HALF YEAR RESULTS Half Year Ended 30 September 2019 www.londonmetric.com
AGENDA Highlights Strategy & Overview Financial Review Property Review Market Outlook Q&A 2
Key Highlights Sector calls and income focus continue to deliver portfolio outperformance Portfolio aligned to structurally supported sectors • Portfolio £2.4bn 1 – Distribution 71% from £1.8bn in March 19 – Long income 22% Urban Logistics Urban logistics exposure grown with Mucklow acquisition • 35% 1 – £455m Mucklow portfolio integrated, strong income growth prospects from 27% in March 19 – £109m of other H1 investments WAULT 11.3 years Strong operational performance • 98.2% occupancy – Total Property Return +3.5%, outperformance of 270 bps 4 Total Accounting Return – LFL income growth of 3.0% 3 +2.5% – 52 portfolio initiatives, adding £3.1m rent +3.9% ex Mucklow deal costs 2 3 1. Including developments 2. 2.5p transaction costs relating to the acquisition 3. On standalone LMP portfolio, excluding Mucklow 4. Compared to IPD All Property
Financial Highlights Half Year to 30 September 2019 Sept 2019 Sept 2018 Change Earnings Yield 3 5.5% Contracted Rent £124.7m £93.4m +33.5% 2018: 5.2% Net Rental Income £54.9m £47.1m +16.6% Revaluation surplus +£16.6m EPRA Earnings £35.2m £30.9m +13.9% Equivalent Yield 2 flat, ERVg +0.5% EPRA Earnings (pps) 4.6p 4.4p +2.9% NAV (excluding Mucklow costs) 177.4p Dividend (pps) 4.0p 3.8p +5.3% 2.5p of deal costs EPRA NAV (pps) 175p 175p 1 LTV 37.9% 32.2% 1 1. Comparison to March 2019 4 2. Equivalent yield movement on portfolio (LFL) 3. Calculation HY20: EPRA Earnings (£35.2m) plus further 3 months contribution from Mucklow (£4.9m) annualised and divided by closing EPRA NAV (£1,465m)
Strategy Creating an “all weather” portfolio aligned to structural trends 2,000 Distribution £1.7bn Distribution real estate underpins modern shopping habits 1,500 Mega Urban & Regional Distribution 1,000 Urban and regional logistics delivering superior rental growth 500 Big box rental growth positive but trending slower 0 2014 2015 2016 2017 2018 2019 2020 10.0 EPS (pps) 8.0 Continued global search for yield H2 6.0 4.6p H1 Long income Demographic shifts will continue to intensify search for income 4.0 Repetitive & reliable income will deliver strong compounded returns 2.0 - 2014 2015 2016 2017 2018 2019 2020 TSR 1,2 since 2013 300 +185% 260 Disciplined and rational approach Dividend Portfolio 220 Share price Fit for purpose modern long let real estate Resilience 180 Granularity & diversification of income 140 100 2014 2015 2016 2017 2018 2019 2020 5 1. Source: Bloomberg as at 30 September 2019, dividend return assumes reinvestment, based on share price of 217.4p 2. Based on financial year end. First year shown is for FY 13/14
A&J Mucklow Acquisition Creating one of the UK’s leading listed logistics & distribution platforms Distribution & Long Income Accelerates conviction call to grow urban logistics exposure Strategic 83% Well located, well let & complementary real estate Rationale of £455m portfolio Greater scale and improved income granularity Midlands, London & SE 96% with strong Birmingham focus More intensive asset management focus Applying Our Pro-actively engaged with occupiers Approach Top 10 occupiers 1 Conservative structure and corporate actions creating efficiencies 39% of income Compared to 51% at March 19 H1 portfolio initiatives delivered £0.5m rent uplift Portfolio Initiatives in H1 Delivering Annualised administrative cost savings of £1.8m 14 deals Early Results Post period end: 25 deals (+£0.5m) 2 Highly focused and motivated team integrated 6 1. LondonMetric and Mucklow occupiers combined 2. Deals signed and in legals
Our Portfolio Aligned to structurally supported sectors Value 1 NIY 2 EY 2 WAULT CVg 3 TPR 3 (6m) (6m) (£m) (%) (%) (Years) 30 September 2019 Urban 4 34.5% Urban 826 4.8 5.4 7.8 +2.4% +4.3% Regional 450 4.2 5.0 14.4 +5.3% +7.5% 71.2% Mega 430 4.5 4.7 14.8 +0.6% +3.0% Long Distribution Income Regional 22.2% Long Income 531 5.6 5.7 12.5 -0.3% +2.5% 18.8% Retail Parks 88 7.0 6.8 9.4 -5.9% -2.6% Retail Parks 3.7% Office Mega Offices 63 6.3 6.5 6.7 +0.2% +1.9% 2.6% 17.9% Resi 0.3% 2,388 4.9 5.4 11.3 +1.0% +3.5% Occupancy Gross to Net Contractual uplifts 98.2% 98.7% 52.3% 7 1. Includes developments (£55.6m). Excludes development trading assets (£1.1m), residential (£6.7m) and head lease/right of use assets (£6.0m) 2. Topped up NIY (NIY) and Equivalent Yield (EY). NIY, EY and WAULT on investment portfolio 3. Source: IPD. Developments included in relevant sectors. Portfolio TPR and CVg includes residential 4. Shaded part of urban represents multi-let estates (£73m)
Total Property Return for LondonMetric over 3 years 1 Urban (+61%) 160 Regional (+58%) 150 140 LMP All Property (+36%) Long Income (+35%) Mega (+35%) 130 IPD All Property (+21%) 2 120 110 Retail Parks (+9%) 100 H2 FY17 H1 FY18 H2 FY18 H1 FY19 H2 FY19 H1 FY20 8 1. Source: IPD 2. Comparison IPD benchmark
FINANCIAL REVIEW
Income Statement 1 30 Sept 2019 30 Sept 2018 Change Net rental income £54.9m £47.1m +16.6% Administrative costs £(7.6)m £(6.9)m Net Finance costs £(12.5)m £(9.8)m EPRA Earnings £35.2m £30.9m +13.9% EPRA Earnings (pps) 4.6p 4.4p +2.9% Dividend (pps) 4.0p 3.8p +5.3% Reported (Loss)/Profit 2 £(10.2)m £79.3m Reported Profit ex. Mucklow costs 2 £47.0m £79.3m Gross / net income leakage 4 1.3% 1.8% EPRA cost ratio 3,4 14.3% 15.0% Dividend cover 114% 117% 1. Proportionally consolidated basis, unless otherwise stated 10 2. IFRS basis 3. Including vacancy costs 4. Comparative FY 19
Balance Sheet 1 30 September 2019 31 March 2019 Change Property portfolio £2,402.2 £1,846.2m Cash £52.7m £24.1m Debt £(963.0)m £(626.2)m Fair value of derivatives £(4.7)m £(1.9)m Other net liabilities £(26.9)m £(25.4)m IFRS Net Assets £1,460.3m £1,216.8m EPRA Adjustments £4.7m £1.9m EPRA Net Assets £1,465.0m £1,218.7m +20.2% - EPRA NAV per share 174.9p 174.9p 11 1. Proportionally consolidated basis
Movements in EPRA NAV EPRA NAV per share (p) 180.0 4.0 4.6 0.3 2.2 2.5 175.0 1.7 170.0 2.0 177.4 177.4 174.9 175.5 175.5 174.9 174.9 165.0 160.0 EPRA NAV EPRA Earnings Dividend Revaluation Other EPRA NAV Mucklow EPRA NAV Mar '19 charge movements Ex Mucklow deal costs Sept '19 deal costs 12
Financing Debt Metrics 1 30 September 2019 31 March 2019 Total Facilities £1,034.0m £999.7m Gross Debt 2 £963.0m £626.2m 76% unsecured 70% unsecured Loan to Value 3 37.9% 32.2% Average cost of finance 3.0% 3.1% Marginal cost of finance 2.0% 2.0% Average maturity 5.3 years 6.4 years Hedging 4 72% 73% 13 1. Proportionally consolidated basis 2. Includes fair value adjustment of £2.8m relating to a secured debt facility from the Mucklow acquisition 3. LTV as at 31 March 2019 included consideration receivable on a £10.5m sales exchanged with delayed completion at year end 4. Based on total facilities drawn
PROPERTY REVIEW & OUTLOOK
Market Review Online shopping and rising consumer expectations driving demand for logistics Logistics Physical Retail • Online adoption continues to grow • Headwinds strengthen – Shift remains profound and permanent – Further store closures are a guaranteed certainty – CVAs prove not a case of ‘prime’ v ‘secondary’ – ‘Amazon Race’ with rising consumer expectations • Retailers continue to right size • Logistics continues to perform – Leases shortening, rents declining & incentives rising – Supply chains requiring continual investment – Survivors are inheriting unprecedented pricing – Big box supply responding to demand, tempering power rental growth • Investment market remains challenging • Urban Logistics enjoying strong tailwinds – Liquidity tightening and yields expanding – Perfect scenario of rising demand and falling supply – Benefiting from first mover advantage in a • Not all retail the same fragmented market – Convenience & discount complementing online 15
Distribution End to end logistics with significant focus on urban Urban 1,3 - 49% Regional 1 - 26% Mega 1 - 25% 100 assets, 6.5m sq ft 13 assets, 3.2m sq ft 5 assets, 3.6m sq ft • • • £41.0m rent (£6.40 psf) £18.9m rent (£6.20 psf) £20.6m rent (£5.80 psf) • • • NIY 2 4.8%, EY 5.4% NIY 2 4.5%, EY 4.7% NIY 2 4.2%, EY 5.0% • • • WAULT 8 years WAULT 14 years WAULT 15 years • • • Occupancy 97% Occupancy 96% Occupancy 100% • • • Contractual uplifts: 100% Contractual uplifts: 27% Contractual uplifts: 78% • • • Rent Reviews 5 : +9% (+8% PPE) Rent Reviews 5 : +16% (+33% PPE 4 ) Rent Reviews 5 : +14% • • • TPR: +3.0% TPR: +4.3% TPR: +7.5% • • • 1. Rent, yields, occupancy & WAULT on investment portfolio. Number of assets and sq ft include developments 16 2. Topped up NIY 3. Including Multi-let Estates 4. Including deals in legals 5. Ahead of passing on 5 yearly equivalent basis
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