LondonMetric Property Plc ($LMP)

I'm delighted to be joined by Andrew Jones today, CEO of LondonMetric. Today, their full year results were released. Andrew, thank you for joining us today.

Delighted to be here.

Andrew, you've delivered strong growth in your net rental income in the year. What have been the key drivers for this growth? And how has the business been performing more widely?

Yes. So we've announced a record rental income for the period of GBP 455 million. It's an increase of 17% on this time last year. And the big driver of that has been the acquisition strategy that we executed. We took over 2 public companies in the period, Urban Logistics REIT and Highcroft properties. So that's helped propel our rents to record levels. And then that's flown through into an EPRA earnings of over GBP 305 million. That's an increase of 14%. And that has also then flowed through into an increased dividend. We've paid a dividend for the period of 12.45p per share, an increase of 3.8%, and that represents the 11th consecutive year of dividend progression. And we think that the activity, the strength of the portfolio will allow us to propel those numbers even further in the coming year.

With your increased scale, can you talk to us about how this is benefiting LondonMetric for the future?

Look, we live in pretty uncertain times. We have volatile financial markets. Without a doubt, scale equals liquidity. And we're using that scale for a number of advantages. We're certainly leveraging it to try and extract better financing terms on our debt book and also using it to access different forms of debt. We're quite active in the U.S. debt markets. And that gives us different sources of debt, but interestingly and more importantly, it gives us cheaper debt. The scale is also means that we've been getting -- the asset base has got bigger, but the platform that operates it has stayed relatively stable. So when we add new properties or we add new companies, we've got huge economies of scale coming through because we're not having to add significantly more people to our efficient platform. And the third element of the scale, I suppose, is it opens up bigger opportunities for us, opportunities that we would have maybe turned away from a few years back because they were just too big, they require too much capital. We're now able to look at. So we can compete with some of the big American private equity businesses for some of these interesting deals. There's no point, it's not fair that they get all the good deals just because they're so big. And now we can compete with them on a pretty level playing field. So scale has come to us with some terrific advantages, both in terms of the opportunities that flow, but also the cost of operation are much lower as you get bigger.

Now in terms of the property market, what are your thoughts on the wider sector?

Well, look, the property market is largely influenced by the financial markets, interest rates, bond yields are -- they are the yardstick by which all assets get measured against. And we, as I said earlier, live in quite a volatile market at the moment, elevated gilts, elevated 5-year swaps. So that's a difficult market to navigate. Cost of money has increased since the start of the Iran conflict, it's up probably 100 basis points. And that has to affect the real estate market. I think for us, though, because we have this big focus on income and collecting and compounding it, we're slightly insulated against that. I mean -- and therefore, relatively, I think we're a strong outperformer. But without a doubt, volatile financial markets will affect liquidity. Now we've managed to navigate that successfully over the past 12 months. We've sold over GBP 320 million worth of assets. And the reason we've been able to do that is because smaller asset sales have been less exposed to the volatility of the financial markets. And so we will continue to do that. We're very fortunate that we have a very diverse portfolio of assets that appeal to an even more diverse type of buyer. We're selling to a lot of high net worth individuals. We're selling to a lot of owner-occupiers. And those are natural buyers that haven't really been in the market historically. And so we have to navigate this difficult period. But I think we're pretty well set up to do that. We have an incredible focus on income and compounding. And we often refer to our portfolio as all weather. So it can take the shocks that the financial markets might throw at us. Let's be clear, LondonMetric has navigated Brexit. It's navigated the Ukraine war. It's navigated the trust budget. It's navigated COVID. I mean we've had a lot thrown at us, and we're still here, and we've just announced our 11th year of dividend progression. Also by operating -- when you operate it within volatile markets, that will create opportunities. Our focus on investing in what we call structurally-supported sectors: logistics, entertainment and leisure, convenience, grocery, in particular, that will undoubtedly see more opportunities. I mean, this morning, we announced the acquisition of 4 new grocery stores anchored by Marks & Spencer. That is because some of the vendors are finding the financial markets more challenging, and therefore, they're looking for new sources of capital. And we are very happy to provide it in the right sectors and for the right quality of assets. So market uncertainty is the friend of the long-term investor. And I think we're well positioned to take advantage of that.

Andrew, as you look ahead, what are your aspirations for LondonMetric over the next year?

Look, we've built a great company. We're not here by accident. We're either the second or the third largest property listed property in the U.K. I think we have a fantastic platform. The foundation for further growth are there. And we remain alert and interested to take advantage of opportunities, whether or not it's further M&A, whether or not it's development fundings, whether or not it's sale and leasebacks or trying to take advantage of the structural changes taking place in the institutional pension market. We're in a great position. We have record rents flowing with very high occupancy. Our debt book looks in great shape. We're 99.8% hedged against future interest rate volatility. Our dividends are growing. I think that we're just going to be able to allocate capital into the dislocation that's going to happen -- comes with volatility, that will give us the ability to grow our assets, increase our rents, progress our earnings and again deliver, hopefully, by this time next year, our 12th year of dividend increases. So the company is well set. And in some ways, having an all-weather portfolio is incredibly comforting in some of these volatile markets that we're operating in.

So Andrew, any final thoughts?

Well, thank you very much. It's been a very challenging year, but I think LondonMetric has come out stronger. We operate this company with an ownership culture. I often refer to my role at LondonMetric is as a shareholder first and as an employee second. And that avoids us doing silly things and make sure that we're always fully aligned with our shareholders. I think that without a doubt, market volatility will create new opportunity for us. And I have very little doubt that this time next year, our numbers will be even stronger.

Andrew, what a great set of results. Thank you for your time today.

You're very welcome and enjoy.