LondonMetric H1 net rental income up 12%, to buy two logistics warehouses

LondonMetric posted a 12% jump in first-half net rental income on Wednesday as it said it has agreed to buy two logistics warehouses for £47.6m, reflecting a blended net initial yield of 5.0% rising to a minimum of 5.6% after five years.

In the six months to the end of September, net rental income rose to £44.5m from 39.7m in the same period a year ago, as EPRA earnings ticked up to £28.8m from £25.3m. The company made a reported profit of £79.6m versus a loss of £13.1m in 2016, driven by a £52.8m revaluation surplus, which it said reflects the strength of its chosen asset classes and the occupier appeal of its assets.

EPRA net asset value per share increased to 155.7p from 149.8p and the group lifted its dividend by 3% to 3.7p per share.

Chief executive Andrew Jones said: "Our primary goal is to allocate capital into those sectors of real estate that will generate high quality, sustainable income growth from structural changes and management actions.

"Today, almost 70% of our portfolio is allocated to the distribution sector with the balance mainly invested in long income and convenience retail; both areas that are benefiting from the changes taking place in consumer shopping habits. Our decision a number of years ago to pivot into these winning sectors was driven by the impact of technology on shopper behaviour.

"We were early movers into both these sectors and this is reflected in our strong financial numbers. We have performed across every key financial measure, increasing our income, earnings, profits, dividend and NAV whilst maintaining our strong portfolio metrics."

LondonMetric has agreed to buy a 364,000 sq ft regional warehouse at Ollerton in Nottinghamshire let to logistics solutions provider Clipper on a 20-year lease, at a rent of £5.04 per square foot, subject to annually payable RPI uplifts of between 2% and 4%.

It has also agreed to acquire a new 132,000 sq ft regional logistics warehouse at Speke let to global logistics company Gefco on a new 15-year lease, at a rent of £5.17 per square foot subject to five yearly RPI linked reviews of between 2% and 4%. The unit is located nine miles from Liverpool city centre and close to junction 6 of the M62.

Jones said: "Following the recent disposals of two short let assets in Daventry and Bolton, we have quickly recycled some of the proceeds into two very long let logistics investments where we will benefit from guaranteed rental growth.

"Ecommerce fulfilment and reverse logistics continue to be an increasingly important element of retailer supply chains. Clipper is a market leader in the ecommerce sector and has strong relationships with a number of the UK's leading retailers including John Lewis, ASOS and M&S, whilst Gefco is a top 10 logistics integrator in Europe."

At 0910 GMT, the shares were up 0.3% to 180.30p.