LondonMetric reports robust year, agrees to acquire CTPT

LondonMetric Property reported a robust operational performance in its annual results on Tuesday, leading to growth in EPRA earnings and dividends.

The FTSE 250 company said net rental income for the 12 months ended 31 March totalled £146.8m, up from £133.1m in the previous year.

EPRA earnings reached £101.1m, compared to £93.5m in 2022, and earnings per share rose to 10.33p, up from 10.04p in the prior year.

The dividend per share also saw an increase, reaching 9.5p compared to 9.25p in 2022.

However, LondonMetric said its EPRA net tangible assets decreased to £1.96bn at year-end, from £2.56bn at the end of the 2022 period.

The net tangible assets per share also declined to 198.9p, from 261.1p a year earlier.

“The last year has seen a weaker economic backdrop, elevated inflation and a significantly higher interest rate environment,” said chief executive officer Andrew Jones.

“Not surprisingly, this has led to a recalibration of real estate values and conditions that have undoubtedly impacted our approach to leverage and interest rate exposure.”

Jones said that while risks and uncertainty remained, the outlook was improving and some confidence was returning.

“Looking forward, we have a strong conviction that our portfolio is firmly positioned on the right side of the long term structural shifts and that it will continue to generate reliable, repetitive and growing income to deliver on our progressive dividend policy.”

In a separate development, LondonMetric said it had entered into an agreement to acquire the entire issued and to-be-issued share capital of CT Property Trust.

The board said the acquisition would take place via an all-share offer, under which CTPT shareholders would receive 0.455 new LondonMetric shares for each CTPT share they held.

Based on the closing price of LondonMetric shares on 23 May, the acquisition valued each CTPT share at 85.5p, and the total share capital of CTPT at around £198.6m.

The offer represented a premium of 34.3% to CTPT's closing price per share on the same date.

LondonMetric said the acquisition would result in its existing shareholders holding 90.3% of the enlarged issued share capital, with CTPT shareholders owning 9.7%.

“We believe the acquisition is compelling for both CTPT and LondonMetric shareholders,” said chairman Patrick Vaughan.

“The CTPT management team has assembled a high quality platform of complementary assets, diversified by tenant base and geography and with significant reversionary potential.

“The acquisition grows the combined group's exposure to the winning sectors of urban logistics and long income, underpinned by evolving consumer demand and delivering strong rental growth.”

Vaughan said that in the current interest rate environment, LondonMetric believed resilient cash flows, scale and liquidity would be the “defining characteristics” differentiating winners and losers.

“The income and income growth characteristics of the CTPT portfolio, combined with select asset management opportunities, should enhance our total return focus, whilst enabling us to drive earnings optimisation and maintain our progressive dividend policy.”

In a final, third announcement, LondonMetric said it had finalised the sale of a DHL logistics warehouse in Solihull for £20.5m.

The sale, which reflected a net initial yield of 4.15%, was executed at a slight premium to the book value as of 31 March.

It said the warehouse spanned an area of 142,000 square feet, and was originally acquired as part of a portfolio in 2017 for £15.7m.

Following a lease extension to 10 years, with a break option after five, the property now had six years remaining on the lease.

The sale yielded an ungeared internal rate of return of 9%.

“With the recent strengthening in the investment market, we have reacted to an opportunistic off-market approach to sell this warehouse,” Andrew Jones commented.

“The proceeds of the disposal will be used to further reduce our floating rate debt and loan-to-value.”

At 1100 BST, shares in LondonMetric Property were down 5.32% at 178p.

Reporting by Josh White for Sharecast.com.