LondonMetric boasts profitable year as liquidity returns to property market

3rd Jun 2014 07:13

- NAV up 11% to 121p- Portfolio uplift of 8.5%- Flat full year dividend of 7pOut-of-town retail and warehouse property group LondonMetric has reported a profit of £125.3m and says the market in the second half of the year has strengthened and rational pricing has returned across the UK.The FTSE 250 company, the results of a merger between London & Stamford and Metric Property in January 2013, enjoyed a revaluation surplus of £95.9m, a portfolio uplift of 8.5%. Net asset value per share climbed 11% to 121.0p over the year. Earnings per share rose 7.7% to 4.2p.LondonMetric completed a very high level of portfolio activity, with £405.6m of purchases and £568.4m of sales in the period. The company said that the market in the second half of the year was "very strong with rational pricing returned to most sectors across the UK" and strengthened further than anticipated in some sectors. The average purchase yield was 7.6% and sales yield was 4.4%. The weighted average lease length has risen from 11.6 years to 12.7 years.Management believe the UK commercial property market is in the middle of its cycle, with an improving economy, a flow of reasonably priced credit and strong competition for supply, making for a very competitive investment market.Chief Executive Andrew Jones said yield compression could not continue forever and was confident real income growth was possible."The last six months has seen a dramatic change in the UK property market particularly for assets outside the south-east," he said. "We have seen liquidity return to the vast majority of the UK market for the first time since 2007 and strong secondary assets outperforming prime real estate, a trend we expect to continue. "As yields on prime real estate head towards record lows there is an increasing acceptance that yield compression is a button that can't be pushed forever. Conversely strong secondary assets continue to offer higher sustainable income returns and with an improving economic outlook and little new development, will also begin to deliver real income growth. "Our focus on out-of-town retail and distribution has not only simplified the business but created a portfolio of good quality real estate with strong occupier appeal and desirable income characteristics, as well as laying the foundations for income growth."A proposed a final dividend of 3.5p per share results in a flat total dividend for the year of 7.0p.The company also on Tuesday announced the disposal of its completed retail development at Berkhamsted for £12.45m and reflecting a net initial yield of 4.5%, and further sales from its Odeon and DFS portfolios for for £15.2m and £17.1m, reflecting net initial yields of 6.1% and 7.8% respectively. It also announced the purchase of the Royal Mail distribution centre in Rotherham for £10.3m, reflecting a net initial yield of 6.0% and with a let in place for 14 more years.OH