LNSPF (LNSPF) Q4 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to LondonMetric's full year results. It's quite a long table just for Martin and I. But actually, I'm going to open up, we're congratulating Steve and all the other arsenal supporters in the room for what has been an incredibly long wait. So well done, Steve, right? I quite often take the mickey out of you, but today, I'm going to congratulate you. I'll stop tomorrow. . Okay. So a quick overview on the last 12 months. So the company has continued its triple-net net income compounding model. We've grown the portfolio up 23%, courtesy of obviously external growth as well as internal growth, continue to invest in the right sectors, mission-critical assets. We added GBP 1.5 billion to our portfolio value, GBP 1.2 billion of which came from the acquisition of Urban Logistics and Highcroft . Come on and talk about that in a little bit more detail later on how that's going. Our income continues to flow and grow. Net rental income was up 17% in the year. And again, as you would expect from a budding dividend aristocrat, we have again increased our dividend for the 11th year in a row. It's now up actually -- it's up 3.8% in the year. It's actually up 78% since the creation of LondonMetric back in 2013 when I probably stood up in a room similar to this, taking questions on whether or not we're going to cut our dividend because we were over distributing like so many others in our sector. That obviously has been reversed. The portfolio -- we added across the portfolio of GBP 16.6 million of additional income, 4.2% like-for-like growth. And I'll come on to talk about that. That's effectively a combination of rent use lease rules, asset management, at least 3 years and what have you, and I'll break that down in a bit more detail later. So as a result, our average uplift on rent reviews, lease renewals was 19%. Open market rent reviews delivered 33%. And the standout performer was again our open market rent reviews on our urban logistics portfolio, which was up 38%. And then as you can see, we still have more rent to collect over the next 2 years, GBP 38 million. So all in that, all that delivered a total property return of 7.1%, which is effectively again relatively flat cap rates. I mean we all know we're living in a very volatile world at the moment. So to be able to actually predict cap rates, I think, for values at this moment in time is particularly difficult. I don't think it's easy in any market to predict what assets will trade at. But it's particularly difficult today when you've seen in the last 12 weeks, 100 basis movement in the 5-year swap, I mean it is very, very difficult. And even the valuations that companies are reporting at this moment for end of March, what do they look like at the end of May or the end of June, I mean, this is a fast-moving world. The great thing is why we focus on income is because it's real. As we say, valuations can be vanity, but income is sanity. So the scale continues to give us some competitive advantages. Martin, Ritesh, and the finance team refinanced GBP 2.7 billion of debt in the period. And we've been doing that at opportune times, and we've got a graph to show that later is making take -- the volatility of this 5-year swap is amazing, absolutely amazing. And what you need to be is fleet of foot, and we need to be quick. And you'll see the timing of our financings has meant that we try to take advantage of the swap rates when they're closer to GBP 3.5 million and when they're closer to GBP 4.5 million. Our scale is giving us other opportunities to think about as we look to deploy capital, whether or not it's development fundings. We announced a small GBP 40 million trade today with a developer across some food stores, M&A, which you all know about, say the leasebacks, which is a sector that we continue to operate in, and obviously, portfolios as we see a shakeup in the wider pension fund sector. The most important number on this slide is actually the bottom right. It actually shows that we paid out dividends last year to our shareholders that were 9x higher than our overheads, okay? That's against a sector average of about 4x. There are a few companies who are actually, I think, that are overheads are higher than their dividends, but we probably leave those for when we're not on the mic. But that is a very, very powerful number, and we hope to improve on it over the year as we leverage our platform further. Turning to some numbers. I better do this briefly, Otherwise, Martin will be limited in what he can say. EPRA earnings were up 14% to GBP 305.3 million driven really by that increase in our net rental income which is now at a record GBP 455 million. I mean that is a lot of money to arrive in our bank account every day. As I said to somebody this morning, the great thing about this model is we're collecting rent when we sleep, right? It's a phenomenally comforting strategy. Our earnings per share is up at GBP 13.4 to GBP 13.45 per share, which has allowed us, as I say, to announce A final dividend of GBP 3.3 million today to bring our total dividend for the year at GBP 12.45. That's up 3.8% on the previous period. We're also announcing this morning a Q1 dividend for the financial year '27 of 3.15p, which is up 3.3% on the Q1 last year. And as you see on the right-hand side, 11 years of dividend progression, just another 14 to go to get aristocracy. Portfolio value I've just touched on already. EPRA NTA is at 200.6p. That's helped drive a total accounting return of 6.9%. Excluding M&A costs and refinancing costs, whatever that would obviously be a bit higher at 7.7p. And so that's there's been a drag there, which we don't expect to be recurring. And as I've already indicated, the activity in the debt markets has allowed us to maintain an average cost of debt for the period of 4%, and that's courtesy of the GBP 2.7 billion of the refinancing that Martin and Ritesh did over the year. So on that note, I'll let Martin do a deeper dive into those numbers, and I'll come back to talk about the portfolio in a bit more detail. Thank you.

Steve, I'm glad you took the heat. Otherwise, It was going to be me. And he dealt with the timing of the [indiscernible]. So that was my best point, I thought he probably would. So our focus this year has been on income and portfolio growth through significant further M&A activity and asset recycling. We've delivered a strong set of results increasing our EPRA earnings, growing our dividend and strengthening our balance sheet through significant financing activity as Andrew said. I'm pleased to report that our net rental income is GBP 455.3 million. an increase of 16.6% over last year. We've included GBP 60 million of additional rent from the acquisition of Urban Logistics and Highcroft. That reflects 9 months of trading, we'll benefit from the full effect of the Urban Logistics and Highcroft acquisitions next year or the year we're currently in. We've included GBP 13 million of additional rent from other acquisitions, and these increases in rents have more than offset the rent loss through noncore disposals of GBP 23 million. Rent collection remains exceptionally strong. We've collected 99.7% of rents during the year and our gross to net income leakage remains very low at 1.4%. Our administrative overhead for the year is GBP 30.2 million. That does reflect an increase from the scale of the business. The increase in overheads in the year primarily includes head count and remuneration costs. Our head count is now 54, up from 48 last year, which includes small number of former Urban Logistics employees and new recruits to ensure that we continue to have the right level of resource and the right skills for the enlarged business. So despite the increase in our EPRA cost ratio -- despite these increases, our EPRA cost ratio continues to be sector-leading at 7.7%, a little better even than last year. Our net finance costs have increased to GBP 124 million compared to GBP 97 million last year. We've held higher debt balances in the enlarged group in the year. We acquired an additional GBP 464 million of debt through our corporate acquisitions, and we funded the cash consideration for the Urban Logistics acquisition of GBP 205 million. So our average drawn debt balance in the year has been GBP 500 million higher than it was last year. Despite the increase in financing costs, our tight cost control on top of our rental income growth has driven our EPRA earnings of GBP 305.3 million, an increase of 13.9% and or 13.45 pence per share, an increase of 2.4% over last year. This supports the increase to our dividend for the year to 12.45 pence per share, providing very strong 108% dividend cover and full cash cover. The trading performance has been strong with the portfolio valuations increasing by GBP 68 million in the year, allowing us to report IFRS profits of GBP 295.7 million. This is after deducting exceptional acquisition costs of GBP 16.3 million, debt and hedging early repayment costs of GBP 16.9 million and a goodwill impairment write-off of GBP 9.6 million. These were incurred in the previous year, we would not expect them to recur going forward. Turn to the balance sheet. The value of the portfolio is now GBP 7.6 billion, including GBP 1.23 billion of property assets acquired through the acquisitions of Urban Logistics and Highcroft. Whilst much of our focus continues to be on the disposal of noncore assets, the combination of other acquisitions, development expenditure and accretive capital expenditure has exceeded disposals by almost GBP 160 million. This, together with our valuation uplift of GBP 68 million has contributed to the increased portfolio value. Gross debt is now almost GBP 3 billion compared with just over GBP 2 billion last year, and the cash balance is GBP 143 million. Other net liabilities for the period end is GBP 113.6 million. That is -- the major component of that is rents paid in advance of GBP 63 million. So in summary, our EPRA net tangible assets for the year was GBP 4.7 billion, an increase of 15.4% on last year or 200.6p per share, comprising surplus earnings and revaluation uplifts providing a 6.9% total accounting return or 7.7% if you exclude the exceptional items. This year, we've taken proactive measures to strengthen and diversify our financial position. Our objective has been to improve the balance of our debt stack between bond debt and bank borrowings. We've raised new debt facilities of GBP 1.2 billion, supported by our scale and our Fitch credit rating. New debt includes our inaugural GBP 500 million public bond rated A- with a weighted average maturity of 5.5 years and a coupon of 4.69%. If we're doing that today, I think that coupon would be more like 6%, and the GBP 150 million U.S. private placement at the tightest credit spread of any REIT globally over the last 3 years. These new facilities allowed us to repay GBP 1.1 billion of existing debt, GBP 744 million of which was more expensive for Urban Logistics and LXI secured facilities. We have repaid Aviva debt at 6.2%. Canada Life debt at 5.8%, and AIG debt at 5.3% or materially ahead of our cost of debt. The refinancing of GBP 1.5 billion of unsecured revolving credit facilities and term loans in March reduced the average margin by 49 basis points to 105% and average commitment fees by 19 basis points further diversifying our lender base and removing any material find refinancing risk until FY '30. So the right-hand side of this graph is a little busy, but it does show that our various refinancings through the year marked by the red diamonds have been well tied when the swap curve was near its lowest point and ahead of spikes in rates in May, August of 2025, in January of 2026. We do not expect our finance costs to increase materially over the next 2 years as reduced fees attaching to repaid revolving credit facilities will offset the risk of increases to bank rates. Our debt metrics remain robust with debt maturity at 4.4 years or 5.2 years if I include the plus 1 options. With only GBP 200 million of debt expiring over the next 2 years, undrawn debt facilities amount to GBP 500 million, which taken together with our disposals program, provides significant headroom and flexibility to meet debt maturities over the next 3 years. Our loan-to-value stands at 36.7%, and our net debt-to-EBITDA stands at 7.5x, comfortably within our EPRA target of 8.5x. We would expect both these numbers to reduce as we continue to divest noncore assets. Our interest cover ratio stands at 3.8x, ahead of our covenant limit at 1.25x and our policy continues to be to limit our exposure to interest rate volatility by entering into hedging and fixed rate arrangements. Our drawn debt is now 99.8% hedged at the year-end, and we expect floating rate debt to remain substantially hedged until its maturity. Our contracted rent roll at the year-end now stands at GBP 432.1 million, which includes GBP 75.1 million of annual the annualized benefits of the Urban Logistics and Highcroft acquisitions and other net investments in the year and GBP 16.6 million of additional rent driven by our active asset management. Looking further forward, we expect to add GBP 38.3 million of short-term reversion by 2028, which, together with GBP 11 million of additional rent from the letting of vacant assets will increase the rent roll to in excess of GBP 480 million. This significant earnings growth supports our confidence that we will continue to be able to grow our dividend. And as Andrew said, we've announced our intention to increase our quarterly dividend payment for Q1 2027 to 3.15p per share, an increase of 3% on Q1 FY '26. Finally, a brief look back, which puts that in the increase in the rent roll, which into context and clearly demonstrates that in the last 12 years, we've been able to increase earnings per share by 3.13x and we own the 12th year of dividend progression, as I think Andrew might have mentioned, with excellent dividend cover. Our total property return is strong with a 12-year CAGR of 10% and our total shareholder return driven both by share price appreciation and significantly most recently by dividends, it comes to compound growth rate also in excess of 10%. On that. I'll hand back to Andrew.

Okay. So as I already mentioned, I'm going to dive a bit further into the portfolio and also our thoughts about the market and the periods ahead. We continue to operate a true triple net income compounding model, a disciplined approach you can see there to delivering uninterrupted, predictable and growing rental streams. We have a relentless focus on our cash return, the quality, the quantity and its timing and obsessed around how much leakage comes out of a portfolio. Martin's already touched on our gross-to-net ratios, which were incredibly high. But for this model to work you need to limit income leakage from maintenance CapEx, operations, insurance, taxes. . You also have to avoid vacancy, right? Vacancy is the dementor of the real estate sector, okay? Any joy of holding a building gets sucked out of you and it comes vacant because of the loss of income and the costs and the taxes that you inherit as the owner. And therefore, when we look to allocate capital, not only do we focus on those qualities and the timings and the quantity of income, but also we want to make sure that the future growth trajectory is positive. And in order to then -- that's the income side of it, but then our operations, scaling up of our efficient platform is we have to leverage that. And that is not only about making sure that we operate a very efficient platform at LondonMetric, but also to minimize the cost of debt that is available to us through different sources which Martin has already taken you through. Income, see their gross to net income ratio of 98.6%. I mean there's still room for improvement. I mean, it's a wonderful number, but we could still do a little bit better. And we do want to let up the vacant space that Martin touched on in his previous slides. Turning then to the portfolio. We continue to align them to the structurally supported sectors. Those of you who follow this business for the last 12, 13 years, will have seen us pivot in and out of all sectors into new sectors. Logistics, as you can see, there still dominates our capital allocation, portfolio there of GBP 4 billion. And the reason for that is we think it's due to deliver the highest forecast rental growth. I touched on what our open market Urban rent reviews were over the period. And as you can see there, we're forecasting rental growth over the next few years of just over 5% per annum. We've continued to invest in our entertainment and leisure. Assets, we acquired 17 new Premier Inn hotels in the period, let of 30-year leases with guaranteed inflation-linked rent reviews between 1% and 4%. And also, we've continued as we made a small announcement this morning about further investment into the convenience grocery sector, and that is a market that we continue to look to allocate for the capital into given the evolving consumer behavior for convenience groceries. Time is a more valuable commodity today for the population than it was maybe 20 or 30 years ago. So as you can see at the bottom there, the numbers, it's a GBP 7.6 billion portfolio, a weighted average lease length of just under 17 years and have topped up net initial yield of 5.3%, heading to over 6. 5% That is due to deliver us an average forecast rental growth over the next couple of years of 4.3% per annum, which is largely slightly ahead of the like-for-like number that we've marginally ahead of the like-for-like number. And obviously, we will do our utmost to try and beat those forecasts. So the acquisition activity in the period is focused on 4 key areas, and this hasn't changed for a number of years now. And we separate this out into the M&A and the listed markets where we've obviously been relatively active over the last few years, 4 deals in the last 3 years. Sale and leasebacks, I've already referenced the Whitbread deal, but there are others in the wings too. The shakeup in the pension fund market, which is going to happen, I mean it's happening a bit slower than maybe we would like and therefore, haven't allocated as much money to that -- those opportunities this year as we might have expected. But that pension fund, that big shift from defined benefit to defined contribution is taking place. I mean, there's a lot of money coming out of this. And I think that pension fund, that sector owns as many -- as much commercial real estate as the entire listed sector. So that is an area of focus for us in the current year. And I've touched on development fundings already, and it tends to be either in the logistics or the grocery market where we're seeing the most success. And that is with existing customers who we have already enjoyed strong relationships with. So that will be a focus of attention for us over the next 12 months. Disposal activity. This is probably my favorite slide. Without a doubt, interest rates, were affecting liquidity in the market. And whilst we have elevated swap rates, that becomes difficult for people who are seeking liquidity and monetization of their assets, particularly for assets above GBP 20 million. You can see on the chart on the bottom left, we made 57 disposals in the year totaling GBP 318 million. We've actually made another 12 million post period end, totaling GBP 49 million. That means we're selling one building every 4.5 working days, all right? We're in the market, but all of the tension is at the smaller end. Out of the 57 sales, 50 of them were assets of less than GBP 10 million, right? It just shows you where the demand-supply tension is. And then -- and we're dealing with every sector. You can see it there. Food stores, retail parks, discount stores, car parks, offices, garden centers, motor dealerships, children's nurseries, hotels, pub, you name it, we'll have sold something in those sectors, I tell you. I mean it is, it's a machine. But what is really, really interesting is the type of buyer. 44% of our sales went to high net worth individuals and owner occupiers. Those buyers are not available when you're trying to sell an asset for more than GBP 20 million. They don't exist. They can't afford it. They don't have that sort of money. So fortunately, because we've got small average lot sizes, we're finding great liquidity. We've sold GBP 467 million of noncore assets that we've inherited through our various M&A transactions. We are proving liquidity. And that is -- and that actually takes place in an environment where you're seeing less activity from U.K. institutions or indeed U.S. private equity operators. Asset management activity. I mean, this is, again, a terrific slide, partly because the numbers make it easy for me. As I said before, just under GBP 17 million of rent added in the year delivering a 4.2% like-for-like income growth, GBP 38 billion of reversion to collect over the next 2 years. Rent reviews, on average, I said, 19% up, open market urban at 38% up, 69 lettings and regears. We don't actually have the opportunity to do lots of lettings because we don't any vacancy. So actually, most of that activity will have been regears that Mark and his team will have executed on average, 23% higher than previous passing rents. And we have a vacancy of about 1.2 million square feet. We're working hard on that. I mean we obsess about it. We have weekly meetings. I join them all, and a lot of that would has come from the assets we would have been acquired from Urban Logistics, and we're just working through it. We are chopping down a lot of wood here. And then as all good portfolio managers, we always keep an eye on our income and our income granularity. And as you can see, through asset management activity, portfolio management activity, also growing the asset base, we've seen our exposure to our top 3 customers fall over the period. As I say, Travel lodges would have fallen quite a lot use of the amount of sales that we've made out of the hotel sector. And a lot of that money has been reinvested as you can see into, I talked about the same leaseback deal with Whitbread for Premier Inns, but also activity with Tesco's and Booker and also Marks & Spencers increasing materially. And that income granularity is something that we think about a lot, and it's something that we will continue to improve. And even over the last 12 months, it was quite a short period of time. Our top 3 occupiers now down from 27% of our rent roll to 22%. There are a number of you in this room would have remembered when Primark was our biggest tenant, okay? I think at one time, they accounted for 11% of our rent roll, all right? Today, it's 1.4, all right? We know how to actively manage income graduality. Then if I look at the outlook, I've touched on a number of these themes already. Macro events continue to impact investor sentiment. Interest rates are the yardstick by which all investments should be obsessed, gilt rate, swap rates. They are influencing the market, pricing and liquidity. Political uncertainty is not helpful. However, I still believe U.K. consumer remains resilient, good employment, high savings ratios, wage growth still outpacing inflation, even better if you're in the public sector. But it's still above. It's 4.1%. It's 4.9% if you're in the public sector. It's not that at our place. But our triple net income model is unbelievably resilient. It's helped us build an all-weather portfolio that's driving reliable, predictable and growing income. And consumer behavior continues to affect the sectors that we want to allocate money into. For those of you who've known me a long time, and I started my career in shopping malls. Doesn't work for me anymore. We'd rather be in sheds and beds. But in those sectors, you want to own the best assets. It allows you to be a price setter not a price taker. We want to avoid sectors and buildings that incur maintenance CapEx, OpEx, letting incentives. They all dilute returns. Everybody can talk about big headline numbers on ERV, this beat ERV that I did a letting at 6% above ERV. But why did your valuation only move to then. Well, I gave away 12 months rent free for every 5-year term certain. I mean in some sectors, they're addicted to concessions, even in the very hot office market, which apparently there is in about 4 streets in London. And undoubtedly, market uncertainty creates opportunities for us. We think that there's a -- the consolidation out there in the listed space, and we'll allow to talk about that. We also think I've [indiscernible] earlier, the structural shift in the pension institutional pension fund market. And scale will continue to provide access to these deals, but also to cheaper and more diverse pools of debt. So in summary, our income model is driving earnings and dividend. Our rent is flowing and growing to historic levels. Our disciplined capital allocation has created this all-weather portfolio. We continue to run our winners and we'll sell our losers. And our long-term compounding is what creates value. It is the essence of value creation. We will collect, compound and see our yields compress, and our ownership culture ensures full alignment of interest. It also ensures it stops us doing stupid stuff, right? We're not growing this but just to grow our AUM. There are so many companies out there that have made mistakes in the past by wanting to grow AUM just so that they can increase their management fees, okay? And a full alignment of interest stops you doing that, right? We're shareholders first. We employees second. So thank you for that. And now I think we're going to open up -- if actually there's a large part of the audience actually can't ask questions because they're so offside. And I would like to say they've given me them in advance, but they haven't.So any questions in the room before I go to the screen. I said [indiscernible] Andrew?

Is that me?

Yes.

It's Andrew Saunders from Shore Capital. I wonder if you could just talk about your tenant retention rates, obviously, very impressive numbers on your rental uplifts on these reviews in logistics. But I just wonder, is there a risk that things could get unaffordable if you keep putting through the sort of rent increases?

Yes. I mean it varies around the U.K. I mean, we think London is a weaker than many other areas. It's hard to basically paint the whole U.K. with the same color. I mean, there are regional differences and that comes back down to demand and supply. London is tougher because of the massive rental increases that you've seen in London. The rest of the U.K., I couldn't give you a correlated pattern. I mean we've just agreed, for example, we've got a warehouse up in Motherwell, which is somewhere in Scotland. And we've just retained the tenant XPO for another 5 years. I mean we might have thought that might be a risk. But they're probably not building too many sheds in other well these days. But -- so it varies around the country. London would be our soft. It would be our biggest area of concern. We don't have a lot of money in London anyway, but that would be the one area where people can maybe move out from Zone 2 and just move out a bit further past the M25 and they can have their end. But you also to remember in logistics, rents just not a big proportion of the overhead. It's transport and wages are dominant. It's very different in in retail, for example, where your total occupation costs can hit sometimes 20%. So it's not something we don't really talk about it. I mean, you'd see it through the vacancy if it was a big issue. I mean the amount of people, we have imminent breakthroughs is coming up, with some one going to issue breakthroughs, we think they might then they don't. We had a situation down in Waybridge recently with Tesla. We expected them to issue the breakthroughs they didn't, there'll be somewhere else in the portfolio where we didn't think they'd issue the breakthroughs, but they did. But you'll see it through the vacancy. And we're not really seeing that just yet. This is going to be a technical one, Mark, so it's definitely coming to you.

It's high level. I think it's high level. Congratulations on the good results. Maybe a question on -- so there's obviously a lot of best practices that you can see in LondonMetric, and that's obviously contributed to the success of the growth. In relation to the balance sheet, very strong, really good financing. Just a question on net debt to EBITDA. If you look at the best practice in the U.S., it's about 5, maybe 6. Just any thoughts on that? Obviously, the U.K. market and European market is different. and I appreciate that.

I think it is different. Last year, I think we had net debt-to-EBITDA, Ritesh, at 6.8x and it's gone up to 7.5x as our LTV has also gone up. But the truth is I prefer it to have a 6x in front of it. And I think as we continue the disposal program, I'd hope that some of that will reduce that level of gearing. I don't have a problem with it. Look, the LTV is not going to 40%, net debt to EBITDA is not going into the 8s. If it was -- if it had a 6 in front of it, I'll be more comfortable.

Okay. Great. And maybe just a bigger picture question on -- you obviously have grown a lot and of some size now. How much more difficult does it get to do some of these acquisitions and effectively move the dial.

Yes. I mean, look, I mean, there's 2 questions there. I mean, how difficult? I mean some M&A acquisitions can be relatively straightforward and some of them can be cumbersome and that will depend a lot on management and the advisers. But in terms of moving the dial, I think we take the same approach as we do to our property portfolio. It's all about compounding. We -- I remember Valentine would have stood up here a few years back and said, we might be somebody you're doing small deals. But if you knock out singles instead of waiting for the 4 or the 6, by the time the 4 or 6 arrives, you might have 10 on the scoreboard. A lot of these companies we've acquired haven't -- you would have said, "Oh, why did you bother why did you bother? When you add them all up, you get to a big number. And so we don't really think about it moving the dial, company bothers to do that or whatever. I mean, sometimes the smaller deals are harder than the bigger deals. But yes, we don't think about it. It's really -- is there value in there that we'll be able to extract for our shareholders from an earnings and a value basis. Of course, moving the earnings dial is more difficult, the value every little helps. Arguably, I look back, I mean, even things like the Highcroft, which was like, what was it, an GBP 80 million deal. I mean, it's been good. We've been surprised on it. So we'll keep doing that. But the opportunities aren't just in the listed sector. I mean the listed sector needed shaking out. And largely, he's been there's a few others that dealing with but there's other opportunities. I said in the pension fund market, I mean that is a market that is going to pop. And you just want to be ready.

Contracted rent slide that I put up. I think it's quite interesting because that includes everything that I think is within our control. And I used to say it doesn't hit any double some sorts. There's no sort of addition to that that comes out of an opportunity that we may not know about today, but it's opportunistic, and we take advantage of it. And I remember a time when we'd be celebrating taking that number over 100, we're now pretty close to 500 but there will be things that happen that aren't in that slide that will grow it further. .

One more for me. Just you mentioned the importance of occupancy and keeping portfolios full, and you've certainly got a lot of long-let assets in your portfolio. On the logistics side, in the urban logistics side, it's shorter, how do you think about that? And especially in the context of the dividend aspect?

That's a good question. I mean, it was interesting a couple of years ago, I would have been standing up when we were just announcing or completing the takeover of LXI and LXI was predominantly a long income REIT and their #1 focus was long leases. We applaud that. But actually, it's not the only consideration. You have to think about the desirability of the underlying real estate. I'm just as happy to have a 5-year lease. So sometimes it's actually a 3-year lease on a wonderful building, where you've got the opportunity of resetting the rent to what we consider to be the new market levels. When we have a number of buildings in our portfolio where we've got indexation on the leases, and we wish we didn't. We wish we had the opportunity to be able to mark to market those. And so if something happened at expiry before that, then that would be for us an opportunity. I think you have to think about the underlying. It's what I say, you run your winners and you sell your losers. I mean it's unfair because I've never been to Motherwell, but it's not somewhere we want to allocate money. I'm just not sure I'm going to get a lot of demand tension in the event that my tenant was to leave. So I want to be in places where the tenant leaves. I still feel like I'm a price setter and not a price taker.

Jonny Huber from Deutsche Bank. I'd just be interested to hear why you view convenience as attractive. I mean, it looks like lower forecast rental growth there and also much lower index linked and fixed reviews. So what is about that market?

Well, if you think about consumer behavior, I mean I've been in the grocery sector for about 30 year -- real estate grocery sector for 30 years. In the old days, you used to buy your groceries out of 4 shops. It was Tesco, Sainsbury's, Aster Morrison. And today, as times become a more valuable commodity for the population, they want to be quick. You want convenience. And as M&S, if you can't do a grocery shop in 35 minutes, then you're inefficient. We think that this is a sector where rents are low. The average rent on our grocery assets is going to be around about maybe even just slightly less than GBP 20, maybe slightly around about GBP 20. In big box foods market, it's up at GBP 30. So we think it looks cheap. We're buying these assets, certainly under the funding arrangements at north of 6%. So if you're getting CPI of, say, 3 then you feel pretty good that you're on track. Maybe you want to get 2.5% because of the way inflation moderates, but you're still getting an ungeared 8.5%. And you're doing it on long leases, brand-new buildings fit for purpose, but also with wonderful credits. I mean Marks & Spencer is a terrific business, incredibly well run. And therefore, it feels like a sector with where we're coming in at 6, we sold a grocery store recently in Weymouth for 5.2%. We think there's an arbitrage there.

Matt Norris from Gravis. On Slide 14, where you have the acquisition activity, you've got 4 buckets there. Can you sort of flesh it out in terms of the returns we should expect across the 4 different buckets, please?

The M&A is harder to work out because we don't know how greedy some shareholders are going to be, do we, Matt?. I just want to make it clear. I'm not on LinkedIn. Some people try to negotiate on LinkedIn. I am not going to play.

Everybody should be.

What was the question? I've had 4 coffees, well. So let's take sale and leasebacks. So on average there, depending on quality, lease length, credit, you're probably in around about a 5.5%. And again, actually, in reference to my earlier question, you're probably looking to add about close to 3% on it. So you're somewhere between 8% to 9%, probably probably near 8.5%, but Rockstar credit, 30-year leases, the sort of assets that if I had grandchildren, even though you couldn't mess it up. You have to think about that correctly, but I've got another pack that Will's looking at the moment in the discount retail space, where the credit isn't as good, the lease lengths will be good. The geographies and the quality of the buildings, we would need -- we'd need 10 on that. We'd need a 7 starting, wouldn't we? And that would probably be the 3 on top. So that's going to give you a 10. I'm not even sure we're going to play on it. But we'll see. I won't make who it is. Pension funds is difficult because we just haven't seen enough coming out of it. I mean, the assets that we bought there, the UPS, the hotels at Manchester Airport, the bookers, they're wonderful, unbelievably long leases. I mean I think that the UPS lease is 55 years. It was longer -- longer than that. I think the Clayton Hotel is actually 200 year leases, not -- so you accept the lower return on that. Development fundings is very interesting because there, you are brand-new buildings, good customers, otherwise, you wouldn't do it. Long leases, 15, 20, 25. And there, you're looking for a margin of between 50 and 5 basis points between the development yield that you get the funding yield and the investment -- the completed investment yield. I mean they are wonderful, truly, truly wonderful. Grocery assets doing one at the moment from Marks & Spencer's. We're in at 6.2%. We think it's worth 5.5%. We might get lucky and get 5.25%. But that's your underwrite. We just like to do more of them.

So what's the limiting factor?

Opportunity. Sorry, Tom?

Thomas Musson from Berenberg. You made good progress reducing your debt cost margin in the year. What is the average credit margin you're paying on your debt in total, if you know. And now with more scale, what's the debt cost saving opportunity for that credit margin to fall further as you move through financing more pieces of debt? I appreciate the total cost will move around.

So the GBP 1.5 billion refinancing we did in March. We took the margin down from 155 to 105. And I think that was terrific. And a number of the very generous bankers are in the room who did that for us. I think if you then look at the balance of the debt stack on a -- if you average it across, we're probably about 1.25% in terms of credit spread. Look, as we stand today, I don't think we're in the market for more debt, particularly. But without doubt, the banks would say this, I mean, credit spreads at the moment, they're not historic post, but they are very tight. And I And I sat in rooms with bankers and say, who are not here actually, but I'll say this. You say you've got to do this because the credit spread is unbelievably time, but the underlying cost of money isn't -- so you've got to look at the all-in cost of the debt, not just the credit spread. .

I've got a question here on the screen from Paul. [indiscernible], talking about what was our debt saving. I think our annualized debt saving is about GBP 10 million, GBP 10 million per annum, and we incurred arrangement breakage fees on existing facilities in the period of GBP 5 million.

Very interesting number. When we did the LXI transaction, we took on some Canada Life debt that was incredibly long. It went down to 2039. -- But it was expensive, it was 575 all in. And we thought about breaking it at the time, the break costs would have been GBP 20 million. The movement in the yield curve between then and whenever we did it in September meant that the break costs actually fell below GBP 1 million. And so you just do it when we've been watching the yield, waiting for an opportunity. And then you say that's great. And then between the green deciding to do is and doing it we were worried that the yield curve move out again. So we put a hedge in. That meant that when we actually did the transaction, we did that for less than GBP 1 million, it would have cost us GBP 5 million if we hadn't put that hedge in. So the yield goes incredibly volatile, and you just have to wait. Opportunities will present themselves, and you just have to be ready to go when the opportunity does present itself.

I've got another good question here on the screen actually from Elliott, which is what is causing the difference between the like-for-like income growth at 4.2%. And versus the EPS growth at 2.4%. That's a very good question, which I normally just go, it's all in the timing. I think probably -- and we'll come back maybe with a breakdown of this, but I think it's predominantly because your like-for-like is more of a contracted figure and your -- obviously, your earnings is a cash flow figure. It's the timing. And obviously, some of the timing of the M&A when it came in, when it didn't might affect those numbers as well. But we'll do a big detail that deep dive into it, but it's going to be like-for-like might be higher because you settle a rent review halfway through the year, but you only got half the cash. Phew, that was was quite difficult, that one.. Yes. I think I'm right. I've got pass. I might not get an A, but I got passed. Are there any other questions? I've only got -- I think unless Paul -- I didn't answer his question correctly, -- he'll no doubt reach out if I didn't. No more in the room? Well, thank you so much. I mean we actually weren't predict -- given so many people are off site at the moment, we weren't predicting quite such a strong turnout, but that's great. Thank you so much for your support and your time. Thank you so much for your support and on your time. Thank you.