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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Mckay Securities Plc | LSE:MCKS | London | Ordinary Share | GB0005522007 | ORD 20P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 281.00 | 281.00 | 283.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMMCKS
RNS Number : 1342P
McKay Securities PLC
15 November 2016
McKAY DELIVERS COMPLETED DEVELOPMENT SCHEMES
AND GROWTH IN RENTAL INCOME
McKay Securities PLC, the Real Estate Investment Trust (REIT) specialising in South East and London office and industrial property, today announces its half year results for the six months ended 30 September 2016.
Financial Highlights
-- Adjusted profit before tax up 11.8% to GBP4.42 million (30 September 2015: GBP3.96 million) -- Gross rental income up 2.4% to GBP10.42 million (30 September 2015: GBP10.17 million) -- EPS (EPRA) up 10.3% to 4.3 pence per share (30 September 2015: 3.9 pence per share) -- IFRS loss before tax of GBP3.78 million (30 September 2015: GBP34.59 million profit) -- NAV (EPRA) 295 pence per share, down 2.0% (31 March 2016: 301 pence per share) -- Loan to Value ratio of 31.4% (31 March 2016: 28.9%) -- Interim dividend of 2.7 pence per share (2015: 2.7 pence per share)
Portfolio Highlights
-- Overall increase in property portfolio value of 3.2% (GBP12.71 million) to GBP413.88 million
-- 0.7% (GBP3.07 million) property valuation deficit -- 2.4% (GBP0.77 million pa) increase in ERV to GBP32.21 million
-- Initial portfolio yield of 5.1%, with reversionary potential of GBP9.77 million pa, taking the portfolio yield to 7.3%
-- Redevelopment schemes in Reading and Redhill completed and being marketed -- Redevelopment of 30 Lombard Street, EC3 on schedule for completion in Q1 2018
Simon Perkins, Chief Executive Officer of McKay, said:
"Delivery of our growth strategy remains on programme, with encouraging progress over the period crystallising and consolidating the significant income potential within our existing portfolio. With our proactive portfolio management, contracted rental income has increased by 6.4% to GBP22.45 million pa and the full potential rental value of the portfolio has increased by 2.4% to GBP32.76 million pa.
There is therefore still significant potential in the portfolio, which comes a step closer with the completion of our development schemes in Reading and Redhill. Release of the full 44% portfolio reversion of GBP9.77 million pa would take our portfolio yield from 5.1% to 7.3% at current values.
The property market generally suffered a loss of confidence following the EU referendum result, but more recently, we have seen markets stabilise and improved recognition in our core markets of the attraction of property as an asset class.
The South East office occupier market remains governed by positive fundamentals, with low levels of supply of Grade A quality space and a limited development pipeline. Yet occupiers are increasingly facing building obsolescence issues that will continue to underpin demand and new requirements.
We are well financed and have the ability to generate growth from the busy programme of development and refurbishment projects and management initiatives within our existing portfolio. The world is a more uncertain place than it was a few years ago, but despite this, McKay is in good shape to continue to deliver value for our shareholders."
-ends-
Date: 15(th) November 2016
For further information Media enquiries: please contact: McKay Securities PLC Capital Access Group Simon Perkins, CEO Simon Courtenay Giles Salmon, CFO 020 3763 3400 01189 502333
MCKAY SECURITIES PLC
INTERIM RESULTS
15(TH) NOVEMBER 2016
-----------------------------------------
Details of the programme for the payment of the interim dividend are as follows: Ex-dividend date 24(th) November 2016 Record date 25(th) November 2016 Interim dividend payment 5(th) January 2017 The Directors have declared an interim dividend of 2.7 pence per share, (2015: 2.7 pence per share), which will be paid as an ordinary dividend.
CHAIRMAN'S STATEMENT
-- Profit before tax, adjusted to exclude unrealised movements in the value of the Group's property portfolio and other non-cash items, increased by 11.8% to GBP4.42 million for the six month period to 30(th) September 2016 (30(th) September 2015: GBP3.96 million).
-- The independent valuation of the Group's property portfolio at 30(th) September 2016 totalled GBP413.88 million, resulting in a GBP3.07 million (0.7%) valuation deficit for the period (30(th) September 2015: GBP26.36 million / 7.1% surplus). The negative value of the Group's remaining interest rate hedging instrument increased by GBP4.59 million to GBP27.00 million (30(th) September 2015: GBP4.74 million decrease).
-- Inclusion of these, and other, unrealised items resulted in a loss before tax (IFRS) of GBP3.78 million (30(th) September 2015: GBP34.59 million profit).
-- Net asset value per share (EPRA) reduced over the period by 2.0% to 295 pence (31(st) March 2016: 301 pence). IFRS net asset value per share reduced by 3.9% to 269 pence (31(st) March 2016: 280 pence).
-- The Board has declared an interim dividend of 2.7 pence per share (2015: 2.7 pence).
Overview
In my first statement as Chairman, I am pleased to report that good progress has been made over the period towards our objective of realising the substantial income potential from our existing portfolio in order to increase distributable profits, despite the market reaction to the EU referendum vote.
The result of the referendum, midway through the period, caused a loss of confidence in the property market generally at that time. Since then, the UK economy has fared better than many expected, and capital and rental values have stood up well in our core South East and London markets. A reduction in capital values of just 0.7% and rental growth of 2.5% over the period out-performed market indices and highlights the benefit of the investment we continue to make in upgrading our properties and the resilient characteristics of our portfolio.
As a result of continued letting progress and rent reviews, contracted rental income increased by 6.4% to GBP22.45 million pa over the period, and rental growth increased the full potential rental value of the portfolio (ERV) to GBP32.21 million pa.
The potential to crystallise a significant proportion of the 43.5% portfolio reversion of GBP9.77 million pa has improved with completion of our office development projects at Reading and Redhill, which have a combined rental value of GBP2.61 million pa. These both now offer high quality, modern business space in established centres and our letting agents have recently started marketing the completed buildings.
This programme has resulted in continued growth in our rental income which increased by 2.4% to GBP10.42 million (30(th) September 2015: GBP10.17 million), despite the loss of income from disposals made last year. This increase was the main contributor to the 11.8% increase in adjusted profit before tax, our measure of recurring earnings.
Market Review
Investment volumes across our markets were lower over the period than in recent times. Whilst this was due in part to the referendum, a slowdown in the pace of investment was expected as the market recovery matured and the prospect of cyclical gains reduced. Property returns remain attractive, and with the devaluation of sterling there has been continued appetite from overseas buyers, particularly in London, as well as the emergence of other buyers outside London, such as local authorities. As a result, the decline in capital values to date has generally been limited, particularly for prime assets with secure income.
Low supply levels of new and grade A buildings in our markets continue to limit occupier choice. This fundamental issue is supporting headline rental growth for the best available floor space. A positive consequence of the uncertainty regarding the implications of the referendum result is the likely constraint on the development pipeline, reducing the risk of oversupply.
Within the South East office market, which accounts for 59.9% of the portfolio by value, the supply of new and grade A buildings remains low at 6.2 million sq ft, representing 7.2% of the total office supply. The vacancy rate for new buildings is lower still at 2.2 million sq ft (2.6%).
For the year to date, occupier take up of floor space within this market totalled 1.62 million sq ft, of which 1.42 million sq ft was in new and grade A buildings. This is the same level as recorded at this stage last year and 14.1% ahead of the five-year average for the same period. With 0.56 million sq ft under offer, occupier take up for the full year is expected to be similar to the 2.13 million sq ft recorded last year, and ahead of the five-year average of 1.88 million sq ft. Continued occupier demand is encouraging, but we anticipate the referendum may result in the short term deferral of larger strategic requirements over 60,000 sq ft. However, there are many positive factors still at play in our markets and the opening of the Elizabeth Line (Crossrail) in 2018 and the likelihood of higher business rates are likely to play an increasingly important part in attracting occupiers from London. In any event, our vacant properties are below 60,000 sq ft, and lease events and building obsolescence are likely to continue to generate new requirements in this smaller size band, which accounted for 79.2% of all occupier take up in 2015.
Within the City of London, the referendum has raised uncertainty regarding future occupier demand, particularly from the banking sector. Take up levels for 2016 are expected to be lower than the above average levels of the last two years, but constrained supply continues to support rental values. Capital values are generally lower, but as with other markets, the extent depends on the nature of the asset.
Portfolio Income and Leasing Activity
Over the period, we completed ten open market lettings with a combined contracted rental value of GBP0.73 million pa. This was 5.7% ahead of March 2016 ERV, with the work referred to below helping secure new rental highs in our buildings at Croydon, Woking, Brentford and Maidenhead.
At lease break and lease expiry, seventeen out of twenty tenants were retained, which maintained a high retention rate of 85.0% and secured rents of GBP0.58 million pa. Of this, leases renewed on expiry accounted for GBP0.25 million pa, which was 0.6% ahead of ERV and 18.5% ahead of the previous passing rent.
After taking this leasing activity into account, portfolio occupancy at the end of the period increased from 92.8% to 93.9%, and from 74.2% to 75.5% with the inclusion of the three development properties referred to below.
The outstanding February 2016 rent review at Wimbledon Gate, Wimbledon was settled during the period at a rent of GBP2.35 million pa, equivalent to GBP43.00 psf. Wimbledon has benefited from the ripple effect of higher rental values from central London, and the building, which was constructed by the Group in 2005, remains one of the best in the town. The uplift was a substantial GBP0.80 million pa (51.6%) over the passing rent and a 13.7% increase over 31(st) March 2016 ERV.
The portfolio ERV, which ended the period at GBP32.21 million pa, retains significant potential with vacant properties totalling GBP1.96 million pa, three development properties totalling GBP5.94 million pa and potential rental uplifts at rent review and lease expiry of GBP1.87 million pa.
Refurbishment Projects
Refurbishment of Unit 5 (8,364 sq ft) at Switchback Office Park, Maidenhead completed in early September. Prior to completion, the top floor was pre-let on a 10-year lease at a rent of GBP0.11 million pa, equating to GBP26.75 psf. This is the last building to be refurbished on the 37,450 sq ft Park, and the highest rent achieved, leaving the ground floor (4,133 sq ft) as the remaining space to let.
Other portfolio refurbishment work progressed well over the period at Portsoken House, EC3; The Mille, Brentford and 1 Crown Square, Woking, which together represent 71.4% (GBP1.40 million pa) of the portfolio void. Completed and ongoing improvement works to common areas and vacant floor space have generated gains in ERV's and rents achieved on letting, and marketing is generating encouraging interest.
Following the completion of conversion works at the end of last year, Strawberry Hill House, Newbury has now been leased as a medical Surgery at a rent of GBP0.26 million pa for 25 years.
Development Programme
Our current programme consists of three speculative office projects, which all made good progress over the period. When let, these schemes which represent 9.2% of the total portfolio by area and 18.5% by ERV will make a significant contribution to future earnings.
The major refurbishment at 9 Greyfriars Road, Reading (39,620 sq ft) completed in the summer. The scheme has achieved the first ever BREEAM Outstanding rating awarded outside London, and provides occupiers with a high quality, sustainable building less than five minutes walk from the recently upgraded mainline and Elizabeth Line railway station.
At Redhill, our new scheme (50,370 sq ft) on London Road completed shortly after the end of the period. It is the only new office building in Redhill, where vacancy rates are below 5% for good quality modern floor space. It sets a new benchmark in the southern M25 market with excellent environmental credentials and a high quality specification, providing flexible business space close to Redhill station, with excellent links to London and Gatwick.
In both cases, the marketing campaigns are generating viewings and early interest.
In the City of London, demolition of the 1960's office building (35,820 sq ft) at 30 Lombard Street is nearing completion. Construction of the striking replacement building (58,000 sq ft) in this core city location remains on programme for completion in mid-2018.
Valuation
The independent valuation of the Group's portfolio at 30(th) September 2016 totalled GBP413.88 million (31(st) March 2016: GBP401.17 million). After taking capital expenditure into account, this resulted in a 0.7% deficit for the period of GBP3.07 million overall. The IPD Monthly Index (All Property) deficit for the period was 3.7%.
On a sector basis (excluding developments) the valuation result also out-performed IPD with a surplus for South East offices of 0.9% (IPD: deficit 6.2%), a deficit of 0.9% for London offices (IPD: deficit 4.8%), and a deficit of 1.0% for South East industrial properties (IPD: deficit 1.1%).
The portfolio initial yield was 4.7% (March 2016: 4.5%) increasing to 5.1% (March 2016: 5.0%) on the expiry of letting incentives. At ERV, the reversionary yield would be 7.3% (March 2016: 7.4%). The equivalent yield was 6.4% (March 2016: 6.3%).
The outward shift in yield reflects market reaction to the uncertainty surrounding the outcome of the referendum vote. Initially there were concerns that values would fall across all market sectors, triggered by forced sales from many of the open ended funds. However, the market has evolved since and comparable evidence has indicated a more varied picture with some sectors and building types performing better than expected.
The portfolio valuation reflected this. Those properties with longer leases, variable lease expiries and limited outstanding refurbishment expenditure proved more resilient than those with short income and letting risk. Assumptions in relation to the development properties reflected market appetite to letting risk, and at 30 Lombard Street, EC3 also reflected that this project is the least progressed.
In addition, the benefit of recent and ongoing refurbishment work and the Wimbledon rent review was reflected in the 2.5% increase in portfolio ERV over the period, which was also ahead of the IPD Monthly Index increase of 0.7%. These rental gains helped offset the outward movement in yields.
Finance
EPRA net asset value per share, which excludes the negative value of hedging instruments, decreased by 2.0% to 295 pence since 31st March 2016 (301 pence).
IFRS net asset value decreased by GBP9.12 million to GBP252.11 million over the period and net asset value per share decreased by 3.9% to 269 pence. This was mainly due to a negative movement of GBP4.59 million in the value of the interest rate hedging instrument and the GBP3.07 million valuation deficit referred to above.
Drawn debt increased to GBP130.00 million (31st March 2016: GBP116.00 million), primarily due to development and refurbishment expenditure. The ratio of drawn debt to portfolio value (LTV) was 31.4% (30th September 2015: 33.1%), and the gearing ratio to shareholders' funds, adjusted in accordance with banking covenants, was 46.6% (30th September 2015: 49.9%). The average cost of debt increased to 4.78% during the period (31(st) March 2016: 4.35%) due to a higher proportion of drawn debt at fixed rather than floating rates.
Adjusted profit before tax of GBP4.42 million was 11.8% (GBP0.47 million) higher than the corresponding period last year. A significant proportion of this increase was the result of lettings and the settled rent review at Wimbledon Gate. These contributed to an increase of 2.4% in gross rental income for the period which totalled GBP10.42 million (30(th) September 2015: GBP10.17 million). Non recoverable property costs of GBP1.24 million were marginally lower than the corresponding period last year (30(th) September 2015: GBP1.25 million).
Administration costs of GBP2.98 million for the period were also marginally lower than the corresponding period last year (30(th) September 2015: GBP3.00 million).
Net finance costs reduced by GBP0.16 million to GBP2.12 million (30(th) September 2015: GBP2.28 million) benefitting from the level of capitalised interest increasing to GBP1.15 million (30(th) September 2015: GBP0.76 million).
IFRS profit before tax for the period, prior to any adjustments for unrealised items, shows a GBP3.78 million loss (30th September 2015: GBP34.59 million profit). The loss includes the revaluation deficit and the negative movement in the mark to market valuation of the interest rate hedging instrument.
The Board
There have been a number of changes to note over the period, including my own appointment as Chairman. I would like to thank David Thomas, my predecessor, for all his efforts over his eleven years with the Group, and for the healthy state which he has left business in.
We were pleased to welcome Jon Austen to the Board at the beginning of July as an independent non-executive Director. Jon, who qualified as a Chartered Accountant in 1981, has gained extensive experience in the property sector in a number of senior roles and most recently as Group Finance Director of Urban&Civic plc, and has been appointed Chairman of the Audit Committee.
Steven Mew, Portfolio Director, left the Board at the end of September after 15 years with the Group and we wish him well in his new role. Tom Elliott, who has joined us from Land Securities PLC, has taken on Steven's responsibilities.
Dividend
The Board is pleased to declare an interim dividend of 2.7 pence per share, which maintains the level of dividend paid for the same period last year. This will be paid as an ordinary dividend on 5th January 2017.
Outlook
We are fortunate to be in a strong position to grow the value of the portfolio and future earnings through our refurbishment and development initiatives, rather than needing to rely on market momentum alone.
The pace of this growth will be dependent on the health of the economy and in turn, tenant demand. However, with recent indicators suggesting that the economy has held up well, and with our existing portfolio focused in the most resilient economic regions of the UK, we look forward to delivering further shareholder value.
R. Grainger
Chairman
15(th) November 2016
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CONSOLIDATED PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
-----------------------------------------------------------------------------------------------------------
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000 GBP'000
Gross rents and service charges
receivable 12,113 11,695 23,689
Direct property outgoings (2,939) (2,776) (6,025)
---------- -------- ---------
Net rental income from investment
properties 3 9,174 8,919 17,664
Administration costs (2,984) (2,996) (5,878)
---------- -------- ---------
Operating profit before (loss)/gains
on investment
properties 6,190 5,923 11,786
Profit on disposal of investment
properties - 315 9,106
Revaluation of investment
properties 6 (3,268) 25,885 34,564
---------- ------- ---------
Operating profit 2,922 32,123 55,456
Net finance
costs - finance costs 5 (6,706) (2,276) (4,478)
- finance income 5 6 4,746 2,182
---------- ---------- -----------
(Loss)/profit before taxation (3,778) 34,593 53,160
Taxation - - -
---------- --------- ----------
(Loss)/profit for the period (3,778) 34,593 53,160
Other comprehensive income:
Items that will not be reclassified
subsequently to profit or
loss
Actuarial movement on defined
benefit pension scheme - - (15)
Other 88 -
---------- -------- ---------
Total comprehensive income
for the period (3,778) 34,681 53,145
---------- -------- ---------
Earnings per share 4
Basic (4.04)p 37.27p 57.17p
Diluted (4.04)p 36.75p 56.36p
Adjusted earnings per share figures
are shown in note 4.
GROUP BALANCE SHEET
------------------------------------- As at As at As at
30(th) 30(th) 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
Notes GBP'000 GBP'000) GBP'000
Non-current assets
Valuation as reported by
valuers 413,875 398,630 401,170
Adjustment for rents recognised
in advance under
SIC 15 (6,072) (6,819) (5,869)
Adjustment for grossing
up headleases 3,725 3,765 3,745
----------- ----------- -----------
Investment properties 6 411,528 395,576 399,046
Plant and equipment 76 67 91
----------- ------------ -----------
Total non-current assets 411,604 395,643 399,137
----------- ---------- -----------
Current assets
Trade and other receivables 7,972 7,809 15,641
Cash and cash equivalents 2,938 9,385 -
----------- ---------- -----------
Total current assets 10,910 17,194 15,641
----------- ---------- -----------
Total assets 422,514 412,837 414,778
----------- ---------- ----------
Current liabilities
Trade and other payables (9,380) (12,258) (10,938)
Finance lease liabilities (286) (286) (286)
Interest rate derivatives 7 (2,944) (2,944) (2,944)
Bank overdraft - - (261)
---------- --------- ----------
Total current liabilities (12,610) (15,488) (14,429)
---------- -------- ---------
Non-current liabilities
Loans and other borrowings (127,903) (129,522) (113,701)
Pension fund deficit (1,719) (1,875) (1,839)
Finance lease liabilities (4,120) (4,121) (4,121)
Interest rate derivatives 7 (24,054) (16,899) (19,465)
----------- ---------- -----------
Total non-current liabilities (157,796) (152,417) (139,126)
----------- ---------- -----------
Total liabilities (170,406) (167,905) (153,555)
----------- ---------- -----------
Net assets 252,108 244,932 261,223
----------- ---------- -----------
Equity
Called up share capital 18,762 18,486 18,632
Share premium account 78,929 75,917 77,708
Retained earnings 47,374 40,177 54,571
Revaluation reserve 107,043 110,352 110,312
----------- ---------- -----------
Total equity 252,108 244,932 261,223
----------- ---------- -----------
Net asset value per share 9 269p 263p 280p
EPRA net asset value per
share 295p 281p 301p
GROUP CASH FLOW STATEMENT
------------------------------------------------
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Operating activities
(Loss)/profit before tax (3,778) 34,593 53,160
Adjustments for:
Depreciation 15 12 18
Other non-cash movements 603 552 1,101
Profit on disposal of investment
properties - (315) (9,106)
Movement in revaluation of investment
properties 3,269 (25,885) (34,564)
Net finance costs/(income) 6,700 (2,470) 2,296
-------- -------- ---------
Cash flow from operations before
changes in working capital 6,809 6,487 12,905
Decrease/(increase) in debtors 8,568 2,482 (5,027)
(Decrease)/increase in creditors (2,756) 1,372 1,177
---------- -------- ---------
Cash generated from operations 12,621 10,341 9,055
Interest paid (3,287) (1,330) (5,810)
Swap cancellation fee - (13,165) -
Interest received 6 9 11
---------- --------- --------
Cash flows from operating activities 9,340 (4,145) 3,256
---------- -------- --------
Investing activities
Proceeds from sale of investment
properties - 865 33,207
Proceeds from sale of investments - 793 793
Purchase and development of investment
properties (14,453) (19,987) (37,660)
Purchase of other fixed assets - (15) (45)
--------- -------- ----------
Cash flows from investing activities (14,453) (18,344) (3,705)
--------- -------- ----------
Financing activities
Increase in borrowings 13,995 37,992 21,986
Equity dividends paid (5,683) (5,546) (8,061)
Swap cancellation fee - - (13,165)
---------- --------- ---------
Cash flows from financing activities 8,312 32,446 760
---------- -------- ---------
Net increase in cash and cash
equivalents 3,199 9,957 311
Cash and cash equivalents at
the beginning of the period (261) (572) (572)
---------- -------- ---------
Cash and cash equivalents at
end of period 2,938 9,385 (261)
---------- -------- ---------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity holders
of the parent company
Share Share Revaluation Retained Total
capital premium reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 1(st) April 2015 18,486 75,917 84,752 36,340 215,495
Profit for the period
Other comprehensive
income: - - - 34,593 34,593
Transfer surplus on
revaluation of
properties - - 25,885 (25,885) -
Other - - - 88 88
Transfer on disposal
of investment
properties - - (285) 285 -
--------- --------- --------- --------- ---------
Total comprehensive
income in the
Period - - 25,600 9,081 34,681
Dividends paid in period - - - (5,546) (5,546)
Fair value of share
based payments - - - 302 302
-------- --------- ---------- --------- -----------
At 30(th) September
2015 18,486 75,917 110,352 40,177 244,932
-------- --------- ---------- --------- ----------
Profit for the period - - - 18,567 18,567
Other comprehensive
income:
Transfer surplus on
revaluation of
properties - - 8,679 (8,679) -
Other - - - (88) (88)
Transfers on disposal
of investment
properties - - (8,719) 8,719 -
Actuarial gain on defined
benefit
pension scheme - - - (15) (15)
--------- --------- --------- --------- ---------
Total comprehensive
income for the
period - - (40) 18,504 18,464
Issue of new shares
net of costs 146 1,791 - (1,937) -
Dividends paid in period - - - (2,515) (2,515)
Fair value of share
based payments - - - 342 342
-------- -------- ----------- --------- -----------
At 31(st) March 2016 18,632 77,708 110,312 54,571 261,223
Loss for the period - - - (3,778) (3,778)
Other comprehensive
income:
Transfer surplus on
revaluation of
properties - -- (3,269) 3,269 --
-------- -------- -------- -------- ---------
Total comprehensive
income for the
period - - (3,269) (509) (3,778)
Issue of new shares
net of costs 130 1,221 - (1,351) -
Dividends paid in period - - - (5,683) (5,683)
Fair value of share
based payments - - - 346 346
-------- -------- ---------- --------- ----------
At 30(th) September
2016 18,762 78,929 107,043 47,374 252,108
--------- --------- ---------- --------- ----------
1 Accounting policies
Basis of preparation
This condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.
As required by the Disclosure and Transparency Rules of the Financial Conduct Authority, the financial statements have been prepared applying the accounting policies and presentation that were applied in the preparation of the Company's published consolidated financial statements for the year ended 31(st) March 2016.
The comparative figures for the financial year ended 31(st) March 2016 are not the Company's statutory accounts for that financial year. Those accounts have been reported on by the Company's auditor and delivered to the Registrar of Companies. The report of the auditor was (i) unqualified, (ii) did not include a reference to any matter to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006.
The Board approved the unaudited interim financial statements on 14(th) November 2016.
Identification of business risks
The Group's principal risks and uncertainties are consistent with those noted in the Annual Report for the year ended 31(st) March 2016 which include compliance with financial covenants on bank borrowing, tenant default, liquidity, interest rate hedging instruments and interest rate movements on bank borrowing. The Directors consider that the significant areas of judgement made by management that have significant effect on the Group's performance and estimates with a significant risk of material adjustment are valuation of investment properties and financial instruments. These are unchanged from those identified in the Annual Report for the year ended 31(st) March 2016.
Going concern
The Interim Report has been prepared on a going concern basis, which assumes the Group will be able to meet its liabilities as they fall due, for the foreseeable future. The Directors have prepared cash flow forecasts which show that the cash generated from operating activities will provide sufficient cash headroom for the foreseeable future.
The Group does not have any significant borrowing facilities expiring in the next 12 months. The Group is in full compliance with its borrowing covenants at 30(th) September 2016 and is expected to be in compliance for the next 12 months.
2 Adjusted profit before tax
Adjusted profit before tax is the Group's preferred measure to provide a clearer picture of recurring profits from core rental activities before tax, adjusted as set out below.
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
(Loss)/profit before tax (3,778) 34,593 53,160
Fair value loss/(gain) on swaps 4,588 (4,737) (2,171)
Movement in valuation of investment
properties 3,269 (25,885) (34,564)
Profit on disposal of investment
properties - (315) (9,106)
IFRS2 adjustment to share based
payments 346 302 624
---------- -------- --------
Adjusted profit before tax 4,425 3,958 7,943
---------- -------- --------
3 Net rental income from investment
properties
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Gross rents receivable 10,212 9,694 19,413
SIC15 adjustment (spreading of
rental incentives) 204 477 746
---------- -------- ---------
Gross rental income 10,416 10,171 20,159
Service charges receivable 1,697 1,524 3,530
---------- -------- ---------
12,113 11,695 23,689
Direct property outgoings (2,939) (2,776) (6,025)
---------- --------- ---------
Net rental income 9,174 8,919 17,664
---------- -------- ---------
Rent receivable under the terms of the leases is adjusted,
in accordance with SIC15, for the effect of any incentives
given.
4 Earnings per share
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
p p p
Basic (loss)/earnings per share (4.04) 37.27 57.17
Change in fair value of derivatives 4.91 (5.11) (2.34)
Movement in revaluation of
investment properties 3.49 (27.89) (37.17)
Profit on disposal of investment
properties - (0.34) (9.79)
Adjusted profit for share based
payments 0.37 0.33 0.67
--------- --------- --------
Adjusted earnings per share 4.73 4.26 8.54
--------- --------- -------
Basic (loss)/earnings per share on ordinary shares
is calculated on the loss in the half year of GBP3,778,471
(September 2015: profit GBP34,593,000 and March 2016:
profit GBP53,160,000) and 93,511,768 (September 2015:
92,807,763 and March 2016: 92,983,951) shares, being
the weighted average number of ordinary shares in
issue during the period.
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
Number Number Number
of shares of shares of shares
Weighted average number of ordinary
shares in issue 93,511,768 92,807,763 92,983,951
Number of shares under option 1,346,921 1,705,818 1,722,237
Number of shares that would
have been issued at fair
Value (481,332) (391,633) (399,554)
--------------- --------------- --------------
Diluted weighted average number
of ordinary shares in
Issue 94,377,357 94,121,948 94,306,634
--------------- --------------- ---------------
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
p p p
Basic (loss)/earnings per share (4.04) 37.27 57.17
Effect of dilutive potential
ordinary shares under option - (0.52) (0.81)
------- ------- -------
Diluted (loss)/earnings per
share (4.04) 36.75 56.36
Change in fair value of derivatives 4.86 (5.03) (2.30)
Movement in revaluation of
investment properties 3.46 (27.50) (36.65)
Profit on disposal of investment
properties - (0.34) (9.65)
Adjusted profit for share based
payments 0.37 0.32 0.66
--------- --------- --------
Adjusted diluted earnings per
share 4.65 4.20 8.42
---------- ---------- --------
Adjusted profit for share based
payments (0.37) (0.32) (0.66)
---------- ---------- --------
EPRA earnings per share 4.28 3.88 7.76
---------- ---------- ---------
Diluted (loss)/earnings per share is calculated on the same profit after tax and on the weighted average diluted number of shares in issue during the year of 94,377,357 (September 2015: 94,121,948 and March 2016: 94,306,634) shares, which takes into account the number of potential ordinary shares under option. No account has been taken in diluted (loss)/earnings earnings per share of potential ordinary shares in the period to 30(th) September 2016 where their conversion to ordinary shares would decrease the loss per share but is included to arrive at adjusted diluted earnings per share.
Adjusted (loss)/earnings per share excludes the after tax effect of profit from the disposal of investment properties, surrender premiums received (if any), the change in the fair value of derivatives and the movement in revaluation of investment properties. The EPRA measure includes all of these adjustments, except for surrender premiums which are added back.
5 Net finance costs
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Interest on bank overdraft
and loans 2,922 2,671 5,657
Finance lease interest on
leasehold property
Obligations 142 142 285
Finance arrangement costs 208 228 413
Fair value loss on derivatives 4,588 - -
Capitalised interest (1,154) (765) (1,877)
--------- --------- ---------
Finance expense 6,706 2,276 4,478
Fair value gain on derivatives - (4,737) (2,171)
Interest receivable (6) (9) (11)
--------- --------- ---------
Finance income (6) (4,746) (2,182)
--------- --------- ---------
Net finance costs/(income) 6,700 (2,470) 2,296
--------- --------- ----------
6 Investment properties
As at As at As at
30(th) 30(th) 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Valuation
At 1(st) April 2016 399,046 350,204 350,204
Additions - acquisition - 11,337 11,337
- development 15,770 8,721 26,046
Revaluation (deficit)/surplus (3,065) 26,362 35,311
Adjustment for rents recognised
in advance under
SIC15 (203) (477) 473
Disposals - (550) (24,285)
Amortisation of grossed up
headlease liabilities (20) (21) (40)
----------- ------------ -----------
Book value 411,528 395,576 399,046
------------ ------------ ----------
Adjustment for grossing up
of headlease liabilities (3,725) (3,765) (3,745)
Adjustment for rents recognised
in advance under
SIC15 6,072 6,819 5,869
----------- ----------- -----------
Valuation 413,875 398,630 401,170
----------- ----------- -----------
In accordance with the Group's accounting policy on properties there was an external valuation at 30(th) September 2016. These valuations, were carried out by Mellersh & Harding LLP, Chartered Surveyors and Valuers. All valuations were carried out in accordance with the Appraisal and Valuation Standards of RICS, on an open market basis.
7 Liabilities
The Group adopts a policy of ensuring that its exposure
to interest rate fluctuations is mitigated by the use
of financial instruments. Interest rate swaps have been
entered into to achieve this purpose.
The Group does not hold or issue derivative financial
instruments for trading purposes.
As at 30(th) September
2016 (Unaudited)
Maturity (1) Next Amount Rate Fair Fair
credit GBP'000 value value
break before (2) BCVA GBP'000
BCVA
Interest rate Sept Sept
swaps 2032 2022 45,000 5.17% (29,569) 2,571 (26,998)
As at 30(th) September
2015 (Unaudited)
Maturity (1) Next Amount Rate Fair Fair
credit GBP'000 value value
break before (2) BCVA GBP'000
BCVA
Interest rate Sept Sept
swaps 2032 2022 45,000 5.17% (21,789) 1,946 (19,843)
As at 31(st) March
2016 (Audited)
Maturity (1) Next Amount Rate Fair Fair
credit GBP'000 value value
break before (2) BCVA GBP'000
BCVA
Interest rate Sept Sept
swaps 2032 2022 45,000 5.17% (24,422) 2,013 (22,409)
(1) Credit breaks are triggered by the bank and require
the prevailing mark to market value to be paid or
received.
(2) BCVA - Bilateral Credit Valuation Adjustment is
now required by IFRS 13 to be incorporated in the
mark to market valuations.
The fair value of interest rate derivatives has been split between current and non-current liabilities according to the expected timing of cashflows as follows:
As at As at As at
30(th) 30(th) 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Current (2,944) (2,944) (2,944)
Non-current (24,054) (16,899) (19,465)
---------- ---------- ----------
(26,998) (19,843) (22,409)
---------- ---------- ----------
The Group does not hedge account its interest rate derivatives and states them at fair value in the balance sheet based on quotations from the Group's banks, any movement passing through the Consolidated Profit or Loss and Other Comprehensive Income. All financial liabilities are classed as level 2 in accordance with the fair value hierarchy stated in IFRS 13. The fair value of these level 2 contracts are estimated by discounting expected future cash flows using current market interest rates and yield curve over the remaining term of the instrument.
There are no liabilities at maturity and no material unrecognised gains or losses.
In both 2016 and 2015 there was no difference between the book value and the fair value of all the other financial assets and liabilities of the Group.
8 Dividends
6 months 6 months 12 months
to 30(th) to 30(th) to 31(st)
September September March
2016 2015 2016
(Unaudited) (Unaudited) (Audited)
GBP'000 GBP'000 GBP'000
Final dividend
Year ended 31(st) March 5,683 - -
2016
Year ended 31(st) March
2015 - 5,546 5,546
Interim dividend
Year ended 31(st) March
2015 - - 2,515
---------- ---------- ----------
5,683 5,546 8,061
---------- ---------- ----------
The final dividend of 6.1 pence per share (GBP5,683,000)
for the year ended 31(st) March 2016 was paid
on 28(th) July 2016.
The Directors have declared an interim dividend
of 2.7 pence per share (2015: 2.7 pence per share).
Since becoming a REIT, the Group is required to
distribute at least 90% of qualifying income profits
each year as a Property Income Distribution (PID),
and the interim dividend of 2.7 pence per share
will be paid as an ordinary dividend. Further
REIT information is available on the Company's
website.
9 Net asset value per share 30(th) September 2016
Net assets Shares Net
GBP'000 '000 asset
value
per share
p
Basic 252,108 93,808 269
Shares under option 1,035 1,221 (3)
------------ ---------- -----
Diluted/EPRA NNNAV 253,143 95,029 266
Adjustment for fair value
of derivatives 26,998 - 29
----------- --------- -----
EPRA NAV 280,141 95,029 295
30(th) September 2015
Net assets Shares Net
GBP'000 '000 asset
value
per share
p
Basic 244,932 93,158 263
Number of shares under option 863 1,552 (3)
----------- ---------- -----
Diluted/EPRA NNNAV 245,795 94,710 260
Adjustment for fair value
of derivatives 19,843 - 21
----------- ----------- -----
EPRA NAV 265,638 94,710 281
31(st) March 2016
Net assets Shares Net
GBP'000 '000 asset
value
per share
p
Basic 261,223 93,158 280
Number of shares under option 863 1,552 (3)
----------- ---------- -----
Diluted/EPRA NNNAV 262,086 94,710 277
Adjustment for fair value
of derivatives 22,410 - 24
----------- ----------- -----
EPRA NAV 284,496 94,710 301
10 Disclaimer
The Interim Report of McKay Securities PLC for
the six months to 30(th) September 2016 has been
drawn up and presented for the purposes of complying
with English law. If any issue were to arise in
relation to any liability under or in connection
with the Interim Report for the six months to 30(th)
September 2016, it would also be determined in
accordance with English law.
11 Interim Report
The Interim Report is being posted to all shareholders
on 25(th) November 2016. Copies are available to
members of the public from the Company's registered
office at 20 Greyfriars Road, Reading, Berkshire
RG1 1NL, and on the Company's website at www.mckaysecurities.plc.uk.
Statement of the Directors Responsibilities
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.
S C Perkins
CEO
G P Salmon
CFO
15(th) November 2016
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFIRLILSLIR
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November 15, 2016 02:00 ET (07:00 GMT)
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