approved Policy and its terms of reference,
which are reviewed annually by the Board and
are available on the Company’s website at
www.londonmetric.com.
The Board recognises that it is ultimately
accountable for executive remuneration
but has delegated this responsibility to the
Committee. All Committee members are Non
Executive Directors of the Company, which is
an important prerequisite to ensure Executive
Directors’ pay is set by Board members who
have no personal financial interest in the
Company other than as potential shareholders.
The Committee meets regularly without
the Executive Directors being present and is
independently advised by PwC, a signatory
to the Remuneration Consultants’ Code of
Conduct and which has no connection with
the Group other than in the provision of advice
on executive and employee remuneration
matters, corporate due diligence and taxation
advice. PwC were appointed in 2017 by
the Remuneration Committee following a
competitive tender process. Total fees paid
to PwC in respect of remuneration advice to
the Committee were £208,500 calculated on
both hourly and fixed fee bases and which this
year included £120,000 for the policy review.
The Committee is satisfied that the advice
provided by PwC is objective and independent.
No Executive Director is involved in the
determination of his own remuneration and
fees for Non Executive Directors are determined
by the Board as a whole.
The Company Secretary acts as secretary to
the Committee and the Chief Executive and
Finance Director attend meetings by invitation
but are not present when their own pay is being
discussed. The Chair of the Committee reports
to the Board on proceedings and outcomes
following each Committee meeting.
Meetings and activities
The Committee met on five occasions during the year. The main activities of the Committee during the year and to the date of this report
were as follows:
Annual bonus and LTIP Set challenging EPS targets for the 2022 LTIP awards granted and annual bonus for the year to 31 March 2023
Approved Executive Directors’ share awards under the LTIP following the announcement of the Company’s results for the
year ended 31 March 2022
Assessed the performance of Executive Directors against targets set at the beginning of the year and determined annual bonuses
for the year to 31 March 2023
Salary Reviewed and approved annual salary increases effective from 1 June 2023
Governance Reviewed and approved the Remuneration Committee Report
External evaluation of its own performance and review of its terms of reference
Reviewed and approved the CEO pay ratio
Remuneration Policy Conducted an independent review of the current Policy and considered the proposed new Policy
Consulted with 22 major shareholders representing 63% of the issued share capital on the proposed changes to the Policy
Remuneration
Annual Report
on Remuneration
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Governance
Earnings for the financial year
Remuneration for Executive Directors
Salary
£000
Benefits
£000
Pension
£000
Bonus
£000
LTIP³
£000
Total
2023
2
£000
Total
2022
£000
Illustrative change
in value of shares owned and
outstanding share awards
1
£000
Andrew Jones 609 26 63 799 897 2,394 2,881 680
Martin McGann 407 28 42 442 465 1,384 1,692 414
1 Based on an illustrative swing in share price of 10p. For reference, the highest closing share price during the year was 278.0p and the lowest closing price was 161.8p. The number of shares and share
awards was calculated based on the year end total
2 Full details of Directors’ remuneration for the year can be found in the table on page 163
3 2020 LTIP awards expected to vest in June 2023
Annual bonus plan – targets and outcome
Performance measure
Payout target
Actual £00025% 50% 100%
%
awarded
Combining these outcomes
with the personal objectives
gives the following payouts:
% of
maximum
EPRA EPS 10.04p 10.14p 10.33p 10.33p 100% Andrew Jones 799 79
TPR (3 year All Property) 1.9% 2.0% 2.2% 8.5% 100% Martin McGann 442 77
TPR (1 year All Property) -12.6% -11.3% -10.1% -12.0% –
TPR (3 year reweighted) 6.2% 6.8% 7.4% 8.5% 100%
TPR (1 year reweighted) -17.2% -15.5% -13.8% -12.0% –
2020 LTIPs vesting – targets and outcomes
Performance measure
Payout target
The estimated number
of shares vesting are as follows: Number25% 100% Actual
%
awarded
TSR -4.9% 11.8% 11.7% 99.8% Andrew Jones 485,945
TAR 0.6% 29.9% 32.5% 100.0% Martin McGann 251,822
EPRA EPS 10.26p 10.63p 10.33p 39%
The level of LTIP vesting in 2023 demonstrates the successful performance of the Company over the longer three year performance period with strong
absolute earnings growth and a resulting comparative return performance in excess of the Company’s direct competitors.
LTIPs granted in the year
Basis of award
(% of salary)
Date
of grant
Share awards
number
Face value
per share
Face value
of award
£000
Andrew Jones 200% 6 June 2022 479,000 257.4p 1,233
Martin McGann 155% 6 June 2022 248,222 257.4p 639
Shareholding of the Executive Directors
0% 150% 300% 450% 600% 750% 900% 1050% 1200% 1350% 1500%
% of salary
700%
1484%
453%
1433%
343%
700%
Andrew
Jones
Martin
McGann
Shareholding requirement
Beneficially owned shares
Unvested interests over shares
Shareholding requirement
Beneficially owned shares
Unvested interests over shares
Remuneration
Directors' remuneration
at a glance
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Governance
Summary of Policy Implementation in the year to 31 March 2024
Annual bonus
Annual performance targets are set by the Committee at the start
of the financial year linked to the Group’s long term strategy.
The performance targets are calibrated by the Committee
considering the Company’s business plan, strategic and
operational objectives and market conditions. At least 60% of
the bonus will be subject to key property and financial metrics
and a further 15% subject to other quantifiable metrics.
The payout for on target performance is 50% of the
maximum and the payout for threshold performance is 25%
of the maximum.
For existing Executive Directors, 50% of any bonus earned
over 120% of salary will be deferred into shares. 50% of
deferred shares will vest after two years and 50% after three
years. For new Executive Directors, one-third of any bonus
earned will be deferred into shares. 50% of deferred shares
will vest after two years and 50% after three years. Dividend
equivalents will be payable on deferred shares.
The portion of the bonus earned and not deferred into
shares will be paid in cash.
Once a new Executive Director has built up a 700% of salary
shareholding then the deferral mechanism will revert to that
set out above for existing Executive Directors.
The maximum bonus opportunity is 200% of salary for the Chief Executive and 175% of salary for
the Finance Director. The performance conditions and their weightings for the annual bonus are as
follows:
Performance
measure Weighting Description of targets
Growth in
EPRA EPS
30% Growth in Company’s EPRA EPS against a range of challenging targets
Growth
in total
property
return (‘TPR’)
30% Growth in Company’s TPR against the MSCI All Property index and
the index for the Group's portfolio of assets on a multi-year basis; Full
payout if growth is equal to the upper quartile; 25% payout if growth is
equal to the median; Straight line interpolation between limits
Strategic
objectives
30% Measures management’s performance against the strategic
imperatives set annually by the Board. Many will be financial in nature
such that at least 75% of the overall annual bonus will be subject to
quantifiable metrics
ESG
objectives
10% Measures management’s performance against targets aligned with
delivering the company’s ESG strategy
The Committee believes that the annual bonus targets for the coming year are commercially
sensitive and accordingly these are not disclosed. These will be reported and disclosed retrospectively
next year in order for shareholders to assess the basis for any payouts.
Base salary
An Executive Director’s basic salary is set on appointment
and reviewed annually with changes normally taking
effect from 1 June or when there is a change in position or
responsibility.
When determining an appropriate level of salary, the
Committee considers multiple factors including pay
increases to other employees, remuneration within
comparable real estate companies and the general
performance of the Company and individual.
The Committee has approved salary increases for the Executive Directors in line with the workforce
average increase of 4.2%.
Executive Director
Base salary from
1 June 2023
Base salary from
1 June 2022
Andrew Jones
£642,465 £616,569
Martin McGann £429,588 £412,273
Pension
The maximum contribution for Executive Directors is 10% of
salary in line with employees, which is payable as a monthly
contribution to the Executive Director’s individual personal
pension plan or taken as a cash equivalent. Salary sacrifice
arrangements can apply.
Executive Directors will receive the 10% of salary supplement in lieu of pension.
Benefits
The Committee recognises the need to maintain suitable
flexibility in the benefits provided to ensure
it is able to support the objective of attracting
and retaining personnel in order to deliver the
Group strategy.
In line with the Policy, each Executive Director receives:
• Car allowance
• Private medical insurance
• Life insurance
• Permanent health insurance
Long Term Incentive Plan The Committee is mindful of the fall in share price over the past year and has determined that LTIP
awards for 2023 will be limited to 190% of salary for the Chief Executive and 150% of salary for the
Finance Director.
Remuneration
Implementation
of policy next year
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Governance
Summary of Policy Implementation in the year to 31 March 2024
Annual awards of up to 225% of salary for the Chief
Executive and 200% of salary for the other Executive
Directors.
Awards will normally vest at the end of a three year period
subject to:
• The Executive Director’s continued employment at the
date of vesting; and
• Satisfaction of the performance conditions.
Vested awards will be subject to a further two year holding
period during which Executive Directors cannot dispose of
shares other than for tax purposes.
The Committee may award dividend equivalents on awards
that vest.
Performance
measure Weighting
Threshold
(25% vesting)
Maximum
1
(100% vesting)
Total shareholder
return ('TSR')
37.5% Equal to index Equal to upper quartile ranked
company
Total accounting
return ('TAR')
37.5% Equal to index Equal to upper quartile ranked
company
EPRA EPS growth 25% CPIH plus 0% over
three years
CPIH plus 4.5% over three years
1 Straight line interpolation between threshold and maximum
TSR and TAR are relative measures against the FTSE 350 Real Estate Sector excluding agencies and
operators (‘the Index’). The Committee determined that the indices would not be weighted.
In relation to EPS, vesting will be based on the EPS achieved in the year ending 31 March 2026. CPIH is
subject to a cap of 4.5% in line with in-flight awards as set out in the Chair’s introduction on page 140.
Shareholding requirement
Executive Directors are encouraged to build up and hold a
shareholding equivalent to a percentage of base salary.
Executive Directors will be required to retain at least 50% of
the post tax amount of vested shares from incentive plans
until this requirement is met and maintained.
The post cessation shareholding requirement is the
minimum of 200% of salary and actual shareholding for two
years post cessation of employment.
The shareholding requirement is:
• Chief Executive and other existing Executive Directors – 700% of salary
• Newly appointed Executive Directors – 400% of salary
Malus and clawback
Malus may apply to any cash bonus up to the date of
payment and any deferred bonus or LTIP award during their
respective vesting periods. Clawback may apply to any cash
bonus for up to two years following the payment of the
bonus and may apply to LTIP awards for up to two years
following vesting. Malus/clawback may result in the value of
awards being reduced to nil.
The circumstances in which malus and clawback could apply are:
• Material misstatement
• Calculation error in incentives
• Fraud or misconduct
• Reputational damage
• Corporate failure
Key elements and time period
Year ending March 2024 2025 2026 2027 2028
Base salary
Pension
Benefits
Annual bonus
– Cash
– Deferred shares
LTIP
Non Executive Directors’ fees
Performance period Vesting period Holding period
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Governance
Alignment of Policy with the 2018 Corporate Governance Code
In determining the implementation of Policy, the Committee considered its alignment with provision 40 of the 2018 Code, which is set out below.
Provision 40 element How the Remuneration Policy aligns
Clarity – remuneration arrangements should be
transparent and promote effective engagement
with shareholders and the workforce.
Performance measures and targets under the LTIP are disclosed before grant and performance targets for
the annual bonus are disclosed retrospectively.
Both the annual bonus and LTIP measures are based on core elements of the strategy and therefore there is
a clear link to all stakeholders between their delivery and Executive Director reward.
Simplicity – remuneration structures should avoid
complexity and their rationale and operation should
be easy to understand.
The Remuneration Policy is designed with simplicity in mind and its operation aligns with that of the majority
of FTSE 350 companies and is therefore easy to understand.
Risk – remuneration arrangements should ensure
reputational and other risks from excessive rewards,
and behavioural risks that can arise from target based
incentive plans, are identified and mitigated.
The selection of performance measures and targets ensures that incentives will only pay out where strategic
goals have been met. The mix of relative and absolute performance measures help to balance the effect of
external market factors (whether positive or negative).
The Remuneration Policy contains strict minimum shareholding requirements as well as a post cessation of
employment shareholding requirement which ensures that the wealth of Executive Directors is linked to the
long term stability and growth of the share price which discourages short term excessive risk taking which
could negatively impact on long term value.
The Policy contains sufficient flexibility to adjust payments through malus and clawback and an overriding
discretion on the part of the Committee to depart from formulaic outcomes if it appears that the criteria on
which the award was based does not reflect the underlying performance of the Company.
Predictability –the range of possible values of
rewards to individual Directors and any other limits
or discretions should be identified and explained
at the time of approving the Policy.
The Remuneration Policy sets out clearly the range of values, limits and discretions in respect of the
remuneration of management.
Proportionality – the link between individual
awards, the delivery of strategy and the long term
performance of the company should be clear.
Outcomes should not reward poor performance.
The remuneration package is weighted in favour of variable pay. This, combined with the Committee’s
approach to target setting including the use of relative performance measures, means that total
remuneration will be reduced in the event of poor performance. Pay-outs at maximum will only be available
for delivery of the strategy and strong underlying performance.
Alignment to culture – incentive schemes should
drive behaviour consistent with Company purpose,
values and strategy.
The overall structure of the Remuneration Policy including the incentive schemes is consistent with the
principles of the Policy which encourage share ownership.
Furthermore, the elements of the Executive Director remuneration package are cascaded further down the
organisation, as is the culture of share ownership.
Remuneration
Implementation
of policy next year
continued
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Governance
Remuneration
Directors’
Remuneration in 2023
Single total figure of remuneration for each Director (audited)
Salary and fees Benefits
1
Pension
2
Total Fixed Annual bonus
3
LTIP
4
Total Variable Total
Director
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
2023
£000
2022
£000
Executive
Andrew Jones 609 565 26 26 63 73 698 664 799 847 897 1,370 1,696 2,217 2,394 2,881
Martin McGann 407 378 28 29 42 49 477 456 442 480 465 756 907 1,236 1,384 1,692
Non Executive
Patrick Vaughan 208 216 – – – – 208 216 – – – – – – 208 216
Suzanne Avery 62 60 – – – – 62 60 – – – – – – 62 60
James Dean 52 50 – – – – 52 50 – – – – – – 52 50
Alistair Elliott 45 – – – – – 45 – – – – – – – 45 –
Robert Fowlds 77 75 – – – – 77 75 – – – – – – 77 75
Andrew Livingston 57 55 – – – – 57 55 – – – – – – 57 55
Kitty Patmore 57 55 – – – – 57 55 – – – – – – 57 55
Rosalyn Wilton 72 70 – – – – 72 70 – – – – – – 72 70
1 Taxable benefits include the provision of a car allowance for Executive Directors and private medical insurance
2 Pension contribution from 1 June 2022 is 10.0% of salary and may be taken partly or entirely in cash
3 Annual bonus payable in respect of the financial year ending 31 March 2023 paid fully in cash as minimum shareholding requirements met
4 2020 LTIP awards expected to vest in June 2023 for the performance period to 31 March 2023. The value of the award has been calculated by multiplying the estimated number of shares that will vest,
including the dividend equivalent, by the average share price for the three months to 31 March 2023. No discretion was applied in determining the estimated vesting of the award as a result of changes
in share price or other factors. The change in share price between grant and 31 March 2023 reduces the value of the award by £120,000 for Andrew Jones and £62,000 for Martin McGann as reflected
in the table on page 167. The estimated figures disclosed in the previous Annual Report for the 2019 LTIP awards vesting in 2022 have been restated to reflect final vesting figures and the share price on
the date of vesting. The estimated share price used last year was 265.2p and the actual share price on vesting was 235.9p. The differences in value were -£154,000 for Andrew Jones and -£85,000 for
Martin McGann
The Committee believes it is important to take a holistic view of the Executive Directors’ total wealth when considering the single figure of
remuneration. The Executive Directors have very large shareholdings in the Company and are exposed to relatively small changes in the share price
significantly affecting their overall wealth. In the Committee’s opinion, the impact of share price movements on the total wealth of the Director is more
important than the single figure. The significant shareholding encourages Directors to take a long term view of the sustainable performance of the
Company, which is critical in a cyclical business. The Directors’ significant exposure to share price movements remains a key facet of the Company’s
Remuneration Policy.
Annual bonus outcome for the year ended 31 March 2023
The annual bonus performance targets set for the year to 31 March 2023 and the assessment of actual performance achieved is set out in the table
below. Bonus awards are based 70% on the Company’s financial performance and 30% on the individual’s contribution in the year. The maximum
opportunity was 165% of salary for Andrew Jones and 140% of salary for Martin McGann.
The financial performance element measures growth in EPRA EPS and TPR relative to the MSCI benchmark for the Group’s portfolio of assets.
In determining the base EPRA EPS target, the Committee looks to maintain consistency with longer term incentive targets but is mindful of shorter
term strategic priorities and changing market conditions. This year, in response to the deterioration in market conditions, the Board materially changed
its strategy away from new investments and development funding to a focus on net disposals to manage LTV and retain a robust balance sheet.
This directly impacted the Company’s EPRA EPS and therefore the Committee has taken this into account when assessing the EPS target. The impact
of the reduced investment and withdrawal of project funding was excluded from the original EPS targets.
In line with best practice, TPR has been measured on a multi-year basis (over one and three years) to reflect performance against the All Property index
and the index for the Group’s portfolio of assets.. The 2023 annual bonus outcome is set out in the table below. No discretion has been exercised as the
payout is in line with underlying corporate performance.
Financial
objectives
(out of 70%)
Individual
objectives
(out of 30%)
Bonus % of
maximum
Bonus %
of salary
Total bonus
£000
Andrew Jones 53% 26% 79% 130% 799
Martin McGann 53% 24% 77% 107% 442
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Governance
Group financial targets
Performance measure Weighting Basis of calculation
Range
Actual
performance
%
awarded(0%) (25%) (50%) (100%)
EPRA EPS 35%
Growth in EPRA
EPS against
a challenging
target <10.04p 10.04p 10.14p 10.33p 10.33p 100%
Total property return
(‘TPR’) 35%
Growth in TPR
against MSCI
benchmark Positive growth
TPR matches
index
TPR is 1.1 times
index
TPR is 1.2 times
index See below 50%
3 year All
Property 1.9% 2.0% 2.2% 8.5% 100%
1 year All
Property -12.6% -11.3% -10.1% -12.0% –
3 year
reweighted 6.2% 6.8% 7.4% 8.5% 100%
1 year
reweighted -17.2% -15.5% -13.8% -12.0% –
Individual non financial targets
Executive Directors’ non financial targets accounted for 30% of the maximum bonus award. Personal objectives were aligned to the delivery of the
Group’s key strategic objectives. The Committee felt that the Executive Directors had substantially achieved their individual personal objectives and
approved payouts of 87% of maximum for Andrew Jones and 80% of maximum for Martin McGann. In making this decision, the Committee took into
consideration the strong operating performance despite a challenging macroeconomic environment.
The table below outlines the key personal objectives set and the Committee’s assessment of performance for each of the Executive Directors for the
annual bonus awarded in the year to 31 March 2023.
Objective Assessments
Andrew Jones
Portfolio & financial
Portfolio focus to maximise both EPS and NAV growth • Increase in EPRA EPS from 10.04p to 10.33p, providing cover for an increase in the dividend for
the year
• Decrease in EPRA NTA per share from 261.1p to 198.9p largely due to revaluation loss of
£587.5 million
Recycling capital with sell down of non core assets • Investment in preferred logistics and long income sectors maintained at 97%, with logistics
representing 73% of the portfolio
• Divestment of non core assets to protect the LTV which was 32.8% at the year end.
Total disposals of £273 million
Focus on income quality to deliver opportunities for sustainable
and progressive earnings
• Increase in contracted rent to £145.2 million
• Low EPRA cost ratio of 11.7% maintained, falling 80bps over the year
• Growth in EPRA earnings per share in the year of 2.9%, supporting a continuation in
dividend progression
To provide oversight to the delivery of development schemes
during the year
• Completion of 0.7 million sq ft of development during the year producing £5.5 million of annual
rent with a further 0.2 million sq ft under construction
Reinforce the position of the Company as leading investor/partner
of choice in logistics with our stakeholders
• Reinforcement of growth characteristics of urban logistics continues to be well received in the
market and by stakeholders
ESG
Optimise our EPRA/GRESB sustainability rankings • GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 64% and Green Star status
Remuneration
Directors’
Remuneration in 2023
continued
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ESG continued
Demonstrate sustainable improvement in buildings across the
portfolio as evidenced by EPC ratings of A-C for 85% of the
portfolio, three new renewable installations in the year and
completed large developments to be certified BREEAM Very Good
• 97% of developments completed in the year certified BREEAM Very Good
• EPC A-C rated assets increased to 90%, from 85% last year
• Added five solar PV systems in the year
Lengthen and strengthen relationships with key stakeholders:
institutional shareholders, private client wealth managers (‘PCM’),
occupiers and analysts
• 241 investors met in the year, good investor feedback
• Continuing focus on private wealth managers and funds which account for c.34% of the register
• Strong portfolio metrics and results from the latest occupier survey demonstrate contentment,
with occupancy of 99.1% and a landlord recommendation score of 8.7/10.0
Position the Company as an employer of choice and continue to
generate positive employee feedback, very low staff turnover and
an inclusive corporate culture
• Sixth staff survey undertaken in February with very positive results
• 94% of staff feel proud to work for the Company
• Continued very low staff turnover rate of 6%
Continue to realign the team in line with our evolving
portfolio strategy
• Continuing focus on the right team with the right skills
Objective Assessments
Martin McGann
Portfolio & financial
Optimising the funding structure to support
the real estate strategy
• New £275 million sustainability-linked unsecured credit facility
• Existing short dated facility repaid
• £225 million interest rate swaps acquired increasing the proportion of debt hedged to 93%
Focus on income quality to deliver growth in our
sustainable earnings
• Growth in EPRA EPS in the year of 2.9%, supporting a continuation in dividend progression
• Increase in contracted rent to £145.2 million
Delivery of development schemes on schedule and on budget,
and within agreed timescales and in line with BREEAM
• Completion of 0.7 million sq ft of development during the year producing £5.5 million of annual
rent with a further 0.2 million sq ft under construction
Maintain appropriate LTV, cost of finance and debt
maturity metrics
• Average cost of debt of 3.4% (2022: 2.6%)
• Managed LTV through targeted disposals, LTV at year end of 32.8% (2022: 28.8%)
• Mitigated exposure to floating rate debt by acquiring £225 million interest rate swaps, increasing
hedging 71% to 93%
• Repaid short dated facilities and mitigated refinancing risk for the next three years
• Average maturity of 6.0 years (2022: 6.5 years).
ESG
Optimise our EPRA/GRESB sustainability rankings • GRESB Green Star, EPRA sustainability Gold Award
• GRESB score of 64%
Demonstrate sustainable improvement in buildings across the
portfolio as evidenced by EPC ratings of A-C for 85% of the
portfolio, three new renewable installations in the year and
completed large developments to be certified BREEAM Very Good
• 97% of developments completed in the year certified BREEAM Very Good
• EPC A-C rated assets increased to 90%, from 85% last year
• Added five solar PV systems in the year
Position the Company as an employer of choice and continue to
generate positive employee feedback, very low staff turnover and
an inclusive corporate culture
• Sixth staff survey undertaken in February with very positive results
• 94% of staff feel proud to work for the Company
• Continued very low staff turnover rate of 6%
Deliver Responsible Business agenda to increasing satisfaction of
stakeholders, including investors, tenants, suppliers, our staff and
the local communities within which we operate
• Occupier survey undertaken with high level of satisfaction, 8.7/10.0 landlord
recommendation score
• 88% of staff agreed the Company supports and promotes social responsibility
• Investor feedback demonstrated we are meeting their ESG expectations on performance
and disclosure
• Charitable donations of £104,000 in the year
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Governance
Deferred Bonus Plan
The current Remuneration Policy allows the Directors to opt out of bonus deferral if the minimum shareholding requirement is met. At the date of
this report, both Executive Director’s shareholding materially exceeds the minimum requirement and therefore no annual bonus earned in the year to
31 March 2023 will be deferred into shares.
Long Term Incentive Plan - awards granted
Awards granted in the year to 31 March 2023 as nil cost options are summarised in the table below.
Basis of award
(% of salary)
Date of
grant
Share awards
number
Face value
per share
Face value
of award
£000
Face value of
award at threshold
(25%) vesting
£000
Andrew Jones 200% 6 June 2022 479,000 257.4p 1,233 308
Martin McGann 155% 6 June 2022 248,222 257.4p 639 160
The face value is based on a weighted average price per share, being the average share price over the five business days immediately preceding the date
of the award. Awards will vest after three years subject to continued service and the achievement of performance conditions over the three year period
to 31 March 2025 as set out below.
Performance condition Vesting level
Total Shareholder Return (‘TSR’) measured against FTSE 350 Real Estate Super Sector
excluding agencies and operators (37.5% of Award)
TSR less than index over 3 years 0%
TSR equals index over 3 years
1
25%
TSR between index and upper quartile ranked company in the index
1
Pro rata on a straight line basis between 25% and 100%
TSR equal to or better than the upper quartile ranked company in the index
1
100%
Total Accounting Return (‘TAR’) measured against FTSE 350 Real Estate Super Sector
excluding agencies and operators (37.5% of Award)
TAR less than index over 3 years 0%
TAR equals index over 3 years 25%
TAR between index and upper quartile ranked company in the index Pro rata on a straight line basis between 25% and 100%
TAR equal to or better than the upper quartile ranked company in the index 100%
EPRA EPS growth against a base target plus CPIH (25% of award)
Less than base plus CPIH plus 0% over 3 years 0%
Base plus CPIH plus 0% over 3 years 25%
Base plus CPIH plus between 0% and 4.5% over 3 years Pro rata on a straight line basis between 25% and 100%
Base plus CPIH plus 4.5% or better over 3 years 100%
1 TSR must be positive over three years
The adjusted EPRA EPS base target for the three year performance periods commencing 1 April 2022 has been set at 10.04p. The Group’s three year
financial forecast was taken into account when setting these targets along with consideration of strategic goals and priorities, proposed investment
and development plans, gearing levels and previous years’ results. Targets are considered challenging yet achievable in order to adequately incentivise
management and are in line with the Company’s strategic aim of delivering long term growth for shareholders. In line with the approach taken for the
2020 LTIP awards, CPIH will be capped at 4.5% as set out in the Committee Chair’s statement.
Remuneration
Directors’
Remuneration in 2023
continued
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Governance
Long Term Incentive Plan - awards vesting
2020 LTIP awards expected to vest in relation to the three year performance period ending 31 March 2023 are summarised on below. No discretion
has been exercised as the payout is in line with underlying corporate performance.
Range
Actual
performance
%
awardedPerformance measure Weighting Basis of calculation (0%) (25%) (100%)
Total shareholder return (‘TSR’) 37.5%
Growth in TSR against FTSE
350 Real Estate Index <-4.9% -4.9% 11.8% 11.7% 99.8%
Total accounting return (‘TAR’) 37.5%
Growth in TAR against FTSE
350 Real Estate Index <0.6% 0.6% 29.9% 32.5% 100.0%
EPRA EPS 25%
Growth in EPRA EPS against
a challenging base target <10.26p 10.26p 10.63p 10.33p 39.0%
Director
Maximum
number of
shares²
LTIP
% of
maximum
Estimated
number of
shares vesting
Face value
at grant
£000
Share price
depreciation
£000
Total estimated
value of Award
vesting
1
£000
Andrew Jones 573,725 84.7% 485,945 1,030 (120) 897
Martin McGann 297,310 84.7% 251,822 534 (62) 465
1 The estimated face value is based on the average share price for the three months to 31 March 2023 of 184.6p
2 Includes notional dividend shares to 31 March 2023
On vesting, the Committee will determine whether any adjustment should be made in relation to windfall gains. However, it notes that the 2020 LTIP award was
granted in June 2020 when the Company’s share price had recovered close to its pre-Covid level and above the share price used to determine the 2019 LTIP awards.
Outstanding LTIP awards held by the Executive Directors are set out in the table below.
Number of shares under award
1
Director
Date of
grant
Face value
on grant
At 1 April
2022
Granted
in year
Notional dividend
shares in year
Vested
in year
Lapsed
in year
At 31 March
2023
Performance
period
Andrew Jones 5.6.2019 204.2p 599,644 – 6,513 (580,698) (25,459) –
1.4.2019 to
31.3.2022
17.6.2020 212.0p 548,382 – 25,343 – – 573,725
1.4.2020 to
31.3.2023
4.6.2021 234.7p 497,026 – 22,828 – – 519,854
1.4.2021 to
31.3.2024
6.6.2022 257.4p – 479,000 17,052 – – 496,052
1.4.2022 to
31.3.2025
Martin McGann 5.6.2019 204.2p 330,789 – 3,594 (320,339) (14,044) –
1.4.2019 to
31.3.2022
17.6.2020 212.0p 284,177 – 13,133 – – 297,310
1.4.2020 to
31.3.2023
4.6.2021 234.7p 240,946 – 11,067 – – 252,013
1.4.2021 to
31.3.2024
6.6.2022 257.4p – 248,222 8,837 – – 257,059
1.4.2022 to
31.3.2025
1 Awards granted as nil cost options
Directors’ shareholdings and share interests (audited)
The beneficial interests in the ordinary shares of the Company held by the Directors and their families who were in office during the year and at the
date of this report are set out in the table on page 168.
There were no movements in Directors’ shareholdings between 31 March 2023 and the date of this report.
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Governance
The shareholding guidelines recommend Executive Directors build up a shareholding in the Company at least equal to seven times salary. All Executive
Directors complied with this requirement at 31 March 2023 and as at the date of this report. No Director had any interest or contract with the Company
or any subsidiary undertaking during the year.
The Executive Directors have entered into individual personal loan arrangements with Coutts & Co and granted pledges over ordinary shares in the
Company as security in connection with the loans. The loans were used to repay debt secured against various residential investment properties held
personally. The number of shares pledged by each of the Directors is reflected in the table below.
Overall beneficial
Interest 31 March
2023 Ordinary
shares of 10p each
Overall beneficial
Interest 31 March
2022 Ordinary
shares of 10p each
LTIP shares subject
to performance
conditions
Deferred
bonus
shares
Total
interests as at
31 March 2023
Share
ownership as
% of salary
1
Shareholding
guideline
met
Number of shares
pledged as at 31
March 2023
Executive Directors
Andrew Jones 5,209,491 4,909,823 1,589,631 – 6,799,122 1484% Yes 3,446,072
Martin McGann 3,364,348 3,171,897 806,382 – 4,170,730 1433% Yes 2,341,585
Non Executive Directors
Patrick Vaughan 9,977,000 10,277,000
Suzanne Avery 27,050 22,750
James Dean 95,000 20,000
Alistair Elliott 60,000 –
Robert Fowlds 104,000 104,000
Andrew Livingston 106,830 106,830
Suzy Neubert – –
Kitty Patmore 5,000 5,000
Rosalyn Wilton 111,095 100,000
1 Based on the Company’s share price at 31 March 2023 of 175.6p and the beneficial interests of the Directors
Performance graph
The graph below shows the Group’s total shareholder return (‘TSR’) for the ten year period to 31 March 2023, compared to the FTSE All Share REIT
Index, the FTSE 350 Real Estate Index and the FTSE 350 Real Estate Super Sector Index. These have been chosen by the Committee as in previous
years as they are considered the most appropriate and relevant benchmarks against which to assess the performance of the Company.
Total shareholder return measures share price growth with dividends deemed to be reinvested on the ex-dividend date.
90
140
190
240
290
340
390
440
01 Apr
2013
01 Apr
2014
01 Apr
2015
01 Apr
2016
01 Apr
2017
01 Apr
2018
01 Apr
2019
01 Apr
2020
01 Apr
2021
01 Apr
2022
31 Mar
2023
LondonMetric FTSE All Share REIT FTSE 350 REIT FTSE 350 RE SS
Remuneration
Directors’
Remuneration in 2023
continued
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Governance
Chief Executive’s remuneration table
The table below details the remuneration of the Chief Executive, Andrew Jones, for the ten year period to 31 March 2023.
Year to 31 March
Total
remuneration
£000
Annual bonus
(as a % of the
maximum
payout)
LTIP vesting
(as a % of the
maximum
opportunity)
2023 2,394 79 84.7
2022 2,881 90 95.8
2021 2,998 97 100
2020 2,925 97.5 88
2019 2,703 90 84
2018 2,392 79 94
2017 2,506 89 100
2016 2,792 77 100
2015 1,167 78 –
2014 1,296 100 –
Annual percentage change in remuneration of Directors and employees
The percentage change in Director remuneration from the previous year compared to the average percentage change in remuneration for all other
employees is as follows:
2023 % change 2022 % change 2021 % change
Salary
and fees
Taxable
benefits
Annual
bonus
Salary
and fees¹
Taxable
benefits
Annual
bonus
Salary
and fees¹
Taxable
benefits
Annual
bonus
Andrew Jones 7.8% – -5.7% 3.4% – -3.3% 0.4% – -0.2%
Martin McGann 7.7% -3.4% -7.9% 3.5% – -3.4% 0.6% 3.6% 2.5%
Patrick Vaughan -4.6% n/a n/a – n/a n/a 0.5% n/a n/a
Suzanne Avery 3.3% n/a n/a – n/a n/a 1.7% n/a n/a
James Dean 4.0% n/a n/a -7.4% n/a n/a -15.6% n/a n/a
Alistair Elliott n/a n/a n/a n/a n/a n/a n/a n/a n/a
Robert Fowlds 2.7% n/a n/a 5.6% n/a n/a 10.9% n/a n/a
Andrew Livingston 3.6% n/a n/a – n/a n/a 1.9% n/a n/a
Suzy Neubert n/a n/a n/a n/a n/a n/a n/a n/a n/a
Kitty Patmore 3.6% n/a n/a n/a n/a n/a n/a n/a n/a
Rosalyn Wilton 2.9% n/a n/a 1.4% n/a n/a – n/a n/a
Other employees² 8.4% -4.2% -5.1% 4.2% 3.0% -0.9% –% -5.0% 10.0%
1 Excludes Directors' and other staff salary waiver in 2021
2 Excluding Directors
CEO pay ratio
Whilst the Company has fewer than 250 employees and therefore is not required to disclose a ratio, the Committee felt that it was appropriate to
disclose the CEO to all-employee pay ratio, recognising that the Company’s investors expect to see such disclosure.
Pay ratio
Year
Method of
calculation
25th
percentile
50th
percentile
75th
percentile
2023 A 33:1 19:1 7:1
2022 A 43:1 22:1 8:1
2021 A 34:1 13:1 7:1
2020 A 42:1 16:1 8:1
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Governance
The Company chose to adopt the Option A methodology when calculating the ratio as it deemed it the most appropriate approach and had sufficient
data to be able to carry out this method. This method was used to calculate all figures in the table above. The Chief Executive’s single figure of
remuneration used for the calculation ratio is as detailed on page 163. The same methodology was used to calculate all-employee pay for the purposes
of the ratios, which were calculated based on amounts receivable up to the end of the relevant financial year for all employees excluding the CEO and
the Non Executive Directors. No elements of pay have been omitted and no assumptions have been made.
As we continue to disclose the ratio in future years, we anticipate that there are likely to be changes in the ratio as the CEO’s total remuneration has a
greater portion of pay delivered as variable remuneration, which is consistent with the Company’s remuneration principles. In summary, we anticipate
volatility in this ratio, and we believe that this is caused by the following:
• Our CEO pay is made up of a higher proportion of incentive pay than that of our employees, in line with the expectations of our shareholders.
This introduces a higher degree of variability in his pay each year which affects the ratio;
• The value of long term incentives which measure performance over three years is disclosed in pay in the year it vests, which increases the CEO pay
in that year, again impacting the ratio for the year;
• Long term incentives are provided in shares, and therefore an increase in share price over the three years magnifies the impact of a long term
incentive award vesting in a year;
• We recognise that the ratio is driven by the different structure of the pay of our CEO versus that of our employees, as well as the make-up of our
workforce. This ratio varies between businesses even in the same sector. What is important from our perspective is that this ratio is influenced only
by the differences in structure and not by divergence in fixed pay between the CEO and the wider workforce. The table showing the year on year
change of CEO remuneration and average employee remuneration demonstrates that divergence is not occurring; and
• Where the structure of remuneration is similar, as for the Senior Leadership Team and the CEO, the ratio is much more stable over time.
The Committee is comfortable that the median pay ratio is consistent with pay and progression policies for employees.
Payments to past Directors and for loss of office
Valentine Beresford and Mark Stirling stepped down from the Board on 11 July 2019 but remained employees of the Company and thus in accordance with the
Policy and relevant share plan rules are entitled to vesting of existing share awards in line with their original schedules. The 2019 LTIP awards made to Valentine
Beresford and Mark Stirling when they were Directors vested during the year on 14 June 2022 in line with the outcomes for the current Executive Directors with
no discretion applied. Upon vesting, Messrs Beresford and Stirling each received 331,070 shares. There have been no payments for loss of office in the year.
Relative importance of spend on pay
The table below shows the expenditure and percentage change in spend on employee remuneration compared to other key financial indicators.
2023
£m
2022
£m
%
change
Employee costs
1
11.4 11.5 -0.9%
Dividends
2
92.4 81.7 13.1%
1 Figures taken from note 4 Administrative costs on page 191 and are stated before any amounts capitalised and exclude share scheme costs
2 Figures taken from note 7 Dividends on page 193
Statement of voting at AGM
At the AGM on 13 July 2022, the Annual Report on Remuneration was approved with votes from shareholders representing 79% of the issued share
capital of the Company. The Directors’ Remuneration Policy was approved at the AGM on 22 July 2020 with votes from shareholders representing 77%
of the issued share capital at the time. The details of these outcomes are below.
2022 Annual Report on Remuneration 2020 Directors’ Remuneration Policy
Votes cast % Votes cast %
For 729,175,951 94.68 636,778,186 95.40
Against 40,978,748 5.32 30,689,708 4.60
Withheld 5,680,691 32,932,457
Total 775,835,390 700,400,351
Robert Fowlds
Chair of the Remuneration Committee
24 May 2023
Remuneration
Directors’
Remuneration in 2023
continued
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Governance
Report of
the Directors
On behalf of the Board, I am
delighted to present the Report
of the Directors together with the
audited financial statements for
the year ended 31 March 2023.
Annual General Meeting (‘AGM’)
The AGM of the Company will be held on 12 July
2023 at 10 am at The Connaught, Carlos Place,
Mayfair, London, W1K 2AL. The Notice of AGM
on pages 224 to 231 sets out the proposed
resolutions and voting details.
The Board considers that the resolutions
promote the success of the Company and are in
the best interests of its shareholders.
The Directors unanimously recommend that
you vote in favour of the resolutions as they
intend to do in respect of their own beneficial
holdings, which amount in aggregate to
19,059,814 shares representing approximately
Corporate governance arrangements
We have applied the principles of good
governance contained in the UK Corporate
Governance Code 2018 (the ‘Code’) throughout
the year under review.
We were unable to comply with provisions
3 and 19 of the Code and we became fully
compliant with provision 38 on 1 June 2022.
Our explanations for the departures are
contained in the compliance statement on
page 105.
Further details on how we have applied the
Code can be found in the Governance section
on pages 102 to 170 and should be read as part
of this report.
Company status and branches
LondonMetric Property Plc is a Real Estate
Investment Trust (‘REIT’) and the holding
company of the Group, which has no branches.
It is listed on the London Stock Exchange with a
premium listing.
Principal activities and business review
The principal activity of the Group
continues to be property investment and
development, both directly and through joint
venture arrangements.
The purpose of the Annual Report is to provide
information to the members of the Company
which is a fair, balanced and understandable
assessment of the Group’s performance,
business model and strategy. A detailed review
of the Group’s business and performance during
the year, its principal risks and uncertainties,
its business model, strategy and its approach
to Responsible Business and ESG is contained
in the Strategic report on pages 1 to 101 and
should be read as part of this report.
The Annual Report contains certain forward
looking statements with respect to the
operations, performance and financial condition
of the Group. By their nature, these statements
involve risk and uncertainty because they relate
to future events and circumstances which
can cause results and developments to differ
from those anticipated. The forward looking
statements reflect knowledge and information
available at the date of preparation of this
Annual Report. Nothing in this Annual Report
should be construed as a profit forecast.
Additional information which is incorporated into this report by reference, including information
required in accordance with the Companies Act 2006 and Listing Rule 9.8.4R can be found on the
following pages:
Information Relevant section Page
Review of business and future
developments Strategic report
Page 1
Section 172 Statement Governance – Section 172 Statement
Page 118
Principal risks Strategic report – Risk management and internal control
Page 88
Greenhouse gas emissions Strategic report – Responsible Business and ESG review
Page 62
Internal financial control Governance – Audit Committee report
Page 136
Strategic report – Risk management and internal control
Page 83
Diversity and inclusion Governance – Nomination Committee report
Page 128
Monitoring culture Governance
Page 113
Viability Statement Strategic report – Risk management and internal control
Page 100
Financial instruments Financial statements – note 14
Page 201
Directors’ details Governance – biographies
Page 108
Financial risk management policies Financial statements – note 14
Page 201
Directors’ interests Governance – Remuneration Committee report
Page 168
Interest capitalised Financial statements – note 5
Page 192
Long term incentive schemes Governance – Remuneration Committee report
Page 166
Related party transactions Financial statements – note 19
Page 207
Stakeholder engagement Strategic report – Responsible Business and ESG review
Page 63
Post balance sheet events Financial statements – note 20
Page 207
All other subsections of LR 9.8.4R are not applicable
1.9% of the existing issued ordinary share capital
of the Company as at 24 May 2023.
Resolution 5 of the Company’s Annual General
Meeting held on 13 July 2022 (the ‘2022 AGM’)
(re-election of Patrick Vaughan, Chair of the
Board and Nominations Committee), received
79.2% of votes in favour. As less than 80% of
votes received were in favour, the Company
was required under the provisions of the Code
to consult with shareholders, and is required to
provide a final summary of such consultation
in this report. We have engaged with relevant
shareholders regarding the votes received
against this resolution, and understand that
votes were received against the resolution due
to female representation on the Board falling
below 33% at the 2022 AGM and a concern
that the Chair's tenure had exceeded nine years.
As at 31 March 2023, female representation on
the Board was 36%, and Patrick Vaughan will
step down as Chair on 11 July 2023.
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Governance
Report of
the Directors
continued
Results and dividends
The Group reported a loss for the year
attributable to equity shareholders of
£506.3 million (2022 profit: £734.5 million).
The first two quarterly dividends for 2023
totalling 4.6p per share were paid in the year as
Property Income Distributions (‘PIDs').
The third quarterly dividend of 2.3p was paid
following the year end on 12 April 2023 as a
PID. The Directors have approved a fourth
quarterly dividend of 2.6p per share payable on
12 July 2023 to shareholders on the register at
the close of business on 2 June 2023, of which
1.5p will be paid as a PID.
The total dividend charge for the year to
31 March 2023 was 9.5p per share, an increase
of 2.7% over the previous year. Of this, 8.4p was
payable as a PID as required by REIT legislation,
after deduction of withholding tax at the basic
rate of income tax. The balance of 1.1p was
payable as an ordinary dividend which is not
subject to withholding tax.
Investment properties
A valuation of the Group’s investment properties
at 31 March 2023 was undertaken by CBRE
Limited and Savills (UK) Limited on the basis of
fair value which amounted to £2,993.8 million
(2022: £3,593.9 million) including the Group’s
share of joint venture property as reflected in
the Financial review on page 51 and note 2 to
the financial statements on page 190.
Share capital
As at 31 March 2023, there were 982,646,261
ordinary shares of 10p in issue, each carrying
one vote and all fully paid. The Company issued
4,038,754 new ordinary shares under the terms
of its Scrip Dividend Scheme. Since the year
end the Company issued a further 322,203
ordinary shares in relation to the third quarterly
dividend scrip alternative.
There is only one class of share in issue and
there are no restrictions on the size of a holding
or on the transfer of shares. None of the
shares carry any special rights of control over
the Company. There were no persons with
significant direct or indirect holdings in the
Company other than those listed as substantial
shareholders opposite.
The rules governing appointments, replacement
and powers of Directors are contained in
the Company’s Articles of Association, the
Companies Act 2006 and the UK Corporate
Governance Code. These include powers to
authorise the issue and buy back of shares by
the Company. The Company’s Articles can be
amended by Special Resolution in accordance
with Companies Act 2006.
Purchase of own shares
The Company was granted authority at the
Annual General Meeting in 2022 to purchase
its own shares up to an aggregate nominal
value of 10% of the issued nominal capital.
That authority expires at this year’s AGM and
a resolution will be proposed for its renewal.
No ordinary shares were purchased under this
authority during the year.
Shares held in the Employee Benefit Trust
As at 31 March 2023, the Trustees of the
LondonMetric Long Term Incentive Plan held
2,942,592 shares in the Company in trust to
satisfy awards under the Company’s Long
Term Incentive and Deferred Bonus Plans.
The Trustees have waived their right to receive
dividends on shares held in the Company.
Substantial shareholders
The Directors have been notified that the
following shareholders have a disclosable
interest of 3% or more in the ordinary shares of
the Company at the date of this report:
Shareholder
Number
of shares %
BlackRock Inc 106,109,653 10.79
Norges Bank 60,981,764 6.20
Rathbones 51,879,135 5.28
The Vanguard
Group Inc 49,003,578 4.98
State Street
Global Advisors 36,452,642 3.71
Franklin
Resources Inc 35,916,217 3.65
Legal & General 32,131,761 3.27
Directors
The present membership of the Board and
biographical details of Directors are set out on
pages 108 and 109.
The interests of the Directors and their families
in the shares of the Company are set out in the
Remuneration Committee report on page 139.
In accordance with the UK Corporate
Governance Code and in line with previous
years, all of the Directors except Patrick
Vaughan and Rosalyn Wilton will offer
themselves for election and re-election by
the shareholders at the forthcoming AGM on
12 July 2023.
The powers of Directors are described in
their Terms of Reference, which are available
on request.
Directors’ and Officers’ liability insurance
The Company has arranged Directors’ and
Officers’ liability insurance cover in respect
of legal action against its Directors, which is
reviewed and renewed annually and remains in
force at the date of this report.
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Governance
Stakeholders
The Group’s long term sustainable success
is dependent on its relationships with
key stakeholders.
In the Responsible Business and ESG review on
pages 54 to 76, we outline the ways in which we
have engaged with our key stakeholders, any
issues raised and how they have influenced the
Board’s decision making.
Employees
At 31 March 2023 the Group had 35 employees
including the Executive Directors.
The Company promotes employee
involvement and consultation and invests time
in ensuring staff are informed of the Group’s
transactions, activities and performance through
internal email communication of corporate
announcements and periodic updates by the
Chief Executive. In addition, the Group’s interim
and annual results are presented to all staff by
the Executive Directors.
The Board recognises the importance of
attracting, developing and retaining the
right people.
The Company operates a non discriminatory
employment policy which provides equal
opportunities for all employees irrespective
of gender, race, colour, disability, sexual
orientation, religious beliefs and marital status.
A significant number of employees are eligible
to participate in the annual bonus and LTIP
arrangements, helping to develop an interest in
the Group’s performance and align rewards with
Directors’ incentive arrangements.
The Company provides retirement benefits for
its employees and Executive Directors.
Andrew Livingston is the designated workforce
Non Executive Director and acts as a liaison
between the Board and employees and a
channel through which staff can share their
views and raise concerns. His work during the
year is discussed in detail in the Responsible
Business and ESG review section of this report
on page 69.
Further details of how we engage with
employees can be found in the Governance
report on pages 118 to 119, the Strategic report
on pages 20 to 21 and the Responsible Business
and ESG review on pages 63 to 75.
The environment
Details of our approach to Responsible Business
and its aims and activities can be found on the
Company’s website www.londonmetric.com,
where a full version of the Responsible Business
report can be downloaded. An overview of our
Responsible Business activity can be found on
pages 54 to 76 of this report.
The Group recognises the importance of
minimising the adverse impact of its operations
on the environment and the management of
energy consumption and waste recycling.
The Group strives to maximise opportunities
to improve the resilience of assets to climate
change and the impact of transitioning to a low
carbon economy, as set out in the Responsible
Business and ESG review.
Greenhouse gas reporting
In accordance with Schedule 7 of the Large
and Medium-Sized Companies and Groups
(Accounts and Reports) Regulations 2008,
information regarding the Company’s
greenhouse gas emissions can be found on
page 62.
Suppliers
The Group aims to settle supplier accounts
in accordance with their individual terms
of business.
The number of creditor days outstanding
for the Group at 31 March 2023 was 13 days
(2022: 14 days).
Charitable and political contributions
This year we set a budget of £100,000 for
charitable funding as set out on pages 74
to 75 of the Responsible Business and ESG
review, and have made donations of £103,906
(2022: £66,766). No political donations were
made during the year (2022: £nil).
Provisions on change of control
Under the Group’s credit facilities, the
lending banks may require repayment of the
outstanding amounts on any change of control.
The Group’s Long Term Incentive Plan and
Deferred Share Bonus Plan contain provisions
relating to the vesting of awards in the event of
a change of control of the Company.
There are no agreements between the
Company and its Directors or employees
providing for compensation for loss of office or
employment that occurs specifically because of
a takeover bid, except for the provisions within
the Company’s share schemes as noted above.
Disclosure of information to auditor
So far as the Directors who held office at the
date of approval of this Directors’ report are
aware, there is no relevant audit information of
which the auditor is unaware and each Director
has taken all steps that he or she ought to
have taken as a Director to make himself or
herself aware of any relevant audit information
and to establish that the auditor is aware of
that information.
Auditor
A competitive tender process for the role of
Group auditor was undertaken in the year as
reported on page 136. The Audit Committee
considered the reports and presentations
from two audit firms and recommended the
reappointment of Deloitte LLP (‘Deloitte’) to the
Board. Deloitte is willing to be reappointed as
the external auditor to the Company and Group.
A resolution will be proposed at the AGM on
12 July 2023.
By order of the Board
Martin McGann
Finance Director
24 May 2023
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102-174
Governance
The Directors are responsible for preparing the
Annual Report and the financial statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year.
Under that law the Directors are required to
prepare the Group financial statements in
accordance with UK-adopted international
accounting standards in conformity with the
requirements of the Companies Act 2006.
The financial statements also comply with
International Financial Reporting Standards
(‘IFRSs’) as issued by the International
Accounting Standards Board. The Directors
have elected to prepare the Company financial
statements in accordance with Financial
Reporting Standard 101 (‘FRS 101’) ‘Reduced
Disclosure Framework’. Under Company law the
Directors must not approve the accounts unless
they are satisfied that they give a true and fair
view of the state of affairs of the Company
and of the profit or loss of the Company for
that period.
In preparing the Company financial statements,
the Directors are required to:
• Select suitable accounting policies and then
apply them consistently;
• Make judgements and accounting estimates
that are reasonable and prudent;
• State whether applicable FRS 101 ‘Reduced
Disclosure Framework’ has been followed,
subject to any material departures disclosed
and explained in the financial statements;
and
• Prepare the financial statements on the
going concern basis unless it is inappropriate
to presume that the Company will continue
in business.
In preparing the Group financial statements,
International Accounting Standard 1 requires
that Directors:
• Properly select and apply
accounting policies;
• Present information, including accounting
policies, in a manner that provides
relevant, reliable, comparable and
understandable information;
• Provide additional disclosures when
compliance with the specific requirements
in IFRSs are insufficient to enable users
to understand the impact of particular
transactions, other events and conditions on
the entity’s financial position and financial
performance; and
• Make an assessment of the Company’s
ability to continue as a going concern.
The Directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the Company’s
transactions and disclose with reasonable
accuracy at any time the financial position of
the Company and to enable them to ensure
that the financial statements comply with the
Companies Act 2006. They are also responsible
for safeguarding the assets of the Company
and hence for taking reasonable steps for
the prevention and detection of fraud and
other irregularities.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on the
Company’s website. Legislation in the UK
governing the preparation and dissemination of
financial statements may differ from legislation
in other jurisdictions.
Responsibility statement
We confirm that to the best of our knowledge:
• The financial statements, prepared in
accordance with the relevant financial
reporting framework, give a true and fair
view of the assets, liabilities, financial
position and profit or loss of the Company
and the undertakings included in the
consolidation taken as a whole
• The Strategic report includes a fair review
of the development and performance
of the business and the position of the
Company and the undertakings included in
the consolidation taken as a whole, together
with a description of the principal risks and
uncertainties that they face
• The Annual Report and financial statements,
taken as a whole, are fair, balanced and
understandable and provide the information
necessary for shareholders to assess the
Company’s performance, business model
and strategy
By order of the Board
Andrew Jones
Chief Executive
24 May 2023
Martin McGann
Finance Director
24 May 2023
Directors’ Responsibilities
Statement
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Independent Auditor’s report 176
Group financial statements 182
Notes forming part of the Group financial statements 186
Company financial statements 208
Notes forming part of the Company financial statements 210
Supplementary information 215
Glossary 222
Notice of Annual General Meeting 224
Financial calendar 232
Shareholder information 232
175
Financial
statements
The Group financial statements
that follow in this section have been
prepared in accordance with IFRS.
The Company financial statements
have been prepared in accordance
with FRS 101.
The Independent Auditor’s
report that supports the financial
statements is reflected on page 176.
Martin McGann
Finance Director
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Report on the audit of the financial statements
1. Opinion
In our opinion:
• the financial statements of LondonMetric Property Plc (the ‘Parent Company’)
and its subsidiaries (the ‘Group’) give a true and fair view of the state of the
Group’s and of the Parent Company’s affairs as at 31 March 2023 and of the
Group’s loss for the year then ended;
• the Group financial statements have been properly prepared in accordance
with United Kingdom adopted international accounting standards and
International Financial Reporting Standards (IFRSs) as issued by the
International Accounting Standards Board (IASB);
• the Parent Company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting Practice,
including Financial Reporting Standard 101 “Reduced Disclosure Framework”;
and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
• the Group Income Statement;
• the Group and Company Balance Sheets;
• the Group and Company Statements of Changes in Equity;
• the Group Cash Flow Statement; and
• the related notes 1 to 20 for the Group and i to xi for Company.
The financial reporting framework that has been applied in the preparation of
the Group financial statements is applicable law, and United Kingdom adopted
international accounting standards and IFRSs as issued by the IASB. The financial
reporting framework that has been applied in the preparation of the Parent
Company financial statements is applicable law and United Kingdom Accounting
Standards, including FRS 101 “Reduced Disclosure Framework” (United Kingdom
Generally Accepted Accounting Practice).
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards
are further described in the auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Group and the Parent Company in accordance with
the ethical requirements that are relevant to our audit of the financial statements
in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical
Standard as applied to public interest listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements. We confirm
that we have not provided any non-audit services prohibited by the FRC’s Ethical
Standard to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient and appropriate
to provide a basis for our opinion.
3. Summary of our audit approach
Key audit matters The key audit matter that we identified in the current year was:
Valuation of investment property
Within this report, key audit matters are identified as follows:
Newly identified
Increased level of risk
Decreased level of risk
Similar level of risk
Materiality The materiality that we used for the Group financial statements was £39.9 million which was determined on the basis of 2% of shareholder’s
equity at 31 March 2023. For testing balances that impacted EPRA earnings we used a lower materiality of £5.0 million, which was based on
5% of EPRA earnings for the year end 31 March 2023.
Scoping The Group is subject to a full scope audit of net assets, revenue and profit before tax.
Significant changes in
our approach
No changes to our approach for the current year.
To the members of LondonMetric Property Plc
Independent
Auditor’s report
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4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’
use of the going concern basis of accounting in the preparation of the financial
statements is appropriate.
Our evaluation of the Directors’ assessment of the Group’s and Parent
Company’s ability to continue to adopt the going concern basis of
accounting included:
• Assessing the Group’s 2023 and 2024 cash flow forecasts based on actual
cash flow performance in 2022 and the 2023 financial year;
• Assessed each of the key assumptions made as part management’s
forecast to evaluate whether they are consistent with our understanding
of the external factors, including consideration of the impact of the current
macroeconomic environment;
• Agreeing the level of committed, undrawn facilities of £380m to signed
facility agreements;
• Recalculating the headroom within the forecasts based on the cash flow
forecasts and the undrawn committed facilities;
• Recalculating covenants ratios on the year end position to evaluate compliance;
• Assessing the stress test scenarios, the reverse stress test run by the Directors
including the linkage of these scenarios to the Group’s principal risks disclosed
on pages 88 to 99 of the annual report & accounts and impact on covenants;
• Assessing the mitigating actions that could be taken by the Directors to
maximise liquidity headroom including a reduction in capital expenditure and
a reduction in discretionary spend; and
• Assessing the appropriateness of the going concern disclosures in the
financial statements.
Based on the work we have performed, we have not identified any material
uncertainties relating to events or conditions that, individually or collectively, may
cast significant doubt on the Group's and Parent Company’s ability to continue
as a going concern for a period of at least twelve months from when the financial
statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate
Governance Code, we have nothing material to add or draw attention to in
relation to the Directors’ statement in the financial statements about whether
the Directors considered it appropriate to adopt the going concern basis
of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going
concern are described in the relevant sections of this report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were
of most significance in our audit of the financial statements of the current
period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those
which had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
5.1. Valuation of investment property
Key audit matter
description
The Group owns a portfolio of largely distribution property assets, which is valued at £2,945 million (2022: £3,495 million) as at 31 March 2023.
The valuation of the portfolio is a significant judgement area and is underpinned by a number of assumptions including capitalisation yields, lease
incentives, future lease income and Red Book guidance.
The Group uses professionally qualified external valuers to fair value the Group’s portfolio at six-monthly intervals. The valuers are engaged by the
Directors and performed their work in accordance with the Royal Institution of Chartered Surveyors (‘RICS’) Valuation – Professional Standards.
The valuation exercise also relies on the integrity of the underlying lease and financial information provided to the valuers by management. Therefore,
due to this and the high level of judgement in the assumptions, we have determined this as a potential area for fraud.
Refer to page 135 (Audit Committee report), page 186 (accounting policy) and note 9 on page 196 (financial disclosures).
How the scope
of our audit
responded to the
key audit matter
We performed the following procedures:
• Obtained an understanding and tested the relevant controls over the valuation process, including management’s review of the information
provided to valuers.
• Assessed management’s process for reviewing and assessing the work of the external valuer and development appraisals.
• Assessed the competence, capabilities and objectivity of the external valuer and read their terms of engagement with the Group to determine
whether there were any matters that might have affected their objectivity or may have imposed scope limitations on their work.
• Obtained the external valuation reports and, with the involvement of our real estate specialist, assessed and challenged the valuation process,
performance of the portfolio and significant assumptions and critical judgement areas, including lease incentives, future lease income and
capitalisation yields.
• Assessed the valuation methodology used and considered any departures from the Red Book guidance as well as tested the integrity of the
model which is used by the external valuer.
• Held a meeting with the external valuers of the portfolio to discuss the results of their work and, for a sample of properties, we further
challenged the yield assumptions and valuation by benchmarking it to market, including where relevant the impact of interest rates and inflation.
• Performed audit procedures to assess the integrity of a sample of the information provided to the external valuer by agreeing that information
to underlying lease agreements.
Key observations Based on the work performed we concluded that valuation of investment property is appropriate.
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6. Our application of materiality
6.1. Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a reasonably
knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements Parent Company financial statements
Materiality £39.9 million (2022: £51.3 million)
We consider EPRA Earnings as a critical performance measure for the Group
and parent and we applied a lower threshold of £5.0 million (2022: £4.6
million) for testing of all balances and classes of transaction which impact that
measure, primarily transactions recorded in the Income Statement other than
fair value movements on investment property, development property and
derivatives, debt and hedging related costs.
£35.3 million (2022: £33.3 million)
Basis for determining
materiality
Materiality for the Group is based on 2% (2022: 2%) of shareholders’ equity
at 31 March 2023. For EPRA Earnings the basis used is 5% of EPRA earnings
(2022: 5% EPRA earnings) of that measure.
Materiality for the Company is based on 2% of
shareholders’ equity (2022: 2% shareholders' equity).
Rationale for the
benchmark applied
As an investment property company, the focus of management is to generate
long-term capital value from the investment property portfolio and, therefore,
we consider equity to be the most appropriate basis for materiality.
As an investment holding company, the focus of
management is to generate long-term capital value from
the investment property portfolio held by the Group and,
therefore, we consider equity to be the most appropriate
basis for materiality.
Shareholders’ equity
Group materiality
Parent materiality £35.3m
Group materiality £39.9m
Audit Committee reporting threshold £2.0m
Shareholder's Equity
£1,967.3m
6.2. Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected misstatements exceed the
materiality for the financial statements as a whole.
Group financial statements Parent Company financial statements
Performance materiality 70% (2022: 70%) of Group materiality 70% (2022: 70%) of Parent Company materiality
Basis and rationale for
determining performance
materiality
In determining performance materiality, we considered the following factors:
a) Our past experience of the audit, which has indicated a low number of corrected and uncorrected misstatements identified in prior
periods; and
b) Our risk assessment, including our assessment of the Group’s overall control environment.
6.3. Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £2.0 million (2022: £2.6 million), as well as differences
below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we identified
when assessing the overall presentation of the financial statements.
To the members of LondonMetric Property Plc
Independent
Auditor’s report
continued
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7. An overview of the scope of our audit
7.1. Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its
environment, including group-wide controls, and assessing the risks of material
misstatement at the Group level.
Our full scope audit is performed on components accounting for 100%
(2022: 100%) of the Group’s net assets, revenue and profit before tax.
The audit work in response to the risks of material misstatement was performed
directly by the Group engagement team. Our audit also included testing of the
consolidation process.
The Company is located in London, UK and audited directly by the Group
audit team.
7.2. Our consideration of the control environment
We have obtained an understanding of the relevant controls such as those
relating to the financial reporting cycle, revenue cycle and those in relation
to our key audit matter. We tested the relevant controls over the valuation
process, including the investment and development property cycle, and
based on the result of our work performed, we have not been able to rely on
controls. This is due to the fact that the Group does not perform significant
automated processing of large volumes of data and the control environment
is predominantly manual in nature. In addition, we have identified a control
observation related to the formalisation of a key control, which we have
communicated to management and the Audit Committee.
7.3. Our consideration of climate-related risks
In planning our audit, we have considered the potential impact of environmental,
social and governance (“ESG”) related risks, including climate change.
Climate related risks are managed collaboratively between the Board, Audit
Committee, senior Team and working group. The risk register is updated at
least annually and is used to monitor identified principal risks, along with
corresponding mitigation measures. The Group consider climate change as an
emerging risk particularly in relation to flooding risks, EPCs and costs to upgrade
assets where required. Refer to the Responsible Business and ESG review on
page 54.
As a part of our audit procedures, we have obtained an understanding of the
Group’s process for identifying and managing climate related risk, including
physical and transition risks. With the assistance of our climate-change
specialists, we assessed the Group’s climate related financial disclosures
against the Task Force on Climate-related Financial Disclosures (“TCFD”)
Recommendations including management’s risk assessment of the
potential impact of climate change on the Group’s account balances and
classes of transaction and did not identify any reasonably possible risks of
material misstatement.
We read the disclosures included in the Strategic Report to consider whether
they are materially consistent with the financial statements and our knowledge
obtained in the audit. We concur that they appropriately disclose the current
risk that management has identified. We have not been engaged to provide
assurance over the accuracy of these disclosures.
8. Other information
The other information comprises the information included in the annual
report, other than the financial statements and our auditor’s report thereon.
The Directors are responsible for the other information contained within the
annual report.
Our opinion on the financial statements does not cover the other information
and, except to the extent otherwise explicitly stated in our report, we do not
express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise
appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise to a material misstatement
in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we
are required to report that fact.
We have nothing to report in this regard.
9. Responsibilities of Directors
As explained more fully in the Directors’ responsibilities statement, the Directors
are responsible for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such internal control as
the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors are responsible for assessing
the Group’s and the Parent Company’s ability to continue as a going concern,
disclosing as applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to liquidate
the Group or the Parent Company or to cease operations, or have no realistic
alternative but to do so.
10. Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditor’s report.
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11. Extent to which the audit was considered capable of
detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and
regulations. We design procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud is detailed below.
11.1. Identifying and assessing potential risks related to irregularities
In identifying and assessing risks of material misstatement in respect of
irregularities, including fraud and non-compliance with laws and regulations, we
considered the following:
• the nature of the industry and sector, control environment and business
performance including the design of the Group’s remuneration policies, key
drivers for Directors’ remuneration, bonus levels and performance targets;
• results of our enquiries of management, the Directors and the Audit
Committee about their own identification and assessment of the risks of
irregularities including those that are specific to the Group’s sector;
• any matters we identified having obtained and reviewed the Group’s
documentation of their policies and procedures relating to:
– identifying, evaluating and complying with laws and regulations and
whether they were aware of any instances of non-compliance;
– detecting and responding to the risks of fraud and whether they have
knowledge of any actual, suspected or alleged fraud;
– the internal controls established to mitigate risks of fraud or non-
compliance with laws and regulations; and
• the matters discussed among the audit engagement team and involving
relevant internal specialists, and real estate specialists regarding how and
where fraud might occur in the financial statements and any potential
indicators of fraud.
As a result of these procedures, we considered the opportunities and
incentives that may exist within the organisation for fraud and identified the
greatest potential for fraud in the following areas: Valuation of investment
and development property. In common with all audits under ISAs (UK), we
are also required to perform specific procedures to respond to the risk of
management override.
We also obtained an understanding of the legal and regulatory framework that
the Group operates in, focusing on provisions of those laws and regulations that
had a direct effect on the determination of material amounts and disclosures
in the financial statements. The key laws and regulations we considered in
this context included the UK Companies Act, Listing Rules, as well as relevant
provisions of tax legislation, including the REIT rules.
In addition, we considered provisions of other laws and regulations that do not
have a direct effect on the financial statements but compliance with which may
be fundamental to the Group’s ability to operate or to avoid a material penalty,
most notably health and safety regulations.
11.2. Audit response to risks identified
As a result of performing the above, we identified valuation of investment and
development property as a key audit matter related to the potential risk of fraud.
The key audit matters section of our report explains the matter in more detail
and also describes specific procedures we performed in response to that key
audit matter.
In addition to the above, our procedures to respond to risks identified included
the following:
• reviewing the financial statement disclosures and testing to supporting
documentation to assess compliance with provisions of relevant laws and
regulations described as having a direct effect on the financial statements;
• enquiring of management, the audit committee and external legal counsel
concerning actual and potential litigation and claims;
• performing analytical procedures to identify any unusual or unexpected
relationships that may indicate risks of material misstatement due to fraud;
• reading minutes of meetings of those charged with governance; and
• in addressing the risk of fraud through management override of controls,
testing the appropriateness of journal entries and other adjustments; assessing
whether the judgements made in making accounting estimates are indicative
of a potential bias; and evaluating the business rationale of any significant
transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential
fraud risks to all engagement team members including internal specialists, and
remained alert to any indications of fraud or non-compliance with laws and
regulations throughout the audit.
Report on other legal and regulatory requirements
12. Opinions on other matters prescribed by the
Companies Act 2006
In our opinion the part of the Directors’ remuneration report to be audited has
been properly prepared in accordance with the Companies Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the strategic report and the Directors’ report for the
financial year for which the financial statements are prepared is consistent with
the financial statements; and
• the strategic report and the Directors’ report have been prepared in
accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the Parent
Company and their environment obtained in the course of the audit, we have
not identified any material misstatements in the strategic report or the Directors’
report.
To the members of LondonMetric Property Plc
Independent
Auditor’s report
continued
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13. Corporate Governance Statement
The Listing Rules require us to review the Directors’ statement in relation to
going concern, longer-term viability and that part of the Corporate Governance
Statement relating to the Group’s compliance with the provisions of the UK
Corporate Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each
of the following elements of the Corporate Governance Statement is materially
consistent with the financial statements and our knowledge obtained during
the audit:
• the Directors’ statement with regards to the appropriateness of adopting the
going concern basis of accounting and any material uncertainties identified set
out on page 100;
• the Directors’ explanation as to its assessment of the Group’s prospects, the
period this assessment covers and why the period is appropriate set out on
page 100;
• the Directors’ statement on fair, balanced and understandable set out on
page 174;
• the Board’s confirmation that it has carried out a robust assessment of the
emerging and principal risks set out on page 85;
• the section of the annual report that describes the review of effectiveness of
risk management and internal control systems set out on pages 82 to 99; and
• the section describing the work of the audit committee set out on page 85.
14. Matters on which we are required to report by
exception
14.1. Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not received all the information and explanations we require for our
audit; or
• adequate accounting records have not been kept by the Parent Company,
or returns adequate for our audit have not been received from branches not
visited by us; or
• the Parent Company financial statements are not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters.
14.2. Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion
certain disclosures of Directors’ remuneration have not been made or the part
of the Directors’ remuneration report to be audited is not in agreement with the
accounting records and returns.
We have nothing to report in respect of these matters.
15. Other matters which we are required to address
15.1. Auditor tenure
Following the recommendation of the Audit Committee, we were appointed
on 19 September 2013 by the Board of Directors to audit the financial
statements for the year ending 31 March 2014 and subsequent financial periods.
The period of total uninterrupted engagement including previous renewals and
reappointments of the firm is 10 years, covering the years ending 31 March 2014
to 31 March 2023.
15.2. Consistency of the audit report with the additional report to the
audit committee
Our audit opinion is consistent with the additional report to the audit committee
we are required to provide in accordance with ISAs (UK).
16. Use of our report
This report is made solely to the Company’s members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the Company’s members those matters
we are required to state to them in an auditor’s report and for no other purpose.
To the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s members as a body, for
our audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and
Transparency Rule (DTR) 4.1.14R, these financial statements will form part of the
European Single Electronic Format (ESEF) prepared Annual Financial Report filed
on the National Storage Mechanism of the UK FCA in accordance with the ESEF
Regulatory Technical Standard (‘ESEF RTS’). This auditor’s report provides no
assurance over whether the annual financial report has been prepared using the
single electronic format specified in the ESEF RTS.
Rachel Argyle
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
24 May 2023
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Note
2023
£m
2022
£m
Revenue 3 146.7 133.2
Cost of sales (1.5 ) (1.5 )
Net income 145.2 131.7
Administrative costs 4 (16.4 ) (16.0 )
(Loss)/profit on revaluation of investment properties 9 (577.4 ) 615.2
(Loss)/profit on sale of investment properties (14.7 ) 8.0
Share of (losses)/profits of joint ventures 10 (10.3 ) 23.3
Operating (loss)/profit (473.6 ) 762.2
Finance income 5 2.9 0. 5
Finance costs 5 (36.8 ) (24 .4 )
(Loss)/profit before tax (507.5 ) 738.3
Taxation 6 (0.1 ) (0. 1 )
(Loss)/profit for the year and total comprehensive (expense)/income (507 .6 ) 738.2
Attributable to:
Equity shareholders (506.3 ) 734.5
Non-controlling interest 19 (1.3 ) 3.7
Earnings per share
Basic 8 (51.8 )p 78.8 p
Diluted 8 (51.8 )p 78.4 p
All amounts relate to continuing activities. There are no items of comprehensive income other than those presented in the income statement above and accordingly a
separate statement of comprehensive income is not presented.
The notes on pages 186 to 207 form part of these financial statements.
Group income statement
For the year ended 31 March
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Note
2023
£m
2022
£m
Non current assets
Investment properties 9 2,944. 9 3,494.6
Investment in equity accounted joint ventures 10 61.5 72.6
Other investments and tangible assets 1.2 1.3
Derivative financial instruments 14 11.1 –
Current assets
Assets held for sale 9 19.8 21.2
Trading properties 1.1 1.1
Trade and other receivables 11 5.8 13.1
Cash and cash equivalents 12 32.6 51.3
Total assets 3, 078.0 3,655.2
Current liabilities
Trade and other payables 13 65.9 59.4
Borrowings 14 65.0 –
Non current liabilities
Borrowings 14 944.8 1,021.4
Lease liabilities 15 7.1 4.6
Total liabilities 1,082.8 1,085.4
Net assets 1,995.2 2,569.8
Equity
Called up share capital 16,17 98.3 97 .9
Share premium 16,17 395.5 386.8
Capital redemption reserve 17 9.6 9. 6
Other reserve 17 490.3 491.1
Retained earnings 17 973.6 1,574.3
Equity shareholders’ funds 1,967.3 2,559 .7
Non-controlling interest 19 2 7. 9 1 0.1
Total equity 1,995.2 2,569.8
IFRS net asset value per share 8 203.7 p 262.3 p
The financial statements were approved and authorised for issue by the Board of Directors on 24 May 2023 and were signed on its behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
The notes on pages 186 to 207 form part of these financial statements.
Group balance statement
As at 31 March
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Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Equity
shareholders’
funds
£m
Non-controlling
interest
£m
Total
equity
£m
At 1 April 2022 9 7. 9 386.8 9. 6 491.1 1,574.3 2,559.7 10.1 2,569.8
Loss for the year and total
comprehensive expense – – – – (506.3 ) (506.3 ) (1.3 ) (507 .6 )
Purchase of shares held in
Employee Benefit Trust – – – (5.6 ) – (5.6 ) – (5.6 )
Vesting of shares held in
Employee Benefit Trust – – – 4.8 (5.6 ) (0. 8 ) – (0. 8 )
Investment from non-
controlling interest 19b – – – – – – 19.5 19.5
Distribution to non-
controlling interest 19b – – – – – – (0 .4 ) (0.4 )
Share based awards – – – – 3.6 3.6 – 3.6
Dividends 7 0.4 8.7 – – (92.4 ) (83.3 ) – (83.3 )
At 31 March 2023 98.3 395.5 9. 6 490.3 973.6 1,967 .3 2 7. 9 1,995.2
Note
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Equity
shareholders’
funds
£m
Non-controlling
interest
£m
Total
equity
£m
At 1 April 2021 91.0 219.3 9.6 487.7 923.7 1,731.3 6.4 1,737.7
Profit for the year and total
comprehensive income – – – – 734.5 734.5 3.7 738.2
Equity placing 6.7 163.5 – – – 170 .2 – 170.2
Purchase of shares held in
Employee Benefit Trust – – – (1.5 ) – (1.5 ) – (1.5 )
Vesting of shares held in
Employee Benefit Trust – – – 4. 9 (5.7 ) (0.8 ) – (0.8 )
Share based awards – – – – 3.5 3.5 – 3.5
Dividends 7 0.2 4.0 – – (81.7 ) (77.5 ) – (77 .5 )
At 31 March 2022 97 .9 386.8 9.6 491.1 1,574 .3 2,559.7 1 0.1 2,569.8
The notes on pages 186 to 207 form part of these financial statements.
Group statement
of changes in equity
For the year ended 31 March
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Note
2023
£m
2022
£m
Cash flows from operating activities
(Loss)/profit before tax (507 .5 ) 738.3
Adjustments for non cash items:
Loss/(profit) on revaluation of investment properties 577 .4 (615.2 )
Loss/(profit) on sale of investment properties 14.7 (8 .0 )
Share of post-tax loss/(profit) of joint ventures 10.3 (23.3 )
Movement in lease incentives (11.7 ) (8.9 )
Share based payment 3.6 3.5
Net finance costs 33.9 23.9
Cash flows from operations before changes in working capital 120.7 110.3
Change in trade and other receivables 8.1 (2.6 )
Change in trade and other payables 4.5 11.5
Cash flows from operations 133.3 119.2
Tax (paid)/received (0. 3 ) 0.3
Cash flows from operating activities 133.0 119.5
Investing activities
Purchase of investment properties (258.0 ) (500.6 )
Capital expenditure on investment properties (16.9 ) (51.0 )
Purchase of investments (0.1 ) (1.1 )
Lease incentives paid (2.6 ) (4.2 )
Sale of investment properties 258.6 179.8
Distributions from joint ventures 0.8 9. 9
Interest received 0.8 –
Net cash used in investing activities (17 .4 ) (367 .2 )
Financing activities
Dividends paid (83.3 ) (77 .5 )
Investment from non-controlling interest 19b 19.5 –
Distribution to non-controlling interest 19b (0. 4 ) –
Proceeds from issue of ordinary shares – 17 0.2
Purchase of shares held in Employee Benefit Trust (5.6 ) (1.5 )
Vesting of shares held in Employee Benefit Trust (0. 8 ) (0.8 )
New borrowings and amounts drawn down 18 440.0 1, 059. 0
Repayment of loan facilities 18 (450.0 ) (871.0 )
Purchase of derivative financial instruments (15.1 ) –
Financial arrangement fees and break costs (5.0 ) (6.6 )
Lease liabilities paid (0. 8 ) (0.7 )
Interest paid (32.8 ) (23.5 )
Net cash (used in)/from financing activities (134.3 ) 247.6
Net decrease in cash and cash equivalents 18 (18.7 ) (0.1 )
Opening cash and cash equivalents 51.3 51.4
Closing cash and cash equivalents 32.6 51.3
The notes on pages 186 to 207 form part of these financial statements.
Group cash flow statement
For the year ended 31 March
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Group financial statements
continued
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Group financial statements
continued
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Notes forming part of the
Group financial statements
continued
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Group financial statements
continued
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Group financial statements
continued
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Group financial statements
continued
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Group financial statements
continued
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continued
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Group financial statements
continued
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Non current assets Note
2023
£m
2022
£m
Investment in subsidiaries and joint ventures iii 1,680.5 1,524.7
Investment properties iv 3.5 0.8
Amounts due from subsidiary undertakings – 28.8
Other investments and tangible assets 1.1 1.2
Derivative financial instruments 11.1 –
1,696.2 1,555.5
Current assets
Trade and other receivables v 1,041.6 1,049.0
Cash at bank 19.1 35.4
1,060.7 1,084.4
Total assets 2,756.9 2,639.9
Current liabilities
Trade and other payables vi 38.0 11.7
Borrowings vii 65.0 –
Non current liabilities
Borrowings vii 883.6 960.0
Lease liabilities viii 3.4 0.8
887.0 960.8
Total liabilities 990.0 972.5
Net assets 1,766.9 1,667.4
Equity
Called up share capital 98.3 97.9
Share premium 395.5 386.8
Capital redemption reserve 9.6 9.6
Other reserve (7.1) 36.4
Retained earnings 1,270.6 1,136.7
Equity shareholders’ funds 1,766.9 1,667.4
The Company reported a profit for the financial year to 31 March 2023 of £185.6 million (2022: £195.4 million).
The financial statements were approved and authorised for issue by the Board of Directors on 24 May 2023 and were signed on its behalf by:
Martin McGann
Finance Director
Registered in England and Wales, No 7124797
The notes on pages 210 to 214 form part of these financial statements.
Company balance sheet
As at 31 March
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Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Total
£m
At 1 April 2022 97.9 386.8 9.6 36.4 1,136.7 1,667.4
Profit for the year – – – – 185.6 185.6
Purchase of shares held in employee benefit trust – – – (5.6) – (5.6)
Vesting of shares held in employee benefit trust – – – 4.8 (5.6) (0.8)
Share based awards – – – – 3.6 3.6
Reserve transfer of impairment in subsidiary – – – (42.7) 42.7 –
Dividends 0.4 8.7 – – (92.4) (83.3)
At 31 March 2023 98.3 395.5 9.6 (7.1) 1,270.6 1,766.9
Share
capital
£m
Share
premium
£m
Capital
redemption
reserve
£m
Other
reserve
£m
Retained
earnings
£m
Total
£m
At 1 April 2021 91.0 219.3 9.6 51.5 1,006.7 1,378.1
Profit for the year – – – – 195.4 195.4
Equity placing 6.7 163.5 – – – 170.2
Purchase of shares held in employee benefit trust – – – (1.5) – (1.5)
Vesting of shares held in employee benefit trust – – – 4.9 (5.7) (0.8)
Share based awards – – – – 3.5 3.5
Reserve transfer of impairment in subsidiary – – – (18.5) 18.5 –
Dividends 0.2 4.0 – – (81.7) (77.5)
At 31 March 2022 97.9 386.8 9.6 36.4 1,136.7 1,667.4
The notes on pages 210 to 214 form part of these financial statements.
Company statement
of changes in equity
For the year ended 31 March
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i Accounting policies
Accounting convention
The separate financial statements of the Company are presented as required by the Companies Act 2006. They have been prepared in accordance with FRS 101
(Financial Reporting Standard 101) ‘Reduced Disclosure Framework’ as issued by the Financial Reporting Council.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to share based payments,
financial instruments, capital management, presentation of a cash flow statement, fair value measurement, impairment, standards in issue and not yet effective
and certain related party transactions. The key source of estimation uncertainty relevant to the Company relates to the impairment of investment in subsidiaries.
The determination of the recoverable amount of the subsidiaries is underpinned by the valuation of the underlying properties owned by each subsidiary.
In determining this recoverable amount, the use of estimates and assumptions is required which are consistent with the key sources of estimation uncertainty
disclosed in note 1 and 9 for the Group. The accounting policies relevant to the Company are the same as those set out in the accounting policies for the Group, except
as noted below.
Subsidiary undertakings and joint ventures
Investments in subsidiary undertakings and joint ventures are stated at cost less any provision for impairment.
Amounts due from subsidiary undertakings
Amounts owed by subsidiaries are unsecured, have no fixed date of repayment and are repayable on demand. Amounts due from subsidiary undertakings included
within current assets are expected to be repaid within one year and are measured for impairment using the simplified approach under IFRS 9. Amounts due from
subsidiary undertakings included within non current assets are repayable within one to two years and are also measured for impairment using the simplified approach
under IFRS 9.
ii Profit attributable to members of the parent undertaking
As permitted by Section 408 Companies Act 2006, the income statement of the Company is not presented as part of these financial statements. The reported profit
of the Company was £185.6 million (2022: £195.4 million).
Audit fees in relation to the Company only were £247,500 in the year (2022: £225,000).
iii Fixed asset investments
Subsidiary
Cost
£m
Subsidiary
impairment
£m
Joint venture
Cost
£m
Joint venture
impairment
£m
Total
undertakings
£m
At 1 April 2022 2,001.2 (476.6) 16.7 (16.6) 1,524.7
Additions 241.5 – – – 241.5
Disposals (4.9) 4.9 – – –
Impairment of investment – (85.7) – – (85.7)
At 31 March 2023 2,237.8 (557.4) 16.7 (16.6) 1,680.5
The carrying value of the Company’s investments was impaired by £85.7 million following an impairment review to assess the recoverable amount based on the net
assets of the subsidiary companies and joint venture investments. The resulting impairment loss was due to property sales and dividend payments.
The recoverable amount of investments in subsidiary undertakings of £1,680.4 million and joint ventures of £0.1 million has been determined based on their fair value
less cost of disposal. The Directors believe that this approximates to their net assets due to the investment property that they hold being valued using the valuation
techniques and the key assumptions disclosed in note 9 Investment property to the Group financial statements.
The Company is incorporated in England and is the ultimate holding company of the Group with the subsidiary undertakings and joint venture investments detailed in
the tables below.
Except where disclosed, the Group owns the entire share capital of each undertaking comprising of ordinary shares. All subsidiaries are consolidated in the Group’s
consolidated financial statements.
Notes forming part of the
Company financial statements
For the year ended 31 March 2023
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Audit exemption taken for subsidiaries
Certain UK subsidiaries are exempt from the requirement of the Companies Act 2006 relating to the audit of individual accounts by virtue of Section 479A of that Act.
Subsidiaries for which Section 479A
Companies Act 2006 exemption taken
Country of incorporation
or registration
Companies House
registered number
Nature
of business
A & J Mucklow & Co Limited
1
England 00384508 Property trading
A & J Mucklow (Halesowen) Limited
1
England 04848576 Property investment
A & J Mucklow (Nominees) Limited
1
England 01232337 Administrative company
A & J Mucklow (Properties) Limited
1
England 00758764 Property investment
A & J Mucklow Group Limited England 00717658 Intermediate holding company
LondonMetric Bognor Regis Limited England 09409081 Property investment
LondonMetric Crawley Limited England 10120420 Property investment
LondonMetric Derby Limited England 08568072 Property investment
LondonMetric Development Limited England 13481500 Property investment
LondonMetric Distribution Limited England 09269541 Property investment
LondonMetric Droitwich Limited England 11245371 Property investment
LondonMetric DT Limited England 14124064 Property investment
LondonMetric Leisure Limited England 11357686 Property investment
LondonMetric Logistics Limited England 10882805 Property investment
LondonMetric Milton Keynes Limited England 13033223 Property investment
LondonMetric Retail Distribution I Limited England 08524540 Property investment
LondonMetric Retail Distribution II Limited England 08644584 Property investment
LondonMetric Retail Limited England 09062484 Property investment
LondonMetric Saturn II Limited England 08565264 Property investment
LondonMetric Saturn Limited England 08336260 Property investment
LondonMetric Swindon Limited England 08989820 Property investment
LondonMetric Unitholder 2 Limited England 13743626 Unitholder
LondonMetric Urban Limited England 13249056 Property investment
LSI (Investments) Limited England 03539331 Property investment
MCL Omega PropCo Limited England 12133819 Property investment
Metric LP Income Plus Limited
1
England 07780077 Intermediate holding company
Metric Property Coventry Limited England 07347027 Property investment
Metric Property Finance 1 Limited England 07403434 Intermediate holding company
Metric Property Investments Limited England 07172804 Intermediate holding company
Metric Property Kirkstall Limited
1
England 07455382 Property investment
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Subsidiaries for which Section 479A
Companies Act 2006 exemption not taken
Country of incorporation
or registration
Nature
of business
A & J Mucklow (Investments) Limited
1
England Property investment
Penbrick Limited¹ England Property investment
Metric GP Income Plus Limited
1,6
England Intermediate holding company
Metric Income Plus Limited Partnership
1,6
England Property investment
Metric Income Plus Nominees Limited
1,6
England Administrative company
LMP Steel LP
1,2
England Property investment
LMP Steel GP LLP
2
England Limited partner
A & J Mucklow (Birmingham) Limited
1,2
England Dormant
A & J Mucklow (Callowbrook Estate) Limited
1,2
England Dormant
A & J Mucklow (Estates) Limited
1,2
England Dormant
A & J Mucklow (Ettingshall Estate) Limited
1,2
England Dormant
A & J Mucklow (Lancashire) Limited
1,2
England Dormant
A & J Mucklow (Wollescote Estate) Limited
1,2
England Dormant
A and J Mucklow (Lands) Limited
1,2
England Dormant
Barr’s Industrial Limited
1,2
England Dormant
Belfont Homes (Birmingham) Limited
1,2
England Dormant
Goresbrook Property Limited
2
England Dormant
LondonMetric OKR Limited England Dormant
LSI Developments Limited England Dormant
Metric Property Finance 2 Limited
2
England Dormant
L&S Highbury Limited
2
Guernsey Property investment
LMP Bell Farm Limited
2
Guernsey Property investment
LMP Dagenham Limited
2
Guernsey Property investment
LMP Green Park Cinemas Limited
2
Guernsey Property investment
LMP Omega II Limited
2
Guernsey Property investment
LMP Retail Warehouse JV Holdings Limited
2,4
Guernsey Property investment
LMP Thrapston Limited
2
Guernsey Property investment
LondonMetric Management Limited Guernsey Management company
LSP London Residential Holdings Limited
3,5
Guernsey Intermediate holding company
LSP London Residential Investments Limited
3,5
Guernsey Intermediate holding company
LSP RI Moore House Limited
3,5
Guernsey Property investment
THG Omega Limited
2,3
Guernsey Dormant
LMP Burton & Evesham Limited
2
Jersey Property investment
LMP Steel Property Unit Trust
2
Jersey Intermediate holding entity
1 Undertakings held indirectly by the Company
2 Exempt from the requirement to file audited accounts
3 In the process of being liquidated
4 The Company owns 100% of the voting rights and 100% of the A ordinary shares representing 69.14% of the beneficial interest in the share capital
5 The Company owns ordinary shares representing 40% of the beneficial interest in the share capital
6 The Company owns a 50% beneficial interest
All of the undertakings listed above are tax resident in the UK with the exception of LSP RI Moore House Limited, LSP London Residential Investments Limited and
LSP London Residential Holdings Limited which are tax resident in Guernsey and LMP Steel Property Unit Trust which is tax resident in Jersey.
The registered address for companies incorporated in England is One Curzon Street, London, W1J 5HB. The registered address for companies incorporated in
Guernsey is Regency Court, Glategny Esplanade, St Peter Port, Guernsey, GY1 3AP. The registered address for LMP Steel Property Unit Trust is 3rd Floor, Liberation
House, Castle Street, St Helier, Jersey, JE1 2LH and for LMP Burton & Evesham Limited is 4th Floor, St Paul's Gate, 22-24 New Street, St Helier, Jersey, JE1 4TR.
Notes forming part of the
Company financial statements
continued
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iv Investment property
At 31 March 2023, investment properties included £3.5 million (2022: £0.8 million) for the head lease right of use assets which have been recognised following
adoption of IFRS 16.
v Trade and other receivables
As at 31 March
2023
£m
2022
£m
Prepayments and accrued income 1.0 2.0
Amounts due from subsidiary undertakings 1,040.6 1,047.0
1,041.6 1,049.0
All amounts under receivables fall due for payment in less than one year. Based on the IFRS 9 Expected Credit Loss model, an impairment review was undertaken and
no provision was considered necessary in the current or previous year.
vi Trade and other payables
As at 31 March
2023
£m
2022
£m
Trade payables 0.5 1.1
Other accruals and deferred income 7.5 7.8
Other payables 3.3 2.8
Amounts due to subsidiary undertakings 26.7 –
38.0 11.7
Included within other accruals and deferred income is accrued interest payable of £1.0 million (2022: £0.6 million).
vii Borrowings and financial instruments
Borrowings
As at 31 March
2023
£m
2022
£m
Unsecured bank loans 955.0 965.0
Unamortised finance costs (6.4) (5.0)
948.6 960.0
The Company uses interest rate derivatives and fixed rates to manage its interest rate exposure and hedge future interest rate risk for the term of the bank loan.
At 31 March 2023, 93% of the Company’s debt drawn was hedged through fixed coupon debt arrangements. Borrowings of £65 million relating to the 2016 Private
Placement are repayable within one year.
The following table shows the contractual maturity profile of the Company’s financial liabilities assuming settlement on the earliest repayment date.
As at 31 March
Bank
loans
£m
Interest
payable
£m
2023
£m
2022
£m
Less than one year 63.1 1.0 64.1 49.3
One to five years 331.4 – 331.4 357.5
More than five years 554.1 – 554.1 553.8
948.6 1.0 949.6 960.6
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Derivative financial instruments
The Company is exposed to market risk through interest rate fluctuations. It is the Company’s policy that a reasonable portion of external bank borrowings are at a
fixed interest rate in order to manage this risk.
The Company uses interest rate derivatives and fixed rates to manage its interest rate exposure and hedge future interest rate risk for the term of the bank loan.
Although the Board accepts that this policy neither protects the Company entirely from the risk of paying rates in excess of current market rates nor eliminates fully the
cash flow risk associated with interest payments, it considers that it achieves an appropriate balance of exposure to these risks.
At 31 March 2023, 93% of the Company’s debt drawn was hedged, through fixed coupon debt arrangements and interest rate swaps.
In accordance with accounting standards, fair value is estimated by calculating the present value of future cash flows, using appropriate market discount rates. For all
derivative financial instruments this equates to a Level 2 fair value measurement as defined by IFRS 13 Fair Value Measurement. The valuation therefore does not
reflect the cost or gain to the Company of cancelling its interest rate protection at the balance sheet date, which is generally a marginally higher cost (or smaller gain)
than a market valuation.
Further information on financial risk management policies and practices can be found in note 14 to the Group financial statements.
viii Leases
In accordance with IFRS 16, the Group has recognised a right of use asset for its head office lease obligations. The Group’s minimum lease payments are due as follows:
As at 31 March
Undiscounted
minimum lease
payments
£m
Interest
£m
Present value of
minimum lease
payments
2023
£m
Present value of
minimum lease
payments
2022
£m
Less than one year 0.4 (0.1) 0.3 0.6
Between one and five years 3.4 (0.3) 3.1 0.2
3.8 (0.4) 3.4 0.8
ix Related party transactions
Related party transactions for the Company are as noted for the Group in note 19 to the Group financial statements.
x Reserves
The Company statement of changes in equity is shown on page 209. The nature and purpose of each reserve within equity is described in note 17 to the Group
financial statements.
Opening balance
Merger
reserve
£m
Employee
Benefit Trust
shares
£m
Total other
reserves
2023
£m
Merger
reserve
£m
Employee
Benefit Trust
shares
£m
Total other
reserves
2022
£m
Employee share schemes: 42.7 (6.3) 36.4 61.2 (9.7) 51.5
Purchase of shares – (5.6) (5.6) – (1.5) (1.5)
Vesting of shares – 4.8 4.8 – 4.9 4.9
Impairment in subsidiary (42.7) – (42.7) (18.5) – (18.5)
Closing balance – (7.1) (7.1) 42.7 (6.3) 36.4
xi Share capital and share premium
The movement in the share capital and share premium of the Company during the year is reflected in note 16 to the Group accounts on page 205.
Notes forming part of the
Company financial statements
continued
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i EPRA summary table
2023 2022
EPRA earnings per share 10.33p 10.04p
EPRA net tangible assets per share 198.9p 261.1p
EPRA net disposal value per share 206.1p 262.2p
EPRA net reinstatement value per share 219.6p 281.7p
EPRA vacancy rate 0.9% 1.3%
EPRA cost ratio (including vacant property costs) 11.7% 12.5%
EPRA cost ratio (excluding vacant property costs) 11.3% 11.8%
EPRA net initial yield 4.1% 3.4%
EPRA ‘topped up’ net initial yield 4.6% 3.7%
The definition of these measures can be found in the Glossary on page 222.
ii EPRA proportionally consolidated income statement
For the year to 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2022
£m
Gross rental income 145.6 4.3 (1.5) 148.4 131.5 4.5 (1.3) 134.7
Property costs (1.5) (0.1) – (1.6) (1.5) (0.1) – (1.6)
Net rental income 144.1 4.2 (1.5) 146.8 130.0 4.4 (1.3) 133.1
Management fees 1.1 (0.5) 0.1 0.7 1.3 (0.5) – 0.8
Other income – – – – 0.4 – – 0.4
Administrative costs (16.4) (0.1) – (16.5) (16.0) (0.1) – (16.1)
Net finance costs (29.5) (0.6) 0.2 (29.9) (23.9) (1.0) 0.2 (24.7)
Tax (0.1) – 0.1 – (0.1) – 0.1 –
EPRA earnings 99.2 3.0 (1.1) 101.1 91.7 2.8 (1.0) 93.5
iii EPRA proportionally consolidated balance sheet
As at 31 March
100%
owned
£m
JV
£m
NCI
£m
Total
2023
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2022
£m
Investment property 2,944.9 70.8 (35.7) 2,980.0 3,494.6 96.6 (15.1) 3,576.1
Assets held for sale 19.8 – – 19.8 21.2 – – 21.2
Trading property 1.1 – – 1.1 1.1 – – 1.1
2,965.8 70.8 (35.7) 3,000.9 3,516.9 96.6 (15.1) 3,598.4
Gross debt (1,017.0) (13.5) – (1,030.5) (1,027.2) (26.5) – (1,053.7)
Cash 32.6 5.4 (1.5) 36.5 51.3 3.6 (0.6) 54.3
Other net liabilities (58.8) (1.2) 9.3 (50.7) (43.8) (1.2) 5.6 (39.4)
EPRA net tangible assets 1,922.6 61.5 (27.9) 1,956.2 2,497.2 72.5 (10.1) 2,559.6
Derivatives 11.1 – – 11.1 – 0.1 – 0.1
IFRS equity shareholders' funds 1,933.7 61.5 (27.9) 1,967.3 2,497.2 72.6 (10.1) 2,559.7
IFRS net assets 1,933.7 61.5 – 1,995.2 2,497.2 72.6 – 2,569.8
Loan to value 32.8% 11.4% – 32.8% 28.9% 24.3% – 28.8%
Cost of debt 3.4% 3.6% – 3.4% 2.6% 3.4% – 2.6%
Undrawn facilities 380.0 – – 380.0 245.0 – – 245.0
Supplementary information
(not audited)
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iv EPRA cost ratio
For the year to 31 March
2023
£m
2022
£m
Property operating expenses 1.5 1.5
Administrative costs 16.4 16.0
Share of joint venture property costs, administrative costs and management fees 0.7 0.7
Less:
Joint venture property management fee income (1.1) (1.3)
Ground rents (0.1) (0.1)
Total costs including vacant property costs (A) 17.4 16.8
Group vacant property costs (0.7) (0.9)
Total costs excluding vacant property costs (B) 16.7 15.9
Gross rental income 145.6 131.5
Share of joint venture gross rental income 4.3 4.5
Share of non-controlling interest gross rental income (1.5) (1.3)
148.4 134.7
Less:
Ground rents (0.1) (0.1)
Total gross rental income (C) 148.3 134.6
Total EPRA cost ratio (including vacant property costs) (A)/(C) 11.7% 12.5%
Total EPRA cost ratio (excluding vacant property costs) (B)/(C) 11.3% 11.8%
v EPRA net initial yield and ‘topped up’ net initial yield
As at 31 March
2023
£m
2022
£m
Investment property – wholly owned
1
2,957.6 3,511.3
Investment property – share of joint ventures 70.8 96.6
Trading property 1.1 1.1
Less development properties (33.7) (67.8)
Less residential properties (0.9) (0.9)
Less non-controlling interest (35.7) (15.1)
Completed property portfolio 2,959.2 3,525.2
Allowance for:
Estimated purchasers’ costs 201.2 239.7
Estimated costs to complete 10.4 33.7
EPRA property portfolio valuation (A) 3,170.8 3,798.6
Annualised passing rental income 128.2 129.4
Share of joint ventures 4.2 4.5
Less development properties (1.8) (3.3)
Annualised net rents (B) 130.6 130.6
Contractual rental increase across the portfolio 15.9 11.5
‘Topped up’ net annualised rent (C) 146.5 142.1
EPRA net initial yield (B/A) 4.1% 3.4%
EPRA ‘topped up’ net initial yield (C/A) 4.6% 3.7%
1 Wholly owned investment property includes assets held for sale of £19.8 million (2022: £21.2 million)
Supplementary information
(not audited)
continued
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vi EPRA vacancy rate
As at 31 March
2023
£m
2022
£m
Annualised estimated rental value of vacant premises 1.5 2.1
Portfolio estimated rental value¹ 168.6 157.1
EPRA vacancy rate 0.9% 1.3%
1 Excludes residential and development properties
vii EPRA capital expenditure analysis
As at 31 March
100%
owned
5
£m
JV
£m
NCI
£m
Total
2023
£m
100%
owned
£m
JV
£m
NCI
£m
Total
2022
£m
Opening valuation 3,516.9 96.6 (15.1) 3,598.4 2,505.7 94.4 (11.4) 2,588.7
Acquisitions
1
187.4 – (22.8) 164.6 457.5 – – 457.5
Developments
2
83.7 – – 83.7 87.8 – – 87.8
Investment properties
– incremental lettable space
3
0.1 – – 0.1 4.5 – (0.7) 3.8
– no incremental lettable space
3
7.3 0.2 – 7.5 5.6 1.6 – 7.2
– tenant incentives 10.2 0.2 (0.2) 10.2 5.6 (0.5) (0.3) 4.8
Capitalised interest
4
4.0 – – 4.0 1.4 – – 1.4
Total EPRA capex 292.7 0.4 (23.0) 270.1 562.4 1.1 (1.0) 562.5
(269.0) (13.7) – (282.7) (165.8) (18.6) – (184.4)
Revaluation (577.4) (12.5) 2.4 (587.5) 615.2 19.7 (2.7) 632.2
ROU asset 2.6 – – 2.6 (0.6) – – (0.6)
Closing valuation 2,965.8 70.8 (35.7) 3,000.9 3,516.9 96.6 (15.1) 3,598.4
1 Group acquisitions in the year include completed investment properties as reflected in note 9 to the financial statements
2 Group developments include acquisitions, capital expenditure and lease incentive movements on properties under development as reflected in note 9 after excluding capitalised interest noted in
footnote 4 below
3 Group capital expenditure on completed properties, as reflected in note 9 to the financial statements after excluding capitalised interest noted in footnote 4 below
4 Capitalised interest on investment properties of £0.3 million (2022: £0.3 million) and development properties of £3.7 million (2022: £1.1 million)
5 Including trading property of £1.1 million and assets held for sale of £19.8 million
6 Group disposals include disposals of assets held for sale
viii Total accounting return
For the year to 31 March
2023
pence
per share
2022
pence
per share
EPRA net tangible assets per share
– at end of year 198.9 261.1
– at start of year 261.1 190.3
(Decrease)/increase (62.2) 70.8
Dividend paid 9.5 8.9
Total (decrease)/increase (52.7) 79.7
Total accounting return -20.2% 41.9%
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ix Portfolio split and valuation
As at 31 March
2023
£m
2023
%
2022
£m
2022
%
Mega distribution 311.5 10.4 425.2 11.8
Regional distribution 586.1 19.6 665.3 18.5
Urban logistics 1,262.3 42.2 1,551.5 43.2
Distribution 2,159.9 72.2 2,642.0 73.5
Long income 707.4 23.7 785.3 21.8
Retail parks 70.2 2.3 70.6 2.0
Offices 21.7 0.7 27.3 0.8
Investment portfolio 2,959.2 98.9 3,525.2 98.1
Development
1
33.7 1.1 67.8 1.9
Residential 0.9 – 0.9 –
Total portfolio 2,993.8 100.0 3,593.9 100.0
Head lease and right of use assets 7.1 4.5
3,000.9 3,598.4
1 Represents urban logistics £25.3 million (0.9%), long income £5.6 million (0.1%), office and other land £2.8 million (0.1%) at 31 March 2023. Split of prior year comparatives was regional distribution
£15.9 million (0.4%) urban logistics £25.8 million (0.7%), long income £23.2 million (0.7%), office and other land £2.9 million (0.1%)
x Investment portfolio yields
2023 2022
As at 31 March
EPRA NIY
%
EPRA
topped up NIY
%
Equivalent
yield
%
EPRA NIY
%
EPRA
topped up NIY
%
Equivalent
yield
%
Distribution 3.8 4.3 5.3 3.0 3.4 4.1
Long income 4.9 5.4 5.6 4.6 4.7 5.1
Retail parks 4.5 5.4 5.4 4.5 4.9 4.8
Offices 6.8 7.1 7.5 6.4 6.4 6.5
Investment portfolio 4.1 4.6 5.4 3.4 3.7 4.4
xi Investment portfolio – Key statistics
As at 31 March 2023
Area
’000 sq ft
WAULT
to expiry
years
WAULT
to first break
years
Occupancy
%
Average rent
£ per sq ft
Distribution 13,303 11.7 10.5 98.9 7.40
Long income 2,776 13.1 11.7 100.0 16.20
Retail parks 266 8.2 8.2 100.0 16.50
Offices 118 3.0 2.8 82.6 16.40
Investment portfolio 16,463 11.9 10.7 99.1 8.90
xii Total property returns
For the year to 31 March
All property
2023
%
All property
2022
%
Capital return -15.7 22.9
Income return 4.4 4.4
Total return -12.0 28.2
Supplementary information
(not audited)
continued
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xiii Contracted rental income
As at 31 March
2023
£m
2022
£m
Distribution 97.8 95.6
Long income 39.8 38.9
Retail parks 4.1 3.6
Offices 1.7 1.9
Investment portfolio 143.4 140.0
Development – distribution 1.0 2.4
Development – long income 0.8 0.9
Total portfolio 145.2 143.3
xiv Rent subject to expiry
As at 31 March 2023
Within 3 years
%
Within 5 years
%
Within 10 years
%
Within 15 years
%
Within 20 years
%
Over 20 years
%
Distribution 9.2 16.0 46.7 70.7 83.8 100.0
Offices 74.2 78.9 100.0 100.0 100.0 100.0
Long income 5.8 9.3 33.1 61.0 93.6 100.0
Retail parks 21.1 37.1 61.5 100.0 100.0 100.0
Investment portfolio 9.4 15.5 44.0 69.2 87.1 100.0
xv Contracted rent subject to inflationary or fixed uplifts
As at 31 March
2023
£m
2023
%
2022
£m
2022
%
Distribution 61.4 62.8 60.0 61.2
Long income 27.3 68.7 27.0 67.7
Retail parks 1.6 38.5 0.3 9.2
Investment portfolio 90.3 63.0 87.3 60.9
xvi Top ten assets (by value)
As at 31 March 2023
Area
’000 sq ft
Contracted
rent
£m
Occupancy
%
WAULT
to expiry
years
WAULT
to first break
years
Eddie Stobart, Dagenham 454 4.1 100.0 20.4 20.4
Primark, T2, Islip 1,062 5.9 100.0 17.4 17.4
Argos, Bedford 658 4.1 100.0 10.9 10.9
THG, Warrington 686 4.1 100.0 21.6 21.6
Tesco, Croydon 191 1.9 100.0 5.0 5.0
Movianto, Bedford 356 2.8 100.0 23.6 23.6
Amazon, Warrington 357 2.4 100.0 8.7 8.7
Oak Furniture, Swindon 357 2.2 100.0 12.6 12.6
Costco, Coventry 129 1.8 100.0 13.8 13.8
Clipper, Ollerton 364 2.2 100.0 14.4 14.4
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xvii Top ten occupiers
As at 31 March 2023
Contracted
rental income
£m
Contracted
rental income
%
Primark 5.9 4.1
Amazon 4.9 3.4
Argos 4.2 2.9
THG 4.1 2.9
Eddie Stobart 4.1 2.8
Currys 3.9 2.7
Odeon 3.6 2.5
DFS 3.4 2.3
Waitrose 3.3 2.3
Movianto 2.8 2.0
Top ten 40.2 27.9
xviii Loan to value
As at 31 March
100% owned
£m
JV
£m
NCI
£m
2023
£m
2022
£m
Gross debt 1,017.0 13.5 – 1,030.5 1,053.7
less: Fair value adjustments (2.0) – – (2.0) (2.2)
less: Cash balances (32.6) (5.4) 1.5 (36.5) (54.3)
Net debt 982.4 8.1 1.5 992.0 997.2
Acquisitions exchanged in the period 2.3 – – 2.3 72.4
Disposals exchanged in the period (19.1) – – (19.1) (21.2)
Adjusted net debt (A) 965.6 8.1 1.5 975.2 1,048.4
Exclude:
Acquisitions exchanged in the period (2.3) – – (2.3) (72.4)
Disposals exchanged in the period 19.1 – – 19.1 21.2
Include:
Net payables 60.1 1.2 (0.4) 60.9 47.2
EPRA net debt (B) 1,042.5 9.3 1.1 1,052.9 1,044.4
Investment properties at fair value 2,937.8 70.8 (35.7) 2,972.9 3,571.6
Properties held for sale 19.8 – – 19.8 21.2
Trading properties 1.1 – – 1.1 1.1
Total property portfolio 2,958.7 70.8 (35.7) 2,993.8 3,593.9
Acquisitions exchanged in the period 2.3 – – 2.3 72.4
Disposals exchanged in the period (19.8) – – (19.8) (21.2)
Adjusted property portfolio (C) 2,941.2 70.8 (35.7) 2,976.3 3,645.1
Exclude:
Acquisitions exchanged in the period (2.3) – – (2.3) (72.4)
Disposals exchanged in the period 19.8 – – 19.8 21.2
Include:
Financial assets 5.2 – – 5.2 5.2
EPRA property portfolio (D) 2,963.9 70.8 (35.7) 2,999.0 3,599.1
Loan to value (A)/(C) 32.8% 32.8% 28.8%
EPRA Loan to value (B)/(D) 35.2% 35.1% 29.0%
Supplementary information
(not audited)
continued
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xix Acquisitions and disposals
As at 31 March
100%
owned
£m
JV
£m
NCI
£m
2023
£m
2022
£m
Acquisition costs
Completed in the year 187.4 – (22.8) 164.6 457.5
Exchanged in the previous year (72.4) – – (72.4) (35.7)
Exchanged but not completed in the year 2.3 – – 2.3 72.4
Forward funded investments classified as developments 32.1 – – 32.1 97.0
Transaction costs and other (10.0) – 3.8 (6.2) (15.9)
Exchanged in the year 139.4 – (19.0) 120.4 575.3
Disposal proceeds
Completed in the year 258.4 13.3 – 271.7 199.8
Exchanged in the previous year (21.2) – – (21.2) (15.2)
Exchanged but not completed in the year 19.1 – – 19.1 21.2
Transaction costs and other 2.7 0.2 – 2.9 1.8
Exchanged in the year 259.0 13.5 – 272.5 207.6
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Building Research Establishment Environmental
Assessment Methodology (‘BREEAM’)
A set of assessment methods and tools designed
to help construction professionals understand
and mitigate the environmental impacts of the
developments they design and build.
Capital Return
The valuation movement on the property portfolio
adjusted for capital expenditure and expressed as a
percentage of the capital employed over the period.
Chief Operating Decision Makers (‘CODMs’)
The Executive Directors, Senior Leadership Team
members and other senior managers.
Contracted Rent
The annualised rent excluding rent free periods.
Cost of Debt
Weighted average interest rate payable.
Debt Maturity
Weighted average period to expiry of debt drawn.
Distribution
The activity of delivering a product for consumption
by the end user.
Energy Performance Certificate (‘EPC’)
Required certificate whenever a property is built,
sold or rented. An EPC gives a property an energy
efficiency rating from A (most efficient) to G (least
efficient) and is valid for ten years. An EPC contains
information about a property’s energy use and
typical energy costs, and recommendations about
how to reduce energy use and save money.
EPRA Cost Ratio
Administrative and operating costs (including and
excluding costs of direct vacancy) as a percentage of
gross rental income.
EPRA Earnings per share (‘EPS’)
Underlying earnings from the Group’s property
rental business divided by the average number of
shares in issue over the period.
EPRA Loan to Value (LTV)
Net debt and net current payables if applicable,
divided by the total property portfolio value
including net current receivables if applicable and
financial assets due from the NCI.
EPRA NAV per share
Balance sheet net assets excluding fair value of
derivatives, divided by the number of shares in issue
at the balance sheet date.
EPRA Net Disposal Value per share
Represents the shareholders’ value under a disposal
scenario, where assets are sold and/or liabilities
are not held to maturity. Therefore, this measure
includes an adjustment to mark to market the
Group’s fixed rate debt.
EPRA Net Reinstatement Value per share
This reflects the value of net assets required to
rebuild the entity, assuming that entities never
sell assets. Assets and liabilities, such as fair value
movements on financial derivatives that are not
expected to crystallise in normal circumstances, are
excluded. Investment property purchasers’ costs
are included.
EPRA Net Tangible Asset Value per share
This reflects the value of net assets on a long term,
ongoing basis assuming entities buy and sell assets.
Assets and liabilities, such as fair value movements
on financial derivatives that are not expected to
crystallise in normal circumstances, are excluded.
EPRA Net Initial Yield
Annualised rental income based on cash rents
passing at the balance sheet date, less non
recoverable property operating expenses, expressed
as a percentage of the market value of the property,
after inclusion of estimated purchaser’s costs.
EPRA Topped Up Net Initial Yield
EPRA net initial yield adjusted for expiration of
rent free periods or other lease incentives such as
discounted rent periods and stepped rents.
EPRA Vacancy
The Estimated Rental Value (‘ERV’) of immediately
available vacant space as a percentage of the total
ERV of the Investment Portfolio.
Equivalent Yield
The weighted average income return expressed as a
percentage of the market value of the property, after
inclusion of estimated purchaser’s costs.
Estimated Rental Value (‘ERV’)
The external valuers’ opinion of the open market
rent which, on the date of valuation, could
reasonably be expected to be obtained on a new
letting or rent review of a property.
European Public Real Estate Association (‘EPRA’)
EPRA is the industry body for European Real Estate
Investment Trusts (‘REITs’).
European Single Electronic Format (‘ESEF’)
ESEF is the electronic reporting format required
from 1 January 2021 to facilitate access, analysis and
comparison of annual financial reports.
Gross Rental Income
Rental income for the period from let properties
reported under IFRS, after accounting for lease
incentives and rent free periods. Gross rental income
will include, where relevant, turnover based rent,
surrender premiums and car parking income.
Glossary
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Group
LondonMetric Property Plc and its subsidiaries.
IFRS
The International Financial Reporting Standards
issued by the International Accounting Standards
Board and adopted by the European Union.
IFRS Net Assets
The Group’s equity shareholders’ funds at the period
end, which excludes the net assets attributable to
the non-controlling interest.
IFRS Net Assets per share
IFRS net assets divided by the number of shares in
issue at the balance sheet date.
Income Return
Net rental income expressed as a percentage of
capital employed over the period.
Investment Portfolio
The Group’s property portfolio excluding
development, land holdings and
residential properties.
Investment Property Databank (‘IPD’)
IPD is a wholly owned subsidiary of MSCI producing
an independent benchmark of property returns and
the Group’s portfolio returns.
Like for Like Income Growth
The movement in contracted rental income
on properties owned through the period under
review, excluding properties held for development
and residential.
Loan to Value (‘LTV’)
Net debt expressed as a percentage of the total
property portfolio value at the period end, adjusted
for deferred completions on sales and acquisitions
that exchanged in the period.
Logistics
The organisation and implementation of operations
to manage the flow of physical items from origin to
the point of consumption.
Net Debt
The Group’s bank loans net of cash balances at the
period end.
Net Rental Income
Gross rental income receivable after deduction
for ground rents and other net property outgoings
including void costs and net service charge expenses.
NNN Retail
These are primarily single or cluster assets let
to discount, essential, electrical and home retail
occupiers.
Occupancy Rate
The ERV of the let units as a percentage of the total
ERV of the Investment Portfolio.
Passing Rent
The gross rent payable by tenants under operating
leases, less any ground rent payable under
head leases.
Property Income Distribution (‘PID’)
Dividends from profits of the Group’s tax-exempt
property rental business under the REIT regulations.
The PID dividend is paid after deducting withholding
tax at the basic rate.
Real Estate Investment Trust (‘REIT’)
A listed property company which qualifies for
and has elected into a tax regime which is exempt
from corporation tax on profits from property
rental income and UK capital gains on the sale of
investment properties.
Task Force on Climate-Related Financial Disclosures
(‘TCFD’)
Created in 2015 to develop a framework for
consistent climate-related financial risk disclosure.
Total Accounting Return (‘TAR’)
The movement in EPRA Net Tangible Assets per
share plus the dividend paid during the period
expressed as a percentage of the EPRA net tangible
assets per share at the beginning of the period.
Total Property Return (‘TPR’)
Unlevered weighted capital and income return of the
property portfolio as calculated by MSCI.
Total Shareholder Return (‘TSR’)
The movement in the ordinary share price as quoted
on the London Stock Exchange plus dividends per
share assuming that dividends are reinvested at the
time of being paid.
Weighted Average Interest Rate
The total loan interest and derivative costs per
annum (including the amortisation of finance costs)
divided by the total debt in issue at the period end.
Weighted Average Unexpired Lease Term (‘WAULT’)
Average unexpired lease term across the investment
portfolio weighted by Contracted Rent.
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This document is important and requires your immediate attention. If you
are in any doubt as to the action you should take, you should seek your own
personal financial advice from your stockbroker, bank manager, solicitor,
accountant, or other financial advisor authorised under the Financial Services
and Markets Act 2000.
If you have sold or otherwise transferred all your ordinary shares, please
send this document, together with the accompanying documents, as soon as
possible to the purchaser or transferee, or to the stockbroker, bank or other
agent through whom the sale or transfer was effected, for delivery to the
purchaser or transferee.
Notice is hereby given that the Annual General Meeting of the members of
LondonMetric Property Plc (Registered number 7124797) will be held at The
Connaught, Carlos Place, Mayfair, London, W1K 2AL on 12 July 2023 at 10.00 am.
Resolutions 1 to 16 (inclusive) will be proposed as ordinary resolutions and
resolutions 17 to 20 (inclusive) will be proposed as special resolutions. Voting on
all resolutions will be by way of poll.
1. That the Annual Report and Accounts for the year ended 31 March 2023
be received.
2. That the Annual Report on Remuneration in the form set out in the Annual
Report and Accounts for the year ended 31 March 2023 be approved.
3. That the Directors' Remuneration Policy in the form set out in the Annual
Report and Accounts for the year ended 31 March 2023 be approved.
4. That Deloitte LLP be reappointed as auditor of the Company, to hold office
until the conclusion of the next general meeting at which accounts are laid
before the Company.
5. That the Directors be authorised to determine the remuneration of
the auditor.
6. That Andrew Jones be re-elected as a Director.
7. That Martin McGann be re-elected as a Director.
8. That Alistair Elliott be re-elected as a Director.
9. That James Dean be re-elected as a Director.
10. That Andrew Livingston be re-elected as a Director.
11. That Suzanne Avery be re-elected as a Director.
12. That Robert Fowlds be re-elected as a Director.
13. That Katerina Patmore be re-elected as a Director.
14. That Suzy Neubert be elected as a Director.
15. That the Directors be and they are hereby generally and unconditionally
authorised in accordance with Section 551 of the Companies Act 2006 (the
‘2006 Act’), in substitution for all existing authorities:
a. to exercise all the powers of the Company to allot shares and to make
offers or agreements to allot shares in the Company or grant rights to
subscribe for or to convert any security into shares in the Company
(together ‘Relevant Securities’):
(i) in the event that the Company’s proposed acquisition of the entire
issued, and to be issued, share capital of CT Property Trust Limited (the
‘Acquisition’) has not taken place in accordance with its terms, up to a
maximum aggregate nominal amount of £32,765,615; or
(ii) in the event that the Acquisition has taken place in accordance with its
terms, up to a maximum aggregate nominal amount of £36,286,261,
(such amount to be reduced by the nominal amount of any equity
securities (within the meaning of Section 560 of the 2006 Act) allotted
under paragraph 15b below in excess of the applicable amount set out in
15a above; and
b. to exercise all the powers of the Company to allot equity securities (within
the meaning of Section 560 of the 2006 Act):
(i) in the event that the Acquisition has not taken place in accordance with
its terms, up to a maximum aggregate nominal amount of £65,531,230;
or
(ii) in the event that the Acquisition has taken place in accordance with its
terms, up to a maximum aggregate nominal amount of £72,572,523,
(such amount to be reduced by any Relevant Securities allotted or granted
under paragraph 15a above) provided that this authority may only be used
in connection with a rights issue in favour of holders of ordinary shares and
other persons entitled to participate therein where the equity securities
respectively attributable to the interests of all those persons at such record
date as the Directors may determine are proportionate (as nearly as may
be) to the respective numbers of equity securities held by them or are
otherwise allotted in accordance with the rights attaching to such equity
securities subject to such exclusions or other arrangements as the Directors
may consider necessary or expedient to deal with fractional entitlements
or legal difficulties under the laws of any territory or the requirements of a
regulatory body or stock exchange or by virtue of shares being represented
by depositary receipts or any other matter whatsoever,
provided that the authorities in paragraphs 15a and 15b shall expire at the
conclusion of the next Annual General Meeting of the Company after the
passing of this resolution (or, if earlier, on the date which is 15 months after
the date of this Annual General Meeting), except that the Company may
before such expiry make an offer or agreement which would or might require
Relevant Securities or equity securities as the case may be to be allotted
(and treasury shares to be sold) after such expiry and the Directors may allot
Relevant Securities or equity securities (and sell treasury shares) in pursuance
of any such offer or agreement as if the authority in question had not expired.
16. That the rules of the LondonMetric Property Plc 2023 Long Term Incentive
Plan (the principal terms of which are summarised in the attached Appendix
to this Notice on pages 230 to 231 of the Annual Report and Accounts and
the draft rules for which will be produced at the meeting and initialled by
the Chair for purposes of identification) be and are hereby approved (with
such immaterial modifications (if any) as the Directors may from time to
time consider necessary or desirable) and the Directors be and are hereby
authorised to do all such acts and things as they consider necessary or
desirable for the purposes of implementing, operating and carrying the same
into effect.
17. That, if resolution 15 is passed, the Directors be and are empowered, in
accordance with Sections 570 and 573 of the 2006 Act, to allot equity
securities (as defined in Section 560(1) of the 2006 Act) for cash pursuant to
the authority conferred by resolution 15 and/or by way of a sale of treasury
shares as if Section 561(1) of the 2006 Act did not apply to any such allotment
or sale, provided that this power shall be limited to:
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a. the allotment of equity securities and sale of treasury shares for cash in
connection with an offer of, or invitation to apply for, equity securities
made to (but in the case of the authority conferred by paragraph 15b of
resolution 15 above, by way of a rights issue only):
(i) to ordinary shareholders in proportion (as nearly as may be practicable)
to their existing holdings;
(ii) to holders of other equity securities as required by the rights of those
securities or, if the Directors otherwise consider necessary, as permitted
by the rights of those securities, and so that the Directors may impose
any limits or restrictions and make any arrangements which they
consider necessary or appropriate to deal with any treasury shares,
fractional entitlements, record dates, legal, regulatory or practical
problems in, or under the laws of, any territory or any other matter; and
b. the allotment of equity securities or sale of treasury shares (otherwise than
under paragraph 17a above):
(i) up to a maximum aggregate nominal amount of £9,829,684; or
(ii) in the event that the Acquisition has taken place in accordance with its
terms, up to a maximum aggregate nominal amount of £10,885,878,
provided that this power shall expire at the conclusion of the next Annual
General Meeting of the Company (or, if earlier, on the date which is 15 months
after the date of this Annual General Meeting) but prior to its expiry the
Company may make offers, and enter into agreements, which would, or
might, require equity securities to be allotted (and treasury shares to be sold)
after the authority expires and the Directors may allot equity securities (and
sell treasury shares) under any such offer or agreement as if the authority had
not expired.
18. That, if resolution 15 is passed, the Directors be and are empowered, in
accordance with Sections 570 and 573 of the 2006 Act, in addition to any
authority granted under resolution 17 to allot equity securities (as defined in
Section 560(1) of the 2006 Act) for cash pursuant to the authority conferred
by resolution 15 and/or by way of a sale of treasury shares as if Section 561(1)
of the 2006 Act did not apply to any such allotment or sale, such power to be:
a. limited to the allotment of equity securities or sale of treasury shares:
(i) in the event that the Acquisition has not taken place in accordance with
its terms up to a maximum aggregate nominal amount of £9,829,684; or
(ii) in the event that the Acquisition has taken place in accordance with its
terms, up to a maximum aggregate nominal amount of £10,885,878;
and
b. used only for the purposes of financing (or refinancing, if the authority is
to be used within six months after the original transaction) a transaction
which the Directors determine to be an acquisition or other capital
investment of a kind contemplated by the Statement of Principles on
Disapplying Pre-Emption Rights most recently published by the Pre-
Emption Group prior to the date of this notice,
provided that this power shall expire at the end of the next Annual General
Meeting of the Company (or, if earlier, on the date which is 15 months after
the date of this Annual General Meeting) but, in each case, prior to its expiry
the Company may make offers, and enter into agreements which would, or
might, require equity securities to be allotted (and treasury shares to be sold)
after the authority expires and the Directors may allot equity securities (and
sell treasury shares) under any such offer or agreement as if the authority in
question had not expired.
19. That the Company be and is hereby generally and unconditionally authorised,
in accordance with Section 701 of the 2006 Act, to make market purchases
(within the meaning of Section 693(4) of the 2006 Act) of ordinary shares
of 10p each in the capital of the Company (‘ordinary shares’) on such terms
and in such manner as the Directors may from time to time determine
provided that:
a. the maximum aggregate number of ordinary shares authorised to be
purchased is:
(i) in the event that the Acquisition has not taken place in accordance with
its terms, 98,296,840; or
(ii) in the event that the Acquisition has taken place in accordance with its
terms, 108,858,780;
b. the minimum price which may be paid for an ordinary share is 10p
being the nominal amount thereof (exclusive of expenses payable by
the Company);
c. the maximum price which may be paid for an ordinary share (exclusive of
expenses payable by the Company) cannot be more than the higher of:
(i) 105% of the average market value of an ordinary share as derived from
the London Stock Exchange’s Daily Official List for the five business
days prior to the day on which the ordinary share is contracted to be
purchased; and
(ii) the value of an ordinary share calculated on the basis of the higher of:
(A) the last independent trade of; or (B) the highest current independent
bid for, any number of ordinary shares on the trading venue where the
market purchase by the Company will be carried out; and
d. this authority shall expire at the conclusion of the next Annual General
Meeting of the Company (or, if earlier, on the date which is 15 months after
the date of this Annual General Meeting) except that the Company may
before such expiry make a contract to purchase its own shares which will or
may be completed or executed wholly or partly after such expiry and the
Company may purchase its ordinary shares pursuant to such contract as if
this authority had not expired.
20. That the Company is authorised to call any general meeting of the Company
other than the Annual General Meeting by notice of at least 14 clear days
during the period beginning on the date of the passing of this resolution
and ending on the conclusion of the next Annual General Meeting of
the Company.
By order of the Board
Jadzia Duzniak
Company Secretary
24 May 2023
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Notes to the Notice of the Annual General Meeting:
(i) Shareholders entitled to attend and vote at the meeting may appoint one
or more proxies (who need not be shareholders) to attend, speak and vote
on their behalf, provided that each proxy is appointed to exercise the rights
attaching to the different shares held by him or her.
(ii) Your proxy could be the Chair, another Director of the Company or another
person who has agreed to attend and represent you. Your proxy will vote
as you instruct and must attend the meeting for your vote to be counted.
Details of how to appoint the Chair (or another person) as your proxy are
set out in the notes to the proxy form.
(iii) Any person to whom this Notice is sent who is a person nominated under
Section 146 of the 2006 Act to enjoy information rights (a ‘Nominated
Person’) may, under an agreement between him/her and the shareholder
by whom he/she was nominated, have a right to be appointed (or to have
someone else appointed) as a proxy for the Annual General Meeting. If a
Nominated Person has no such proxy appointment right, or does not wish
to exercise it, he/she may, under any such agreement, have a right to give
instructions to the shareholder as to the exercise of voting rights.
The statement of rights of shareholders in relation to the appointment
of proxies in paragraph (i) above does not apply to Nominated Persons.
The rights described in that paragraph can only be exercised by
shareholders of the Company.
(iv) To have the right to attend and vote at the meeting you must hold ordinary
shares in the Company and your name must be entered on the share
register of the Company in accordance with note (vi) below.
(v) You will not have received a hard copy proxy form for the Annual General
Meeting in the post. You can instead submit your proxy vote electronically
by accessing the shareholder portal at www.signalshares.com, logging in
and selecting the ‘Vote Online Now’ link. You will require your username
and password in order to log in and vote. If you have forgotten your
username or password you can request a reminder via the shareholder
portal. If you have not previously registered to use the portal you will
require your investor code (‘IVC’) which can be found on your share
certificate or dividend notification. Proxy votes should be submitted as
early as possible and in any event, no later than 10.00 am on 10 July 2023
(or, in the event of an adjournment, not less than two business days before
the stated time of the adjourned meeting).
You may request a hard copy proxy form directly from the Registrars, Link
Group by emailing shareholderenquiries@linkgroup.co.uk or by post at Link
Group, Central Square, 29 Wellington Street, Leeds, LS1 4DL. To be valid,
any hard copy proxy form must be received by post or (during normal
business hours only) by hand at the Company’s registrars, Link Group,
Central Square, 29 Wellington Street, Leeds, LS1 4DL by no later than
10.00 am on 10 July 2023 (or, in the event of an adjournment, not less than
two business days before the stated time of the adjourned meeting).
To be valid, Forms of Proxy (and the power of attorney or other authority, if
any, under which it is signed or a notarially certified copy thereof) must be
completed and signed and received by Link Group at PXS1, Central Square,
29 Wellington Street, Leeds, LS1 4DL as soon as possible but, in any event,
so as to arrive no later than 10.00 am on 10 July 2023 (or, in the event of an
adjournment, not less than two business days before the stated time of the
adjourned meeting).
Where you have appointed a proxy using the hard copy proxy form and
would like to change the instructions using another hard copy proxy form,
please contact Link Group at PXS1, Central Square, 29 Wellington Street,
Leeds, LS1 4DL. The deadline for receipt of proxy appointments (see
above) also applies in relation to amended instructions.
Completion and return of a proxy form will not preclude members from
attending and voting at the meeting should they wish to do so.
Any attempt to terminate or amend a proxy appointment received
after the relevant deadline will be disregarded. Where two or more valid
separate appointments of proxy are received in respect of the same share
in respect of the same meeting, the one which is last sent shall be treated
as replacing and revoking the other or others.
If you need help with voting online, or require a paper proxy
form, please contact our Registrar, Link Group by email at:
shareholderenquiries@linkgroup.co.uk, or you may call Link on 0371 664
0391 if calling from the UK, or +44 (0) 371 664 0391 if calling from outside
of the UK. Calls are charged at the standard geographic rate and will vary
by provider. Calls outside the United Kingdom will be charged at the
applicable international rate; lines are open 9.00am to 5.30pm, Monday to
Friday excluding public holidays in England and Wales.
(vi) The time by which a person must be entered on the register of members in
order to have the right to attend or vote at the meeting is close of business
on 10 July 2023. If the meeting is adjourned, the time by which a person
must be entered on the register of members in order to have the right to
attend or vote at the adjourned meeting is close of business on the day
that is two business days before the date fixed for the adjourned meeting.
Changes to entries on the register of members after such times shall be
disregarded in determining the rights of any person to attend or vote at
the meeting.
(vii) CREST members who wish to appoint a proxy or proxies by utilising the
CREST electronic proxy appointment service may do so by utilising the
procedures described in the CREST Manual. CREST Personal Members or
other CREST sponsored members, and those CREST members who have
appointed a voting service provider(s), should refer to their CREST sponsor
or voting service provider(s), who will be able to take the appropriate action
on their behalf.
(viii) In order for a proxy appointment or instruction made by means of CREST
to be valid, the appropriate CREST message (a ‘CREST Proxy Instruction’)
must be properly authenticated in accordance with Euroclear UK &
International’s specifications and must contain the information required
for such instructions, as described in the CREST Manual. The message,
regardless of whether it constitutes the appointment of a proxy or an
amendment to the instruction given to a previously appointed proxy, must,
in order to be valid, be transmitted so as to be received by the issuer’s
agent (ID number RA10) by 10.00 am on 10 July 2023 (or, in the event of
an adjournment, not less than two business days before the stated time of
the adjourned meeting).
For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST
Applications Host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST.
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(ix) The Company may treat as invalid a CREST Proxy Instruction in the
circumstances set out in Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
(x) CREST members and, where applicable, their CREST sponsors or voting
service providers should note that Euroclear UK & International does not
make available special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply in relation
to the input of CREST Proxy Instructions. It is the responsibility of the
CREST member concerned to take (or, if the CREST member is a CREST
personal member or sponsored member or has appointed a voting
service provider(s), to procure that his or her CREST sponsor or voting
service provider(s) take(s)) such action as shall be necessary to ensure
that a message is transmitted by means of the CREST system by any
particular time.
In this connection, CREST members and, where applicable, their CREST
sponsors or voting system providers are referred, in particular, to those
sections of the CREST Manual concerning practical limitations of the
CREST system and timings.
(xi) Any corporation which is a member can appoint one or more corporate
representatives who may exercise on its behalf all of its powers as a
member provided that they do not do so in relation to the same shares.
(xii) You may not use any electronic address provided either in this Notice of
Annual General Meeting or any related documents (including the form of
proxy) to communicate with the Company for any purposes other than
those expressly stated.
(xiii) As at 23 May 2023 (being the closest practical business day before the
publication of this Notice), the Company’s issued share capital consisted of
982,968,464 ordinary shares carrying one vote each.
(xiv) Members satisfying the thresholds in Section 527 of the 2006 Act can
require the Company to publish a statement on its website setting out any
matter relating to:
a. the audit of the Company’s accounts (including the Auditor’s report and
the conduct of the audit) that are to be laid before the meeting; or
b. any circumstances connected with an auditor of the Company ceasing
to hold office since the last Annual General Meeting, that the members
propose to raise at the meeting.
The Company cannot require the members requesting the publication
to pay its expenses. Any statement placed on the website must also
be sent to the Company’s auditor no later than the time it makes its
statement available on the website. The business which may be dealt
with at the meeting includes any statement that the Company has been
required to publish on its website.
(xv) Any member attending the meeting has the right to ask questions.
The Company must cause to be answered any such question relating to
the business being dealt with at the meeting but no such answer need be
given if:
a. to do so would interfere unduly with the preparation for the meeting or
involve the disclosure of confidential information;
b. the answer has already been given on a website in the form of an
answer to a question; or
c. it is undesirable in the interests of the Company or the good order of the
meeting that the question be answered.
(xvi) A copy of this Notice, and other information required by Section 311A of the
2006 Act, can be found at www.londonmetric.com.
(xvii) The following documents are available for inspection at the registered
office of the Company during normal business hours on each weekday
(public holidays excluded) from the date of this Notice until the conclusion
of the Annual General Meeting and at the place of the Annual General
Meeting for 15 minutes prior to and during the meeting:
a. copies of the Executive Directors’ service contracts with the Company;
and
b. copies of letters of appointment of Non Executive Directors; and
c. a copy of the Articles of Association of the Company.
Should a shareholder wish to inspect any of these documents please
submit a request to info@londonmetric.com.
(xviii) In the case of joint registered holders, the signature of one holder on a
proxy card will be accepted and the vote of the senior holder who tenders
a vote, whether in person or by proxy, shall be accepted to the exclusion
of the votes of the other joint holders. For this purpose, seniority shall be
determined by the order in which names stand on the register of members
of the Company in respect of the relevant joint holding.
(xix) Voting on all resolutions at the Annual General Meeting will be by way of
poll. The Company believes that this is the best way of representing the
view of as many shareholders as possible in the voting process.
(xx) This Notice (including these notes) reflects the intention of the Board
with respect to the AGM given the law in force, and relevant guidance,
as at the latest practicable date before the publication of this Notice.
Shareholders should check our website to ensure they have the most up to
date information available regarding the AGM.
Explanatory notes:
The information below is an explanation of the business to be considered at the
Annual General Meeting.
Resolution 1 – To receive the Annual Report and Accounts
The Chair will present the Annual Report and Accounts for the year ended
31 March 2023 to the meeting. Resolution 1 is to receive the Report of the
Directors, the financial statements and the Independent Auditor’s report on
the financial statements and on the auditable part of the Annual Report on
Remuneration for the financial year ended 31 March 2023.
Resolution 2 – Annual Report on Remuneration
Resolution 2 is an ordinary resolution to approve the Annual Report on
Remuneration relating to the implementation of the Company’s existing
Remuneration Policy, which was last approved at the Company's 2020
Annual General Meeting. Section 439 of the 2006 Act requires UK-
incorporated listed companies to put their Annual Report on Remuneration
to an advisory shareholder vote. As the vote is advisory it does not affect the
actual remuneration paid to any individual Director. The Annual Report on
Remuneration is set out in full in the Annual Report and Accounts.
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Resolution 3 – Directors' Remuneration Policy
Resolution 3 is an ordinary resolution to approve a new Directors' Remuneration
Policy (which will replace the Company's existing Remuneration Policy).
Shareholders are invited to approve the Directors' Remuneration Policy which
is set out on pages 144 to 157 of the Annual Report and Accounts (the 'Policy').
The Policy, which sets out the Company's forward looking policy on Directors'
remuneration, is subject to a binding shareholder vote by ordinary resolution at
least every three years.
Once the Policy has been approved, all payments by the Company to the
Directors and any former Directors must be made in accordance with the Policy
(unless a payment has separately been approved by shareholder resolution).
If the Company wishes to change the Policy, it will need to put a revised
Directors' Remuneration Policy to a shareholder vote again before it can
implement any payments pursuant to an amended Directors' Remuneration
Policy . If the Policy remains unchanged, the 2006 Act requires the Company to
put the Policy to shareholders for approval again no later than at the Company's
2026 Annual General Meeting.
Resolutions 4 and 5 – Reappointment of auditors
Resolution 4 relates to the reappointment of Deloitte LLP as the Company’s
auditor to hold office until the next Annual General Meeting of the Company and
Resolution 5 authorises the Directors to set their remuneration.
Resolutions 6 to 14 – Re-election and election of Directors
Resolutions 6 to 14 deal with re-election and election of the Directors (as
applicable). Biographies of each of the Directors seeking re-election and election
can be found on pages 108 and 109 of the Annual Report and Accounts.
The Board has confirmed, following a performance review, that all Directors
standing for re-election or election continue to perform effectively and
demonstrate commitment to their role.
Proposed acquisition of CT Property Trust Limited
On 24 May 2023, the Company announced that it had reached agreement on
the terms of a recommended offer pursuant to which the Company will acquire
the entire issued, and to be issued, share capital of CT Property Trust Limited
(the ‘Acquisition’). If the Acquisition becomes effective, the consideration to be
paid to the shareholders of CT Property Trust Limited will be satisfied by way
of an issue of new ordinary shares in the capital of the Company. Accordingly,
if the Acquisition becomes effective, the Company will issue approximately
105,619,395 new ordinary shares in or around early July 2023 and the total issued
share capital of the Company will be increased to approximately 1,088,587,859.
Resolutions 15, 17, 18 and 19, are proposed in a manner which accommodates
whether or not the Acquisition is approved and otherwise becomes effective.
Resolution 15 – Allotment of share capital
At the last Annual General Meeting of the Company the Directors were given
authority to allot ordinary shares in the capital of the Company. This authority
expires at the conclusion of the Annual General Meeting (or, if earlier, on the date
which is 15 months after the date of the Annual General Meeting).
Your Board considers it appropriate that a similar authority be granted to allot
ordinary shares in the capital of the Company up to a maximum nominal
amount of (i) £32,765,615 in the event that the Acquisition has not taken place in
accordance with its terms; or (ii) £36,286,261 in the event that the Acquisition has
taken place in accordance with its terms, (representing approximately one third
of the Company’s issued ordinary share capital (i) as at 23 May 2023 in the
event that the Acquisition has not taken place in accordance with its terms; or
(ii) following completion of the Acquisition, in the event that the Acquisition has
taken place in accordance with its terms) during the period up to the conclusion
of the next Annual General Meeting of the Company. Such authority is sought in
paragraph 15a of Resolution 15.
In accordance with the guidelines issued by the Investment Association,
paragraph 15b of Resolution 15 will allow Directors to allot, including the
shares referred to in paragraph 15a of Resolution 15, shares in the Company in
connection with a pre-emptive offer by way of a rights issue to shareholders
up to a maximum nominal amount of (i) £65,531,230 in the event that the
Acquisition has not taken place in accordance with its terms; or (ii) £72,572,523
in the event that the Acquisition has taken place in accordance with its terms,
representing approximately two thirds of the issued ordinary share capital of the
Company (i) as at 23 May 2023 in the event that the Acquisition has not taken
place in accordance with its terms; or (ii) following completion of the Acquisition,
in the event that the Acquisition has taken place in accordance with its terms.
Your Board considers it appropriate to seek this additional allotment authority
at the Annual General Meeting in order to take advantage of the flexibility it
offers. However, the Board has no present intention of exercising either authority
(except in relation to the Company’s scrip dividend scheme and its share
schemes). If they do exercise the authority, the Directors intend to follow best
practice as regards its use, as recommended by the Investment Association.
As at the date of this Notice the Company does not hold any ordinary shares in
the capital of the Company in treasury.
Resolutions 16 – Approval of the LondonMetric Property Plc 2023 Long Term
Incentive Plan
The LondonMetric Property Plc Long Term Incentive Plan adopted in 2013
(the '2013 LTIP') is due to expire on 10 July 2023. As a result, the Company’s
Remuneration Committee proposes to seek shareholder approval for the
new LondonMetric Property Plc 2023 Long Term Incentive Plan (the '2023
LTIP') which, if approved, would replace the 2013 LTIP for future long term
incentive awards.
The 2023 LTIP is based on the 2013 LTIP, but has been updated to reflect
changes in the proposed Policy and corporate governance best practice.
In particular, the limit on individual award levels has been increased in line with
the proposed Policy.
Resolution 16, which approves the 2023 LTIP, is proposed as an ordinary
resolution. The principal terms of the 2023 LTIP are summarised in the Appendix
to this Notice on pages 230 to 231 of the Annual Report and Accounts.
Resolutions 17 and 18 – General and additional authority to disapply pre-
emption rights
At the last Annual General Meeting of the Company the Directors were also
given authority to allot equity securities for cash without first being required to
offer such shares to existing shareholders. This authority expires at the conclusion
of the Annual General Meeting (or, if earlier, on the date which is 15 months after
the date of last year’s Annual General Meeting).
The passing of Resolutions 17 and 18 would allow the Directors to allot equity
securities (or sell any shares which the Company may purchase and hold in
treasury) without first offering them to existing holders in proportion to their
existing holdings.
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continued
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The authority set out in Resolution 17 is limited to: (a) allotments or sales in
connection with pre-emptive offers and offers to holders of other equity
securities if required by the rights of those shares; or (b) otherwise than in
connection with a pre-emptive offer, up to an aggregate nominal amount of
£9,829,684 (representing 98,296,840 ordinary shares) in the event that the
Acquisition has not taken place in accordance with its terms; or (ii) £10,885,878
(representing 108,858,780 ordinary shares) in the event that the Acquisition
has taken place in accordance with its terms. This aggregate nominal amount
represents approximately 10% of the issued ordinary share capital of the
Company (i) as at 23 May 2023 in the event that the Acquisition has not taken
place in accordance with its terms; or (ii) following completion of the Acquisition,
in the event that the Acquisition has taken place in accordance with its terms.
The authority set out in Resolution 18 is limited to allotments or sales of up to an
aggregate nominal amount of (i) £9,829,684 (representing 98,296,840 shares)
in the event that the Acquisition has not taken place in accordance with its terms;
or (ii) £10,885,878 (representing 108,858,780 ordinary shares) in the event that
the Acquisition has taken place in accordance with its terms, in addition to the
authority set out in Resolution 17 which is to be used only for the purposes of
financing (or refinancing, if the authority is to be used within six months after
the original transaction) a transaction which the Directors determine to be an
acquisition or other capital investment of a kind contemplated by the Statement
of Principles on Disapplying Pre-Emption Rights most recently published by the
Pre-Emption Group prior to the date of this notice (the ‘Statement of Principles’).
This aggregate nominal amount represents approximately an additional 10%
of the issued ordinary share capital of the Company (i) as at 23 May 2023 in the
event that the Acquisition has not taken place in accordance with its terms; or
(ii) following completion of the Acquisition, in the event that the Acquisition has
taken place in accordance with its terms.
The Statement of Principles state that, in addition to the standard annual
disapplication of pre-emption rights which permits companies to issue for cash
on a non-pre-emptive basis equity securities representing no more than 10
% of the Company’s issued ordinary share capital, the Pre-Emption Group is
supportive of extending the general disapplication power by an amount equal
to 10 % of a company’s issued ordinary share capital for certain purposes.
In accordance with the provisions of the Statement of Principles, the Company
confirms its intention that the additional power sought by the Company pursuant
to this resolution (equal to 10 % of the issued ordinary share capital of the
Company) can be used in connection with one or more acquisitions or specified
capital investments, which are announced contemporaneously with the relevant
issue. The Pre-Emption Group recommends that this additional 10 % authority
be sought in a separate resolution, which is the approach the Company has taken.
Resolution 19 – Authority to purchase own shares
Resolution 19 gives the Company authority to buy back its own ordinary shares
in the market as permitted by the 2006 Act. The authority limits the number
of shares that could be purchased to a maximum of: (i)98,296,840 shares
in the event that the Acquisition has not taken place in accordance with its
terms; or (ii) 108,858,780 shares in the event that the Acquisition has taken
place in accordance with its terms, (representing approximately 10% of the
Company’s issued ordinary share capital (i) as at 23 May 2023, in the event that
the Acquisition has not taken place in accordance with its terms; or (ii) following
completion of the Acquisition, in the event that the Acquisition has taken
place in accordance with its terms) and sets minimum and maximum prices.
This authority will expire at the conclusion of the next Annual General Meeting of
the Company.
The Directors have no present intention of exercising the authority to purchase
the Company’s ordinary shares but will keep the matter under review, taking
into account the financial resources of the Company, the Company’s share
price and future funding opportunities. The authority will be exercised only
after consideration by the Directors of the effect on net asset value and if the
Directors believe that to do so would be in the interests of shareholders generally.
Any purchases of ordinary shares would be by means of market purchases
through the London Stock Exchange.
Listed companies purchasing their own shares are allowed to hold them in
treasury as an alternative to cancelling them. No dividends are paid on shares
whilst held in treasury and no voting rights attach to treasury shares.
If Resolution 19 is passed at the Annual General Meeting, it is the Company’s
current intention to hold in treasury the majority of the shares it may purchase
pursuant to the authority granted to it. However, in order to respond properly
to the Company’s capital requirements and prevailing market conditions,
the Directors will need to reassess at the time of any and each actual
purchase whether to hold the shares in treasury or cancel them, provided it
is permitted to do so. The Company may hold a maximum of up to 10% of
its issued share capital in treasury in accordance with guidelines issued by the
Investment Association.
As at 23 May 2023 (the latest practicable date before publication of this Notice),
there were share awards over 5,443,328 ordinary shares in the capital of the
Company representing approximately (i) 0.55% of the Company’s issued
ordinary share capital, in the event that the Acquisition has not taken place in
accordance with its terms; or (ii) 0.50% of the Company’s issued ordinary share
capital, in the event that the Acquisition has taken place in accordance with its
terms. If the authority to purchase the Company’s ordinary shares was exercised
in full, these awards would represent approximately (i) 0.62% of the Company’s
issued ordinary share capital, in the event that the Acquisition has not taken place
in accordance with its terms; or (ii) 0.56% of the Company’s issued ordinary
share capital, in the event that the Acquisition has taken place in accordance with
its terms.
Resolution 20 – Notice period for general meetings
It is proposed in Resolution 20 that shareholders should approve the continued
ability of the Company to hold general meetings other than the Annual General
Meeting on 14 clear days’ notice.
This resolution is required under Section 307A of the 2006 Act. Under that
section, a traded company which wishes to be able to call general meetings
(other than an Annual General Meeting) on 14 clear days’ notice must obtain
shareholders’ approval. Resolution 20 seeks such approval.
The resolution is valid up to the next Annual General Meeting of the Company
and needs to be renewed annually. The Company will also need to meet the
requirements for voting by electronic means under Section 307A of the 2006
Act before it can call a general meeting on 14 days’ notice.
The shorter notice period would not be used as a matter of routine for general
meetings, but only where the flexibility is merited by the business of the meeting
and is thought to be to the advantage of shareholders as a whole.
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The London Metric Property Plc 2023 Long Term Incentive Plan
Resolution 16 seeks shareholder approval for the adoption of the LondonMetric
Property Plc 2023 Long Term Incentive Plan (the 'Plan'). The principal purpose
of the Plan is to provide a long term incentive to senior management which is
aligned as closely possible to the interests of shareholders.
The draft rules of the Plan are available for inspection on the National Storage
Mechanism at https://data.fca.org.uk/#/nsm/nationalstoragemechanism from
the date of sending this document. The draft rules will also be available for
inspection at the place of the Annual General Meeting convened for 12 July 2023
from at least 15 minutes prior to the appointed time for the meeting until the
meeting is concluded or adjourned.
(a) Eligibilit y
All employees of the Company and its subsidiaries from time to time (the
'Group'), including Executive Directors, are eligible to participate in the Plan at the
discretion of the Remuneration Committee.
(b) Grant of awards
The Plan provides for the grant of nil cost options ('Awards') over ordinary shares
in the capital of the Company ('ordinary shares'). Awards may also be structured
as conditional rights to acquire ordinary shares, or to receive a cash payment.
The price (if any) at which a participant may acquire ordinary shares on the
exercise or vesting of an Award under the Plan will be determined by the
Remuneration Committee on the date of grant and may, if the Remuneration
Committee sees fit, be nil or equal to the nominal value of an ordinary share.
Awards may be granted during the period of (i) 42 days following shareholder
approval of the Plan or an amendment to the Plan; (ii) 42 days following the
announcement of the Company's final or interim results for any financial period;
or (iii) 42 days following the occurrence of an event which the Remuneration
Committee considers to be exceptional. If any of the above periods is within a
period when share dealings are restricted, then Awards may be granted within 42
days of the end of that period.
No Awards may be granted more than ten years after the date on which the Plan
is approved by the Company’s shareholders.
Awards may be granted over newly issued ordinary shares, treasury shares or
ordinary shares purchased in the market.
Awards will not form part of a participant’s pensionable earnings. Awards are
not transferable (other than on death) without the consent of the Remuneration
Committee. No payment will be required for the grant of an Award.
(c) Vesting
The Remuneration Committee will determine at the date of grant when and
how Awards will vest. Ordinarily, Awards will vest on the third anniversary of
grant subject to (i) the participant remaining an employee or director of a Group
company, and (ii) the satisfaction of performance targets measured over three
consecutive financial years. The period from the date of grant until the date of
vesting shall be known as the 'Vesting Period'.
The first tranche of Awards to be granted under the Plan will vest subject
to the performance conditions set out on pages 160 to 161 of this report.
Subsequent Awards may be subject to different performance conditions,
which will be determined at the time of their grant at the Remuneration
Committee's discretion.
If events occur which cause the Remuneration Committee to reasonably
believe that the original performance conditions are no longer a fair measure of
performance, then the conditions may be amended or waived in such manner as
may be fair and reasonable in the Remuneration Committee's discretion.
In addition, the Remuneration Committee retains discretion to adjust the level
of vesting of Awards upwards or downwards if in its opinion the level of vesting
resulting from the application of any applicable performance conditions is not a
fair and accurate reflection of business performance, the participant’s personal
performance and such other factors as the Remuneration Committee may
consider appropriate.
(d) Holding period
At the discretion of the Remuneration Committee, Awards may be granted
subject to a holding period following Vesting during which any vested and
exercised Awards cannot normally be sold or otherwise disposed of except for
tax arising on vesting or exercise.
In the event of cessation of employment, the participant will normally remain
subject to any post-vesting holding requirements.
(e) Dividends
If the Remuneration Committee so determines (in its absolute discretion)
participants will be entitled to receive additional ordinary shares (or cash)
representing the value of dividends declared during the Vesting Period on the
number of ordinary shares subject to the participant's Award which have vested.
Any ordinary shares so awarded will not count towards the individual limits
summarised in paragraph (g) nor the company limits summarised in paragraph
(h) below.
(f) Malus and clawback
The Remuneration Committee may decide, at the vesting of an Award or at any
time before, that the number of ordinary shares subject to the Award shall be
reduced (including to nil) on such basis that the Remuneration Committee in its
discretion considers to be fair and reasonable in the following circumstances:
• discovery of a material misstatement resulting in an adjustment in the audited
accounts of the Group or any Group company;
• the assessment of any performance condition or condition in respect of an
Award was based on error, or inaccurate or misleading information;
• the discovery that any information used to determine an Award was based on
error, or inaccurate or misleading information;
• action or conduct of a participant which amounts to fraud or gross misconduct;
• events or the behaviour of a participant have led to the censure of a Group
company by a regulatory authority or have had a significant detrimental
impact on the reputation of any Group company provided that the Board
is satisfied that the relevant participant was responsible for the censure
or reputational damage and that the censure or reputational damage is
attributable to the participant; and/or
• where, as a result of an appropriate review of accountability, the Remuneration
Committee determines that the participant has caused wholly or in part a
corporate failure of the Company.
The Remuneration Committee may apply clawback to all or part of a participant’s
Award in substantially the same circumstances as apply to malus (as described
above) during the two years following the vesting of an Award. Clawback may
be effected, among other means, by requiring the transfer of ordinary shares,
payment of cash or reduction of Awards on such basis that the Remuneration
Committee in its discretion considers to be fair and reasonable.
Appendix
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(g) Individual limits
The aggregate market value of ordinary shares subject to Awards granted to an
eligible employee under the Plan in any financial year will not exceed 225% of
that person's gross annual salary (as at the date of grant) or 235% of that person's
gross annual salary (as at the date of grant) in exceptional circumstances on
recruitment. The Remuneration Committee has discretion to determine the size
of an Award granted to any individual under the Plan within this maximum limit.
In applying the above limit, no account will be taken of ordinary shares which are
issued and which represent the value of dividends declared during the Vesting
Period on the number of ordinary shares which are subject to a participant's
Award and which have vested.
In order to calculate the size of an Award for the purposes of this limit, market
value will be determined by reference to the Company's share price averaged
over five dealing days prior to (but not including) the relevant date of grant, or
such other basis as the Remuneration Committee (in its absolute discretion)
sees fit.
(h) Plan limits
The number of ordinary shares in respect of which Awards to subscribe for
ordinary shares may be granted on any date shall be limited so that the total
number of ordinary shares issued and issuable in respect of Awards granted
under the Plan (and any other executive (discretionary) share scheme operated
by the Company) in any ten-year period is restricted to 5% of the Company’s
issued ordinary shares, calculated at the relevant time.
The number of ordinary shares in respect of which Awards to subscribe for
ordinary shares may be granted on any date shall be limited so that the total
number of ordinary shares issued and issuable in respect of Awards granted
under the Plan (and any other share scheme operated by the Company) in any
ten-year period is restricted to 10% of the Company's issued ordinary shares,
calculated at the relevant time.
For the purposes of these limits, no account will be taken of options or awards
which have lapsed, been surrendered or otherwise become incapable of exercise
or vesting. Treasury shares will be treated as newly issued ordinary shares for
the purposes of this limit for as long as this is required by institutional investor
guidelines, but (for the avoidance of doubt) ordinary shares acquired in the
market will not.
In addition, no account will be taken of ordinary shares which are issued and
which represent the value of dividends declared during the Vesting Period on the
number of ordinary shares subject to the participant's Award which have vested.
(i) Manner of exercise/allotment
Within 30 days of vesting and/or the receipt of a notice of exercise (or 'call') of
an Award, together with a payment (or arrangements to pay) for the aggregate
exercise price due (if any) and a payment (or arrangements to pay) for any
income tax and employee social security contributions (or similar liabilities) due,
the ordinary shares in respect of which the Award has vested or been exercised
must be issued by the Company or the Company must procure their transfer
(which for the purposes of the Plan includes the transfer of ordinary shares
out of treasury) to the participant or their nominee and shall issue a definitive
certificate in respect of the ordinary shares allotted or transferred. Shares issued
or transferred by the Company on the exercise and/or vesting of Awards will rank
pari passu with existing ordinary shares.
(j) Termination of employment
Unvested Awards granted under the Plan will normally lapse on cessation of
employment. However, if a participant is a 'good leaver' i.e. if they die or leave
employment through injury, ill health or disability, redundancy, retirement or
because their employing company or business in which they work is sold out of
the Company's group or for any other reason approved by the Remuneration
Committee (in its absolute discretion), then the Remuneration Committee may
permit that participant (or their personal representatives as the case may be) to
retain the unvested Award and permit vesting/exercise subject to the satisfaction
of the performance conditions and a pro-rata reduction for the time that has
elapsed since the relevant date of cessation. The Remuneration Committee also
reserves the right to permit vesting/exercise subject to a lesser reduction (or none
at all) than that calculated by applying a pro-rata reduction.
Alternatively, the Remuneration Committee may, in its discretion, permit some
or all of the unvested Awards held by a 'good leaver' to immediately vest and/
or be exercised during a limited period following cessation, having regard to the
achievement of the performance conditions and the period of time that has
passed since the relevant date of grant.
If a participant ceases employment in any circumstances other than the 'good
leaver' circumstances described above then all their Awards (vested and
unvested) will lapse on such cessation.
(k) Change of control
If a change of control event occurs, such as a takeover, or other capital event,
the Remuneration Committee will determine the extent to which subsisting
unvested Awards will vest and, in the case of options, become exercisable, by
reference to the extent to which performance conditions have been satisfied
(taking into account the reduced performance period) and pro-rating Awards
to take into account the period which has elapsed since the date of grant.
The Remuneration Committee may, if it sees fit, permit vesting on an alternative
basis, including, but not limited to, full vesting.
(l) Variation of ordinary share capital
In the event of a capitalisation issue or offer by way of rights (including an open
offer), a special dividend or a demerger, or upon any consolidation, subdivision
or reduction or other variation of the Company's capital, the number of ordinary
shares subject to an Award and/or the exercise price (if any) may be adjusted in
such manner as the Remuneration Committee shall, in its opinion, consider fair
and reasonable.
(m) Amendments and general
The Plan may be amended by the Board in any way provided that:
(i) no amendment, addition or deletion may normally be made to the Plan
which would materially prejudice the interests of participants in relation to
Awards already granted to them unless the sanction of at least 75% of the
participants (by value of subsisting Awards) has been obtained; and
(ii) all amendments to the advantage of participants to the provisions relating to
the definition of eligible employee, limits on the number of ordinary shares
subject to the Plan, the maximum entitlement for any one participant or
the basis for determining a participant's entitlement to and the terms of
ordinary shares to be provided and adjustment thereof, if any, in the event
of a capitalisation issue, rights issue, subdivision or consolidation of ordinary
shares or reduction of capital or any other variation of capital will require
the prior consent of the Company in general meeting unless they are minor
amendments to benefit the administration of the scheme or to obtain
or maintain favourable tax, exchange control or regulatory treatment for
participants, the Company or a member of the Group.
The Board may amend the Plan by way of separate schedules to enable it to be
operated overseas, provided that the terms of the separate schedules are not
overall more favourable than the terms of the Plan.
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Advisors to the Company
Financial Advisors and Brokers
Peel Hunt LLP
7th Floor
100 Liverpool Street
London EC2M 2AT
JP Morgan Securities Limited
25 Bank Street
Canary Wharf
London E14 5JP
Barclays Bank Plc
1 Churchill Place
London E14 5HP
Auditor
Deloitte LLP
2 New Street Square
London EC4A 3BZ
Property Valuers
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Savills (UK) Limited
33 Margaret Street
London W1G 0JD
Tax & Remuneration Advisors
PricewaterhouseCoopers LLP
1 Embankment Place
London WC2N 6RH
Solicitors to the Company
CMS Cameron McKenna
Nabarro Olswang LLP
78 Cannon Place
Cannon Street
London EC4N 6AF
Registrar
Link Group
The Registry
Central square
29 Wellington Street
Leeds LS1 4DL
Secretary and Registered Address
Jadzia Duzniak
One Curzon Street
London W1J 5HB
www.londonmetric.com
REIT status and taxation
As a UK REIT, the Group is exempt from
corporation tax on rental income and UK
property gains. Dividend payments to
shareholders are split between Property
Income Distributions (‘PIDs’) and non PIDs.
For most shareholders, PIDs will be paid after
deducting withholding tax at the basic rate.
However, certain categories of shareholder are
entitled to receive PIDs without withholding tax,
principally UK resident companies, UK public
bodies, UK pension funds and managers of
ISAs, PEPs and Child Trust Funds. There is a
form on the Company’s website for shareholders
to certify that they qualify to receive PIDs
without withholding tax.
Payment of dividends
Shareholders who would like their dividends
paid direct to a bank or building society account
should notify Link Group. Tax vouchers will
continue to be sent to the shareholder’s
registered address.
Financial calendar
Shareholder information
Announcement of results 24 May 2023
Annual General Meeting 12 July 2023
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Design and production
Radley Yeldar – www.ry.com
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LondonMetric Property Plc
One Curzon Street
London W1J 5HB
United Kingdom
Telephone +44 (0) 20 7484 9000
Find us online
www.londonmetric.com
Find us online
www.londonmetric.com
LondonMetric Property Plc
Telephone +44 (0) 20 7484 9000